S-1/A

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As filed with the Securities and Exchange Commission on February 17, 2009

Registration No. 333-156408

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Bridgepoint Education, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation or organization) 8221
(Primary Standard Industrial
Classification Code Number) 59-3551629
(I.R.S. Employer
Identification Number)

13500 Evening Creek Drive North, Suite 600
San Diego, CA 92128
(858) 668-2586

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)

Andrew S. Clark
Chief Executive Officer
Bridgepoint Education, Inc.
13500 Evening Creek Drive North, Suite 600
San Diego, CA 92128
(858) 668-2586

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:
John J. Hentrich, Esq. Robert L. Wernli, Jr., Esq. Sheppard, Mullin, Richter & Hampton LLP 12275 El Camino Real, Suite 200 San Diego, CA 92130 Telephone: (858) 720-8900 Facsimile: (858) 509-3691	Kris F. Heinzelman, Esq. Cravath, Swaine & Moore LLP Worldwide Plaza 825 Eighth Avenue New York, New York 10019-7475 Telephone: (212) 474-1000 Facsimile: (212) 474-3700

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of the registration statement.

          If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. o

          If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

          If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

          If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 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 o Accelerated filer o Non-accelerated filer ý
(Do not check if a
smaller reporting company) Smaller reporting company o

          The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not and the selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission of which this prospectus forms a part is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED FEBRUARY 17, 2009

             Shares

Bridgepoint Education, Inc.

Common Stock

        Prior to this offering, there has been no public market for our common stock. The initial public offering price of our common stock is expected to be between $                           and $                           per share. We will apply to list our common stock on the New York Stock Exchange under the symbol "BPI."

        We are selling                           shares of common stock and the selling stockholders are selling                           shares of common stock.

        The underwriters have an option to purchase a maximum of                                        additiona l shares from the selling stockholders to cover over-allotments of shares.

Investing in our common stock involves risks. See "Risk Factors" beginning on page 11.

	Price to Public		Underwriting Discounts and Commissions		Proceeds to Bridgepoint		Proceeds to Selling Stockholders
Per Share		$		$		$		$
Total	$		$		$		$

        Delivery of the shares of common stock will be made on or about                           , 2009.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Credit Suisse J.P.Morgan

The date of this prospectus is                                        , 2009.

TABLE OF CONTENTS

	Page
PROSPECTUS SUMMARY		1
RISK FACTORS		11
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		34
USE OF PROCEEDS		35
DIVIDEND POLICY		35
CAPITALIZATION		36
DILUTION		38
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA		40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		45
BUSINESS		64
REGULATION		82
MANAGEMENT		95
COMPENSATION DISCUSSION AND ANALYSIS		102
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		124
PRINCIPAL AND SELLING STOCKHOLDERS		126
DESCRIPTION OF CAPITAL STOCK		129
SHARES ELIGIBLE FOR FUTURE SALE		135
MATERIAL U.S. FEDERAL TAX CONSEQUENCES TO NON-U.S. HOLDERS OF COMMON STOCK		137
UNDERWRITING		140
INTERNATIONAL SELLING RESTRICTIONS		143
LEGAL MATTERS		145
EXPERTS		145
CHANGE IN ACCOUNTANTS		145
WHERE YOU CAN FIND MORE INFORMATION		146
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1

You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.

Dealer Prospectus Delivery Obligation

Until                  , 2009 (25 days after the commencement of the offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information you should consider in making your investment decision. You should read the entire prospectus, including the consolidated financial statements. You should carefully consider, among other things, the matters discussed in "Risk Factors." Except where the context otherwise requires or where otherwise indicated, (i) the terms "we," "us," "our" and "Bridgepoint" refer to Bridgepoint Education, Inc. and its consolidated subsidiaries, including Ashford University and the University of the Rockies, (ii) the term "Warburg Pincus" refers to Warburg Pincus Private Equity VIII, L.P. and (iii) the terms "redeemable convertible preferred stock" and "Series A Convertible Preferred Stock" refer to our Series A Convertible Preferred Stock, par value $0.01 per share.

Overview

        We are a regionally accredited provider of postsecondary education services. We offer associate's, bachelor's, master's and doctoral programs in the disciplines of business, education, psychology, social sciences and health sciences.

        We deliver our programs online as well as at our traditional campuses located in Clinton, Iowa and Colorado Springs, Colorado. As of September 30, 2008, we offered over 760 courses and 41 degree programs with 37 specializations and 21 concentrations. We had 30,547 students enrolled in our institutions as of September 30, 2008, 98% of whom were attending classes exclusively online.

        We have designed our offerings to have four key characteristics that we believe are important to students:

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Affordability—our tuition and fees fall within Title IV loan limits;

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Transferability—our universities accept a high level of prior credits;

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Accessibility—our online delivery model makes our offerings accessible to a broad segment of the population; and

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Heritage—our institutions' histories as traditional universities provide a sense of familiarity, a connection to a student community and a campus-based experience for both online and ground students.

We believe these characteristics create an attractive and differentiated value proposition for our students. In addition, we believe this value proposition expands our overall addressable market by enabling potential students to overcome the challenges associated with cost, transferability of credits and accessibility—factors that frequently discourage individuals from pursuing a postsecondary degree.

        We are committed to providing a high-quality educational experience to our students. We have a comprehensive curriculum development process, and we employ qualified faculty members with significant academic and practitioner credentials. We conduct ongoing faculty and student assessment processes and provide a broad array of student services. Our ability to offer a quality experience at an affordable price is supported by our efficient operating model, which enables us to deliver our programs, as well as market, recruit and retain students, in a cost-effective manner.

        We have experienced significant growth in enrollment, revenue and operating income since our acquisition of Ashford University in March 2005. At December 31, 2007 and September 30, 2008, our enrollment was 12,623 and 30,547, respectively, an increase of 182.3% and 140.2%, respectively, over our enrollment as of the comparable dates in the prior years. At September 30, 2008, our ground enrollment was 761, as compared to 312 in March 2005, reflecting our commitment to invest in further developing our traditional campus heritage. For the year ended December 31, 2007 and the nine months ended September 30, 2008, our revenue was $85.7 million and $149.2 million, respectively, an increase of 199.5% and 173.4%, respectively, over the same periods for the prior years. For the year ended December 31, 2007 and the nine months ended September 30, 2008, our operating income was

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$4.0 million and $26.3 million, respectively, an increase from an operating loss of $4.8 million and from operating income of $1.4 million, respectively, in the same periods for the prior years. We intend to pursue growth in a manner that continues to emphasize a quality educational experience and that satisfies regulatory requirements.

Our History

        In January 2004, our principal investor, Warburg Pincus, and our Chief Executive Officer, Andrew Clark, as well as several other members of our current executive management team, launched Bridgepoint Education, Inc. Together, they developed a business plan to provide individuals previously discouraged from pursuing an education due to cost, the inability to transfer credits or difficulty in completing an education while meeting personal and professional commitments, the opportunity to pursue a quality education from a trusted institution. The business plan incorporated our management team's experience with other online and campus-based postsecondary providers and sought to employ processes and technologies that would enhance both the quality of the offering and the efficiency with which it could be delivered.

        In March 2005, we acquired the assets of The Franciscan University of the Prairies, located in Clinton, Iowa, and renamed it Ashford University. Founded in 1918 by the Sisters of St. Francis, a non-profit organization, The Franciscan University of the Prairies originally provided postsecondary education to individuals seeking to become teachers and later expanded to offer a broader portfolio of programs. In September 2007, we also acquired the assets of the Colorado School of Professional Psychology, a non-profit institution founded in 1998 and located in Colorado Springs, Colorado, and renamed it the University of the Rockies. The University of the Rockies offers master's and doctoral programs primarily in psychology.

        The majority of our current executive management team was in place at the time we acquired Ashford University. As a result, we were able to begin implementing processes and technologies to prepare for the launch of an online educational offering designed to serve a large student population immediately after the acquisition. Since March 2005, we have launched 24 programs and numerous specializations and concentrations, as well as initiated our formal military and corporate channel development efforts. We have also made investments in enhancing and expanding our campus-based operations as part of our commitment to continuing to invest in developing our traditional campus heritage.

Our Market Opportunity

        The postsecondary education market in the United States represents a large, growing opportunity. Based on a March 2008 report by the Department of Education's National Center for Education Statistics, or NCES, revenue of postsecondary degree-granting educational institutions exceeded $385 billion in the 2004-05 academic year. According to a September 2008 NCES report, the number of students enrolled in postsecondary institutions was 18.0 million in 2007 and is projected to grow to 18.6 million by 2010.

        Online postsecondary enrollment is growing at a rate well in excess of the growth rate of overall postsecondary enrollment. According to Eduventures, LLC, or Eduventures, an education consulting and research firm, online postsecondary enrollment increased from 0.5 million to 1.8 million between 2002 and 2007, representing a compound annual growth rate of 30.4%. We believe the rapid growth in online postsecondary enrollment has been driven by a number of factors, including:

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the greater convenience and flexibility that online programs offer as compared to ground programs;

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the increased acceptance of online programs as an effective educational medium by students, academics and employers; and

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the broader potential student base, including working adults, that can be reached through the use of online delivery.

        We expect continued growth in postsecondary education based on a number of factors. According to a December 2007 report from the U.S. Bureau of Labor Statistics, or BLS, occupations requiring a bachelor's or master's degree are expected to grow 17% and 19%, respectively, between 2006 and 2016, or nearly double the growth rate BLS has projected for occupations that do not require a postsecondary degree. Further, according to data published by the NCES, the 2006 median incomes for individuals 25 years or older with a bachelor's, master's and doctoral degree were 70%, 103% and 186% higher, respectively, than for a high school graduate (or equivalent) of the same age with no college education.

        Although obtaining a postsecondary education has significant benefits, many prospective students are discouraged from pursuing, and ultimately completing, an undergraduate or graduate degree program. According to a March 2008 NCES report, 67% of all individuals 25 years or older in the United States who have obtained a high school degree, or over 110 million individuals, have not completed a bachelor's degree or higher. We believe this is due to a number of factors, including:

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High tuition costs.  According to a March 2008 NCES report, tuition prices have increased at a compound annual growth rate of 7.4% and 7.2% for public and private institutions, respectively, over the past three decades, well in excess of the rate of inflation during this period. Many students are unable to afford such tuition prices and, as a result, elect not to pursue a postsecondary education.

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Restrictions on credit transferability.  According to a March 2008 NCES report, over 32 million individuals 25 years or older in the United States have completed some postsecondary education coursework but have not obtained a degree. These individuals typically seek to transfer credits for previously completed coursework when they re-enroll in a postsecondary degree program. However, institutions often do not allow new students to obtain full credit for prior coursework, forcing them to incur incremental expense and to commit additional time to complete a program.

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Personal and professional commitments.  Many postsecondary students, particularly working adults, must balance other personal and professional commitments while pursuing an education. As a result, these students often require significant scheduling flexibility, as well as an online delivery platform, to obtain the flexibility they require to complete a program.

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Inadequate community support network.  Students often seek, and in many cases require, a sense of student community and the associated support network to successfully complete their coursework. For some institutions, particularly those with limited direct interaction between students, these factors can be difficult to establish.

        We believe postsecondary institutions that effectively address these challenges not only access a broader segment of the overall postsecondary market, but also have the potential to expand the market opportunity and to include individuals who previously were discouraged from pursuing a postsecondary education.

Our Competitive Strengths

        We believe that we have the following competitive strengths:

        Attractive, differentiated value proposition for students.    We have designed our educational model to provide our students with a superior value proposition relative to other educational alternatives in the

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market. We believe our model allows us to attract more students, as well as to target a broader segment of the overall population. Our value proposition is based on the following:

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Affordable tuition.  We structure the tuition and fees for our programs to be below Title IV loan limits, permitting students who do not otherwise have the financial means to pursue an education the ability to gain access to our programs.

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High transferability of credits.  Based on our research, we believe we are one of six postsecondary education institutions in the United States, and the only for-profit provider, that accepts up to 99 transfer credits for a bachelor's degree program. Based on a recent review of our enrolled students, over 78% transferred in credits and 50% of those who transferred in credits transferred in 50 credits or more.

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Accessible educational model.  Our online delivery model, weekly start dates and commitment to affordability and the transferability of credits make our programs highly accessible.

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Heritage as a traditional university with a campus-based student community.  We believe that a strong sense of community and the familiarity associated with a traditional campus environment are important to recruiting and retaining students and differentiate us from many other online providers.

        Commitment to academic quality.    We are committed to providing our students with a rigorous and rewarding academic experience, which gives them the knowledge and experience necessary to be contributors, educators and leaders in their chosen professions. We seek to maintain a high level of quality in our curriculum, faculty and student support services. In a July 2008 survey we conducted, in which over 2,000 students responded, 98% indicated they would recommend Ashford University to others seeking a degree.

        Cost-efficient, scalable operating model.    We have designed our operating model to be cost-efficient, allowing us to offer a quality educational experience at an affordable tuition rate while still generating attractive operating margins. Additionally, we have developed our operating model to be scalable and to support a much larger student population than is currently enrolled.

        Experienced management team and strong corporate culture.    Our management team possesses extensive experience in postsecondary education, in many cases with other large online postsecondary providers. Andrew Clark, our Chief Executive Officer, served in senior management positions at such institutions for 12 years prior to joining us and has significant experience with online education businesses. Additionally, our executive management team has been critical to establishing and maintaining our corporate culture, which is based on four core values: integrity, ethics, service and accountability.

Our Growth Strategies

        We intend to pursue the following growth strategies:

        Focus on high-demand disciplines and degree programs.    We seek to offer programs in disciplines in which there is strong demand for education and significant opportunity for employment. Based on a March 2008 NCES report, programs in our disciplines represent 69% of total bachelor's degrees conferred by all postsecondary institutions in 2005-06.

        Increase enrollment in our existing programs through investment in marketing, recruiting and retention.    We have invested significant resources in developing processes and implementing technologies that allow us to effectively identify, recruit and retain qualified students. We intend to continue to invest in marketing, recruiting and retention and to expand our enrollment advisor workforce to increase enrollment in our existing programs.

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        Expand our portfolio of programs, specializations and concentrations.    We intend to continue to expand our academic offerings to attract a broader portion of the overall market. In addition to adding new programs in high-demand disciplines, we intend to enhance our programs through the addition of specializations and concentrations.

        Further develop strategic relationships in the military and corporate channels.    We intend to broaden our relationships with military and corporate employers, as well as seek additional relationships in these channels. Through our dedicated channel development teams, we are able to cost-effectively target specific segments of the market as well as better understand the needs of students in these segments.

        Deliver measurable academic outcomes and a positive student experience.    We are committed to offering an educational solution that supports measurable academic outcomes, thereby allowing our students to increase their probability of success in their chosen profession, while ensuring a positive student experience. We believe our combination of measurable outcomes and a positive experience is important to helping students persist through graduation.

Risk Factors

        Our business is subject to numerous risks. See "Risk Factors" beginning on page 11. In particular, our business would be adversely affected if:

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we fail to comply with the extensive regulatory framework applicable to our industry, including Title IV of the Higher Education Act and the regulations thereunder, state laws and regulatory requirements and accrediting agency requirements;

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we are unable to continue to develop awareness among, to recruit or to retain students;

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competition in the postsecondary education market negatively impacts our market share, recruiting cost or tuition rates;

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we experience damage to our reputation, or other adverse effects, in connection with any compliance audit, regulatory action, negative publicity or service disruption;

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we are unable to attract or retain the personnel needed to sustain and grow our business;

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we are unable to develop new programs or expand our existing programs in a timely and cost-effective manner; or

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adverse economic or other developments negatively impact demand in our core disciplines or the availability or cost of Title IV or other funding.

Corporate Information

        We were incorporated in Delaware in May 1999. Our principal executive offices are located at 13500 Evening Creek Drive North, Suite 600, San Diego, CA 92128, and our telephone number is (858) 668-2586. Our website is located at www.bridgepointeducation.com. The information on, or accessible through, our website does not constitute part of, and is not incorporated into, this prospectus.

Accreditation

        Ashford University and the University of the Rockies are accredited by the Higher Learning Commission of the North Central Association of Colleges and Schools, 30 N. LaSalle, Suite 2400, Chicago, Illinois 60602-2504, whose telephone number is (312) 263-0456. The Higher Learning Commission's website is located at www.ncahlc.org. The information on, or accessible through, the website of the Higher Learning Commission and the North Central Association of Colleges and Schools does not constitute part of, and is not incorporated into, this prospectus.

Industry Data

        We use market data and industry forecasts and projections throughout this prospectus, which we have obtained from market research, publicly available information and industry publications. These sources generally state that the information they provide has been obtained from sources believed to be reliable but that the accuracy and completeness of the information are not guaranteed. The forecasts and projections are based on industry surveys and on the preparers' experience in the industry as of the time they were prepared, and there is no assurance that any of the projected numbers will be reached. Similarly, we believe that the surveys and market research others have completed are reliable, but we have not independently verified their findings.

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The Offering

Common stock offered by us	shares
Common stock offered by the selling stockholders	shares
Total common stock offered	shares
Common stock outstanding after this offering	shares
Use of proceeds	We estimate the net proceeds to us from this offering will be $       million, based on an initial public offering price of $        per share, the midpoint of the range set forth on the cover of this prospectus. The holders of Series A Convertible Preferred Stock have advised us that they intend to optionally convert their shares of Series A Convertible Preferred Stock into shares of common stock immediately prior to the closing of this offering. Upon such conversion, in addition to receiving shares of common stock, the holders will be entitled to receive the accreted value of $                        on the Series A Convertible Preferred Stock, which the holders have advised us they will elect to receive in cash. This amount will be paid out of the net proceeds to us from this offering. The balance of net proceeds will be available for general corporate purposes. Pending the uses described above, we intend to invest the net proceeds in short-term, interest-bearing, investment-grade securities. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders. See "Use of Proceeds."
Risk factors	See "Risk Factors" for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.
Proposed New York Stock Exchange symbol	"BPI"

        The number of shares of common stock to be outstanding immediately after this offering excludes:

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shares of common stock issuable upon the exercise of warrants outstanding as of                  , 2009, at a weighted average exercise price of $            per share;

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shares of common stock issuable upon the exercise of options outstanding as of                  , 2009, at a weighted average exercise price of $            per share; and

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shares of common stock reserved for future issuance under our equity incentive plans.

        Unless otherwise stated, all information in this prospectus assumes:

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an initial public offering price of $        per share, the midpoint of the range set forth on the cover of this prospectus;

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a one-for-            split of our outstanding common stock to be effective prior to the consummation of this offering; and

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no exercise of the over-allotment option granted to the underwriters.

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Summary Consolidated Financial and Other Data

        The following tables present our summary consolidated financial and other data. You should read this information together with our consolidated financial statements, which are included elsewhere in this prospectus, and the information under "Management's Discussion and Analysis of Financial Condition and Results of Operations." The summary consolidated statement of operations data for the years ended December 31, 2005, 2006 and 2007, and the summary consolidated balance sheet data as of December 31, 2006 and 2007, have been derived from our audited consolidated financial statements, which are included elsewhere in this prospectus. The summary consolidated balance sheet data as of December 31, 2005, has been derived from our unaudited consolidated financial statements, which are not included in this prospectus. Historical results are not necessarily indicative of the results to be expected for future periods.

        The summary consolidated statement of operations data for each of the nine months ended September 30, 2007 and 2008, and the summary consolidated balance sheet data as of September 30, 2008, have been derived from our unaudited consolidated financial statements, which are included elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of our financial position and operating results for the unaudited periods.

			Year Ended December 31,									Nine Months Ended September 30,
			2005(1)			2006(1)			2007(1)			2007			2008(1)
			(Restated)			(Restated)			(Restated)						(Restated)
			(In thousands, except per share data)
Consolidated Statement of Operations Data:
Revenue			$	7,951		$	28,619		$	85,709		$	54,558		$	149,167
Costs and expenses:
	Instructional costs and services			5,498			12,510			29,837			19,154			42,050
	Marketing and promotional			4,078			12,214			35,997			24,532			54,490
	General and administrative			6,190			8,704			15,892			9,503			26,326
		Total costs and expenses		15,766			33,428			81,726			53,189			122,866
Operating income (loss)				(7,815	)		(4,809	)		3,983			1,369			26,301
Interest (income)				(38	)		(10	)		(12	)		(1	)		(195	)
Interest expense				228			351			544			332			197
Income (loss) before income taxes				(8,005	)		(5,150	)		3,451			1,038			26,299
Income tax expense				—			—			164			50			5,521
Net income (loss)				(8,005	)		(5,150	)		3,287			988			20,778
Accretion of preferred dividends(2)				1,344			1,718			1,856			1,392			1,503
Deemed dividend on redeemable convertible preferred stock(3)				11,162			—			—			—			—
Net income available (loss attributable) to common stockholders			$	(20,511	)	$	(6,868	)	$	1,431		$	(404	)	$	19,275
Earnings (loss) per common share
	Basic		$	(1.45	)	$	(0.48	)	$	0.00		$	(0.03	)	$	0.07
	Diluted		$	(1.45	)	$	(0.48	)	$	0.00		$	(0.03	)	$	0.02
Shares used in computing earnings (loss) per common share
	Basic			14,131			14,386			14,900			14,858			15,008
	Diluted			14,131			14,386			20,020			14,858			44,263

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		Year Ended December 31,				Nine Months Ended September 30,
		2005(1)	2006(1)	2007(1)		2007	2008(1)
		(Restated)	(Restated)	(Restated)			(Restated)
		(In thousands, except per share data)
Pro forma earnings per common share (unaudited)(4)
	Basic			$	0.02		$	0.10
	Diluted			$	0.01		$	0.08
Shares used in computing pro forma earnings per common share (unaudited)(4)
	Basic				216,524			216,632
	Diluted				221,645			245,887
Supplemental pro forma earnings per common share (unaudited)(5)
	Basic
	Diluted
Shares used in computing supplemental pro forma earnings per common share (unaudited)(5)
	Basic
	Diluted

	As of December 31,									As of September 30, 2008
	2005(1)			2006(1)			2007(1)			Actual			Pro forma as Adjusted(6)
	(Restated)			(Restated)			(Restated)
	(In thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	2,163		$	54		$	7,351		$	31,992		$
Total assets		14,749			17,091			39,057			94,470
Total indebtedness (including short-term indebtedness)		3,779			4,193			5,673			683
Redeemable convertible preferred stock		21,482			23,200			25,056			26,560
Total stockholders' equity (deficit)		(15,197	)		(21,692	)		(20,143	)		(744	)

		Year Ended December 31,									Nine Months Ended September 30,
		2005(1)			2006(1)			2007			2007			2008
		(Restated)			(Restated)
		(In thousands, except enrollment data)
Consolidated Other Data:
Capital expenditures		$	323		$	1,381		$	3,571		$	3,428		$	9,057
Depreciation and amortization			494			735			1,236			785			1,547
EBITDA(7) (unaudited)			(7,321	)		(4,074	)		5,219			2,154			27,848
Cash flows provided by (used in):
	Operating activities		(7,244	)		(1,082	)		10,367			1,662			39,353
	Investing activities		(8,020	)		(1,373	)		(2,936	)		(2,793	)		(9,723	)
	Financing activities		13,857			346			(134	)		2,448			(4,989	)
Period end enrollment:(8)
	Online		729			4,111			12,104			12,117			29,786
	Ground		334			360			519			599			761
	Total		1,063			4,471			12,623			12,716			30,547

(1)

Our consolidated financial statements have been restated. See Note 3, "Restatement of Consolidated Financial Statements," to our consolidated financial statements, which are included elsewhere in this prospectus.

8

(2)

The holders of Series A Convertible Preferred Stock earn preferred dividends, accreting at the rate of 8% per year, compounding annually. See Note 11, "Redeemable Convertible Preferred Stock (Series A Convertible Preferred Stock)," to our consolidated financial statements, which are included elsewhere in this prospectus.

(3)

We recorded a deemed dividend of $11.2 million for the beneficial conversion feature in our Series A Convertible Preferred Stock. (See Note 11 to our consolidated financial statements).

(4)

Pro forma basic earnings per share has been calculated assuming the optional conversion of all outstanding shares of our Series A Convertible Preferred Stock into shares of common stock, immediately prior to the closing of this offering, with each share of Series A Convertible Preferred Stock converting into 10.194210419 shares of common stock. See Note 11, "Redeemable Convertible Preferred Stock (Series A Convertible Preferred Stock)," to our consolidated financial statements, which are included elsewhere in this prospectus. Pro forma diluted earnings per share further includes the incremental shares of common stock issuable upon the exercise of dilutive stock options and warrants. See Note 10, "Earnings Per Share," to our consolidated financial statements, which are included elsewhere in this prospectus.

(5)

Supplemental pro forma basic earnings per share has been calculated assuming (i) the optional conversion of all outstanding shares of Series A Convertible Preferred Stock into shares of common stock immediately prior to the closing of this offering, with each share of Series A Convertible Preferred Stock converting into 10.194210419 shares of common stock, and (ii) the issuance of               shares of common stock at the assumed offering price of $        per share, the midpoint of the range set forth on the cover of this prospectus, necessary to fund the payment of the accreted value of $        on the Series A Convertible Preferred Stock to the holders thereof. See Note 11, "Redeemable Convertible Preferred Stock (Series A Convertible Preferred Stock)," to our consolidated financial statements, which are included elsewhere in this prospectus. Supplemental pro forma diluted earnings per share further includes the incremental shares of common stock issuable upon the exercise of stock options and warrants. See Note 10, "Earnings Per Share," to our consolidated financial statements, which are included elsewhere in this prospectus.

(6)

The pro forma as-adjusted consolidated balance sheet data as of September 30, 2008, gives effect to:

(i)

the optional conversion of all outstanding shares of Series A Convertible Preferred Stock into 201,624,486 shares of our common stock and the election prior to the closing of this offering by the holders of Series A Convertible Preferred Stock to also receive the accreted value of $                  on such shares subsequent to the closing; and

(ii)

the sale by us of                        shares of common stock in this offering, at an assumed initial public offering price of $                        per share, the midpoint of the range set forth on the cover of this prospectus, and after deducting underwriting discounts and commissions and estimated offering costs payable by us.

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share, the midpoint of the range set forth on the cover of this prospectus, would increase (decrease) cash, cash equivalents and short-term investments, total assets and stockholders' equity by $             million, assuming that the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting underwriting discounts and estimated offering expenses payable by us.

(7)

EBITDA is defined as net income (loss) plus interest expense, less interest income, plus income tax expense and plus depreciation and amortization. However, EBITDA is not a recognized measurement under accounting principles generally accepted in the United States of America, or GAAP, and when analyzing our operating performance, investors should use EBITDA in addition to, and not as an alternative for, net income, operating income or any other performance measure presented in accordance with GAAP. Because not all companies use identical calculations, our presentation of EBITDA may not be comparable to similarly titled measures of other companies.

We believe EBITDA is useful to investors in evaluating our operating performance because it is widely used to measure a company's operating performance without regard to items such as depreciation and amortization. Depreciation and amortization can vary depending on accounting methods and the book value of assets. We believe EBITDA presents a meaningful measure of

9

corporate performance exclusive of our capital structure and the method by which assets have been acquired.

Our management uses EBITDA:

•

as a measurement of operating performance, because it assists us in comparing our performance on a consistent basis, as it removes depreciation, amortization, interest and taxes; and

•

in presentations to our board of directors to enable our board to have the same measurement basis of operating performance as is used by management to compare our current operating results with corresponding prior periods and with results of other companies in our industry.

The following table provides a reconciliation of net income (loss) to EBITDA (unaudited):

	Year Ended December 31,									Nine Months Ended September 30,
	2005			2006			2007			2007			2008
	(Restated)			(Restated)
	(In thousands)
Net income (loss)	$	(8,005	)	$	(5,150	)	$	3,287		$	988		$	20,778
Plus: interest expense		228			351			544			332			197
Less: interest (income)		(38	)		(10	)		(12	)		(1	)		(195	)
Plus: income tax expense		—			—			164			50			5,521
Plus: depreciation and amortization		494			735			1,236			785			1,547
EBITDA	$	(7,321	)	$	(4,074	)	$	5,219		$	2,154		$	27,848

(8)

We define enrollments as the number of active students on the last day of the financial reporting period. A student is considered an active student if he or she has attended a class within the prior 30 days unless the student has graduated or has provided us with a notice of withdrawal.

10

RISK FACTORS

Investing in our common stock involves risk. Before making an investment in our common stock, you should carefully consider the following risks, as well as the other information contained in this prospectus, including our consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The risks described below are those which we believe are the material risks we face. Any of the risks described below could significantly and adversely affect our business, prospects, financial condition and results of operations. As a result, the trading price of our common stock could decline and you could lose part or all of your investment. Additional risks and uncertainties not presently known to us or not believed by us to be material could also impact us.

Risks Related to the Extensive Regulation of Our Business

If our schools fail to comply with extensive regulatory requirements, we could face monetary liabilities or penalties, restrictions on our operations or growth or loss of access to federal loans and grants for our students on which we are substantially dependent.

        In 2007, Ashford University derived 83.9% and the University of the Rockies derived 61.9% of their respective revenues (in each case calculated on a cash basis in accordance with applicable Department of Education regulations) from federal student financial aid programs, referred to in this prospectus as Title IV programs, administered by the Department of Education. To participate in Title IV programs, a school must be legally authorized to operate in the state in which it is physically located, accredited by an accrediting agency recognized by the Secretary of the Department of Education as a reliable indicator of educational quality and certified as an eligible institution by the Department of Education. See "Regulation." As a result, we are subject to extensive regulation by state education agencies, our accrediting agency and the Department of Education. These regulatory requirements cover many aspects of our operations, including our educational programs, facilities, instructional and administrative staff, administrative procedures, marketing, recruiting, financial operations and financial condition. These regulatory requirements can also affect our ability to acquire or open additional schools, to add new or expand existing educational programs, to change our corporate structure or ownership and to make other substantive changes. The state education agencies, our accrediting agency and the Department of Education periodically revise their requirements and modify their interpretations of existing requirements.

        If one of our institutions fails to comply with any of these regulatory requirements, the Department of Education can impose sanctions including:

•

transferring the institution to the heightened cash monitoring level two method of payment or to the reimbursement method of payment, which would adversely affect the timing of the institution's receipt of Title IV funds;

•

requiring the institution to post a letter of credit in favor of the Department of Education as a condition for continued Title IV certification;

•

imposing monetary liability against the institution in an amount equal to any funds determined to have been improperly disbursed;

•

initiating proceedings to impose a fine or to limit, suspend or terminate the institution's participation in Title IV programs;

•

taking emergency action to suspend the institution's participation in Title IV programs without prior notice or a prior opportunity for a hearing;

•

failing to grant the institution's application for renewal of its certification to participate in Title IV programs; or

•

referring a matter for possible civil or criminal investigation.

11

In addition, the agencies that guarantee Title IV private lender loans for our students could initiate proceedings to limit, suspend or terminate our ability to obtain guarantees of our students' loans through that agency. If sanctions were imposed resulting in a substantial curtailment or termination of our participation in Title IV programs, our enrollments, revenues and results of operations would be materially adversely affected. Additionally, if administrative proceedings were initiated alleging regulatory violations, or seeking to impose any such sanctions, or if a third party were to initiate judicial proceedings alleging such violations, the mere existence of such proceedings could damage our reputation. We cannot predict with certainty how all of these regulatory requirements will be applied or whether we will be able to comply with all of the requirements. We have described some of the most significant regulatory risks that apply to us in the following paragraphs.

        Because we operate in a highly regulated industry, we are also subject to compliance reviews and claims of non-compliance and lawsuits by government agencies, regulatory agencies and third parties, including claims brought by third parties on behalf of the federal government under the federal False Claims Act. If the results of these reviews or proceedings are unfavorable to us or if we are unable to defend successfully against such lawsuits or claims, we may be required to pay money damages or be subject to fines, limitations, loss of Title IV funding, injunctions or other penalties. Even if we adequately address issues raised by an agency review or successfully defend a lawsuit or claim, we may have to divert significant financial and management resources from our ongoing business operations to address issues raised by those reviews or to defend against those lawsuits or claims. Claims and lawsuits brought against us may damage our reputation or adversely affect our stock price, even if such claims and lawsuits are eventually determined to be without merit.

We must periodically seek recertification to participate in Title IV programs and may, in certain circumstances, be subject to review by the Department of Education prior to seeking recertification.

        An institution that is certified to participate in Title IV programs must periodically seek recertification from the Department of Education to continue participating in such programs, including when it undergoes a change of control as defined by the Department of Education. Our current provisional certification for Ashford University is scheduled to expire on June 30, 2011. Our current provisional certification for the University of the Rockies is scheduled to expire on September 30, 2010. The Department of Education may also review our schools' continued certification to participate in Title IV programs if we undergo a change of control. In addition, the Department of Education may take emergency action to suspend an institution's certification without advance notice if it determines the institution is violating Title IV requirements and determines that immediate action is necessary to prevent misuse of Title IV funds. If the Department of Education did not renew or if it withdrew our schools' certifications to participate in Title IV programs, our students would no longer be able to receive Title IV funds, which would have a material adverse effect on our enrollment, revenues and results of operations.

Congress may change the eligibility standards or reduce funding for Title IV programs.

        The Higher Education Act, which is the federal law that governs Title IV programs, must be periodically reauthorized by Congress, typically every five to six years. The Higher Education Act was most recently reauthorized in August 2008, continuing Title IV programs through at least September 30, 2014. In addition, Congress must determine funding levels for Title IV programs on an annual basis and can change the laws governing Title IV programs at any time. Political and budgetary concerns significantly affect Title IV programs. Because a significant percentage of our revenue is derived from Title IV programs, any action by Congress that significantly reduces Title IV program funding, or reduces our ability or the ability of our students to participate in Title IV programs, would have a material adverse effect on our enrollment, revenues and results of operations. Congressional

12

action could also require us to modify our practices in ways that could increase our administrative and regulatory costs.

Our failure to maintain institutional accreditation would result in a loss of eligibility to participate in Title IV programs.

        An institution must be accredited by an accrediting agency recognized by the Department of Education in order to participate in Title IV programs. Each of our schools is accredited by the Higher Learning Commission of the North Central Association of Colleges and Schools, which is recognized by the Department of Education as a reliable authority regarding the quality of education and training provided by the institutions it accredits. Ashford University was reaccredited by the Higher Learning Commission in 2006 for a term of ten years, and the University of the Rockies was reaccredited by the Higher Learning Commission in 2008 for a term of seven years. The Higher Learning Commission has scheduled a visit for Ashford University for the 2009-10 academic year to review financial performance and the outcomes of the newly approved prior learning assessments and the increase in transfer credits. The Higher Learning Commission has scheduled Ashford University for a comprehensive evaluation during the 2016-17 academic year in connection with the next regularly scheduled accreditation renewal process. The Higher Learning Commission has scheduled the University of the Rockies for a comprehensive evaluation during the 2015-16 academic year in connection with the next regularly scheduled accreditation renewal process. To remain accredited, we must continuously meet accreditation standards relating to, among other things, performance, governance, institutional integrity, educational quality, faculty, administrative capability, resources and financial stability. If either of our institutions fails to satisfy any of the Higher Learning Commission's standards, it could lose its accreditation. Loss of accreditation would denigrate the value of our institutions' educational programs and would cause them to lose their eligibility to participate in Title IV programs, which would have a material adverse effect on our enrollments, revenues and results of operations.

If one of our schools does not maintain necessary state authorization, it may not operate or participate in Title IV programs.

        To participate in Title IV programs, a school must be authorized by the relevant education agency of the state in which it is physically located.

•

Ashford University is located in the State of Iowa and is exempt from having to register as a postsecondary school with the Iowa Secretary of State. Such exemption may be lost or withdrawn if Ashford University fails to comply with requirements under Iowa law for continued exemption.

•

The University of the Rockies is located in the State of Colorado and is authorized by the Colorado Commission on Higher Education. Such authorization may be lost or withdrawn if the University of the Rockies fails to submit renewal applications and other required submissions to the state in a timely manner or if the University of the Rockies fails to comply with requirements under Colorado statutes and rules for continued authorization.

Loss of state authorization by one of our schools in the state in which it is physically located would terminate our ability to provide educational services through such school, as well as make such school ineligible to participate in Title IV programs, which would have a material adverse effect on our enrollments, revenues and results of operations.

13

The Department of Education's Office of Inspector General has commenced a compliance audit of Ashford University which is ongoing, and which could result in repayment of Title IV funds, interest, fines, penalties, remedial action, damage to our reputation in the industry or a limitation on, or a termination of, our participation in Title IV programs.

        The Department of Education's Office of Inspector General (OIG) is responsible for promoting the effectiveness and integrity of the Department of Education's programs and operations. With respect to educational institutions that participate in Title IV programs, the OIG conducts its work primarily through an audit services division and an investigations division. The audit services division typically conducts general audits of schools to assess their administration of federal funds in accordance with applicable rules and regulations. The investigation services division typically conducts focused investigations of particular allegations of fraud, abuse or other wrongdoing against schools by third parties, such as a lawsuit filed under seal pursuant to the federal False Claims Act.

        The OIG audit services division is conducting a compliance audit of Ashford University which commenced in May 2008. The period under audit is the Title IV award year commencing on July 1, 2006. Based on our conversations with the OIG, we believe it will issue a draft audit report sometime in the first half of 2009 to which we will have an opportunity to respond. We expect that the OIG will not issue a final audit report until several months thereafter. The final audit report would include any findings and any recommendations to the Department of Education's Federal Student Aid office based on those findings. If the OIG identifies findings of noncompliance in its final report, the OIG could recommend remedial actions to the office of Federal Student Aid, which would determine what action to take, if any. Such action could include requiring Ashford University to refund federal student aid funds or modify its Title IV administration procedures, imposing fines, limiting, suspending or terminating its Title IV participation or taking other remedial action. Because of the ongoing nature of the OIG audit, we cannot predict with certainty the ultimate extent of the draft or final audit findings or recommendations or the potential liability or remedial actions that might result. See "Risk Factors—Risks Related to the Extensive Regulation of Our Business—If our schools fail to comply with extensive regulatory requirements, we could face monetary liabilities or penalties, restrictions on our operations or growth or loss of access to federal loans and grants for our students on which we are substantially dependent."

The failure of our schools to demonstrate financial responsibility may result in a loss of eligibility to participate in Title IV programs or require the posting of a letter of credit in order to maintain eligibility to participate in Title IV programs.

        To participate in Title IV programs, an eligible institution must, among other things, satisfy specific measures of financial responsibility prescribed by the Department of Education or post a letter of credit in favor of the Department of Education and possibly accept other conditions to the institution's participation in Title IV programs. The measures of financial responsibility include a minimum composite score of 1.5. The composite score is derived from the institution's or its parent's audited, fiscal-year-end financial statements and is calculated annually by the Department of Education for each participating institution, as described in "Regulation—Regulation of Federal Student Financial Aid Programs—Financial responsibility." If such composite score does not meet or exceed 1.5, the Department of Education may require the institution to post a letter of credit in favor of the Department of Education and possibly accept other conditions on its participation in Title IV programs.

        For the year ended December 31, 2007, our composite score of 0.6 did not meet the 1.5 standard prescribed by the Department of Education and Ashford University was required to post a letter of credit in favor of the Department of Education equal to 10% of total Title IV funds received in 2007, to accept provisional certification to participate in Title IV programs and to conform to the regulations of heightened cash monitoring level one method of payment. Under the heightened cash monitoring level one method of payment, Ashford University may not draw down Title IV funds until the day it

14

disburses them to its students. Ashford University has posted the required letter of credit in the amount of $12.1 million, which will remain in effect through September 30, 2009.

        For the fiscal year ended July 31, 2006, the University of the Rockies did not meet the composite score standard prescribed by the Department of Education and was required to post a letter of credit in favor of the Department of Education equal to 30% of total Title IV funds received in the fiscal year ending July 31, 2007, to accept provisional certification to participate in Title IV programs and to conform to the regulations of heightened cash monitoring level one method of payment. The University of the Rockies has posted the required letter of credit in the amount of $0.7 million, which will remain in effect through June 30, 2009.

        If either Ashford University or the University of the Rockies were unable to secure the required letter of credit, it would lose its eligibility to participate in Title IV programs, which would have a material adverse effect on our enrollments, revenues and results of operations.

The failure of our schools to demonstrate administrative capability may result in a loss of eligibility to participate in Title IV programs.

        Department of Education regulations specify extensive criteria by which an institution must establish that it has the requisite administrative capability to participate in Title IV programs. To meet the administrative capability standards, an institution must, among other things:

•

comply with all applicable Title IV program requirements;

•

have an adequate number of qualified personnel to administer Title IV programs;

•

have acceptable standards for measuring the satisfactory academic progress of its students;

•

have various procedures in place for awarding, disbursing and safeguarding Title IV funds and for maintaining required records;

•

administer Title IV programs with adequate checks and balances in its system of internal control over financial reporting;

•

not be, and not have any principal or affiliate who is, debarred or suspended from federal contracting or engaging in activity that is cause for debarment or suspension;

•

provide financial aid counseling to its students;

•

refer to the OIG any credible information indicating that any student, parent, employee, third-party servicer or other agent of the institution has engaged in any fraud or other illegal conduct involving Title IV programs;

•

submit all required reports and financial statements in a timely manner; and

•

not otherwise appear to lack administrative capability.

If an institution fails to satisfy any of these criteria or comply with any other Department of Education regulations, the Department of Education may impose sanctions including:

•

transferring the institution to the heightened cash monitoring level two method of payment or to the reimbursement method of payment, which would adversely affect the timing of the institution's receipt of Title IV funds;

•

requiring the institution to post a letter of credit in favor of the Department of Education as a condition for continued Title IV certification;

15

•

imposing a monetary liability against the institution in an amount equal to any funds determined to have been improperly disbursed;

•

initiating proceedings to impose a fine or to limit, suspend or terminate the institution's participation in Title IV programs;

•

taking emergency action to suspend the institution's participation in Title IV programs without prior notice or a prior opportunity for a hearing;

•

failing to approve the institution's application for renewal of its certification to participate in Title IV programs; or

•

referring a matter for possible civil or criminal investigation.

If we are found not to have satisfied the Department of Education's administrative capability requirements, we could be limited in our access to, or lose, Title IV program funding, which would have a material adverse effect on our enrollments, revenues and results of operations.

We are subject to sanctions if we fail to correctly calculate and return Title IV program funds in a timely manner for students who withdraw before completing their educational program.

        An institution participating in Title IV programs must correctly calculate the amount of unearned Title IV program funds that have been disbursed to students who withdraw from their educational programs before completion and must return those unearned funds in a timely manner, generally within 45 days of the date the school determines that the student has withdrawn. Under Department of Education regulations, failure to make timely returns of Title IV program funds for 5% or more of students sampled on the institution's annual compliance audit can result in an institution's having to post a letter of credit in an amount equal to 25% of its prior year Title IV returns. If unearned funds are not properly calculated and returned in a timely manner, an institution is also subject to monetary liabilities or an action to impose a fine or to limit, suspend or terminate its participation in Title IV programs.

        For the year ended December 31, 2007, Ashford University exceeded the 5% threshold for late refunds sampled due to human error. As a result, we are subject to the requirement to post a letter of credit in favor of the Department of Education equal to 25% of the total refunds in 2007. Ashford University notified the Department of Education of its intention to post this letter of credit, but was advised by the Department of Education that such posting was unnecessary because we had already posted a letter of credit due to our failure to meet the composite score standard, which letter of credit was in excess of the amount required for late refunds. Although we have taken steps to reduce late refunds, we cannot ensure that such steps will be sufficient to address this issue.

Our schools may be sanctioned if they pay impermissible commissions, bonuses or other incentive payments to individuals involved in certain recruiting, admissions or financial aid awarding activities.

        An institution that participates in Title IV programs may not provide any commission, bonus or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any person or entity engaged in any student recruitment, admissions or financial aid awarding activity. Although the Department of Education's regulations set forth 12 "safe harbors" which describe compensation arrangements that do not violate the incentive compensation rule, including the payment and adjustment of salaries and bonuses under certain conditions, the law and regulations do not establish clear criteria for compliance in all circumstances, and the Department of Education no longer reviews and approves compensation plans prior to their implementation. If one of our institutions were to violate the incentive compensation rule, it would be subject to monetary liabilities or to administrative action to impose a fine or to limit, suspend or terminate its eligibility to participate in

16

Title IV programs, which would have a material adverse effect on our enrollments, revenues and results of operations.

We may lose our eligibility to participate in Title IV programs if the percentage of our revenue derived from those programs is too high.

        Pursuant to a provision of the Higher Education Act, as reauthorized in August 2008, a for-profit institution loses its eligibility to participate in Title IV programs if the institution derives more than 90% of its revenues (calculated on a cash basis in accordance with applicable Department of Education regulations) from Title IV funds for two consecutive fiscal years, commencing with the institution's first fiscal year that ends after the new law's effective date of August 14, 2008. This rule is commonly referred to as the "90/10 rule." Any institution that violates the 90/10 rule becomes ineligible to participate in Title IV programs for at least two fiscal years. In addition, an institution whose rate exceeds 90% for any single year will be placed on provisional certification and may be subject to other enforcement measures.

        In 2007, Ashford University derived 83.9% and the University of the Rockies derived 61.9% of their respective revenues (calculated on a cash basis in accordance with applicable Department of Education regulations) from Title IV funds. Ineligibility to participate in Title IV programs would have a material adverse effect on our enrollments, revenues and results of operations. Recent changes in federal law which increased Title IV grant and loan limits, and any additional increases in the future, may result in an increase in the revenues we receive from Title IV programs, which could make it more difficult for us to satisfy the 90/10 rule. A provision in the rule allows institutions to exclude (for three years) from their Title IV revenues the additional $2,000 per student in certain annual federal student loan amounts that became available starting in July 2008. Following this period, it is unclear if this revenue will be excluded, and it could therefore impact our ability to satisfy the 90/10 rule.

We may lose our eligibility to participate in Title IV programs if our student loan default rates are too high.

        For each federal fiscal year, the Department of Education calculates a rate of student defaults for each educational institution which is known as a "cohort default rate." An institution may lose its eligibility to participate in some or all Title IV programs if, for each of the three most recent federal fiscal years, 25% or more of its students who became subject to a repayment obligation in that federal fiscal year defaulted on such obligation by the end of the following federal fiscal year. In addition, an institution may lose its eligibility to participate in some or all Title IV programs if its cohort default rate exceeds 40% in the most recent federal fiscal year for which default rates have been calculated by the Department of Education. Ashford University's cohort default rates for the 2004, 2005 and 2006 federal fiscal years, the three most recent years for which information is available, were 2.4%, 4.1% and 4.1%, respectively. The cohort default rates for the University of the Rockies for the 2004, 2005 and 2006 federal fiscal years, the three most recent years for which information is available, were 5.5%, 0.0% and 0.0%, respectively.

        The August 2008 reauthorization of the Higher Education Act includes significant revisions to the requirements concerning cohort default rates. Under the revised law, the period for which students' defaults on their loans are included in the calculation of an institution's cohort default rate has been extended by one additional year, which is expected to increase the cohort default rates for most institutions. That change will be effective with the calculation of institutions' cohort default rates for the federal fiscal year ending September 30, 2009, which rates are expected to be calculated and issued by the Department of Education in 2012. The Department of Education will not impose sanctions based on rates calculated under this new methodology until three consecutive years of rates have been calculated, which is expected to occur in 2014. Until that time, the Department of Education will continue to calculate rates under the old calculation method and impose sanctions based on those rates. The revised law also increases the threshold for ending an institution's participation in the

17

relevant Title IV programs from 25% to 30%, effective in the federal fiscal year 2012. Ineligibility to participate in Title IV programs would have a material adverse effect on our enrollments, revenues and results of operations.

Our failure to comply with regulations of various states could preclude us from recruiting or enrolling students in those states.

        Various states impose regulatory requirements on educational institutions operating within their boundaries. Several states have sought to assert jurisdiction over online educational institutions that have no physical location or other presence in the state but that offer educational services to students who reside in the state or that advertise to or recruit prospective students in the state. State regulatory requirements for online education are inconsistent between states and are not well developed in many jurisdictions. As such, these requirements are subject to change and in some instances are unclear or are left to the discretion of state employees or agents. Our changing business and the constantly changing regulatory environment require us to regularly evaluate our state regulatory compliance activities. If we are found not to be in compliance and a state seeks to restrict one or more of our business activities within that state, we may not be able to recruit students from that state and may have to cease recruiting or enrolling students in that state.

        Although the only state authorizations required for Ashford University and the University of the Rockies to participate in Title IV programs are the exemption for Ashford University in the State of Iowa and the University of the Rockies' authorization from the Colorado Commission of Higher Education, the loss of licensure or authorization in other states, or the assertion by other states that licensure is required within their states, could prohibit us from recruiting or enrolling students in those states.

If a substantial number of our students cannot secure Title IV loans as a result of decreased lender participation in Title IV programs or if lenders increase the costs or reduce the benefits associated with the Title IV loans they provide, we could be materially adversely affected.

        The cumulative impact of recent regulatory and market developments has caused some lenders, including some lenders that have previously provided Title IV loans to our students, to cease providing Title IV loans to students. Other lenders have reduced the benefits and increased the fees associated with the Title IV loans they do provide. In addition, the new regulatory refinements may result in higher administrative costs for schools, including us. If the costs of Title IV loans increase or if availability decreases, some students may decide not to enroll in a postsecondary institution, which could have a material adverse effect on our enrollments, revenues and results of operations. In May 2008, new federal legislation was enacted to attempt to ensure that all eligible students will be able to obtain Title IV loans in the future and that a sufficient number of lenders will continue to provide Title IV loans. Among other things, the new legislation:

•

authorizes the Department of Education to purchase Title IV loans from lenders, thereby providing capital to the lenders to enable them to continue making Title IV loans to students; and

•

permits the Department of Education to designate institutions eligible to participate in a "lender of last resort" program, under which federally recognized student loan guaranty agencies will be required to make Title IV loans to all otherwise eligible students at those institutions.

We cannot predict whether this legislation will be effective in ensuring students' access to Title IV loan funding through private lenders.

18

If regulators do not approve or if they delay their approval of transactions involving a change of control of our company, our ability to participate in Title IV programs may be impaired.

        If we experience a change of control under the standards of applicable state education agencies, the Higher Learning Commission or the Department of Education, we must seek the approval of each relevant regulatory agency. The failure of one of our schools to reestablish its state authorization, Higher Learning Commission accreditation or Department of Education certification following a change in control could result in a suspension or loss of operating authority or ability to participate in Title IV programs, which would have a material adverse effect on our enrollments, revenues and results of operations. Transactions or events that constitute a change of control include significant acquisitions or dispositions of an institution's common stock and significant changes in the composition of an institution's board of directors.

        Immediately prior to this offering, Warburg Pincus beneficially owned    % of our outstanding common stock on an as-if-converted basis. Immediately after the closing of this offering, Warburg Pincus will beneficially own    % of our outstanding common stock. We have received confirmation from the Department of Education, that this offering will not constitute a change in control. We also intend to seek, before the closing of this offering, confirmation from the Higher Learning Commission and applicable state agencies whether this offering will constitute a change in control under their respective standards and what is required if any such agency does consider the offering to constitute a change in control. If any of those agencies deem this offering to be a change in control, we would have to apply for and obtain approval from that agency, in some cases in advance of this offering, according to its procedures.

        If, following the offering, the beneficial ownership of Warburg Pincus falls below 25%, or if other events occur that cause us to file a current report on Form 8-K disclosing a change of control, the Department of Education will deem a change of control to have occurred. The potential adverse effects of a change of control with respect to participation in Title IV programs could influence future decisions by us and our stockholders regarding the sale, purchase, transfer, issuance or redemption of our common stock. The adverse regulatory effect of a change of control could also discourage bids for shares of our common stock and could have an adverse effect on the market price of our common stock.

We cannot offer new programs, expand our physical operations into certain states or acquire additional schools if such actions are not approved in a timely fashion by the applicable regulatory agencies, and we may have to repay Title IV funds disbursed to students enrolled in any such programs, states or acquired schools if we do not obtain prior approval.

        Our expansion efforts include offering new educational programs, some of which may require regulatory approval. In addition, we may increase our physical operations in additional states and seek to acquire additional schools. If we are unable to obtain the necessary approvals for such new programs, operations or acquisitions from the Department of Education, the Higher Learning Commission or any applicable state education agency or other accrediting agency, or if we are unable to obtain such approvals in a timely manner, our ability to consummate the planned actions and provide Title IV funds to any affected students would be impaired, which could have a material adverse effect on our expansion plans. If we were to determine erroneously that any such action did not need approval or had all required approvals, we could be liable for repayment of the Title IV program funds provided to students in that program or at that location.

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Our regulatory environment and our reputation may be negatively influenced by the actions of other postsecondary institutions.

        In recent years, regulatory investigations and civil litigation have been commenced against several postsecondary educational institutions. These investigations and lawsuits have alleged, among other things, deceptive trade practices and non-compliance with Department of Education regulations. These allegations have attracted adverse media coverage and have been the subject of federal and state legislative hearings. Although the media, regulatory and legislative focus has been primarily on the allegations made against these specific companies, broader allegations against the overall postsecondary sector may negatively impact public perceptions of postsecondary educational institutions, including Ashford University and the University of the Rockies. Such allegations could result in increased scrutiny and regulation by the Department of Education, Congress, accrediting bodies, state legislatures or other governmental authorities on all postsecondary institutions, including us.

Risks Related to Our Business

Our financial performance depends on our ability to continue to develop awareness among, to recruit and to retain students.

        Building awareness among potential students of Ashford University and the University of the Rockies and the programs we offer is critical to our ability to attract prospective students. It is also critical to our success that we convert these prospective students to enrolled students in a cost-effective manner and that these enrolled students remain active in our programs. Some of the factors that could prevent us from successfully recruiting and retaining students in our programs include:

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the emergence of more and better competitors;

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factors related to our marketing efforts, including the costs of Internet advertising and broad-based branding campaigns;

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performance problems with our online systems;

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failure to maintain accreditation and eligibility for Title IV programs;

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student dissatisfaction with our services and programs;

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a decrease in the perceived or actual economic benefits that students derive from our programs;

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adverse publicity regarding us or online or postsecondary education generally;

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price reductions by competitors that we are unwilling or unable to match; and

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a decline in the acceptance of online education.

Strong competition in the postsecondary education market, especially in the online education market, could decrease our market share, increase our cost of recruiting students and put downward pressure on our tuition rates.

        Postsecondary education is highly competitive. We compete with traditional public and private two- and four-year colleges as well as with other postsecondary schools. Traditional colleges and universities may offer programs similar to ours at lower tuition levels as a result of government subsidies, government and foundation grants, tax-deductible contributions and other financial sources not available to for-profit postsecondary institutions. In addition, some of our competitors, including both traditional colleges and universities, have substantially greater brand recognition and financial and other resources than we have, which may enable them to compete more effectively for potential students. We also expect to face increased competition as a result of new entrants to the online education market,

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including traditional colleges and universities that had not previously offered online education programs.

        We may not be able to compete successfully against current or future competitors and may face competitive pressures that could adversely affect our business. We may be required to reduce our tuition or increase spending in order to retain or to attract students or to pursue new market opportunities. We may also face increased competition in maintaining and developing new marketing relationships with corporations, particularly as corporations become more selective as to which online universities they will encourage their employees to attend and from which they will hire prospective employees.

System disruptions and vulnerability from security risks to our technology infrastructure could impact our ability to generate revenue and could damage the reputation of our institutions.

        The performance and reliability of our technology infrastructure is critical to our reputation and to our ability to attract and retain students. We license the software and related hosting and maintenance services for our online platform from Blackboard, Inc. and the software and related maintenance services for our student information system from Campus Management Corp., both of whom are third-party software and service providers. Additionally, we develop and utilize proprietary software, primarily for our customer relationship management, or CRM, system. Any system error or failure, or a sudden and significant increase in bandwidth usage, could result in the unavailability of systems to us or our students.

        Our computer networks may also be vulnerable to unauthorized access, computer hackers, computer viruses and other security problems. A user who circumvents security measures could misappropriate proprietary information or cause interruptions or malfunctions in operations. As a result, we may be required to expend significant resources to protect against this threat. Although we continually monitor the security of our technology infrastructure, we cannot assure you that these efforts will protect our computer networks against the threat of security breaches.

We may not be able to retain our key personnel or hire and retain the personnel we need to sustain and grow our business.

        Our success depends largely on the skills, efforts and motivations of our executive officers, who generally have significant experience with our company and within the education industry. Due to the nature of our business, we face significant competition in attracting and retaining personnel who possess the skill sets we seek. In addition, key personnel may leave us and may subsequently compete against us. We do not carry life insurance on our key personnel for our benefit. The loss of the services of any of our key personnel, or our failure to attract and retain other qualified and experienced personnel on acceptable terms, could impair our ability to sustain and grow our business. In addition, because we operate in a highly competitive industry, our hiring of qualified executives or other personnel may cause us or such persons to be subject to lawsuits alleging misappropriation of trade secrets, improper solicitation of employees or other claims.

If we are unable to hire and to continue to develop new and existing employees responsible for student recruitment, the effectiveness of our student recruiting efforts would be adversely affected.

        To support our planned enrollment and revenue growth, we intend to (i) hire, develop and train a significant number of additional employees responsible for student recruitment and (ii) retain and continue to develop and train our current student recruitment personnel. Our ability to develop and maintain a strong student recruiting function may be affected by a number of factors, including our ability to integrate and motivate our enrollment advisors, our ability to effectively train our enrollment advisors, the length of time it takes new enrollment advisors to become productive, regulatory

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restrictions on the method of compensating enrollment advisors and the competition in hiring and retaining enrollment advisors.

We have identified material weaknesses in our internal control over financial reporting which, if not remediated, could cause us to fail to timely and accurately report our financial results or prevent fraud, result in restatements of our consolidated financial statements and could subject our stock to delisting. As a consequence, stockholders could lose confidence in our financial reporting and our stock price could suffer.

        In connection with the preparation of the consolidated financial statements included elsewhere in this prospectus, we concluded that there were material weaknesses in our internal control over financial reporting. A material weakness is a control deficiency, or combination of deficiencies, that results in more than a remote likelihood that a material misstatement of our financial statements would not be prevented or detected on a timely basis by our employees in the normal course of performing their assigned functions. In particular, we concluded that we did not have:

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sufficient personnel with an appropriate level of accounting knowledge, experience and training in the selection and application of technical accounting principles in accordance with GAAP to support our financial accounting and reporting functions; or

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effective controls over the selection, application and monitoring of accounting policies related to leasing transactions, revenue recognition, stock-based compensation, redeemable convertible preferred stock, earnings per share and purchase accounting to ensure that such transactions were accounted for in conformity with GAAP.

See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Internal Control Over Financial Reporting." In addition, we restated our consolidated financial statements, in part due to inadequate internal controls. See Note 3, "Restatement of Consolidated Financial Statements," to our consolidated financial statements, which are included elsewhere in this prospectus, and footnote 9 and 10 to the tables in "Selected Consolidated Financial and Other Data."

        As a public company, we will be required to file annual and quarterly reports containing our consolidated financial statements and will be subject to the requirements and standards set by set by the Securities and Exchange Commission (SEC), the Public Company Accounting Oversight Board (PCAOB) and the New York Stock Exchange (NYSE). If we fail to remediate our material weaknesses or to otherwise develop and maintain adequate internal control over financial reporting, we could fail to timely and accurately report our financial results or prevent fraud, have to restate our financial statements or have our stock delisted. Any such failure could also adversely affect the results of periodic management evaluations regarding the effectiveness of our internal control over financial reporting that will be required when the SEC's rules under Section 404 of the Sarbanes-Oxley Act of 2002 become applicable to us beginning with our annual report on Form 10-K for the year ending December 31, 2010. As a result, stockholders could lose confidence in our financial reporting and our stock price could suffer.

        Although we are in the process of remediating these material weaknesses, we have not yet been able to complete our remediation efforts. It will take additional time and expenditures to design, implement and test the controls and procedures required to enable our management to conclude that our internal control over financial reporting is effective. We cannot at this time estimate how long it will take to complete our remediation efforts, and we cannot assure you that measures we plan to take will be effective in mitigating or preventing significant deficiencies or material weaknesses in our internal control over financial reporting.

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A decline in the overall growth of enrollment in postsecondary institutions, or in the number of students seeking degrees in our core disciplines, could cause us to experience lower enrollment at our schools.

        We have experienced significant growth since we acquired Ashford University in 2005. However, while we have continued to achieve growth in revenues and enrollment year-over-year, these growth rates have declined in recent periods and are expected to continue to decline in the future. According to a September 2008 report from the National Center for Education Statistics, enrollment in degree-granting, postsecondary institutions is projected to grow 12.0% over the ten-year period ending in the fall of 2016 to 19.9 million. This growth is slower than the 23.6% increase reported in the prior ten-year period ended in the fall of 2006, when enrollment increased from 14.4 million in 1996 to 17.8 million in 2006. In addition, according to a March 2008 report from the Western Interstate Commission for Higher Education, the number of high school graduates that are eligible to enroll in degree-granting, postsecondary institutions is expected to peak at 3.3 million for the class of 2008 and decline by 150,000 for the class of 2014. In order to maintain current growth rates, we will need to attract a larger percentage of students in existing markets and expand our markets by creating new academic programs. In addition, if job growth in the fields related to our core disciplines is weaker than expected, fewer students may seek the types of degrees that we offer.

Our success depends in part on our ability to update and expand the content of existing programs and to develop new programs, concentrations and specializations on a timely basis and in a cost-effective manner.

        The updates and expansions of our existing programs and the development of new programs, concentrations and specializations may not be accepted by existing or prospective students or employers. If we do not adequately respond to changes in market requirements, our business will be adversely affected. Even if we are able to develop acceptable new programs, we may not be able to introduce these new programs as quickly as students require or as quickly as our competitors introduce competing programs. To offer a new academic program, we may be required to obtain appropriate federal, state and accrediting agency approvals, which may be conditioned or delayed in a manner that could significantly affect our growth plans. In addition, to be eligible for federal student financial aid programs, a new academic program may need to be approved by the Department of Education.

        Establishing new academic programs or modifying existing programs requires us to make investments in management and capital expenditures, incur marketing expenses and reallocate other resources. We may have limited experience with the programs in new disciplines and may need to modify our systems and strategy or enter into arrangements with other educational institutions to provide new programs effectively and profitably. If we are unable to increase enrollment in new programs, offer new programs in a cost-effective manner or are otherwise unable to manage effectively the operations of newly established academic programs, our revenues and results of operations could be adversely affected.

Our failure to keep pace with changing market needs could harm our ability to attract students.

        Our success depends to a large extent on the willingness of employers to hire, promote or increase the pay of our graduates. Increasingly, employers demand that their new employees possess appropriate technical and analytical skills and also appropriate interpersonal skills, such as communication and teamwork. These skills can evolve rapidly in a changing economic and technological environment. Accordingly, it is important that our educational programs evolve in response to those economic and technological changes.

        The expansion of existing academic programs and the development of new programs may not be accepted by current or prospective students or by the employers of our graduates. Even if we develop acceptable new programs, we may not be able to begin offering those new programs in a timely fashion or as quickly as our competitors offer similar programs. If we are unable to adequately respond to

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changes in market requirements due to regulatory or financial constraints, unusually rapid technological changes or other factors, the rates at which our graduates obtain jobs in their fields of study could suffer, our ability to attract and retain students could be impaired and our business could be adversely affected.

We are subject to laws and regulations as a result of our collection and use of personal information, and any violations of such laws or regulations, or any breach, theft or loss of such information, could adversely affect us.

        Possession and use of personal information in our operations subjects us to risks and costs that could harm our business. We collect, use and retain large amounts of personal information regarding our applicants, students, faculty, staff and their families, including social security numbers, tax return information, personal and family financial data and credit card numbers. We also collect and maintain personal information about our employees in the ordinary course of our business. Our services can be accessed globally through the Internet. Therefore, we may be subject to the application of national privacy laws in countries outside the United States from which applicants and students access our services. Such privacy laws could impose conditions that limit the way we market and provide our services. Our computer networks and the networks of certain of our vendors that hold and manage confidential information on our behalf may be vulnerable to unauthorized access, employee theft or misuse, computer hackers, computer viruses and other security threats. Confidential information may also inadvertently become available to third parties when we integrate systems or migrate data to our servers following an acquisition of a school or in connection with periodic hardware or software upgrades. Due to the sensitive nature of the personal information stored on our servers, our networks may be targeted by hackers seeking to access this data. A user who circumvents security measures could misappropriate sensitive information or cause interruptions or malfunctions in our operations. Although we use security and business controls to limit access and use of personal information, a third party may be able to circumvent those security and business controls, which could result in a breach of student or employee privacy. In addition, errors in the storage, use or transmission of personal information could result in a breach of privacy for current or prospective students or employees. Possession and use of personal information in our operations also subjects us to legislative and regulatory burdens that could require notification of data breaches and could restrict our use of personal information, and a violation of any laws or regulations relating to the collection or use of personal information could result in the imposition of fines against us. As a result, we may be required to expend significant resources to protect against the threat of these security breaches or to alleviate problems caused by these breaches. A major breach, theft or loss of personal information regarding our students and their families or our employees that is held by us or our vendors, or a violation of laws or regulations relating to the same, could have a material adverse effect on our reputation and could result in further regulation and oversight by federal and state authorities and increased costs of compliance.

An increase in interest rates could adversely affect our ability to attract and retain students.

        For the years ended December 31, 2005, 2006 and 2007, Ashford University derived 86.9%, 79.9% and 83.9%, respectively, of its revenues (calculated on a cash basis in accordance with applicable Department of Education regulations) from Title IV programs. For the year ended December 31, 2007, the University of the Rockies derived 61.9% of its revenues (calculated on a cash basis in accordance with applicable Department of Education regulations) from Title IV programs. Additionally, some of our students finance their education through private loans that are not part of Title IV programs. Interest rates have reached relatively low levels in recent years, creating a favorable borrowing environment for students. However, if Congress increases interest rates on Title IV loans, or if private loan interest rates rise, our students would have to pay higher interest rates on their loans. Any future increase in interest rates will result in a corresponding increase in educational costs to our existing and

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prospective students. Higher interest rates could also contribute to higher default rates with respect to our students' repayment of their education loans. Higher default rates may in turn adversely impact our eligibility to participate in some or all Title IV programs, which would have a material adverse effect on our enrollments, revenues and results of operations.

We operate in a highly competitive market with rapid technological change, and we may not have the resources needed to compete successfully.

        Online education is a highly competitive market that is characterized by rapid changes in students' technological requirements and expectations and evolving market standards. Our competitors vary in size and organization, and we compete for students with traditional public and private two- and four-year colleges and universities and other postsecondary schools, including those that offer online educational programs. Each of these competitors may develop platforms or other technologies that allow for greater levels of interactivity between faculty and students or that are otherwise superior to the platform and technology we use, and these differences may affect our ability to recruit and retain students. We may not have the resources necessary to acquire or compete with technologies being developed by our competitors, which may render our online delivery format less competitive or obsolete.

Our growth may place a strain on our resources.

        We have experienced significant growth since we acquired Ashford University in 2005. The growth that we have experienced in the past, as well as any further growth that we experience, may place a significant strain on our resources and increase demands on our management information and reporting systems and financial management controls. If we are unable to manage our growth effectively while maintaining appropriate internal controls, we may experience operating inefficiencies that could increase our costs.

We rely on exclusive proprietary rights and intellectual property that may not be adequately protected under current laws, and we may encounter disputes from time to time relating to our use of intellectual property of third parties.

        Our success depends in part on our ability to protect our proprietary rights. We rely on a combination of copyrights, trademarks, service marks, trade secrets, domain names and agreements to protect our proprietary rights. We rely on service mark and trademark protection in the United States and select foreign jurisdictions to protect our rights to the marks "Ashford," "Ashford University," "Bridgepoint," "Classline" and "Smart Track" as well as distinctive logos and other marks associated with our services. We rely on agreements under which we obtain rights to use course content developed by faculty members and other third-party content experts. We cannot assure you that these measures will be adequate, that we have secured, or will be able to secure, appropriate protections for all of our proprietary rights in the United States or select foreign jurisdictions or that third parties will not infringe upon or violate our proprietary rights. Despite our efforts to protect these rights, unauthorized third parties may attempt to duplicate or copy the proprietary aspects of our curricula, online resource material and other content. Our management's attention may be diverted by these attempts, and we may need to use funds in litigation to protect our proprietary rights against any infringement or violation.

        We may encounter disputes from time to time over rights and obligations concerning intellectual property, and we may not prevail in these disputes. In certain instances, we may not have obtained sufficient rights in the content of a course. Third parties may raise a claim against us alleging an infringement or violation of the intellectual property of that third party. Some third party intellectual property rights may be extremely broad, and it may not be possible for us to conduct our operations in such a way as to avoid those intellectual property rights. Any such intellectual property claim could subject us to costly litigation and impose a significant strain on our financial resources and management

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personnel regardless of whether such claim has merit. Our insurance may not cover potential claims of this type adequately or at all, and we may be required to alter the content of our classes or pay monetary damages, which may be significant.

We may incur liability for the unauthorized duplication or distribution of class materials posted online for class discussions.

        In some instances our faculty members or our students may post various articles or other third-party content on class discussion boards. We may incur liability for the unauthorized duplication or distribution of this material posted online for class discussions. Third parties may raise claims against us for the unauthorized duplication of this material. Any such claims could subject us to costly litigation and could impose a significant strain on our financial resources and management personnel regardless of whether the claims have merit. Our general liability insurance may not cover potential claims of this type adequately or at all, and we may be required to alter the content of our courses or pay monetary damages.

Our student enrollment and revenues could decrease if the government tuition assistance offered to military personnel is reduced or eliminated, if scholarships which we offer to military personnel are reduced or eliminated or if our relationships with military bases deteriorate.

        As of September 30, 2008, 14% of our students are affiliated with the military, some of whom are eligible to receive tuition assistance from the government, which they may use to pursue postsecondary degrees. If governmental tuition assistance programs to active duty members of the military are reduced or eliminated or if our relationships with any military base deteriorates, our enrollment could suffer. Additionally, during 2007, we provided scholarships of $0.7 million to students who were affiliated with the military. If we reduce or eliminate our scholarships, our enrollment by military personnel may suffer. In addition, if we increase our scholarships, our per student revenue from military affiliated personnel will decline.

Our expenses may cause us to incur operating losses if we are unsuccessful in achieving growth.

        Our spending is based, in significant part, on our estimates of future revenue and is largely fixed in the short term. As a result, we may be unable to adjust our spending in a timely manner if our revenues fall short of our expectations. Accordingly, any significant shortfall in revenues in relation to our expectations would have an immediate and material adverse effect on our profitability. In addition, as our business grows, we anticipate increasing our operating expenses to expand our program offerings, marketing initiatives and administrative organization. Any such expansion could cause material losses to the extent we do not generate additional revenues sufficient to cover those expenses.

Seasonal and other fluctuations in our results of operations could adversely affect the trading price of our common stock.

        Although not apparent in our results of operations due to our rapid rate of growth, our operations are generally subject to seasonal trends. As our growth rate declines we expect to experience seasonal fluctuations in results of operations as a result of changes in the level of student enrollment. While we enroll students throughout the year, first and fourth quarter new enrollments and revenue generally are lower than other quarters due to the holiday break in December and January. We generally experience a seasonal increase in new enrollments in August and September of each year when most other colleges and universities begin their fall semesters. These fluctuations may cause volatility in or have an adverse effect on the market price of our stock.

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We have a limited operating history. Accordingly, our historical and recent financial and business results may not necessarily be representative of what they will be in the future.

        We have a limited operating history on which you can evaluate our management decisions, business strategy and financial results. As a result, our historical and recent financial and business results may not necessarily be representative of what they will be in the future. We are subject to risks, uncertainties, expenses and difficulties associated with changing and implementing our business strategy that are not typically encountered by companies with longer histories or in more mature industries. As a result, it is possible that we may incur significant operating losses in the future and that we may not be able to sustain long-term profitability.

Government regulations relating to the Internet could increase our cost of doing business, affect our ability to grow or otherwise have a material adverse effect on our business.

        The increasing popularity and use of the Internet and other online services has led and may lead to the adoption of new laws and regulatory practices in the United States or in foreign countries and to new interpretations of existing laws and regulations. These new laws and interpretations may relate to issues such as online privacy, copyrights, trademarks and service marks, sales taxes, fair business practices and the requirement that online education institutions qualify to do business as foreign corporations or be licensed in one or more jurisdictions where they have no physical location or other presence. New laws, regulations or interpretations related to doing business over the Internet could increase our costs and materially and adversely affect our enrollments.

We use third-party software for our online platform, and if the provider of that software was to cease to do business or was acquired by a competitor, we may have difficulty maintaining the software required for our online platform or updating it for future technological changes.

        We use the Blackboard Academic Suite, provided by Blackboard, Inc., a third-party software and service provider, for our online platform. This suite provides an online learning management system and provides for the storage, management and delivery of course content. The suite also includes collaborative spaces for student communication and participation with other students and faculty as well as grade and attendance management for faculty and assessment capabilities to assist us in maintaining quality. We rely on Blackboard for administrative support and hosting of the system. If Blackboard ceased to operate or was unable or unwilling to continue to provide us with services or upgrades on a timely basis, we may have difficulty maintaining the software required for our online platform or updating it for future technological changes.

We may incur significant costs complying with the Americans with Disabilities Act and with similar laws.

        Under the Americans with Disabilities Act of 1990, or the ADA, all public accommodations must meet federal requirements related to access and use by disabled persons. Additional federal, state and local laws also may require modifications to our properties, or restrict our ability to renovate our properties. For example, the Fair Housing Amendments Act of 1988, or FHAA, requires apartment properties first occupied after March 13, 1990, to be accessible to the handicapped. We have not conducted an audit or investigation of all of our properties to determine our compliance with present requirements. Noncompliance with the ADA or FHAA could result in the imposition of fines or an award of damages to private litigants and also could result in an order to correct any non-complying feature. We cannot predict the ultimate amount of the cost of compliance with the ADA, FHAA or other legislation.

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Our failure to comply with environmental laws and regulations governing our activities could result in financial penalties and other costs.

        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. In the event we do not maintain compliance with any of these laws and regulations, or are responsible for a spill or release of hazardous materials, we could incur significant costs for clean-up, damages and fines or penalties.

Our failure to obtain additional capital in the future could adversely affect our ability to grow.

        We believe that proceeds from this offering and cash flow from operations will be adequate to fund our current operating and growth plans for the foreseeable future. However, we may need additional financing in order to finance our continued growth, particularly if we pursue any acquisitions. The amount, timing and terms of such additional financing will vary principally depending on the timing and size of new program offerings, the timing and size of acquisitions we may seek to consummate and the amount of cash flows from our operations. To the extent that we require additional financing in the future, such financing may not be available on terms acceptable to us or at all and, consequently, we may not be able to fully implement our growth strategy.

If we are not able to integrate acquired schools, our business could be harmed.

        From time to time, we may pursue acquisitions of other schools. Integrating acquired operations into our business involves significant risks and uncertainties, including:

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inability to maintain uniform standards, controls, policies and procedures;

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distraction of management's attention from normal business operations during the integration process;

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inability to obtain, or delay in obtaining, approval of the acquisition from the necessary regulatory agencies, or the imposition of operating restrictions or a letter of credit requirement on us or on the acquired school by any of those regulatory agencies;

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expenses associated with the integration efforts; and

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unidentified issues not discovered in our due diligence process, including legal contingencies.

Our corporate headquarters are located in a high brush fire danger area and near major earthquake fault lines.

        Our corporate headquarters are located in San Diego, California in a high brush fire danger area and near major earthquake fault lines. We could be materially and adversely affected in the event of a brush fire or major earthquake, either of which could significantly disrupt our business.

A protracted economic slowdown and rising unemployment could harm our business.

        We believe that many students pursue postsecondary education to be more competitive in the job market. However, a protracted economic slowdown could increase unemployment and diminish job prospects generally. Diminished job prospects and heightened financial worries could affect the willingness of students to incur loans to pay for postsecondary education and to pursue postsecondary education in general. As a result, our enrollment could suffer.

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If we become involved in litigation or other legal proceedings, we could incur significant defense costs and losses in the event of adverse outcomes.

        From time to time, we are a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We are not at this time a party, as plaintiff or defendant, to any legal proceedings which, individually or in the aggregate, would be expected to have a material adverse effect on our business, financial condition, results of operations or cash flows.

        Two holders of our common stock have asserted that we took various actions in violation of their legal rights which resulted in an unfair dilution of their interests as holders of shares of common stock. We are engaged in discussions with the stockholders, through counsel, in an effort to resolve the concerns of the stockholders without litigation. While we believe the claims of the stockholders are without merit and intend to defend vigorously any litigation that is commenced, no assurance can be given that this matter will not have a material adverse effect on our financial condition, results of operation or cash flows.

Risks Related to the Offering

There is no existing market for our common stock, and we do not know if one will develop to provide you with adequate liquidity.

        Immediately prior to this offering, there has been no public market for our common stock. An active and liquid public market for our common stock may not develop or be sustained after this offering. The price of our common stock in any such market may be higher or lower than the price you pay. If you purchase shares of common stock in this offering, you will pay a price that was not established in a competitive market. Rather, you will pay the price that we negotiated with the representatives of the underwriters and such price may not be indicative of prices that will prevail in the open market following this offering.

The price of our common stock may fluctuate significantly and you could lose all or part of your investment.

        Volatility in the market price of our common stock may prevent you from being able to sell your shares at or above the price you paid for your shares. The market price of our common stock could fluctuate significantly for various reasons, which include:

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our quarterly or annual earnings or those of other companies in our industry;

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the public's reaction to our press releases, our other public announcements and our filings with the SEC;

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changes in earnings estimates or recommendations by research analysts who track our common stock or the stocks of other companies in our industry;

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seasonal variations in our student enrollment;

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new laws or regulations or new interpretations of laws or regulations applicable to our business;

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changes in our enrollment or in the growth rate of our enrollment;

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changes in accounting standards, policies, guidance, interpretations or principles;

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changes in general conditions in the United States and global economies or financial markets, including those resulting from war, incidents of terrorism or responses to such events;

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litigation involving our company or investigations or audits by regulators into the operations of our company or our competitors; and

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sales of common stock by our directors, executive officers and significant stockholders.

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In addition, in recent months, the stock market has experienced extreme price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in our industry. Changes may occur without regard to the operating performance of these companies. The price of our common stock could fluctuate based upon factors that have little or nothing to do with our company.

If securities or industry analysts do not publish research or reports about our business, if they change their recommendations regarding our stock adversely or if our operating results do not meet their expectations, our stock price could decline.

        The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover our company downgrade our stock or if our operating results do not meet their expectations, our stock price could decline.

As a public company, we will become subject to additional financial and other reporting and corporate governance requirements that may be difficult for us to satisfy, will increase our costs and may divert management attention from our business.

        We have historically operated as a private company. After this offering, we must file with the SEC annual and quarterly information and other reports that are specified in Section 13 of the Securities and Exchange Act of 1934, as amended. We will be required to ensure that we have the ability to prepare financial statements that comply with SEC reporting requirements on a timely basis. We will also become subject to other reporting and corporate governance requirements, including the listing standards of the NYSE and certain provisions of the Sarbanes-Oxley Act of 2002 and the regulations promulgated thereunder, which will impose significant compliance obligations upon us. As a public company, we will be required to:

•

prepare and distribute periodic reports and other shareholder communications in compliance with our obligations under the federal securities laws and NYSE rules;

•

create or expand the roles and duties of our board of directors and committees of the board;

•

institute compliance and internal audit functions that are more comprehensive;

•

evaluate and maintain our system of internal control over financial reporting, and report on management's assessment thereof, in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the PCAOB;

•

involve and retain outside legal counsel and accountants in connection with the activities listed above;

•

enhance our investor relations function; and

•

establish new internal policies, including those relating to disclosure controls and procedures.

        The changes required by becoming a public company will require a significant commitment of additional resources and management oversight that will cause us to incur increased costs and which might place a strain on our systems and resources. As a result, our management's attention might be diverted from other business concerns. In addition, we might not be successful in implementing these requirements.

        In particular, our internal control over financial reporting does not currently meet the standards set forth in Internal Control—Integrated Framework, issued by the Committee of Sponsoring

30

Organizations of the Treadway Commission (COSO). The adequacy of our internal control over financial reporting must be assessed by management for each year commencing with the year ending December 31, 2010. We do not currently have comprehensive documentation of our internal control over financial reporting, nor do we document or test our compliance with these controls on a periodic basis in accordance with Section 404 of the Sarbanes-Oxley Act. Furthermore, we have not tested our internal control over financial reporting in accordance with Section 404 and, due to our lack of documentation, such a test would not be possible to perform at this time. If we are unable to implement the requirements of Section 404 in a timely manner or with adequate compliance, our independent registered public accounting firm may not be able to report on the adequacy of our internal control over financial reporting. If we are unable to maintain adequate internal control over financial reporting, we may be unable to report our financial information on a timely basis and may suffer adverse regulatory consequences or violations of NYSE listing standards. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements.

Sales of outstanding shares of our stock into the market in the future could cause the market price of our stock to drop significantly, even if our business is doing well.

        After this offering,                  shares of our common stock will be outstanding. Of these shares,                  will be freely tradable (including the                   shares sold in this offering, except for shares that may be purchased by our affiliates), without restriction, in the public market. Our directors, executive officers and certain principal stockholders have agreed to enter into "lock up" agreements with the underwriters, in which they will agree to refrain from selling their shares for a period of 180 days after this offering, subject to certain extensions. After the lock-up period expires, up to an additional                  currently outstanding shares will be eligible for sale in the public market,                  of which are held by directors, executive officers and other affiliates and will be subject to volume limitations under Rule 144 under the Securities Act of 1933, and various vesting agreements. If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the lock-up period expires, the trading price of our common stock could decline. Credit Suisse Securities (USA) LLC and J.P. Morgan Securities, Inc. may, in their sole discretion, permit our directors, officers, employees and current stockholders who are subject to the contractual lock-up to sell shares prior to the expiration of the lock-up agreements.

        In addition, as of          , there were                  shares underlying options and warrants that were issued and outstanding, and we have authorized grants of options covering                   shares of common stock to employees, directors and consultants at the closing of this offering. These shares will become eligible for sale in the public market to the extent permitted by the provisions of various option and warrant agreements, the lock-up agreements and Rules 144 and 701 under the Securities Act. If these additional shares are sold, or if it is perceived that they will be sold in the public market, the trading price of our stock could decline.

        Shortly after the effectiveness of this offering, we also intend to file a registration statement on Form S-8 under the Securities Act covering shares of common stock reserved for issuance under our equity incentive plans. Upon filing the Form S-8, shares of common stock issued upon the exercise of options or otherwise under our equity incentive plans will be available for sale in the public market, subject to Rule 144 volume limitations applicable to affiliates and subject to the lock-up agreements described above.

You will suffer immediate and substantial dilution as a result of this offering and may experience additional dilution in the future.

        If you purchase common stock in this offering, you will experience immediate and substantial dilution insofar as the public offering price will be substantially greater than the tangible book value

31

per share of our outstanding common stock after giving effect to this offering. See "Dilution." The exercise of outstanding options and warrants and any future equity issuances by us will result in further dilution to investors.

Your percentage ownership in us may be diluted by future issuances of capital stock, which could reduce your influence over matters on which stockholders vote.

        Following the closing of this offering, our board of directors has the authority, without action or vote of our stockholders, to issue all or any part of our authorized but unissued shares of common stock, including shares issuable upon the exercise of options, shares that may be issued to satisfy our obligations under our incentive plans or shares of our authorized but unissued preferred stock. Issuances of common stock or voting preferred stock would reduce your influence over matters on which our stockholders vote and, in the case of issuances of preferred stock, likely would result in your interest in us being subject to the prior rights of holders of that preferred stock.

Our principal stockholder will continue to own over 50% of our voting stock after this offering, which will allow them collectively to control substantially all matters requiring stockholder approval and may afford them access to our management.

        Our principal stockholder, Warburg Pincus will beneficially own                  shares, or    %, of our common stock (or                   shares, or    % of our common stock, if the over-allotment option is exercised in full), upon the closing of this offering. Accordingly, Warburg Pincus can control us through its ability to determine the outcome of the election of our directors, to amend our certificate of incorporation and bylaws and to take other actions requiring the vote or consent of stockholders, including mergers, going private transactions and other extraordinary transactions, and the terms of any of these transactions. The ownership position of Warburg Pincus may have the effect of delaying, deterring or preventing a change in control or a change in the composition of our board of directors.

        Additionally, in December 2008, the board of directors approved a nominating agreement to be entered into between us and 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 after the closing of this offering, Warburg Pincus beneficially owns less than 15% but more than 5% of the outstanding shares of common stock, we agree to nominate and recommend to our stockholders that one individual designated by Warburg Pincus be elected to the board. We expect that two directors affiliated with Warburg Pincus, Patrick T. Hackett and Adarsh Sarma, will be serving on our board of directors immediately upon the closing of this offering.

We will have broad discretion in applying the net proceeds of this offering and we may not use those proceeds in ways that will enhance the market value of our common stock.

        Other than the net proceeds from this offering that will be used to pay the holders of our Series A Convertible Preferred Stock upon the closing of this offering, we have broad discretion in applying any remaining net proceeds we will receive in this offering. As part of your investment decision, you will not be able to assess or direct how we apply these net proceeds. If we do not apply these funds effectively, we may lose significant business opportunities. Furthermore, our stock price could decline if the market does not view our use of the net proceeds from this offering favorably. A significant portion of the offering is by selling stockholders, and we will not receive proceeds from the sale of the shares offered by them.

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We currently do not intend to pay dividends on our common stock and, consequently, your only opportunity to achieve a return on your investment is if the price of our common stock appreciates.

        We do not expect to pay dividends on shares of our common stock in the foreseeable future and we intend to use cash to grow our business. Consequently, your only opportunity to achieve a positive return on your investment in us will be if the market price of our common stock appreciates.

Provisions in our certificate of incorporation and bylaws and Delaware law may discourage, delay or prevent a change of control of our company or changes in our management and, therefore, may depress the trading price of our stock.

        Our certificate of incorporation and bylaws contain provisions that could depress the trading price of our stock by acting to discourage, delay or prevent a change of control of our company or changes in our management that the stockholders of our company may deem advantageous. These provisions:

•

authorize the issuance of "blank check" preferred stock that our board of directors could issue to increase the number of outstanding shares to discourage a takeover attempt;

•

provide for a classified board of directors (three classes);

•

provide that stockholders may only remove directors for cause;

•

provide that any vacancy on our board of directors, including a vacancy resulting from an increase in the size of the board, may only be filled by the affirmative vote of a majority of our directors then in office, even if less than a quorum;

•

provide that a special meeting of stockholders may only be called by our board of directors or by our chief executive officer;

•

provide that action by written consent of the stockholders may be taken only if the board of directors first approves such action;

•

provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and

•

establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

Additionally, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any "interested" stockholder for a period of three years following the date on which the stockholder became an "interested" stockholder.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains "forward-looking statements," which include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation and availability of financial resources. These forward-looking statements include, without limitation, statements regarding: proposed new programs; expectations that regulatory developments or other matters will not have a material adverse effect on our enrollments, financial position, results of operations and our liquidity; projections, predictions, expectations, estimates or forecasts as to our business, financial and operational results and future economic performance; management's goals and objectives and other similar matters that are not historical facts. Words such as "may," "should," "could," "would," "predicts," "potential," "continue," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar expressions, as well as statements in the future tense, identify forward-looking statements.

        Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and management's good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

•

our failure to comply with the extensive regulatory framework applicable to our industry, including Title IV of the Higher Education Act and the regulations thereunder, state laws and regulatory requirements and accrediting agency requirements;

•

our ability to continue to develop awareness among, to recruit and to retain students;

•

competition in the postsecondary education market and its potential impact on our market share, recruiting cost and tuition rates;

•

reputational and other risks related to potential compliance audits, regulatory actions, negative publicity or service disruptions;

•

our ability to attract and retain the personnel needed to sustain and grow our business;

•

our ability to develop new programs or expand our existing programs in a timely and cost-effective manner;

•

economic or other developments potentially impacting demand in our core disciplines or the availability or cost of Title IV or other funding; and

•

the other factors discussed under "Risk Factors."

        Forward-looking statements speak only as of the date the statements are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

34

USE OF PROCEEDS

        We estimate that we will receive net proceeds of $     million from our sale of the shares of common stock offered by us in this offering, assuming an initial public offering price of $     per share, which is the midpoint of the range set forth on the cover of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering costs payable by us. A $1.00 increase (decrease) in the assumed initial public offering price of $     per share would increase (decrease) net proceeds received by us in this offering by $     million, assuming the number of shares of common stock offered by us, as set forth on the cover of this prospectus, remains the same.

        The holders of Series A Convertible Preferred Stock have advised us that they intend to optionally convert their shares of Series A Convertible Preferred Stock into shares of common stock immediately prior to the closing of this offering. Upon such conversion, in addition to receiving shares of common stock, the holders will be entitled to receive the accreted value of $                    on the Series A Convertible Preferred Stock, which the holders have advised us they will elect to receive in cash. This amount will be paid out of net proceeds to us from this offering. We intend to use the balance of net proceeds for general corporate purposes. We will retain broad discretion in the allocation of a substantial portion of the net proceeds of this offering. Pending the uses described above, we intend to invest the net proceeds in short-term, interest-bearing, investment-grade securities.

        We will not receive any of the proceeds from any sale of shares by the selling stockholders.

DIVIDEND POLICY

        We currently intend to retain any future earnings to maintain the strength and quality of our academic offerings and to finance the continued development and growth of our business. We do not anticipate paying cash dividends in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our board of directors and will depend upon our financial condition, operating results, capital requirements, any contractual restrictions and such other factors as our board of directors may deem appropriate.

35

CAPITALIZATION

        The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2008:

•

on an actual basis;

•

on a pro forma basis to reflect the optional conversion of all outstanding shares of Series A Convertible Preferred Stock into 201,624,486 shares of our common stock and the election prior to the closing of this offering by the holders of Series A Convertible Preferred Stock to also receive the accreted value of $                        on such shares in cash subsequent to the closing; and

•

on a pro forma as adjusted basis to reflect:



(i)

the optional conversion of all outstanding shares of Series A Convertible Preferred Stock into 201,624,486 shares of common stock and the election prior to the closing of this offering by the holders of Series A Convertible Preferred Stock to also receive the accreted value of $                        on such shares in cash subsequent to the closing;



(ii)

the sale by us of            shares of common stock in this offering at an assumed initial public offering price of $        per share, the midpoint of the range set forth on the cover of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us; and



(iii)

the amendment and restatement of our certificate of incorporation in connection with the closing of this offering, which will increase our authorized capital stock.

        You should read this table together with "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Description of Capital Stock" and our consolidated financial statements, which are included elsewhere in this prospectus.

			As of September 30, 2008
			Actual			Pro Forma			Pro Forma as Adjusted
			(In thousands, except share and per share data)
Cash and cash equivalents			$	31,992		$	31,992		$
Total indebtedness (including short-term indebtedness)			$	683		$	683		$
Series A Convertible Preferred Stock: $0.01 par value; 19,850,000 shares authorized, 19,778,333 shares issued and outstanding, actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted				26,560			—
Stockholders' equity:
	Undesignated preferred stock: $0.01 par value; no shares authorized, issued and outstanding, actual and pro forma;            shares authorized, no shares issued and outstanding, pro forma as adjusted
	Common stock: $0.01 par value; 300,000,000 shares authorized, 15,007,934 shares issued and outstanding, actual; 300,000,000 shares authorized, 216,632,420 shares issued and outstanding, pro forma;            shares authorized,            shares issued and outstanding pro forma as adjusted			150			348
	Additional paid-in capital						—
	Accumulated deficit			(894	)		(1,092	)
	Total stockholders' equity (deficit)			(744	)		(744	)
		Total capitalization	$	26,499		$	(61	)	$

        A $1.00 increase (decrease) in the assumed initial public offering price per share would increase (decrease) cash and cash equivalents by $       million, would increase or decrease additional paid-in capital by $       million and would increase (decrease) total stockholders' equity and total capitalization

36

by $       million, assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting the underwriting discount and estimated offering costs payable by us.

        The table above excludes the following shares:

•

shares of common stock issuable upon the exercise of warrants outstanding as of                        , 2009, at a weighted average exercise price of $            per share, on an actual and pro forma basis;

•

shares of common stock issuable upon the exercise of warrants outstanding as of                        , 2009, at a weighted average exercise price of $            per share, on a pro forma as adjusted basis;

•

shares of common stock issuable upon the exercise of options outstanding as of                        , 2009, at a weighted average exercise price of $            per share, on an actual and pro forma basis; and

•

shares of common stock issuable upon the exercise of options outstanding as of                        , 2009, at a weighted average exercise price of $            per share, on a pro forma as adjusted basis.

37

DILUTION

        If you invest in our common stock, your investment will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the net tangible book value per share of our common stock after this offering. We calculate net tangible book value per share by calculating our total assets less intangible assets and total liabilities, and dividing it by the number of outstanding shares of common stock.

        As of September 30, 2008, our net tangible book value was $23.9 million, or $1.59 per share of common stock, and our pro forma negative net tangible book value, after giving effect to the optional conversion of all outstanding shares of Series A Convertible Preferred Stock into 201,624,486 shares of common stock and the payment of the accreted value of $26.6 million on the Series A Convertible Preferred Stock to the holders thereof in cash, was $(2.6) million, or $(0.01) per share of common stock. After giving effect to (i) the sale of        shares of common stock in this offering by us at an assumed initial public offering price of $        per share, the midpoint of the range set forth on the cover of this prospectus, (ii) the payment by us of the accreted value of $                        on the Series A Convertible Preferred Stock to the holders thereof in cash and (iii) the deduction of the estimated underwriting discounts and commissions and the payment by us of estimated offering costs, our net tangible book value as of September 30, 2008, which we refer to as our pro forma as adjusted net tangible book value, would have been $                        , or $        per share. This represents an immediate increase in net tangible book value of $        per share to our existing stockholders and an immediate dilution of $        per share to purchasers of common stock in this offering. The following table illustrates this dilution on a per share basis:

Assumed initial public offering price per share					$
	Net tangible book value per share as of September 30, 2008	$	1.59
	Decrease in net tangible book value per share attributable to the conversion of all outstanding shares of Series A Convertible Preferred Stock as of September 30, 2008		(1.60	)
	Pro forma negative net tangible book value per share as of September 30, 2008		(0.01	)
	Increase in pro forma net tangible book value per share attributable to this offering
Pro forma as-adjusted net tangible book value per share after this offering
Dilution per share to new investors					$

        The foregoing computation of dilution to new investors does not give effect to the additional dilution as a result of the exercise by certain selling stockholders of options and warrants in connection with this offering. Assuming the issuance of             shares of common stock (i) upon exercise in full of all of our outstanding options to purchase common stock at a weighted average exercise price of $             per share and (ii) upon exercise in full of all outstanding warrants to purchase common stock at a weighted average exercise price of $            per share, in each case at September 30, 2008, pro forma net tangible book value at September 30, 2008, would be $             per share, representing an immediate dilution of $             per share to our existing stockholders and, after giving effect to the sale of             shares of common stock in this offering, there would be an immediate dilution of             per share to purchasers of our common stock in this offering.

        Each $1.00 increase (decrease) in the assumed initial public offering price of $         per share, the midpoint of the range set forth on the cover of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value after this offering by $         per share and the dilution in net tangible book value to new investors in this offering by $        per share, assuming the number of shares of common stock offered by us, as set forth on the cover of this prospectus, remains the same.

38

        The following table summarizes as of September 30, 2008, pro forma as adjusted to give effect to (i) the conversion of all outstanding shares of Series A Convertible Preferred Stock, (ii) the exercise of warrants and options by the selling stockholders in this offering and (iii) the use of proceeds from this offering (including the payment to holders of our Series A Convertible Preferred Stock), the differences between the number of shares of common stock purchased from us, the aggregate cash consideration paid and the average price per share paid by existing stockholders and new investors purchasing shares of common stock from us in this offering. The calculation below is based on an offering price of $        per share (the midpoint of the range set forth on the cover of this prospectus) before deducting estimated underwriting discounts and commissions and estimated offering costs payable by us:

		Shares Purchased				Total Consideration
										Average Price Per Share
		Number	Percent			Amount	Percent
Existing stockholders					%	$			%	$
New investors										$
	Total			100	%	$		100	%

        A $1.00 increase (decrease) in the assumed initial public offering price of $        per share, the midpoint of the range set forth on the cover of this prospectus, would increase (decrease) total consideration paid by new investors to us in this offering by $         million and would increase (decrease) the average price per share by new investors by $1.00, assuming the number of shares of common stock offered by us, as set forth on the cover of this prospectus, remains the same.

39

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

        You should read the following selected consolidated financial and other data in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements, which are included elsewhere in this prospectus. The selected consolidated statement of operations data for the years ended December 31, 2005, 2006 and 2007, and the selected consolidated balance sheet data as of December 31, 2006 and 2007, have been derived from our audited consolidated financial statements, which are included elsewhere in this prospectus. The selected consolidated statements of operations data for the years ended December 31, 2003 and 2004, and the selected consolidated balance sheet data as of December 31, 2003, 2004 and 2005 have been derived from our unaudited consolidated financial statements, which are not included in this prospectus. Historical results are not necessarily indicative of the results to be expected for future periods.

        The selected consolidated statement of operations data for each of the nine months ended September 30, 2007 and 2008, and the selected consolidated balance sheet data as of September 30, 2008, have been derived from our unaudited consolidated financial statements, which are included elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of our financial position and operating results for the unaudited periods.

        Because we did not acquire Ashford University and the University of the Rockies until 2005 and 2007, respectively, the financial and other data for 2003 and 2004 primarily reflect the programs we provided to community college students in cooperation with a postsecondary college in the Connecticut state college system.

			Year Ended December 31,															Nine Months Ended September 30,
			2003(9)			2004(9)			2005(1)			2006(1)			2007(1)			2007			2008(1)
			(Restated)			(Restated)			(Restated)			(Restated)			(Restated)						(Restated)
			(In thousands, except per share data)
Consolidated Statement of Operations Data:
Revenue			$	729		$	1,240		$	7,951		$	28,619		$	85,709		$	54,558		$	149,167
Costs and expenses:
	Instructional costs and services			347			1,387			5,498			12,510			29,837			19,154			42,050
	Marketing and promotional			—			2,254			4,078			12,214			35,997			24,532			54,490
	General and administrative			2,277			2,550			6,190			8,704			15,892			9,503			26,326
		Total costs and expenses		2,624			6,191			15,766			33,428			81,726			53,189			122,866
Operating income (loss)				(1,895	)		(4,951	)		(7,815	)		(4,809	)		3,983			1,369			26,301
Interest (income)				—			—			(38	)		(10	)		(12	)		(1	)		(195	)
Interest expense				—			—			228			351			544			332			197
Income (loss) before income taxes				(1,895	)		(4,951	)		(8,005	)		(5,150	)		3,451			1,038			26,299
Income tax expense				—			—			—			—			164			50			5,521
Net income (loss)				(1,895	)		(4,951	)		(8,005	)		(5,150	)		3,287			988			20,778
Accretion of preferred dividends(2)				16			343			1,344			1,718			1,856			1,392			1,503
Deemed dividend on redeemable convertible preferred stock(3)				1,004			1,948			11,162			—			—			—			—
Net income available (loss attributable) to common stockholders			$	(2,915	)	$	(7,242	)	$	(20,511	)	$	(6,868	)	$	1,431		$	(404	)	$	19,275

40

		Year Ended December 31,														Nine Months Ended September 30,
		2003(9)			2004(9)			2005(1)			2006(1)			2007(1)		2007			2008(1)
		(Restated)			(Restated)			(Restated)			(Restated)			(Restated)					(Restated)
		(In thousands, except per share data)
Earnings (loss) per common share
	Basic	$	(0.48	)		(0.51	)	$	(1.45	)	$	(0.48	)	$	0.00	$	(0.03	)	$	0.07
	Diluted	$	(0.48	)		(0.51	)	$	(1.45	)	$	(0.48	)	$	0.00	$	(0.03	)	$	0.02
Shares used in computing earnings (loss) per common share
	Basic		6,093			14,125			14,131			14,386			14,900		14,858			15,008
	Diluted		6,093			14,125			14,131			14,386			20,020		14,858			44,263
Pro forma earnings per common share (unaudited)(4)
	Basic													$	0.02				$	0.10
	Diluted													$	0.01				$	0.08
Shares used in computing pro forma earnings per common share (unaudited)(4)
	Basic														216,524					216,632
	Diluted														221,645					245,887
Supplemental pro forma earnings per common share (unaudited)(5)
	Basic
	Diluted
Shares used in computing supplemental pro forma earnings per common share (unaudited)(5)
	Basic
	Diluted

																As of September 30, 2008
	As of December 31,
																			Pro forma as Adjusted(6)
	2003			2004			2005(10)			2006(1)			2007(1)			Actual
							(Restated)			(Restated)			(Restated)
	(In thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	1,578		$	3,570		$	2,163		$	54		$	7,351		$	31,992		$
Total assets		1,684			4,506			14,749			17,091			39,057			94,470
Total indebtedness (including short-term indebtedness)		—			125			3,779			4,193			5,673			683
Redeemable convertible preferred stock		1,841			9,526			21,482			23,200			25,056			26,560
Total stockholders' equity (deficit)		(565	)		(5,855	)		(15,197	)		(21,692	)		(20,143	)		(744	)

41

		Year Ended December 31,															Nine Months Ended September 30,
		2003			2004			2005(1)			2006(1)			2007			2007			2008
								(Restated)			(Restated)
		(In thousands, except enrollment data)
Consolidated Other Data:
Capital expenditures		$	5		$	261		$	323		$	1,381		$	3,571		$	3,428		$	9,057
Depreciation and amortization			23			47			494			735			1,236			785			1,547
EBITDA(6)(unaudited)			(1,872	)		(4,904	)		(7,321	)		(4,074	)		5,219			2,154			27,848
Cash flows provided by (used in):
	Operating activities		(300	)		(5,214	)		(7,244	)		(1,082	)		10,367			1,662			39,353
	Investing activities		(5	)		(261	)		(8,020	)		(1,373	)		(2,936	)		(2,793	)		(9,723	)
	Financing activities		1,875			7,467			13,857			346			(134	)		2,448			(4,989	)
Period end enrollment:(7)
	Online		—			202			729			4,111			12,104			12,117			29,786
	Ground		53			126			334			360			519			599			761
	Total		53			328			1,063			4,471			12,623			12,716			30,547

(1)

Our consolidated financial statements have been restated. See Note 3, "Restatement of Consolidated Financial Statements," to our consolidated financial statements, which are included elsewhere in this prospectus.

(2)

The holders of Series A Convertible Preferred Stock earn preferred dividends, accreting at the rate of 8% per year, compounding annually. See Note 11, "Redeemable Convertible Preferred Stock (Series A Convertible Preferred Stock)," to our consolidated financial statements, which are included elsewhere in this prospectus.

(3)

We recorded a deemed dividend of $11.2 million for the beneficial conversion feature in our Series A Convertible Preferred Stock. (See Note 11 to our consolidated financial statements.

(4)

Pro forma basic earnings per share has been calculated assuming the optional conversion of all outstanding shares of our Series A Convertible Preferred Stock into shares of common stock, immediately prior to the closing of this offering, with each share of Series A Convertible Preferred Stock converting into 10.194210419 shares of common stock. See Note 11, "Redeemable Convertible Preferred Stock (Series A Convertible Preferred Stock)," to our consolidated financial statements, which are included elsewhere in this prospectus. Pro forma diluted earnings per share further includes the incremental shares of common stock issuable upon the exercise of dilutive stock options and warrants. See Note 10, "Earnings Per Share," to our consolidated financial statements, which are included elsewhere in this prospectus.

(5)

Supplemental pro forma basic earnings per share has been calculated assuming (i) the optional conversion of all outstanding shares of Series A Convertible Preferred Stock into shares of common stock, immediately prior to the closing of this offering, with each share of Series A Convertible Preferred Stock converting into 10.194210419 shares of common stock, and (ii) the issuance of               shares of common stock at the assumed offering price of $        per share in payment of the accreted value of $        on the Series A Convertible Preferred Stock to the holders thereof. See Note 11, "Redeemable Convertible Preferred Stock (Series A Convertible Preferred Stock)," to our consolidated financial statements, which are included elsewhere in this prospectus. Supplemental pro forma diluted earnings per share further includes the incremental shares of common stock issuable upon the exercise of stock options and warrants. See Note 10, "Earnings Per Share," to our consolidated financial statements, which are included elsewhere in this prospectus.

(6)

The pro forma as-adjusted consolidated balance sheet data as of September 30, 2008, gives effect to:

(i)

the optional conversion of all outstanding shares of Series A Convertible Preferred Stock into 201,624,486 shares of our common stock and the election prior to the closing of this offering by the holders of Series A Convertible Preferred Stock to also receive the accreted value of $                  on such shares subsequent to the closing; and

(ii)

the sale by us of                        shares of common stock in this offering, at an assumed initial public offering price of $                        per share, the midpoint of the range set forth on the cover of this prospectus, and after deducting underwriting discounts and commissions and estimated offering costs payable by us.

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share, the midpoint of the range set forth on the cover of this prospectus, would increase (decrease) cash, cash equivalents and short-term investments, total assets and stockholders' equity by $             million, assuming that the number of

42

shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting underwriting discounts and estimated offering expenses payable by us.

(7)

EBITDA is defined as net income (loss) plus interest expense, less interest income, plus income tax expense and plus depreciation and amortization. However, EBITDA is not a recognized measurement under GAAP, and when analyzing our operating performance, investors should use EBITDA in addition to, and not as an alternative for, net income, operating income or any other performance measure presented in accordance with GAAP. Because not all companies use identical calculations, our presentation of EBITDA may not be comparable to similarly titled measures of other companies.

We believe EBITDA is useful to investors in evaluating our operating performance because it is widely used to measure a company's operating performance without regard to items such as depreciation and amortization. Depreciation and amortization can vary depending on accounting methods and the book value of assets. We believe EBITDA presents a meaningful measure of corporate performance exclusive of our capital structure and the method by which assets have been acquired.

Our management uses EBITDA:

•

as a measurement of operating performance, because it assists us in comparing our performance on a consistent basis, as it removes depreciation, amortization, interest and taxes; and

•

in presentations to our board of directors to enable our board to have the same measurement basis of operating performance as is used by management to compare our current operating results with corresponding prior periods and with results of other companies in our industry.

The following table provides a reconciliation of net income (loss) to EBITDA (unaudited):

	Year Ended December 31,															Nine Months Ended September 30,
	2003			2004			2005			2006			2007			2007			2008
							(Restated)			(Restated)
	(In thousands)
Net income (loss)	$	(1,895	)	$	(4,951	)	$	(8,005	)	$	(5,150	)	$	3,287		$	988		$	20,778
Plus: interest expense		—			—			228			351			544			332			197
Less: interest income		—			—			(38	)		(10	)		(12	)		(1	)		(195	)
Plus: income tax expense		—			—			—			—			164			50			5,521
Plus: depreciation and amortization		23			47			494			735			1,236			785			1,547
EBITDA	$	(1,872	)	$	(4,904	)	$	(7,321	)	$	(4,074	)	$	5,219		$	2,154		$	27,848

(8)

We define enrollments as the number of active students on the last day of the financial reporting period. A student is considered an active student if he or she has attended a class within the prior 30 days unless the student has graduated or has provided us with notice of withdrawal.

(9)

We have restated our previously issued unaudited consolidated financial statements as of and for the years ended December 31, 2003 and 2004 to reflect the impact of errors in our accounting for our redeemable convertible preferred stock. The nature of the related errors and adjustments are summarized as follows and are also described in Note 3 to our consolidated financial statements:

Beneficial conversion feature

We determined that a beneficial conversion feature should have been recorded upon the issuance of our redeemable convertible preferred stock during the years ended December 31, 2003 and 2004 due to the existence of an optional conversion feature that the holders could exercise at any time which allowed them to receive 201,624,486 shares of common stock. This beneficial conversion feature was at the excess of the fair value of the common shares into which the preferred shares are convertible over the accounting conversion price as determined in accordance with EITF 98-5 and EITF 00-27. The adjustment is reflected as an increase of additional paid-in-capital to reflect the beneficial conversion feature upon issuance, with a corresponding reduction of additional paid-in-capital for the deemed dividend. This adjustment has no impact on total stockholder's deficit as of December 31, 2003 and 2004, respectively.

Earnings per share

We determined that we incorrectly excluded the impact of the deemed dividends related to the above beneficial conversion feature and the potential common shares related to the payment of the accreted value in shares associated with the redeemable convertible preferred stock from the numerator and denominator, respectively, in our calculation of earnings per share for the years ended December 31, 2003 and 2004. The

43

following tables present the adjustments to our previously issued consolidated financial statements for the years ended December 31, 2003 and 2004:

		December 31, 2003
		As Reported			Adjustments			As Restated
Net loss		$	(1,895	)	$	—		$	(1,895	)
Accretion of preferred dividends			16			—			16
Deemed dividend on redeemable convertible preferred stock			—			1,004			1,004
Net loss attributable to common stockholders		$	(1,911	)	$	(1,004	)	$	(2,915	)
Loss per common share
	Basic	$	(0.31	)	$	(0.17	)	$	(0.48	)
	Diluted	$	(0.31	)	$	(0.17	)	$	(0.48	)

		December 31, 2004
		As Reported			Adjustments			As Restated
Net loss		$	(4,951	)	$	—		$	(4,951	)
Accretion of preferred dividends			343			—			343
Deemed dividend on redeemable convertible preferred stock			—			1,948			1,948
Net loss attributable to common stockholders		$	(5,294	)	$	(1,948	)	$	(7,242	)
Loss per common share
	Basic	$	(0.37	)	$	(0.14	)	$	(0.51	)
	Diluted	$	(0.37	)	$	(0.14	)	$	(0.51	)

(10)

We have restated our audited consolidated financial statements as of December 31, 2005 to reflect the impact of errors in our accounting for our redeemable convertible preferred stock. The nature of the related errors and adjustments are summarized as follows and are also described in Note 3 to our consolidated financial statements:

Preferred Dividends

We determined that the carrying amount of our redeemable convertible preferred stock was improperly presented on the consolidated balance sheet as it did not include amounts related to accreted dividends. We adjusted the carrying value of the redeemable convertible preferred stock to increase the redeemable convertible preferred stock for the accreted dividends, with a corresponding reduction of retained earnings and additional paid-in-capital. The effect of this adjustment increased the carrying value of the redeemable convertible preferred stock and increased stockholders' deficit by $1.7 million as of December 31, 2005.

Beneficial Conversion Feature

We determined that a beneficial conversion feature should have been recorded upon the issuance of our redeemable convertible stock during the years ended December 31, 2005 due to the existence of an optional conversion feature that the holders could exercise at any time which allowed them to receive 201,624,486 shares of common stock. This beneficial conversion feature was at the excess of the fair value of the common shares into which the preferred shares are convertible over the accounting conversion price as determined in accordance with EITF 98-5 and EITF 00-27. The adjustment is reflected as an increase of additional paid-in-capital to reflect the beneficial conversion feature upon issuance, with a corresponding reduction of additional paid-in-capital for the deemed dividend. The adjustment has no impact on total stockholder's deficit as of December 31, 2005.

The following table presents the adjustments to our previously issued consolidated financial statement as of December 31, 2005:

	December 31, 2005
	As Reported			Adjustments			As Restated
Redeemable convertible preferred stock	$	19,778		$	1,704		$	21,482
Total stockholders' equity (deficit)		(13,493	)		(1,704	)		(15,197	)

44

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements, which are included elsewhere in this prospectus. In addition to historical information, this discussion includes forward-looking information that involves risks and assumptions which could cause actual results to differ materially from management's expectations. See "Risk Factors" and "Special Note Regarding Forward-Looking Information."

Overview

        We are a regionally accredited provider of postsecondary education services. We offer associate's, bachelor's, master's and doctoral programs in the disciplines of business, education, psychology, social sciences and health sciences.

        We deliver programs online as well as at our traditional campuses located in Clinton, Iowa and Colorado Springs, Colorado. As of September 30, 2008, we offered over 760 courses and 41 degree programs with 37 specializations and 21 concentrations. We had 30,547 students enrolled in our institutions as of September 30, 2008, 98% of whom were attending classes exclusively online.

        In March 2005, we acquired the assets of The Franciscan University of the Prairies, located in Clinton, Iowa, and renamed it Ashford University. Founded in 1918 by the Sisters of St. Francis, a non-profit organization, The Franciscan University of the Prairies originally provided postsecondary education to individuals seeking to become teachers and later expanded to offer a broader portfolio of programs. At the time of the acquisition, the university had 332 students, 20 of whom were enrolled in the university's first online program, which launched in January 2005.

        In September 2007, we acquired the assets of the Colorado School of Professional Psychology, located in Colorado Springs, Colorado, and renamed it the University of the Rockies. Founded as a non-profit organization in 1998 by faculty from Chapman University, the school offers master's and doctoral programs primarily in psychology. At the time of the acquisition, the school had 75 students and did not offer any online courses or programs. In October 2008, through the University of the Rockies, we launched one online master's program with two specializations, and our first online doctoral program.

        In 2007, Ashford University derived 83.9% and the University of the Rockies derived 61.9% of their respective revenues (in each case calculated on a cash basis in accordance with applicable Department of Education regulations) from Title IV programs administered by the Department of Education. To participate in Title IV programs, a school must be legally authorized to operate in the state in which it is physically located, accredited by an accrediting agency recognized by the Department of Education and certified as an eligible institution by the Department of Education. As a result, we are subject to extensive regulation by state education agencies, our accrediting agency and the Department of Education. See "Regulation."

        Recent market conditions affecting the availability of credit have caused some lenders, including some lenders that historically have provided Title IV loans to our students, to cease providing Title IV loans to students. Other lenders have reduced the benefits and increased the fees associated with Title IV loans they provide. In addition, new regulatory refinements may result in higher administrative costs for schools, including us. If Congress increases interest rates on Title IV loans, or if private loan interest rates rise, the students who utilize these loans would have to pay higher interest rates on their loans. Any future increase in interest rates will result in a corresponding increase in educational costs to our existing and prospective students. We do not believe these market and regulatory conditions have adversely affected us to date.

45

Restatement of Redeemable Convertible Preferred Stock and Earnings Per Share

        We have restated our previously issued consolidated financial statements as of and for the years ended December 31, 2005, 2006 and 2007 and as of and for the nine month period ended September 30, 2008. The determination to restate these financial statements was made by our management upon identification of errors subsequent to the issuance of those financial statements. See Note 3, "Restatement of Consolidated Financial Statements: Restatement of Redeemable Convertible Preferred Stock and Earnings per Share," to our consolidated financial statements, which are included elsewhere in this prospectus.

Key Financial Metrics

Revenue

        Revenue consists principally of tuition, technology fees and other miscellaneous fees and is shown net of any refunds and scholarships. Factors affecting our revenue include: (i) the number of students who enroll and who remain enrolled in our courses; (ii) our degree and program mix; (iii) changes in our tuition rates; and (iv) the amount of the scholarships that we offer.

        We define enrollments as the number of active students on the last day of the financial reporting period. A student is considered an active student if he or she has attended a class within the prior 30 days unless the student has graduated or has provided us with a notice of withdrawal. Enrollments are a function of the number of continuing students at the beginning of each period and new enrollments during the period, which are offset by students who either graduated or withdrew during the period. Our online courses are typically five or six weeks in length and have weekly start dates through the year, with the exception of a two week break during the holiday period in late December and early January. Our campus-based courses have one start per semester with two semesters per year.

        We believe that the principal factors that affect our enrollments are: (i) the number and breadth of the programs we offer; (ii) the attractiveness of our program offerings; (iii) the effectiveness of our marketing, recruiting and retention efforts, which is affected by the number and seniority of our enrollment advisors, and other recruiting and student services personnel; (iv) the quality of our academic programs and student services; (v) the convenience and flexibility of our online delivery platform; (vi) the availability and cost of federal and other funding for student financial aid; and (vii) general economic conditions.

        The following is a summary of our student enrollment at December 31, 2005, 2006 and 2007 and September 30, 2007 and 2008, by degree type and by instructional delivery method:

	December 31,												September 30,
	2005				2006				2007				2007				2008
Doctoral		—	—			—	—			60	0.5	%		60	0.4	%		60	0.2	%
Master's		236	22.2	%		358	8.0	%		905	7.2			860	6.8			2,174	7.1
Bachelor's		827	77.8			3,980	89.0			11,071	87.7			11,327	89.1			25,563	83.7
Associate's		—	—			68	1.5			533	4.2			401	3.2			2,554	8.4
Other		—	—			65	1.5			54	0.4			68	0.5			196	0.6
Total		1,063	100.0	%		4,471	100.0	%		12,623	100.0	%		12,716	100.0	%		30,547	100.0	%
Online		729	68.6	%		4,111	91.9	%		12,104	95.9	%		12,117	95.3	%		29,786	97.5	%
Ground		334	31.4			360	8.1			519	4.1			599	4.7			761	2.5
Total		1,063	100.0	%		4,471	100.0	%		12,623	100.0	%		12,716	100.0	%		30,547	100.0	%

        The price of our courses varies based upon the number of credits per course (with most courses representing three credits), the degree level of the program and the discipline. For the 2008-09 academic year (which began on July 1, 2008), our prices per credit range from $262 to $337 for undergraduate online courses and from $441 to $490 for graduate online courses. Based on these per

46

credit prices, our prices for a three-credit course range from $786 to $1,011 for undergraduate online courses and $1,323 to $1,470 for graduate online courses. For the 2008-09 academic year, we charge a fixed $7,670 "block tuition" for undergraduate ground students taking between 12 and 18 credits per semester, with an additional $447 per credit for credits in excess of 18. Total credits required to obtain a degree are consistent for online and ground programs: an associate's degree requires 61 credits; a bachelor's degree requires 120 credits; a master's degree typically requires a minimum of 33 additional credits; and a doctoral degree typically requires a minimum of 60 additional credits.

        Tuition is reduced by the amount of scholarships we award to our students. For the years ended December 31, 2006 and 2007, revenue was reduced by $2.7 million and $5.3 million, respectively, as a result of institutional scholarships that we awarded to our students. For the nine months ended September 30, 2007 and 2008, we awarded institutional scholarships with a total value of $3.3 million and $9.2 million, respectively.

        Tuition prices for students in our online programs increased by an average of 2.1% for our 2008-09 academic year as compared to an average increase of 11.6% for our 2007-08 academic year. Tuition increases have not historically been, and may not in the future be, consistent across our programs due to market conditions and differences in operating costs of individual programs. Tuition for our traditional ground programs did not increase for our 2008-09 academic year, as compared to an increase of 3.0% for the prior academic year.

        In 2007, Ashford University derived 83.9% and the University of the Rockies derived 61.9% of their respective revenues (in each case calculated on a cash basis in accordance with applicable Department of Education regulations) from Title IV programs administered by the Department of Education. Our students also utilize personal savings, military student loans and grants, employer tuition reimbursements and private loans to pay a portion of their tuition and related expenses. For the year ended December 31, 2007, Ashford University derived 1.9% and the University of the Rockies derived 0.0% of their respective revenues (in each case calculated on a cash basis in accordance with applicable Department of Education regulations) from private loans. Our future revenues could be affected if and to the extent we are unable to participate in Title IV programs. Current conditions in the credit markets have adversely affected the environment surrounding access to and cost of student loans. The legislative and regulatory environment is also changing, and new federal legislation was recently enacted pursuant to which the Department of Education is authorized to buy Title IV loans and implement a "lender of last resort" program in certain circumstances. See "Risk Factors" and "Regulation—Regulation of Federal Student Financial Aid Programs." We do not believe these market and regulatory conditions have adversely affected us to date.

Costs and expenses

        Instructional costs and services.    Instructional costs and services consist primarily of costs related to the administration and delivery of our educational programs. This expense category includes compensation for faculty and administrative personnel, costs associated with online faculty, curriculum and new program development costs, bad debt expense, financial aid processing costs, technology license costs and costs associated with other support groups that provide service directly to the students. Instructional costs and services also include an allocation of facility and depreciation costs.

        Marketing and promotional.    Marketing and promotional expenses include compensation of personnel engaged in marketing and recruitment, as well as costs associated with purchasing leads and producing marketing materials. Our marketing and promotional expenses are generally affected by the cost of advertising media and leads, the efficiency of our marketing and recruiting efforts, salaries and benefits for our enrollment personnel and expenditures on advertising initiatives for new and existing academic programs. Advertising costs are expensed as incurred. We also incur immediate expenses in connection with new enrollment advisors while these individuals undergo training. Enrollment advisors typically do not achieve anticipated full productivity until four to six months after their dates of hire. Marketing and promotional costs also include an allocation of facility and depreciation costs.

47

        General and administrative.    General and administrative expenses include compensation of employees engaged in corporate management, finance, human resources, information technology, compliance and other corporate functions. General and administrative expenses also include professional services fees, travel and entertainment expenses and an allocation of facility and depreciation costs.

        Interest income.    Interest income consists of interest on investments.

        Interest expense.    Interest expense consists primarily of interest charges on our capital lease obligations and on the outstanding balances of our notes payable and line of credit and related fees.

Factors Affecting Comparability

        We believe the following factors have had, or can be expected to have, a significant effect on the comparability of recent or future results of operations:

Public company expenses

        We have historically operated as a private company. After this offering, we will become obligated to file with the SEC annual and quarterly information and other reports that are specified in Section 13 of the Securities and Exchange Act of 1934, as amended. We will be required to ensure that we have the ability to prepare financial statements that comply with SEC reporting requirements on a timely basis. We will also become subject to other reporting and corporate governance requirements, including the listing standards of the NYSE and certain provisions of the Sarbanes-Oxley Act of 2002 and the regulations promulgated thereunder, which will impose significant compliance obligations upon us. As a public company, we will be required to:

•

prepare and distribute periodic reports and other shareholder communications in compliance with our obligations under the federal securities laws and NYSE rules;

•

create or expand the roles and duties of our board of directors and committees of the board;

•

institute compliance and internal audit functions that are more comprehensive;

•

evaluate and maintain our system of internal control over financial reporting, and report on management's assessment thereof, in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the PCAOB;

•

involve and retain outside legal counsel and accountants in connection with the activities listed above;

•

enhance our investor relations function; and

•

establish new internal policies, including those relating to disclosure controls and procedures.

        We estimate that our incremental annual costs associated with being a publicly traded company will be between $2.5 million and $4.0 million.

Stock-based compensation

        We expect to incur increased non-cash, stock-based compensation expenses in connection with existing and future issuances under our equity incentive plans.

Internal Control Over Financial Reporting

Overview

        Effective internal control over financial reporting is necessary for us to provide reliable annual and quarterly financial reports and to prevent fraud. If we cannot provide reliable financial reports or

48

prevent fraud, our operating results and financial condition could be materially misstated and our reputation could be significantly harmed.

        In addition, as a private company, we were not subject to the same standards as a public company. As a public company, we will be required to file annual and quarterly reports containing our consolidated financial statements and will be subject to the requirements and standards set by the SEC, PCAOB and the NYSE. In particular, commencing with the year ending December 31, 2010, we must perform system and process evaluations and testing of our internal control over financial reporting to allow us to report on the effectiveness of our internal control over financial reporting, as required under Section 404 of the Sarbanes-Oxley Act.

Material weaknesses

        In connection with the preparation of the consolidated financial statements included elsewhere in this prospectus, we concluded that there were matters that constituted material weaknesses in our internal control over financial reporting. A material weakness is a control deficiency, or combination of deficiencies, that results in more than a remote likelihood that a material misstatement of our consolidated financial statements would not be prevented or detected on a timely basis by our employees in the normal course of performing their assigned functions. In particular, we have concluded that we did not have:

•

sufficient personnel with an appropriate level of accounting knowledge, experience and training in the selection and application of technical accounting principles in accordance with GAAP to support our financial accounting and reporting functions; or

•

effective controls over the selection, application and monitoring of accounting policies related to leasing transactions, revenue recognition, stock-based compensation, redeemable convertible preferred stock, earnings per share and purchase accounting to ensure that such transactions were accounted for in conformity with GAAP.

        In addition, we restated our consolidated financial statements, in part due to inadequate internal controls. See Note 3, "Restatement of Consolidated Financial Statements," to our consolidated financial statements, which are included elsewhere in this prospectus, and footnote 9 and 10 to the tables in "Selected Consolidated Financial and Other Data."

        We are committed to remediating the control deficiencies that constitute the material weaknesses by implementing changes to our internal control over financial reporting. Our Chief Financial Officer is responsible for implementing changes and improvements in the internal control over financial reporting and for remediating the control deficiencies that gave rise to the material weaknesses. We have implemented a number of significant changes and improvements in our internal control over financial reporting during the third and fourth quarters of 2008, specifically:

•

hiring key personnel, including a corporate controller, director of internal audit and a director of financial reporting, in each case with experience managing and working in the corporate accounting department of a publicly traded company;

•

making process changes in the financial reporting area, including additional oversight and review; and

•

conducting training of our accounting staff for purposes of enabling them to recognize and properly account for transactions of the type described above.

        Management plans to implement further process changes and conduct further training during 2009. We cannot assure you that the measures we have taken to date and plan to take will remediate the material weaknesses we have identified.

49

Critical Accounting Policies and Estimates

        The discussion of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses. On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue, bad debts, long-lived assets, income taxes and stock-based compensation. These estimates are based on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The results of our analysis form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and the impact of such differences may be material to our consolidated financial statements.

        Critical accounting policies are those policies that, in management's view, are most important in the portrayal of our financial condition and results of operations. The footnotes to the consolidated financial statements also include disclosure of significant accounting policies. The methods, estimates and judgments that we use in applying our accounting policies have a significant impact on the results that we report in our financial statements. These critical accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. Our most critical accounting policies and estimates include those involved in the recognition of revenue, allowance for doubtful accounts, impairment of goodwill and intangible assets, provision for income taxes and accounting for stock based compensation. Those critical accounting policies and estimates that require the most significant judgment are discussed further below.

Revenue recognition

        We recognize revenue when earned in accordance with Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition, and EITF 00-21, Accounting for Revenue Arrangements with Multiple Deliverables.

        The majority of our revenue comes from tuition revenue and is shown net of scholarships and expected refunds. Tuition revenue is recognized on a straight-line basis over the applicable period of instruction. Our online students generally enroll in a program that encompasses a series of five- to six-week courses that are taken consecutively over the length of a program. Students are billed on a course-by-course basis when first attending a class. Our traditional ground campus students enroll in a program that encompasses a series of 16-week courses. These students are billed at the beginning of each semester.

        Deferred revenue represents tuition, fees and other student payments and unpaid amounts due less amounts recognized as revenue. We recognize an account receivable and corresponding deferred revenue for the full amount of course tuition when a student first attends class.

        If a student withdraws from a program prior to certain dates, they are entitled to a refund of certain portions of their tuition, depending on the date they last attended a class. If an online student drops a class and the student's last date of attendance was in the first week of class, the student receives a full refund of the tuition for that class. In the event that an online student drops a class and the last date of attendance was in the second week of the class, the student receives a refund of 50% of the tuition for that class. If an online student drops a class and the student's last date of attendance was after the second week of the class, the student is not entitled to a refund. We monitor student attendance in online courses through activity in the online program associated with that course. After two weeks have passed without attendance in a class by the student, the student is presumed to have dropped the course as of the last date of attendance, and the student's tuition is automatically refunded to the extent the student is entitled to a refund based on the schedule above. The Company estimates expected refunds based on historical refund rates by analogy to Statement of Financial Standards

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(SFAS) No. 48, as permitted by SAB No. 13, and records a provision to reduce revenue to the amount that is not expected to be refunded. Refunds issued by us for services that have been provided in a prior period have not historically been material. Future changes in the rate of student withdrawals may result in a change to expected refunds and would be accounted for prospectively as a change in estimate.

        We also recognize revenue from technology fees that are one-time start up fees charged to each new undergraduate online student. Technology fee revenue is recognized ratably over the average expected term of a student. The average expected term of the student is estimated each quarter based upon historical student duration of attendance and qualitative factors as deemed necessary. A significant change in the composition of our student body could result in a change in the time period over which these technology fees are amortized.

Allowance for doubtful accounts

        We maintain an allowance for doubtful accounts for estimated losses resulting from students' inability to pay us for services performed or for inability of students to repay excess funds received for stipends. Bad debt expense is recorded as a component of instructional costs and services. We calculate the allowance for doubtful accounts based on our historical collection experience and changes in the economic environment. We also consider other factors such as the age of the receivable, the type of receivable and the students' active or inactive enrollment status. Certain variables require management judgment and include inherent uncertainties such as the likelihood of future student attendance and students' ability to qualify for Title IV eligibility. Variations in these factors from our historical experience may impact future estimates of the collectibility of accounts receivable and may cause actual losses due to write-offs of uncollectible accounts to differ from past estimates.

Impairments of long-lived assets

        We account for long-lived assets in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. We assess potential impairment to our long-lived assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Factors we consider important which could cause us to assess potential impairment include significant changes in the manner of our use of the acquired assets or the strategy for our overall business and significant negative industry or economic trends. An impairment loss is recognized when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Any required impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and a charge to operating results.

        We use various assumptions in determining undiscounted cash flows expected to result from the use and eventual disposition of the asset, including assumptions regarding revenue growth rates, operating costs, capital additions, assumed discount rates, disposition or terminal value and other economic factors. These variables require management judgment and include inherent uncertainties such as continuing student acceptance of our value proposition by prospective students, our ability to manage operating costs and the impact of changes in the economy on our business. A variation in the assumptions used could lead to a different conclusion regarding the realizability of an asset and, thus, could have a significant effect on our conclusions regarding whether an asset is impaired and the amount of impairment loss recognized in the consolidated financial statements.

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Income taxes

        We utilize the liability method of accounting for income taxes as set forth in SFAS No. 109, Accounting for Income Taxes, and FASB Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes. Significant judgments are required in determining the consolidated provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax settlement is uncertain. As a result, we recognize tax liabilities based on estimates of whether additional taxes and interest will be due. These tax liabilities are recognized when, despite our belief that our tax return positions are supportable, we believe that it is more likely than not those positions may not be fully sustained upon review by tax authorities. We believe that our accruals for tax liabilities are adequate for all open audit years based on our assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. To the extent that the final tax outcome of these matters differs from our expectations, such differences will impact income tax expense in the period in which such determination is made.

        On January 1, 2008, we adopted FIN 48. The adoption of this standard had no material effect on our consolidated financial statements and did not result in the recording of uncertain tax position liabilities.

        In addition to estimates inherent in the recognition of current taxes payable, we estimate the likelihood that we will be able to recover our deferred tax assets each reporting period. Realization of our deferred tax assets is dependent upon future taxable income. To the extent we believe it is more-likely-than-not that some portion or all of our net deferred tax assets will not be realized, we establish a valuation allowance against the deferred tax assets. Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence including past operating results, estimates of future taxable income and the feasibility of ongoing tax planning strategies. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to income tax expense in the period in which such determination is made. As further discussed in Note 14, "Income Taxes," to our consolidated financial statements, which are included elsewhere in this prospectus, we have revised our estimate of future taxable income and have released a portion of the valuation allowance on deferred tax assets as of September 30, 2008.

Stock-based compensation

        We grant options to purchase our common stock to certain employees and directors under our equity incentive plans. The benefits provided under these plans are share-based payments subject to the provisions of revised SFAS No. 123 ("SFAS 123R"), Share-Based Payments. Effective January 1, 2006, we adopted the provisions of SFAS 123R. SFAS 123R, which is a revision of SFAS 123, Accounting for Stock-Based Compensation, and replaces our previous accounting for share-based awards under Accounting Principles Board Opinion No. 25 ("APB 25"), Accounting for Stock Issued to Employees. SFAS 123R requires all share-based payments to employees, including grants of stock options and the compensatory elements of employee stock purchase plans, to be recognized in our consolidated statement of operations based upon their fair values.

        Under the fair value recognition provisions of SFAS 123R, stock-based compensation cost is measured at the grant date fair value of the award and is expensed over the vesting period. We estimate the fair value of stock options awards on the grant date using the Black-Scholes option pricing model. Determining the fair value of stock-based awards at the grant date under this model requires judgment, including estimating our value per common share of stock, volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock-

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based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment.

        Our computation of expected term was calculated using the simplified method, as permitted by SAB No. 107, "Share-Based Payment." The risk-free interest rate is based on the United States Treasury yield of those maturities that are consistent with the expected term of the stock option in effect on the grant date of the award. Dividend rates are based upon historical dividend trends and expected future dividends. As we have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future, a zero dividend rate is assumed in our calculation. Since our stock is not publicly traded and we have no historical data on the volatility of our stock, our expected volatility is estimated by analyzing the historical volatility of comparable public companies, which we refer to as guideline companies. In evaluating the comparability of the guideline companies, we consider factors such as industry, stage of life cycle, size and financial leverage.

        The amount of stock-based compensation expense we recognize during a period is based on the portion of the awards that are ultimately expected to vest. We estimate option forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. The amount of stock based compensation has not historically been material to the consolidated financial statements. The effect of changes of the estimates to the inputs to the Black-Scholes option pricing model, such as estimated life or volatility, would not have a material impact to our consolidated financial statements.

        Our board of directors estimated the fair value of the common stock underlying stock options granted before September 30, 2008. The intent was for all options granted to be exercisable at a price per share not less than the per share fair market value of common stock on the date of grant. As a privately held company, our board of directors made a reasonable estimate of the then-current fair value of our common stock as of the date of each option grant. Our board of directors considered numerous objective and subjective factors in determining the fair value of our common stock at each option grant date, including the following: (i) the price of the Series A Convertible Preferred Stock we issued in arm's-length transactions and the rights, preferences and privileges of such stock relative to the common stock; (ii) our performance and the status of our business plan development and marketing efforts and (iii) our stage of development and business strategy.

        In determining the fair value of our common stock, we used a combination of the income approach and the market approach to estimate our total enterprise value at each valuation date. We then used that enterprise value to estimate the fair value of the common stock in the context of our capital structure as of each valuation date.

        The income approach is an estimate of the present value of the future monetary benefits expected to flow to the owners of a business. It requires a projection of the cash flows that the business is expected to generate. These cash flows are converted to a present value, using a rate of return that accounts for the time value of money after factoring in certain risks inherent in the business. Under the market approach, the value of our company is estimated by comparing our business to similar businesses whose securities are actively traded in public markets. Valuation multiples are derived from the prices at which the securities trade in public markets and the companies' underlying financial metrics. The valuation multiples are then applied to the equivalent financial metrics of our business. Valuation multiples may be adjusted to account for differences between our company and similar companies for such factors as company size, growth prospects or diversification of operations.

        The enterprise value calculated at each valuation date was then allocated to the shares of Series A Convertible Preferred Stock and common stock assuming the conversion of all the outstanding Series A Convertible Preferred Stock and the exercise of all outstanding options and warrants. The use of estimates other than the ones above may have resulted in different amounts assigned to the value of our common stock and the fair value of options granted during these periods. The following table sets forth

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information regarding the historical trend of options granted to employees and directors, the exercise price of the options and the fair value of our common stock for certain dates during 2006 and 2007:

	Total Number of Options Granted		Per Share Exercise Price of Options Granted		Fair Value of Common Stock		Intrinsic Value per Share
February 15, 2006		31,350,847	$	0.07	$	0.07	$	—
April 7, 2006		1,211,713	$	0.07	$	0.07	$	—
February 28, 2007		198,516	$	0.09	$	0.10	$	—
November 27, 2007		8,780,000	$	0.13	$	0.12	$	—

Results of Operations

        The following table sets forth data from our consolidated statement of operations as a percentage of revenue for each of the periods indicated:

			Year Ended December 31,									Nine Months Ended September 30,
			2005(1)			2006(1)			2007			2007			2008
			(Restated)			(Restated)						(Unaudited)			(Unaudited)
Revenue				100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Costs and expenses
	Instructional cost and services			69.1			43.7			34.8			35.1			28.2
	Marketing and promotional			51.3			42.7			42.0			45.0			36.5
	General and administrative			77.9			30.4			18.6			17.4			17.7
		Total operating expenses		198.3			116.8			95.4			97.5			82.4
Operating income (loss)				(98.3	)		(16.8	)		4.6			2.5			17.6
Interest (income)				(0.5	)		—			—			—			(0.1	)
Interest expense				2.9			1.2			0.6			0.6			0.1
Income (loss) before income taxes				(100.7	)		(18.0	)		4.0			1.9			17.6
Income tax expense				—			—			0.2			0.1			3.7
Net income (loss)				(100.7	)%		(18.0	)%		3.8	%		1.8	%		13.9	%

(1)

Our consolidated financial statements for the periods ended December 31, 2005 and 2006 have been restated. See Note 3, "Restatement of Consolidated Financial Statements," to our consolidated financial statements, which are included elsewhere in this prospectus.

        We have experienced significant growth in enrollments, revenue and operating income as well as improvement in liquidity since our acquisition of Ashford University in March 2005. We continue to grow in response to the increasing demand in the market for higher education. We believe our enrollment and revenue growth is driven primarily by (i) our significant investment in enrollment advisors and online advertising which commenced immediately upon our acquisition of Ashford University and (ii) students' acceptance of our value proposition. Our significant growth in operating income is a result of leveraging our fixed costs with increased revenue.

        While we cannot guarantee that these trends will continue in the current economy, we continue to invest in enrollment advisors and online advertising and expect students to continue to accept our value proposition.

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Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007

        Revenue.    Our revenue for the nine months ended September 30, 2008, was $149.2 million, an increase of $94.6 million, or 173.4%, as compared to $54.6 million for the nine months ended September 30, 2007. Our revenue growth is primarily attributed to enrollment growth. Enrollment growth is driven by various factors including the students' acceptance of our value proposition, the quality of lead generation efforts, the number of enrollment advisors and our ability to retain existing students. To a lesser extent, the growth is due to increases in the average tuition per student as a result of tuition price increases, partially offset by an increase in institutional scholarships of $5.9 million. Student enrollment as of September 30, 2008, was 30,547, an increase of 17,831, or 140.2%, compared to 12,716 as of September 30, 2007.

        Instructional costs and services.    Our instructional costs and services for the nine months ended September 30, 2008, were $42.1 million, an increase of $22.9 million, or 119.5%, as compared to $19.2 million for the nine months ended September 30, 2007. This increase was primarily due to increases in instructional compensation costs of $12.0 million to meet the needs of a 140.2% increase in student enrollment, financial aid processing costs of $2.4 million, license fees of $1.1 million and bad debt expense of $5.8 million. Instructional costs and services decreased, as a percentage of revenue, to 28.2% for the nine months ending September 30, 2008, as compared to 35.1% for the nine months ended September 30, 2007. The decrease, as a percentage of revenue, is primarily due to certain scalable fixed costs which relate primarily to the online environment (such as the student services and financial aid personnel, software license fees and online program development costs) being spread over increased enrollment and increased revenue. Such decrease was offset by the increase in our bad debt expense, as a percentage of revenue, to 5.9% for the nine months ended September 30, 2008, from 5.5% for the nine months ended September 30, 2007. The increase in bad debt expense, as a percentage of revenue, resulted from increased receivables due to greater availability of Title IV funds per student and from general deterioration of economic conditions.

        Marketing and promotional.    Our marketing and promotional expenses for the nine months ended September 30, 2008, were $54.5 million, an increase of $30.0 million, or 122.1%, as compared to $24.5 million for the nine months ended September 30, 2007. The increase was primarily due to increases in compensation costs of $17.4 million and advertising expenses of $8.1 million. This increase in compensation and advertising spending is expected to continue as we grow our enrollment advisor base and increase our lead generation efforts to support those advisors. Our marketing and promotional expenses, as a percentage of revenue, decreased to 36.5% for the nine months ended September 30, 2008, from 45.0% for the nine months ended September 30, 2007. The decrease is primarily due to operating leverage associated with compensation costs and advertising costs.

        General and administrative.    Our general and administrative expenses for the nine months ended September 30, 2008, were $26.3 million, an increase of $16.8 million, or 177.0%, as compared to $9.5 million for the nine months ended September 30, 2007. The increase was primarily due to increases in compensation costs of $9.2 million, professional fees of $2.5 million and travel costs of $0.3 million. Our general and administrative expenses, as a percentage of revenue, increased slightly to 17.7% for the nine months ended September 30, 2008, from 17.4% for the nine months ended September 30, 2007.

        Interest income.    Our interest income for the nine months ended September 30, 2008, was $0.2 million, an increase of $0.2 million from less than $0.1 million for the nine months ended September 30, 2007, as a result of increased levels of cash and cash equivalents.

        Interest expense.    Our interest expense for the nine months ended September 30, 2008, was $0.2 million, a decrease of $0.1 million from $0.3 million for the nine months ended September 30, 2007. The decrease was primarily due to reductions in borrowings.

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        Income tax expense.    Income tax expense for the nine months ended September 30, 2008, was $5.5 million, an increase of $5.4 million from $0.1 million for the nine months ended September 30, 2007. This increase was primarily attributable to increased income before income taxes as well as net operating loss carryforwards that completely eliminated regular taxable income in 2007 and only partially offset the income in 2008. For the nine months ended September 30, 2008, we have reduced our valuation allowance by $5.8 million, based on our belief that our net deferred tax assets will be realized in future periods. As a result, our effective income tax rate increased to 21.0% from 4.8%.

        Net income.    Our net income for the nine months ended September 30, 2008, was $20.8 million, an increase of $19.8 million, or 2,003.0%, as compared to net income of $1.0 million for the nine months ended September 30, 2007, due to the factors discussed above.

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

        Revenue.    Our revenue for 2007 was $85.7 million, an increase of $57.1 million, or 199.5%, as compared to $28.6 million for 2006. The increase was primarily due to increased student enrollment, partially offset by an increase in institutional scholarships of $2.5 million. Student enrollment as of December 31, 2007, was 12,623, an increase of 8,152, or 182.3%, compared to 4,471 as of December 31, 2006.

        Instructional costs and services.    Our instructional costs and services expenses for 2007 were $29.8 million, an increase of $17.3 million, or 138.5%, as compared to $12.5 million for 2006. The increase was primarily due to increases in instructional compensation costs of $8.4 million to meet the needs of a 182.3% increase in student enrollment financial aid processing fees of $1.8 million and license fees of $1.0 million. Bad debt expense increased to $4.7 million for 2007 from $1.0 million for 2006 as a result of a proportional increase in revenue. As a percentage of revenue, instructional costs and services decreased to 34.8% for 2007 as compared to 43.7% for 2006. The decrease, as a percentage of revenue, is primarily due to operating leverage associated with instructional compensation costs, partially offset by an increase in our bad debt expense, as a percentage of revenue, to 5.5% for 2007 from 3.4% for 2006. The increase in bad debt expense, as a percentage of revenue, resulted from increased receivables due to a greater availability of Title IV funds per student.

        Marketing and promotional.    Our marketing and promotional expenses for 2007 were $36.0 million, an increase of $23.8 million, or 194.7%, as compared to $12.2 million for 2006. The increase was primarily due to increases in compensation of $10.9 million and advertising expenses of $10.0 million. Our marketing and promotional expenses, as a percentage of revenue, decreased to 42.0% for 2007, from 42.7% for 2006. The decrease, as a percentage of revenue, was primarily due to operating leverage in compensation costs.

        General and administrative.    Our general and administrative expenses for 2007 were $15.9 million, an increase of $7.2 million, or 82.6%, as compared to $8.7 million for 2006. The increase was primarily due to increases in compensation costs of $4.1 million, professional fees of $0.8 million and travel costs of $0.6 million. Our general and administrative expenses, as a percentage of revenue, decreased to 18.6% for 2007 from 30.4% for 2006, primarily due to operating leverage associated with compensation costs and miscellaneous other expenses.

        Interest income.    Interest income for 2007 and 2006 was less than $0.1 million.

        Interest expense.    Interest expense for 2007 was $0.5 million, an increase of $0.2 million, or 55.0%, from $0.3 million for 2006, as a result of increased borrowings.

        Income tax expense.    Income tax expense for 2007 was $0.2 million primarily due to federal and state alternative minimum tax. There was no income tax provision for 2006 due to our net operating losses incurred in the current and prior years.

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        Net income.    Our net income for 2007 was $3.3 million, an increase of $8.4 million as compared to a net loss of $5.2 million for 2006, due to the factors discussed above.

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

        Revenue.    Our revenue for 2006 was $28.6 million, an increase of $20.7 million, or 260.0%, as compared to $8.0 million for 2005. The increase was primarily due to increased student enrollment, partially offset by an increase in institutional scholarships of $1.8 million. Student enrollment as of December 31, 2006, was 4,471, an increase of 3,408, or 320.6%, compared to 1,063 as of December 31, 2005.

        Instructional costs and services.    Our instructional costs and services for 2006 were $12.5 million, an increase of $7.0 million, or 127.5%, as compared to $5.5 million for 2005. The increase was primarily due to increases in instructional compensation costs of $4.8 million to meet the demand of a 320.6% increase in student enrollment and financial aid processing fees of $0.5 million. Bad debt expense increased to $1.0 million for 2006 from $0.9 million for 2005 as a result of a proportional increase in revenue. As a percentage of revenue, instructional costs and services decreased to 43.7% for 2006 as compared to 69.1% for 2005. The decrease, as a percentage of revenue, was primarily due to operating leverage associated with compensation costs as well as other direct costs.

        Marketing and promotional.    Our marketing and promotional expenses for 2006 were $12.2 million, an increase of $8.1 million, or 199.5%, as compared to $4.1 million for 2005. The increase was primarily due to increases in compensation costs of $4.1 million and advertising expenses of $3.5 million. Our marketing and promotional expenses, as a percentage of revenue, decreased to 42.7% for 2006, from 51.3% for 2005. The decrease, as a percentage of revenue, is primarily due to operating leverage associated with compensation costs and advertising expenses.

        General and administrative.    Our general and administrative expenses for 2006 were $8.7 million, an increase of $2.5 million, or 40.6%, as compared to $6.2 million for 2005. The increase was primarily due to increases in compensation costs of $1.9 million and travel costs of $0.5 million. Our general and administrative expenses, as a percentage of revenue, decreased to 30.4% for 2006 from 77.9% for 2005, primarily due to operating leverage associated with compensation costs and travel costs.

        Interest income.    Interest income for 2006 and 2005 was less than $0.1 million.

        Interest expense.    Interest expense for 2006 of $0.4 million, an increase of $0.2 million, from $0.2 million for 2005 as a result of borrowing levels and interest rates.

        Income tax expense.    We did not record an income tax benefit for 2006 and 2005 primarily due to our net operating loss from the current and prior periods and the likelihood that the tax benefit would be realized.

        Net loss.    Our net loss for 2006 was $5.2 million, an increase of $2.9 million as compared to a net loss of $8.0 million for 2005 due to the factors discussed above.

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Quarterly Results and Seasonality

        The following tables set forth certain unaudited financial and operating data for each of the first three quarters of 2008 and for each quarter during 2007. We believe that the unaudited information reflects all adjustments, which include only normal and recurring adjustments, necessary to present fairly the information below.

			First Quarter			Second Quarter			Third Quarter		Fourth Quarter
			(Unaudited)			(Unaudited)			(Unaudited)		(Unaudited)
			(In thousands, except enrollment data)
2007
Revenue			$	13,749		$	16,607		$	24,202	$	31,151
Costs and expenses:
	Instructional costs and services			5,282			6,114			7,758		10,683
	Marketing and promotional			6,280			8,562			9,690		11,465
	General and administrative			2,952			3,176			3,375		6,389
		Total costs and expenses		14,514			17,852			20,823		28,537
		Operating income (loss)		(765	)		(1,245	)		3,379		2,614
	Interest (income)			(1	)		—			—		(11	)
	Interest expense			120			110			102		212
		Income (loss) before income taxes		(884	)		(1,355	)		3,277		2,413
	Income tax expense (benefit)			(42	)		(64	)		156		114
		Net income (loss)	$	(842	)	$	(1,291	)	$	3,121	$	2,299
Period end enrollment
	Online			6,440			8,365			12,117		12,104
	Ground			416			301			599		519
	Total:			6,856			8,666			12,716		12,623

			First Quarter			Second Quarter			Third Quarter
			(Unaudited)			(Unaudited)			(Unaudited)
			(In thousands, except enrollment data)
2008
Revenue			$	38,948		$	49,942		$	60,277
Costs and expenses:
	Instructional costs and services			11,888			13,794			16,368
	Marketing and promotional			15,063			18,369			21,058
	General and administrative			7,210			7,925			11,191
		Total costs and expenses		34,161			40,088			48,617
		Operating income		4,787			9,854			11,660
	Interest (income)			(32	)		(59	)		(104	)
	Interest expense			86			97			14
		Income (loss) before income taxes		4,733			9,816			11,750
	Income tax expense (benefit)			(295	)		2,817			2,999
		Net income (loss)	$	5,028		$	6,999		$	8,751
Period end enrollment
	Online			18,918			22,201			29,786
	Ground			591			406			761
	Total:			19,509			22,607			30,547

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        Although not apparent in our results of operations due to our rapid rate of growth, our operations are generally subject to seasonal trends. As our growth rate declines we expect to experience seasonal fluctuations in results of operations as a result of changes in the level of student enrollment. While we enroll students throughout the year, first and fourth quarter new enrollments and revenue generally are lower than other quarters due to the holiday break in December and January. We generally experience a seasonal increase in new enrollments in August and September of each year when most other colleges and universities begin their fall semesters.

Liquidity and Capital Resources

Liquidity

        We financed our operating activities and capital expenditures during 2005 and 2006 primarily through proceeds from the issuance of redeemable convertible preferred stock and from borrowings. We financed our operating activities and capital expenditures during 2007 and the first nine months of 2008 primarily through cash provided by operating activities. Our cash and cash equivalents were $0.1 million, $7.4 million and $32.0 million at December 31, 2006, December 31, 2007 and September 30, 2008, respectively. Our restricted cash was $0.7 million at September 30, 2008.

        We have a credit agreement (Credit Agreement) with Comerica Bank that provides for a maximum amount of borrowing under a revolving credit facility of $15.0 million, with a letter of credit sub-limit of $14.2 million. The Credit Agreement also provides for an equipment line of credit not to exceed $0.2 million.

        A significant portion of our revenue is derived from tuition funded by Title IV programs. As such, the timing of disbursements under Title IV programs is based on federal regulations and our ability to successfully and timely arrange financial aid for our students. Title IV funds are generally provided in multiple disbursements before we earn a significant portion of tuition and fees and incur related expenses over the period of instruction. Students must apply for new loans and grants each academic year. These factors, together with the timing of our students beginning their programs, affect our operating cash flow.

        Based on the most recent fiscal year end financial statements, Ashford University and the University of the Rockies did not satisfy the composite score requirement of the financial responsibility test which institutions must satisfy in order to participate in Title IV programs. As a result, (i) Ashford University posted a letter of credit in favor of the Department of Education in the amount of $12.1 million, remaining in effect through September 30, 2009, and (ii) the University of the Rockies posted a letter of credit in favor of the Department of Education in the amount of $0.7 million, remaining in effect through June 30, 2009. Additionally, we have posted an aggregate of $2.2 million in letters of credit related to our leased facilities. The letters of credit related to Ashford University and to our leased facilities are issued under our Credit Agreement. The letter of credit on behalf of the University of the Rockies is cash secured. Although we expect our universities to satisfy the composite score requirement of the financial responsibility test under Title IV for the year ending December 31, 2008, and as a result would not be required to replace the outstanding letters of credit upon expiration, we expect to have sufficient cash on hand and availability of credit to replace or increase those letters of credit if necessary.

        Based on our current level of operations and anticipated growth, which is based upon the increased enrollments discussed in "Results of Operations," we believe that our cash flow from operations, existing cash and cash equivalents and other sources of liquidity, will provide adequate funds for ongoing operations, planned capital expenditures and working capital requirements for at least the next 12 months.

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        Operating Activities.    Net cash provided by operating activities for the nine months ended September 30, 2008, was $39.4 million, primarily due to our net income and the timing of cash collections. Net cash provided by operating activities for 2007 was $10.4 million, primarily due to our increased net income. We expect to continue to generate cash from our operations. Net cash used in operating activities for 2006 was $1.1 million, primarily due to our net loss of $5.2 million. Net cash used in operating activities for the year ended December 31, 2005 was $7.2 million, primarily driven by our net loss of $8.0 million.

        Investing Activities.    Net cash used in investing activities was $8.0 million, $1.4 million and $2.9 million for 2005, 2006 and 2007, respectively, and $9.7 million for the nine months ended September 30, 2008. Our cash used in investing activities is primarily related to the purchase of property and equipment and leasehold improvements. In 2005, we purchased $7.7 million of assets related to the acquisition of Ashford University. A majority of our historical capital expenditures are related to the establishment of our initial infrastructure to support our online operations and to improve our ground campus. Capital expenditures were $0.3 million, $1.4 million and $3.6 million for 2005, 2006 and 2007, respectively, and $9.1 million for the nine months ended September 30, 2008. We expect our capital expenditures for 2009 to be approximately $15 million. In the future we will continue to invest in computer equipment and office furniture and fixtures to support our increasing employee headcounts. We expect capital expenditures to represent a decreasing percentage of net revenue in the future.

        Financing Activities.    Net cash provided by (used in) financing activities was $13.9 million, $0.3 million and $(0.1)  million for 2005, 2006 and 2007, respectively, and $(5.0) million for the nine months ended September 30, 2008. Net cash provided by financing activities for 2005 was primarily due to proceeds from the issuance of preferred stock of $10.6 million and proceeds from borrowing of $3.6 million. Net cash used in financing activities for the nine months ended September 30, 2008, was primarily due to repayments of borrowing of $4.9 million. In the future we expect that we will continue to utilize commercial financing, lines of credit and term debt for the purpose of expansion of our online business infrastructure and to expand and improve our ground campuses in Clinton, Iowa and Colorado Springs, Colorado.

Contractual Obligations

        The following table sets forth, as of December 31, 2007, the aggregate amounts of our contractual obligations and commitments with definitive payment terms due in each of the periods presented (in millions):

	Payments Due by Period
	Total		Less than 1 Year		Years 2-3		Years 4-5		More than 5 Years
	(In millions)
Long term debt (1)(2)	$	5.1	$	1.6	$	1.0	$	0.9	$	1.6
Capital lease obligations (3)		0.6		0.2		0.3		0.1		—
Operating lease obligations (3)		89.7		5.7		18.2		16.9		48.9
Total contractual obligations	$	95.4	$	7.5	$	19.5	$	17.9	$	50.5

(1)

As of September 30, 2008, our outstanding debt obligations are $0.3 million, of which $0.1 million is the current portion.

(2)

See Note 8, "Notes Payable and Long-Term Debt," to our consolidated financial statements, which are included elsewhere in this prospectus.

(3)

See Note 9, "Lease Obligations," to our consolidated financial statements, which are included elsewhere in this prospectus.

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        In January 2008, we entered into an additional operating lease commitment with definitive payment terms through 2018. That commitment contains minimum lease payments of $0.9 million due in less than one year, $12.8 million due in two to three years, $15.0 million due in four to five years and $46.9 million due in more than five years. In October 2008, we entered into an additional operating lease commitment with definitive payment terms through 2020. That commitment contains minimum lease payments of $13.4 million due in two to three years, $18.9 million due in four to five years and $77.4 million due in more than five years. These lease payments are not reflected in the table above.

Off-Balance Sheet Arrangements

        We do not have any off-balance sheet arrangements.

Impact of Inflation

        We believe that inflation has not had a material impact on our results of operations for the years ended December 31, 2005, 2006 or 2007 or the nine months ended September 30, 2008. There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition.

Quantitative and Qualitative Disclosure About Market Risk

Market risk

        We have no derivative financial instruments or derivative commodity instruments. We invest cash in excess of current operating requirements in short term certificates of deposit and money market accounts.

Interest rate risk

        All of our capital lease obligations are fixed rate instruments and are not subject to fluctuations in interest rates. However, to the extent we borrow funds under the Credit Agreement, we would be subject to fluctuations in interest rates.

Segment Information

        We operate in one reportable segment as a single educational delivery operation using a core infrastructure that serves the curriculum and educational delivery needs of both our ground and online students regardless of geography. Our chief operating decision maker, our Chief Executive Officer, manages our operations as a whole, and no expense or operating income information is evaluated by our chief operating decision maker on any component level.

Related Party Transactions

        Ryan Craig, one of our directors, entered into an agreement with Warburg Pincus, our principal investor, in August 2004 to serve on our board of directors and as a consultant to us in 2004 on behalf of Warburg Pincus. This agreement was amended in December 2008. Under this agreement, Warburg Pincus agreed to compensate Mr. Craig from its equity ownership in us. For his services as a Warburg Pincus representative to our board of directors from August 2004 to August 2008, Mr. Craig earned the right to receive 198,516 shares of our common stock from Warburg Pincus. In his role as an independent consultant to us in 2004, Mr. Craig earned the right to receive 305,826 shares of our common stock from Warburg Pincus. For these services, Mr. Craig received an aggregate amount of 504,342 shares of common stock in January 2009.

        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

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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 is secured by 75,000 shares of Series A Convertible Preferred Stock held by Mr. Clark. Mr. Clark intends to repay the loan by March 31, 2009. While Warburg Pincus does not anticipate difficulty collecting from the executive and enforcing the full-recourse nature of this loan, Warburg Pincus is willing to pursue every available avenue to recover all amounts due under the terms of the loan should the executive not repay the loan.

        In 2004, Warburg Pincus entered into a guarantee in favor of a postsecondary college in the Connecticut state college system pursuant to which Warburg Pincus agreed to guarantee certain of our obligations. See "Certain Relationships and Related Transactions—Warburg Pincus Guarantee." In 2005, we issued an unsecured subordinated convertible promissory note to Warburg Pincus. See "Certain Relationships and Related Transactions—Unsecured Subordinated Convertible Promissory Note Issued to Warburg Pincus." Additionally, in 2007, we entered into a line of credit with Warburg Pincus. See "Certain Relationships and Related Transactions—Line of Credit with Warburg Pincus." These notes are no longer outstanding.

        Our current certificate of incorporation and bylaws, as well as the certificate of incorporation and bylaws that will be in effect upon the closing of this offering, require us to indemnify our directors and executive officers to the fullest extent permitted by Delaware law. We have also entered into indemnification agreements with each of our directors and executive officers. See "Certain Relationships and Related Transactions—Indemnification Agreements."

Recent Accounting Pronouncements

        In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS 157"), which provides enhanced guidance for using fair value to measure assets and liabilities. SFAS 157 establishes a common definition of fair value, provides a framework for measuring fair value under GAAP and expands disclosure requirements about fair value measurements. SFAS 157 is effective for financial statements issued in fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We adopted SFAS 157 on January 1, 2008, and our adoption did not have a material impact on our consolidated financial statements.

        In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115 ("SFAS 159"). This standard permits entities to choose to measure financial instruments and certain other items at fair value and is effective for the first fiscal year beginning after November 15, 2007. SFAS 159 must be applied prospectively, and the effect of the first re-measurement to fair value, if any, should be reported as a cumulative-effect adjustment to the opening balance of retained earnings. We adopted SFAS 159 on January 1, 2008, and our adoption did not have a material impact on our consolidated financial statements.

        In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations ("SFAS 141R"). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141R is effective for fiscal years beginning after December 15, 2008. We are in the process of determining the effect, if any, the adoption of SFAS 141R will have on our consolidated financial statements.

        In June 2008, the FASB ratified EITF Issue 07-5, "Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock" ("EITF 07-5"). Paragraph 11(a) of SFAS

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No. 133 ("SFAS 133"), "Accounting for Derivatives and Hedging Activities," specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to such company's own stock and (b) classified in stockholders' equity in the statement of financial position would not be considered a derivative financial instrument. EITF 07-5 provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer's own stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception. EITF 07-5 will be effective for the first annual reporting period beginning after December 15, 2008, and early adoption is prohibited. Management is currently evaluating whether the adoption of EITF 07-5 will have an impact on the accounting for the conversion features embedded in the redeemable convertible preferred stock. If management determines that the adoption of EITF 07-5 impacts the accounting for the redeemable convertible preferred stock, management may change its conclusion regarding whether the conversion features embedded in the redeemable convertible preferred stock are required to be bifurcated and accounted for separately under SFAS 133.

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BUSINESS

Overview

        We are a regionally accredited provider of postsecondary education services. We offer associate's, bachelor's, master's and doctoral programs in the disciplines of business, education, psychology, social sciences and health sciences.

        We deliver our programs online as well as at our traditional campuses located in Clinton, Iowa and Colorado Springs, Colorado. As of September 30, 2008, we offered over 760 courses and 41 degree programs with 37 specializations and 21 concentrations. We had 30,547 students enrolled in our institutions as of September 30, 2008, 98% of whom were attending classes exclusively online.

        We have designed our offerings to have four key characteristics that we believe are important to students:

•

Affordability—our tuition and fees fall within Title IV loan limits;

•

Transferability—our universities accept a high level of prior credits;

•

Accessibility—our delivery model makes our offerings accessible to a broad segment of the population; and

•

Heritage—our institutions' histories as traditional universities provide a sense of familiarity, a connection to a student community and a campus-based experience for both online and ground students.

We believe these characteristics create an attractive and differentiated value proposition for our students. In addition, we believe this value proposition expands our overall addressable market by enabling potential students to overcome the challenges associated with cost, transferability of credits and accessibility—factors that frequently discourage individuals from pursuing a postsecondary degree.

        We are committed to providing a high-quality educational experience to our students. We have a comprehensive curriculum development process, and we employ qualified faculty members with significant academic and practitioner credentials. We conduct ongoing faculty and student assessment processes and provide a broad array of student services. Our ability to offer a quality experience at an affordable price is supported by our efficient operating model, which enables us to deliver our programs, as well as market, recruit and retain students, in a cost-effective manner.

        We have experienced significant growth in enrollment, revenue and operating income since our acquisition of Ashford University in March 2005. At December 31, 2007 and September 30, 2008, our enrollment was 12,623 and 30,547, respectively, an increase of 182.3% and 140.2%, respectively, over our enrollment as of the comparable dates for the prior years. At September 30, 2008, our ground enrollment was 761, as compared to 312 in March 2005, reflecting our commitment to invest in further developing our traditional campus heritage. For the year ended December 31, 2007 and the nine months ended September 30, 2008, our revenue was $85.7 million and $149.2 million, respectively, an increase of 199.5% and 173.4%, respectively, over the same periods for the prior years. For the year ended December 31, 2007 and the nine months ended September 30, 2008, our operating income was $4.0 million and $26.3 million, respectively, an increase from an operating loss of $4.8 million and from operating income of $1.4 million, respectively, in the same periods for the prior years. We intend to pursue growth in a manner that continues to emphasize a quality educational experience and that satisfies regulatory requirements.

Our History

        In January 2004, our principal investor, Warburg Pincus, and our Chief Executive Officer, Andrew Clark, as well as several other members of our current executive management team, launched Bridgepoint Education, Inc. to establish a differentiated postsecondary education provider. They developed a business plan to provide individuals previously discouraged from pursuing an education due to cost, the inability to transfer credits or difficulty in completing an education while meeting

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personal and professional commitments, the opportunity to pursue a quality education from a trusted institution. The business plan incorporated our management team's experience with other online and campus-based postsecondary providers and sought to employ processes and technologies that would enhance both the quality of the offering and the efficiency with which it could be delivered. As the foundation for this plan, we sought out opportunities to acquire a traditional university with a history of providing quality education to its students and with a rich heritage of student community.

        In March 2005, we acquired the assets of The Franciscan University of the Prairies, located in Clinton, Iowa, and renamed it Ashford University. Founded in 1918 by the Sisters of St. Francis, a non-profit organization, The Franciscan University of the Prairies originally provided postsecondary education to individuals seeking to become teachers and later expanded to offer a broader portfolio of programs. The university obtained regional accreditation in 1950 from the Higher Learning Commission. At the time of the acquisition, the university had 332 students, 20 of whom were enrolled in the university's first online program, which launched in January 2005.

        The majority of our current executive management team was in place at the time we acquired Ashford University. As a result, we were able to begin implementing processes and technologies to prepare for the launch of an online education offering to serve a large student population immediately after the acquisition. In spring 2005, we introduced several new online programs through Ashford University, including four bachelor's and two master's programs. Since then, we have introduced one associate's program, 14 bachelor's programs and two master's programs, all offered exclusively online, including numerous specializations and concentrations within these programs. During this same period, we also invested in enhancing and expanding the campus' physical infrastructure. In 2006, Ashford University received re-accreditation from the Higher Learning Commission through 2016. In 2007, we formally launched our military and corporate channel development efforts and, as a result, expanded our relationships with military and corporate employers through which we seek to recruit students.

        In September 2007, we acquired the assets of the Colorado School of Professional Psychology, located in Colorado Springs, Colorado, and renamed it the University of the Rockies. Founded as a non-profit institution in 1998 by faculty from Chapman University, the school offers master's and doctoral programs primarily in psychology. At the time of the acquisition, the school had 75 students and did not offer any online courses or programs. In October 2008, through the University of the Rockies, we launched one online master's program with two specializations and our first online doctoral program. Originally accredited in 2003 for a period of five years by the Higher Learning Commission, the University of the Rockies received re-accreditation from the Higher Learning Commission in 2008 for a period of seven years.

Our Market Opportunity

        The postsecondary education market in the United States represents a large, growing opportunity. Based on a March 2008 report by the NCES, revenue of postsecondary degree-granting educational institutions exceeded $385 billion in the 2004-05 academic year. According to a September 2008 NCES report, the number of students enrolled in postsecondary institutions was projected to be 18.0 million in 2007 and is projected to grow to 18.6 million by 2010.

        Within the postsecondary education market, enrollments at private for-profit institutions have grown at a higher rate than enrollments at not-for-profit postsecondary institutions. According to a March 2008 NCES report, from 1995 to 2005, private for-profit enrollments grew at a compound annual growth rate of 15.5% compared to a compound annual growth rate of 1.6% for both public and private not-for-profit enrollments. We believe this growth is due to the ability of for-profit providers to assess marketplace demand, to quickly adapt program offerings, to scale their operations to serve a growing student population, to provide strong customer service and to offer a high-quality education.

        Online postsecondary enrollment is growing at a rate well in excess of the growth rate of overall postsecondary enrollment. According to Eduventures, online postsecondary enrollment increased from 0.5 million to 1.8 million between 2002 and 2007, representing a compound annual growth rate of

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30.4%. By comparison, according to a September 2008 NCES report, enrollment in overall postsecondary programs increased at a projected compound annual growth rate of 1.6% during the same period. We believe the rapid growth in online postsecondary enrollment has been driven by a number of factors, including:

•

the greater convenience and flexibility that online programs offer as compared to ground programs;

•

the increased acceptance of online programs as an effective educational medium by students, academics and employers; and

•

the broader potential student base, including working adults, that can be reached through the use of online delivery.

        We expect continued growth in postsecondary education based on a number of factors, including (i) an increase in the number of occupations that require a bachelor's or a master's degree and (ii) the higher compensation that individuals with postsecondary degrees typically earn as compared to those without a degree. According to a December 2007 report from the BLS, occupations requiring a bachelor's or master's degree are expected to grow 17% and 19%, respectively, between 2006 and 2016, or nearly double the growth rate BLS has projected for occupations that do not require a postsecondary degree. Further, individuals with postsecondary degrees are generally able to achieve higher compensation than those without a degree. According to data published by the NCES, the 2006 median incomes for individuals 25 years or older with a bachelor's, master's and doctoral degree were 70%, 103% and 186% higher, respectively, than for a high school graduate (or equivalent) of the same age with no college education.

        Although obtaining a postsecondary education has significant benefits, many prospective students are discouraged from pursuing, and ultimately completing, an undergraduate or graduate degree program. According to a March 2008 NCES report, 67% of all individuals 25 or older in the United States who have obtained a high school degree, or over 110 million individuals, have not completed a bachelor's degree or higher. We believe this is due to a number of factors, including:

•

High tuition costs.  According to a March 2008 NCES report, tuition prices have increased at a compound annual growth rate of 7.4% and 7.2% for public and private institutions, respectively, over the past three decades, well in excess of the rate of inflation during this period. As a result, according to the NCES, average tuition prices at public and private institutions during the 2006-2007 academic year, were 81% and 60% greater, respectively, as compared to tuition prices during the 1996-1997 academic year. Many students are not able to afford such tuition prices and, as a result, elect not to pursue an education.

•

Restrictions on credit transferability.  According to a March 2008 NCES report, over 32 million individuals 25 years or older in the United States have completed some postsecondary education coursework but have not obtained a degree. These individuals typically seek to transfer credits for previously completed coursework when they re-enroll in a postsecondary degree program. However, institutions often do not allow new students to obtain full credit for prior coursework, forcing them to incur incremental expense and to commit additional time to complete a program. Further, the willingness of accrediting agencies to sanction credit transferability depends, in part, on the extent to which it is consistent with an institution's mission.

•

Personal and professional commitments.  Many postsecondary students, particularly working adults, must balance other personal and professional commitments while pursuing an education. As a result, these students often require significant scheduling flexibility, both with daily coursework and with start and end dates for any particular course, to be able to complete a program. Additionally, attending courses in person, rather than online, can present an obstacle for some individuals given the time and expense required to commute to campus.

•

Inadequate community support network.  Students often seek, and in many cases require, a sense of student community and the associated support network to successfully complete their

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coursework, particularly in a rigorous academic environment. For some institutions, particularly those with limited direct interaction between students, these factors can be difficult to establish.

        We believe postsecondary institutions that effectively address these challenges not only access a broader segment of the overall postsecondary market, but also have the potential to expand the market opportunity and to include individuals who previously were discouraged from pursuing a postsecondary education.

Our Competitive Strengths

        We believe that we have the following competitive strengths:

Attractive, differentiated value proposition for students

        We have designed our educational model to provide our students with a superior value proposition relative to other educational alternatives in the market. We believe our model allows us to attract more students, as well as to target a broader segment of the overall population. Our value proposition is based on the following:

•

Affordable tuition.  We structure the tuition and fees for our programs to be below Title IV loan limits, permitting students who do not otherwise have the financial means to pursue an education the ability to gain access to our programs. We believe that removing the financial burden of obtaining incremental private loans, or making significant cash tuition payments while pursuing a postsecondary education, not only permits more students to access our programs but also enables students to focus more on their coursework and on program completion while in school. We also recognize that private loans are increasingly difficult to obtain, which can prevent academically qualified students from pursuing an education at institutions with higher tuition and fees.

•

High transferability of credits.  Based on our research, we believe we are one of six postsecondary education institutions in the United States, and the only for-profit provider, that accepts up to 99 transfer credits for a bachelor's degree program. Many adult students have completed some postsecondary education and have credits which they would like to transfer to a new degree program, but are often prevented from doing so, thereby increasing the time and expense incurred to earn a degree. This situation is common among military personnel who, as of September 30, 2008, comprised 14% of our total enrollment. We believe students should receive credit for their prior work and, as such, we have worked closely with our accrediting agencies to obtain the right to accept a high level of transfer credits. Based on a recent review of our enrolled students, over 78% transferred in credits and 50% of those who transferred in credits transferred in 50 credits or more.

•

Accessible educational model.  Our online delivery model, weekly start dates and commitment to affordability and the transferability of credits make our programs highly accessible. Our online platform has been designed to deliver a quality educational experience while offering the flexibility and convenience that many students, particularly working adults, require. As of September 30, 2008, 98% of our students were taking classes exclusively online. Our weekly starts provide students with significant flexibility to structure their course schedule around their other personal and professional commitments.

•

Heritage as a traditional university with a campus-based student community.  We believe that a strong sense of community and the familiarity associated with a traditional campus environment are important to recruiting and retaining students and differentiate us from many other online providers. We encourage our online students to follow activities on our campuses, including our 13 NAIA athletic teams, our student clubs and our student projects with our campuses' local communities. Additionally, all online student activity, including completing coursework and seeking support services, is initiated through each university's homepage, which also highlights campus activities, including athletic and social events. As a result, students have the opportunity

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to become more connected to their fellow students and to develop a stronger connection with our institutions. Additionally, we hold graduation ceremonies at our Ashford University campus for online and ground students. In the May 2008 graduation, 69% of the students participating in the ceremony were graduating from online programs.

Commitment to academic quality

        We are committed to providing our students with a rigorous and rewarding academic experience, which gives them the knowledge and experience necessary to be contributors, educators and leaders in their chosen professions. We seek to maintain a high level of quality in our curriculum, faculty and student support services, all of which contribute to the overall student experience. Our curriculum is reviewed annually to ensure that content is refined and updated as necessary. Our faculty members have over seven years of instructional experience on average, and all hold graduate degrees in their respective fields of instruction and typically have relevant practitioner experience. We provide extensive student support services, including academic, administrative and technology support, to help maximize the success of our students. Additionally, we monitor the success of our educational delivery processes through periodic faculty and student assessments. We believe our commitment to quality is evident in the satisfaction and demonstrated proficiency of our students, which we measure at the completion of every course. In a July 2008 survey we conducted, in which over 2,000 Ashford students responded, 98% indicated they would recommend Ashford University to others seeking a degree.

Cost-efficient, scalable operating model

        We have designed our operating model to be cost-efficient, allowing us to offer a quality educational experience at an affordable tuition rate while still generating attractive operating margins. Our management team has relied upon its significant experience with other online education models to develop processes and employ technology to enhance the efficiency and scalability of our business model. Our processes and related technologies allow us to efficiently meet our students' instructional support services needs and to execute our marketing, recruiting and retention strategy. These processes and related technologies enable our management team to operate the business effectively and to identify areas for opportunity to refine the model further. Additionally, we have developed our operating model to be scalable and to support a much larger student population than is currently enrolled.

Experienced management team and strong corporate culture

        Our management team possesses extensive experience in postsecondary education, in many cases with other large online postsecondary providers. Andrew Clark, our Chief Executive Officer, served in senior management positions at such institutions for 12 years prior to joining us and has significant experience with online education businesses. The other members of our executive management team, most of whom have been with us since our launch of Bridgepoint Education, Inc., also bring a combination of academic, operational, technological and financial expertise that we believe has been critical to our success. The continuity of our executive management team demonstrates the strong relationship between functional areas within our business and the team's belief in the potential of our business model. Additionally, our executive management team has been critical to establishing and maintaining our corporate culture during our rapid growth. Our culture is based on four core values: integrity, ethics, service and accountability. We believe these values (i) have allowed us to create an environment that makes us a sought-after employer for professionals within our industry and (ii) have contributed to the strong relationships we maintain with each of our regulatory and accrediting agencies.

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Our Growth Strategies

        We intend to pursue the following growth strategies:

Focus on high-demand disciplines and degree programs

        We seek to offer programs in disciplines in which there is strong demand for education and significant opportunity for employment. Our current program portfolio includes offerings at the associate's, bachelor's, master's and doctoral levels in the disciplines of business, education, psychology, social sciences and health sciences. We follow a defined process for identifying new degree program opportunities which incorporates student, faculty and market feedback, as well as macro trends in the relevant disciplines, to evaluate the expected level of demand for a new program prior to developing the content and marketing it to potential students. Based on a March 2008 NCES report, programs in our disciplines represent 69% of total bachelor's degrees conferred by all postsecondary institutions in 2005-2006.

Increase enrollment in our existing programs through investment in marketing, recruiting and retention

        We have invested significant resources in developing processes and implementing technologies that allow us to effectively identify, recruit and retain qualified students. We intend to continue to invest in marketing, recruiting and retention and to expand our enrollment advisor workforce to increase enrollment in our existing programs. Our proprietary CRM system and related processes allow us to effectively pursue potential new students that have expressed an interest in a postsecondary program. Additionally, our superior value proposition allows us to differentiate our educational offering to potential students. Once a student enrolls in our programs, we provide consistent, ongoing support to assist the student in acclimating to the online environment and to address challenges that arise in order to increase the likelihood that the student will persist through graduation. We also intend to continue to develop our brand recognition through targeted marketing efforts to students and employers.

Expand our portfolio of programs, specializations and concentrations

        We intend to continue to expand our academic offerings to attract a broader portion of the overall market. In addition to adding new programs in high-demand disciplines, we intend to enhance our programs through the addition of more specializations and concentrations. Specializations and concentrations are used to create an offering that is tailored to the specific objectives of a target student population and therefore is more attractive to potential students interested in a particular program. As a result, the addition of specializations and concentrations represents a cost-effective way both to expand our target market and to further enhance the differentiation of our programs in that market. Additionally, we intend to expand our portfolio of master's and doctoral degree programs, consistent with our commitment to a quality academic offering, and to pursue graduate students because we believe they represent an attractive segment of the population.

Further develop strategic relationships in the military and corporate channels

        We intend to broaden our relationships with military and corporate employers, as well as seek additional relationships in these channels. Through our dedicated channel development teams, we are able to cost-effectively target specific segments of the market as well as better understand the needs of students in these segments so that we can design programs that more closely meet their needs. We believe our value proposition is attractive to potential students in these markets. In the military segment, individuals may frequently change locations or may seek to complete a program intermittently over the course of several years. In the corporate channel, employers value our traditional campus heritage, while our affordability allows employer tuition reimbursement to be used more efficiently.

Deliver measurable academic outcomes and a positive student experience

        We are committed to offering an educational solution that supports measurable academic outcomes, thereby allowing our students to increase their probability of success in their chosen

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profession. We use a comprehensive course development program and ongoing assessments to define the desired outcomes for a course, to design the course to deliver these outcomes and to measure each student's progress towards achieving these outcomes as they progress through a course. Our online platform supports this objective as we are able to monitor each student's action in an online course. Additionally, our students benefit from the strong sense of community that exists from being associated with a traditional campus and student community, including the related student activities. We believe our combination of measurable outcomes and a positive experience is important to helping students persist through graduation.

Approach to Academic Quality

Rigorous curricula

        We are committed to offering academically rigorous curricula, which provide students the knowledge and skills necessary to be successful in their respective professions. Our curricula are developed to ensure a consistent, high-quality learning experience for all students. Faculty and subject matter experts design our curricula to emphasize the requisite professional knowledge and skills that our students will need following graduation. Our programs and curricula are continuously monitored and undergo regular reviews to ensure their quality, efficacy and relevance.

Qualified faculty

        Our faculty members have over seven years of instructional experience on average, and all hold graduate degrees in their respective fields of instruction and typically have relevant practitioner experience. Of our faculty teaching graduate courses, 84% have earned doctoral degrees. Faculty members participate in ongoing professional development as well as regional face-to-face meetings designed to ensure appropriate levels of faculty engagement and student learning.

Consistent delivery

        We use standard curricula, texts and syllabi each time a given course is taught to ensure consistency in delivery. The course sequences we offer are standardized in a given program to enable consistent delivery. Courses have clear, consistent objectives which enable us to measure learning outcomes every time a course is given. Additionally, standard course student assessment materials are used to guarantee a consistent approach. Our uniform content, course objectives, assessment process and course sequences allow us to consistently deliver our programs to a large student population.

Effective student services

        Each student is provided a dedicated support team to assist such student in pursuing academic objectives. Financial aid and student services personnel help each new student evaluate financial service options and provide assistance in reviewing prior credits and planning scheduled classes. Each student is also assigned a teaching assistant at the beginning of matriculation to serve as a personal writing coach and is offered access to writing skills assistance, tutoring services and library resources.

Academic assessment and oversight

        An academic leadership team and board provide oversight to ensure the academic integrity of all program offerings. Academic quality is measured and assessed by our faculty and monitored by our instructional specialists and assessment staff. In order to measure the efficacy of our programs, we have implemented a technologically-enabled assessment model that allows for continuous assessment, thoughtful review and revision of courses when necessary. Faculty performance is routinely reviewed by our instructional specialists to assess the quality of the student learning experience.

Accreditation

        Both of our institutions are accredited by the Higher Learning Commission of the North Central Association of Colleges and Schools. Our continuing accreditations are a testament to the quality of our academic programs. Ashford University was originally accredited in 1950 and received its most recent ten-year reaccreditation in 2006. The University of the Rockies was originally accredited in 2003 for five years and received a seven-year reaccreditation in 2008.

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Curricula and Scheduling

        As of September 30, 2008, we offered 41 degree programs, 37 specializations and 21 concentrations. Specializations comprise a select number of courses offered by us within an existing program. Concentrations comprise a select number of courses a student has already taken, which we accept via credit transfers. We offer the following programs, specializations and concentrations through Ashford University's three colleges: the College of Business and Professional Studies; the College of Education; and the College of Arts and Sciences; and through the University of the Rockies.

Ashford University

Discipline	Degree Program	Specialization (S) Concentration (C)
Business	Associate's Degree Business
	Bachelor's of Arts Degree Business Administration
		Finance (C) Marketing (C)
	Computer Graphic Design
		Animation (C) Print Media (C) Web Design (C)
	Accounting
	Professional Accounting Organizational     Management Public Relations and     Marketing Sports and Recreation     Management
	Bachelor's of Applied Science Degree Computer Graphic Design
		Animation (C) Print Media (C) Web Design (C)
	Accounting Computer Management
	Master's Degree Business Administration
		Finance (S) Global Management (S) Human Resources     Management (S) Information Systems (S) Marketing (S) Organizational     Leadership (S)
	Organizational     Management
		Global Management (S) Human Resources     Management (S) Organizational     Leadership (S)
Education	Bachelor's of Arts Degree Elementary Education     with endorsement areas     in:
		English/Language Arts (S) Math (S) Science (S) Social Sciences (S) Reading (S) Special Education—     Instructional     Specialist I (S) Middle School (S) Coaching (S)
	Secondary Education with     endorsement areas     in:
		Math (S) English/Language Arts (S) General Science (S) Biology (S) Chemistry (S) American History (S)

Discipline	Degree Program	Specialization (S) Concentration (C)
		World History (S) Sociology (S) Psychology (S) Middle School (S) Special Education—     instructional     Specialist I (S) Coaching (Authorization     or Endorsement) (S)
	Education (non licensure) Business Education
	Master's of Arts Degree Teaching and Learning w/     Technology
Psychology	Bachelor's of Arts Degree Psychology
Social Sciences	Bachelor's of Arts Degree English and     Communication
		Communications (C) English/Language     Arts (C) Literature (C)
	Social Science
		Education (C) Health and Human     Services Management (C) History (C) Human Services (C) Psychology (C) Sociology (C)
	Environmental Studies Natural Science Social and Criminal     Justice Sociology Visual Art
	Bachelor's of Science Degree Computer Science and     Mathematics
		Computer Science (C) Mathematics (C) Education (C)
	Natural Science
		Education (C)
Health Sciences	Bachelor's of Arts Degree Health Care     Administration
	Bachelor's of Science Degree Biology Clinical Cytotechnology Clinical Laboratory     Science Health Science Health Science     Administration Nuclear Medicine     Technology
	Bachelor's of Applied Science Degree Health Care     Administration

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University of the Rockies

Discipline	Degree Program	Specialization (S) Concentration (C)
Psychology	Master's Degree Psychology (Organizational)
	Psychology (Professional)	Executive Coaching (S) Organizational     Leadership (S) Professional     Counselor (S) Marriage and Family     Therapy (S)

Discipline	Degree Program	Specialization (S) Concentration (C)
Psychology	Doctoral Degree Psychology (Organizational)
	Psychology (Professional)	Executive Coaching (S) Organizational     Leadership (S) Clinical (S) Respecialization (S)

        Online courses are offered with weekly start dates throughout the year except for two weeks in late December and early January. Courses typically run five to six weeks, and all courses are offered in an asynchronous format, so students can complete their coursework as their schedule permits. Online students typically enroll in one course at a time. This focused approach to learning allows the student to engage fully in each course.

        Ground courses typically run 16 weeks and have 2 start dates per year for semesters beginning in January and September. Undergraduate ground students can enroll in up to six concurrent courses at a time and typically enroll in at least four courses in a given semester.

        Doctoral students, both online and ground, are required to participate in periodic seminars located on campus as well as compose and defend a dissertation on an approved topic.

        Total credits required to obtain a degree are consistent for online and campus programs. An associate's degree requires 61 credits, a bachelor's degree requires 120 credits, a master's degree typically requires a minimum of 33 additional credits and a doctoral degree typically requires a minimum of 60 additional credits.

Program Development

        Potential new programs, specializations and concentrations are determined based on proposals submitted by faculty and staff and on an assessment of overall market demand. Our faculty and academic leadership work in collaboration with our marketing team to research and select new programs that are expected to have strong market demand and that can be developed at a reasonable cost. Programs are reviewed by the appropriate college and must also receive approval through the normal governance process at the relevant institution.

        Once a program is selected for development, a subject matter expert is assigned to work with our curriculum development staff to define measurable program objectives. Each course in a program is designed to include learning activities that address the program objectives and assess learning outcomes. A new program is reviewed for approval by the dean of the applicable college, the office of the provost and the chief academic officer of the institution prior to launching with students. Following the approval, the programs are conformed to the standards of our online learning management system, and the marketing department creates a marketing plan for the program. In most cases, the time frame to identify, develop and approve a new program is approximately six months.

Assessment

        Each institution has developed and implemented a comprehensive assessment plan focused on student learning and effective teaching. The plans measure learning outcomes at the course, program and institutional levels. Learning outcomes are unique to each institution and demonstrate the skills that graduates should be able to demonstrate upon completion of their respective program. With the assistance of our dedicated assessment team, our faculty routinely evaluates and revises courses and learning resources based upon outcomes and institutional research data. Using direct and indirect measurements, student performance is assessed on an ongoing basis to ensure student success. Both Ashford University and the University of the Rockies have been accepted into the Higher Learning

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Commission Assessment Academy which promotes a continuous improvement cycle in the area of assessment.

        In addition to course and program assessments, our faculty's performance is continuously assessed by our institutional specialists and by results of student surveys at the completion of each course. The results of all of our assessment practices are reviewed by an assessment team, and, based on their conclusions, recommendations may be made to add or modify our programs.

Faculty

        Faculty members are selected based upon academic credentials, prior teaching experience and on performance in faculty orientation and in the classroom. Currently, we have over 1,000 active online faculty members (individuals that have taught a course for us in the last 12 months) and 50 full-time campus faculty members. All of our faculty members have earned a graduate degree, and of the faculty members teaching graduate courses, 84% have earned doctoral degrees. We also have 76 teaching assistants who support faculty members and students in certain online undergraduate courses.

        All faculty members participate in an extensive initial interview and orientation. Online faculty candidates must participate in three weeks of online training to understand the instructional design of our courses, our online platform and teaching expectations. The online environment that we use to train and evaluate candidates is designed to replicate the learning experience of our students, as well as provide a platform for the candidates to demonstrate their competence as an instructor.

        Ongoing professional development is also provided to support and assist all faculty members in continually enhancing the quality of instruction provided to our students. Our instructional specialists are a team of faculty members who assess the performance of and provide feedback to our online faculty to ensure quality and consistent delivery across all of our programs. Our instructional specialists evaluate online faculty on their ability to:

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inspire an atmosphere of sincerity and encouragement;

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establish trust among the community of students;

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establish clear expectations and outcomes that maintain academic standards;

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respond promptly to students and provide needed expertise;

•

provide constructive criticism;

•

advance written communication skills; and

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motivate and engage students in active and positive dialogue.

We believe our instructional specialists serve a critical role in allowing us to deliver a quality education to our students.

        We believe that supporting faculty in classroom duties as well as in their professional development is an integral component to the success of our students. We place significant emphasis on supporting and rewarding faculty for quality teaching and have implemented programs designed to provide necessary faculty support. We employ faculty mentors to acclimate new instructors to our online platform and instructional model, and we employ teaching assistants to assist faculty members in certain online undergraduate courses. Faculty members are encouraged to be active in their field by presenting at national conferences, conducting research, writing and joining professional organizations. Additionally, faculty members may earn formal recognition for excellence such as earning acceptance into the Ashford University Provost's Circle or Teaching Academy or by receiving formal faculty recognition awards.

        We believe providing a supportive community for our faculty is critical to the success of our institutions. Accordingly, we foster a sense of community among our online and our campus faculty

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through both in-person gatherings as well as online community building. We hold regional faculty meetings two to four times per year where all of our online faculty from a specific region are invited to gather to discuss experiences, best practices and effective teaching approaches. Additionally, we publish newsletters and maintain a faculty website to facilitate professional development and intra-faculty communication and exchange of ideas.

Student Support Services

        To promote academic success, support new students and enhance persistence, we offer a broad array of services that assist students at our institutions. A majority of our student support services are accessible online, permitting convenient student access. Our service infrastructure includes academic, administrative, technology and library services.

Academic

        Students enrolling in an undergraduate program are given access to teaching assistants who serve as personal writing coaches and provide feedback and guidance on academic matters. Additionally, every student is offered unlimited access to Smarthinking, an online tutoring service for writing, math, statistics and accounting. We also offer students access to an online writing center that utilizes a virtual writing tutor and provides sample essays, an automated reference generator and tutorials on utilizing our online library. For students with disabilities, we provide appropriate educational accommodations through our disability support services team.

Administrative

        We offer students access to our administrative services telephonically, as well as via the Internet. We believe online accessibility provides the convenience and self-service capabilities that our students value. Each student is assigned an enrollment advisor, a financial services advisor and an academic advisor who work together as a team and serve as a student's main point of contact. Financial service advisors work with enrollment advisors to ensure that the student is financially prepared to pursue their degree. Academic advisors work with the student to evaluate any past credits they have earned, to plan their degree path and to schedule their classes.

Technology

        We provide online technology support to assist our students and faculty with technology-related issues. Our internal technology support team is available from 8:00 am EST to 10:00 pm EST. In addition, we provide our students with support 24 hours per day, seven days per week to address common issues such as password resets and questions related to our learning management system.

Library

        We provide access to online and ground libraries containing materials to assist students and faculty with research and instruction. Our libraries satisfy the criteria established by the Higher Learning Commission for us to offer undergraduate, master's and doctoral degree programs.

Campus Operations

        Ashford University is located on 17 acres in Clinton, Iowa. Since our acquisition of Ashford University in March 2005, we have invested in enhancing and expanding the physical infrastructure of the campus, which currently includes seven buildings used for academic, athletic, administrative and social activities. Ground enrollments at Ashford University have grown to 686 as of September 30, 2008, as compared to 312 when we acquired the institution.

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        The University of the Rockies is located in Colorado Springs, Colorado. We have begun to develop a plan to further enhance the infrastructure of the University of the Rockies and to increase the ground enrollment at this institution.

        We believe that the continued growth of our ground enrollment, our commitment to academic quality, student athletics and social activities and community involvement by students at our campuses will continue to contribute to the heritage of the institutions. As a result, we intend to continue to seek opportunities to invest in developing our campus operations.

Marketing, Recruiting and Retention

Marketing

        We develop and participate in various marketing activities to generate leads for prospective students and to build the Ashford University and University of the Rockies brands. For our online student population, we target working adults, many of whom have already completed some postsecondary courses and are seeking an accessible, affordable education from a quality institution. For our campus student population, we target traditional college students, typically between the ages of 18 and 24.

        Our leads are primarily generated from online sources. Our main source of leads is third party online lead aggregators. Typically, our contracts with online lead aggregators are for a period of 30 days, which provides us with significant flexibility to add or remove vendors on short notice. We also purchase key words from search providers to generate online leads directly, rather than acquiring them through lead aggregators. Additionally, we have an in-house team focused on generating online leads through search engine optimization techniques. In select instances, primarily for potential ground students, we utilize print, television and radio media campaigns as well as direct mail to generate leads.

        Our military and corporate channel relationships are developed and managed by our channel development teams. Our military development specialists and corporate liaisons work with representatives in these organizations to demonstrate the quality, impact and value that our programs can provide to individuals in the organizations as well as to the organizations themselves. Additionally, we attend trade shows and conferences to communicate our value proposition to potential channel partners.

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Military Relationships.  We offer scholarships to all members of the military, including active duty members, veterans, national guard members, reservists, civilian employees of the Department of Defense and immediate family members of active duty personnel. As of September 30, 2008, 14% of our students were affiliated with the military.

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Corporate Relationships.  We develop corporate relationships to offer our programs to employees of large companies. Based on these relationships, corporations make information about Ashford University and the University of the Rockies available to their employees.

        We use print media as well as trade show appearances to enhance the brand equity of Ashford University and the University of the Rockies. These campaigns are designed to increase awareness among potential students, differentiate us from other postsecondary education providers, start dialogues between our enrollment advisors and potential students, motivate existing students to re-register and encourage referrals from existing students.

Recruiting

        We employ a team structure in our recruiting operations. Each team consists of enrollment advisors, academic advisors and financial service advisors. Our teams provide a single point of contact and facilitate all aspects of enrollment and integration of a prospective student into a program of study.

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Our team structure promotes internal accountability among employees involved in identifying, recruiting, enrolling and retaining new students.

        All leads are managed through our proprietary CRM system. Our CRM system directs a lead for a prospective student to a recruiting team and assigns an enrollment advisor within that team to serve as the primary liaison for that prospective student. Once contact with the prospective student is established, our enrollment advisors, along with the academic and financial service advisors, begin an assessment process to determine if our program offerings match the student's needs and objectives. Additionally, our enrollment advisors communicate other criteria, including expected duration and cost of our programs, to prospective students. Through our proprietary systems, our enrollment advisors are able to generate a comparison of tuition levels across our competitors in order for prospective students to make more informed decisions.

        Each enrollment advisor undergoes a comprehensive training program that addresses financial aid options, our value proposition, our academic offerings and the regulatory environment in which we operate, including the restrictions that regulations impose on the recruitment process. We place significant emphasis on regulatory requirements and promote an environment of strict compliance. An enrollment advisor typically does not achieve full productivity until four to six months after the advisor's date of hire.

        As of December 31, 2006 and 2007 and September 30, 2008, we employed 149, 479 and 674 enrollment advisors, respectively. As of September 30, 2008, we also employed 30 military development specialists and corporate liaisons.

Retention

        Providing a superior learning experience to every student is a key component in retaining students at our institutions. We feel that our team-based approach to recruitment and the robust student services we provide enhance retention because of each student's interaction with their contact in the team and the accountability inherent in the team architecture. We also incorporate a systematic approach to contacting students at key milestones during their enrollment, providing encouragement and highlighting their progress. Additional contact points include quarterly updates on the school and campus life. Academic advisors are measured on their ability to retain their assigned students and regularly work with at-risk students who have not attended their most recent class or who have not ordered books. These frequent personal interactions between academic advisors and students are a key component to our retention strategy. Additionally, we employ a retention committee that monitors performance metrics and other key data to analyze student retention rates and causes and potential risks for student drops. Also, our ombudsman department serves as a neutral third party for students to raise any concerns or complaints. Such concerns and complaints are then elevated to the appropriate department so we may proactively address any issues potentially impacting retention.

Admissions

        Our admission process is designed to offer access to prospective students who seek the benefits of a postsecondary education. Ashford University undergraduate students may qualify in various ways, including by having a high school diploma or a General Education Development (GED) equivalent. Graduate level students at Ashford University and the University of the Rockies are required to have an undergraduate degree from an accredited college and may be required to have a minimum grade point average or meet other criteria to qualify for admission to certain programs

Enrollment

        We define enrollments as the number of active students on the last day of the financial reporting period. A student is considered an active student if he or she has attended a class within the prior 30 days unless the student has graduated or provided us with a notice of withdrawal.

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        As of September 30, 2008, 75% of our online students were female, 34% were minorities and the average age was 34. We have online students from all 50 states.

        The following summarizes our enrollments as of December 31, 2007 and September 30, 2008:

	December 31, 2007			September 30, 2008
Doctoral	60	0.5	%		60	0.2	%
Master's	905	7.2			2,174	7.1
Bachelor's	11,071	87.7			25,563	83.7
Associate's	533	4.2			2,554	8.4
Other*	54	0.4			196	0.6
Total	12,623	100.0	%		30,547	100.0	%

Online	12,104	95.9	%	29,786	97.5	%
Ground	519	4.1		761	2.5
Total	12,623	100.0	%	30,547	100.0	%

*

Includes students who are taking one or more courses with us, but have not declared that they are pursuing a specific degree.

Tuition and Fees

        The price of our courses varies based upon the number of credits per course (with most courses representing three credits), the degree level of the program and the discipline. For the 2008-09 academic year (which began on July 1, 2008), our prices per credit range from $262 to $337 for undergraduate online courses and from $441 to $490 for graduate online courses. Based on these per credit prices, our prices for a three-credit course range from $786 to $1,011 for undergraduate online courses and $1,323 to $1,470 for graduate online courses. For the 2008-09 academic year, we charge a fixed $7,670 "block tuition" for undergraduate ground students taking between 12 and 18 credits per semester, with an additional $447 per credit for credits in excess of 18. Total credits required to obtain a degree are consistent for online and ground programs: an associate's degree requires 61 credits; a bachelor's degree requires 120 credits; a master's degree typically requires a minimum of 33 additional credits; and a doctoral degree typically requires a minimum of 60 additional credits.

Student Financing

        Our students finance their education through a combination of the following financing options:

Title IV Programs

        If a student attends any institution certified as eligible by the Department of Education and meets applicable student eligibility standards, that student may receive grants and loans to fund their education under programs provided for by Title IV of the Higher Education Act, which we refer to as Title IV. Some of this aid is based on need, which is generally defined as the difference between the tuition levels the student and his or her family can reasonably afford and the cost of attending the eligible institution. An institution participating in Title IV programs must ensure that all program funds are accounted for and disbursed properly. To continue receiving program funds, students must demonstrate satisfactory academic progress toward the completion of their program of study.

        For the year ended December 31, 2007, Ashford University derived 83.9% and the University of the Rockies derived 61.9% of their respective revenues (in each case calculated on a cash basis in accordance with applicable Department of Education regulations) from Title IV programs administered by the Department of Education.

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        FFEL.    Under the Family Federal Education Loan (FFEL) Program, banks and other lending institutions make loans to students. The FFEL Program includes the Federal Stafford Loan Program, the Federal PLUS Program (which provides loans to graduate students, as well as parents of dependent undergraduate students) and the Federal Consolidation Loan Program. If a student defaults on a FFEL loan, payment to the lender is guaranteed by a federally recognized guaranty agency, which is then reimbursed by the Department of Education. Students who demonstrate financial need may qualify for a subsidized Stafford loan. With a subsidized Stafford loan, the federal government pays the interest on the loan while the student is in school and during grace periods and any approved periods of deferment, until the student's obligation to repay the loan begins. Unsubsidized Stafford loans are not based on financial need, and are available to students who do not quality for a subsidized Stafford loan, or in some cases, in addition to a subsidized Stafford loan. Loan funds are paid to us, and we in turn credit the student's account for tuition and fees and disburse any amounts in excess of tuition and fees to the student.

        Effective July 1, 2008, under the Federal Stafford Loan Program, a dependent undergraduate student can borrow up to $5,500 for the first academic year, $6,500 for the second academic year and $7,500 for each of the third and fourth academic years. Students classified as independent, and dependent students whose parents have been denied a PLUS loan for undergraduate students, can obtain up to an additional $4,000 for each of the first and second academic years and an additional $5,000 for each of the third and fourth academic years. Students enrolled in graduate programs can borrow up to $20,500 per academic year.

        Pell.    Under the Pell Program, the Department of Education makes grants to undergraduate students who demonstrate financial need. Effective July 1, 2008, the maximum annual grant a student can receive under the Pell Program is $4,731. Under the August 2008 reauthorization of the Higher Education Act, students are able for the first time to receive Pell Grant funds for attendance on a year-round basis, and can potentially receive more in a given year than the traditionally defined maximum annual amount.

        Federal Direct Loan Program.    We are eligible to participate in the Federal Direct Loan Program, under which the Department of Education, rather than a private lender, lends to students. The types of loans, the maximum annual loan amounts and other terms of the loans made under the Federal Direct Loan Program are similar to those for loans made under the FFEL Program. We have not yet participated in this program.

        Federal Work Study Program.    Under the Federal Work Study Program, federal funds are made available to pay up to 75% of the cost of part-time employment of eligible students, based on their financial need to perform work for the school or for off-campus public or non-profit organizations.

Military and Other Governmental Financial Aid

        Some of our students also receive financial support from military and other government financial aid programs. For the year ended December 31, 2007, Ashford University derived 1.9% and the University of the Rockies derived 1.3% of their respective revenues (in each case calculated on a cash basis in accordance with applicable Department of Education regulations) from military and other governmental financial aid sources.

Cash Pay and Corporate Reimbursement

        Some students pay a portion or all of their tuition with cash. In some instances, these payments are reimbursable to the student or directly to us, by the student's employer under a corporate tuition reimbursement program. For the year ended December 31, 2007, Ashford University derived 12.9% and the University of the Rockies derived 36.8% of their respective revenues (in each case calculated

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on a cash basis in accordance with applicable Department of Education regulations) from cash pay and other corporate reimbursement.

Private Loans

        Some students use private loans to assist with the financing of their tuition. Due to our affordable value proposition, our students generally have limited need for private loans. For the year ended December 31, 2007, Ashford University derived 1.9% and the University of the Rockies derived 0.0% of their respective revenues (in each case calculated on a cash basis in accordance with applicable Department of Education regulations) from private loans.

Technology

        We have created a scalable technology system that is secure, reliable and redundant and permits our courses and support services to be offered online.

Online course delivery and management

        We use the Blackboard Academic Suite, provided by Blackboard Inc., a third-party software and services provider, for our online platform. The suite provides an online learning management system and provides for the storage, management and delivery of course content. The suite includes collaborative spaces for student communication and participation with other students and faculty as well as grade and attendance management for faculty, and assessment capabilities to assist us in maintaining quality. Blackboard hosts the software for us in its data center to allow us to efficiently scale the applications to meet the needs of our growing student population. Access to our systems is provided through our student portals, an extension of our individual university websites. These portals are dynamic destinations for students to securely access personal information and services and also serve as vehicles for student communications, activities and student support services.

Internal administration

        We employ a proprietary customer relations management, or CRM, system for lead management, document management, workflow, analytics and reporting. Our CRM suite enables rapid response to new leads. We believe our CRM system is able to support the needs of our business for the foreseeable future. We also utilize an online application portal to accept, integrate and process student applications.

        We utilize CampusVue, a student information system provided by Campus Management Corp., to manage student data (including grades, attendance, status and financial aid) and to generate periodic management reports. This system interfaces with our learning management system.

Infrastructure

        Our platform servers are located in a third party hosting facility and at our corporate headquarters. All of our servers are linked and have redundant data backup. We currently use a combination of Microsoft-based software on Dell servers and related equipment. We have a disaster recovery system in place.

Student Community and Activities

Athletics

        Our athletic teams at Ashford University compete as members of the Midwest Collegiate Conference and the National Association of Intercollegiate Athletics (NAIA). We field teams as the Ashford University Saints in men's baseball, basketball, cross-country, golf, soccer and track and field, and in women's basketball, cross-country, golf, soccer, softball, track and field and volleyball.

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Student Organizations and Activities

        Our students have the ability to participate in a wide range of social and recreational activities and organizations, including Ashford University's student-run newspaper and interest groups ranging from choir and fine arts to cheerleading. Additionally, we periodically have influential corporate, political and academic leaders on campus to speak to students on a variety of topical issues.

Graduation

        Every December and May, Ashford University holds a ceremony on campus for students graduating from our campus and online programs. In May 2008, we hosted approximately 1,200 family members and guests of 275 attending graduates. Of the students in attendance, approximately 200 were graduating from online programs. We believe the opportunity to attend a traditional graduation ceremony on campus is an important component to recognizing our online students for their achievements. It also provides online students with the opportunity to further develop their connection to us and to our broader student population.

Employees

        As of September 30, 2008, we had a total of 1,065 faculty members, consisting of 50 full-time campus faculty and over 1,000 adjunct online faculty. Our adjunct faculty are part-time employees.

        We engage our adjunct faculty on a course-by-course basis. Adjunct faculty are compensated a fixed amount per course, which varies among faculty members based on each individual's experience and background. In addition to teaching assignments, adjunct faculty may also be asked to serve on student committees, such as comprehensive examination and dissertation committees, or assist with course development.

        As of September 30, 2008, we also employed 1,735 non-faculty staff in university services, academic advising and academic support, enrollment services, university administration, financial aid, information technology, human resources, corporate accounting, finance and other administrative functions. None of our employees is a party to any collective bargaining or similar agreement with us.

Competition

        The postsecondary education market is highly fragmented and competitive, with no private or public institution enjoying a significant market share. We compete primarily with public and private degree-granting regionally accredited colleges and universities. Our competitors include the University of Phoenix, Kaplan University and other private and public universities and community colleges. Many of these colleges and universities enroll working adults in addition to traditional 18 to 24 year-old students. In addition, many of those colleges and universities offer a variety of distance education and online initiatives.

        We believe that the competitive factors in the postsecondary education market include the following:

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relevant, practical and accredited program offerings;

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convenient, flexible and dependable access to programs and classes;

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program costs;

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reputation of the college or university among students and employers;

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relative marketing and selling effectiveness;

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regulatory approvals;

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qualified and experienced faculty;

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•

level of student support services; and

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the time necessary to earn a degree.

We expect to face increased competition as a result of new entrants to the online education market, including traditional colleges and universities that had not previously offered online education programs.

Intellectual Property

        Intellectual property is important to our business. We rely on a combination of copyrights, trademarks, service marks, trade secrets, domain names and agreements with third parties to protect our proprietary rights. In many instances, our course content is produced for us by faculty and other content experts under work-for-hire agreements pursuant to which we own the course content in return for a fixed development fee. In certain limited cases, we license course content from third parties on a royalty fee basis.

        We have trademark and service mark registrations and pending applications in the U.S. and select foreign jurisdictions. We also own domain name rights to www.ashford.com, www.ashford.edu, www.ashforduniversity.edu, www.rockies.edu and www.universityoftherockies.com, as well as other words and phrases important to our business.

Properties

        In addition to our owned Ashford University facilities of 286,000 square feet in Clinton, Iowa, our corporate headquarters occupies 280,000 square feet in San Diego, California under a lease that expires in 2018 where we house enrollment services, student support services and corporate functions. We also lease 39,000 square feet under a lease that expires in 2014 in Clinton, Iowa to complement our California enrollment services and student services functions. We lease 21,500 square feet under a lease that expires in 2015 in Colorado Springs, Colorado for the University of the Rockies. We signed an 11 year lease in October 2008 for an additional 248,000 square feet to house enrollment services, student support services and corporate functions in San Diego scheduled for occupancy in 2009 and 2010. We believe our existing facilities, including the newly leased space, are adequate for current requirements and that additional space can be obtained on commercially reasonable terms to meet future requirements.

Environmental Matters

        We believe our facilities are substantially in compliance with federal, state and local laws and regulations that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment. Compliance with these laws and regulations has not had, and is not expected to have, a material effect on our capital expenditures, earnings or competitive position.

Legal Proceedings

        From time to time, we are a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We are not at this time a party, as plaintiff or defendant, to any legal proceedings which, individually or in the aggregate, would be expected to have a material adverse effect on our business, financial condition or results of operations.

        Two holders of our common stock have asserted that we took various actions in violation of their legal rights which resulted in an unfair dilution of their interests as holders of shares of common stock. We are engaged in discussions with the stockholders, through counsel, in an effort to resolve the concerns of the stockholders without litigation. While we believe the claims of the stockholders are without merit and intend to defend vigorously any litigation that is commenced, no assurance can be given that this matter will not have a material adverse effect on our financial condition, results of operation or cash flows.

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REGULATION

        Ashford University and the University of the Rockies are accredited institutions of higher education that participate in federal student financial aid programs and, as a result, are subject to extensive regulation by a variety of agencies. These agencies include the agency that accredits our institutions, thereby providing an independent assessment of educational quality; the Department of Education, which administers the federal student aid programs relied upon by many of our students to help finance their educations; and state education licensing authorities, which provide legal authority to deliver educational programs and to grant degrees and other credentials in states where our campuses are physically located. The laws, regulations and standards of these agencies address the vast majority of our operations.

        Our institutions are accredited by the Higher Learning Commission of the North Central Association of Colleges and Schools. The Higher Learning Commission is one of six regional accrediting agencies recognized by the Department of Education for colleges and universities in the United States. Accreditation is a non-governmental process through which an institution submits to qualitative review by an organization of peer institutions based on the standards of the accrediting agency and the mission of the institution. The Higher Learning Commission reviews and evaluates many aspects of an institution's operations, primarily related to educational quality and effectiveness.

        We are also subject to regulation by the Department of Education due to our participation in federal student financial aid programs authorized by Title IV of the Higher Education Act of 1965, as amended, which we refer to in this prospectus as Title IV programs. Title IV programs include (i) subsidized and unsubsidized loans to students and their parents by private lenders which are guaranteed by the federal government, (ii) similar loans provided directly by the federal government, (iii) grants to students with demonstrated financial need and (iv) federal subsidies for a school's part-time employment of eligible students. To participate in Title IV programs, a school must obtain and maintain authorization by the state education agency or agencies where it is physically located, be accredited by an accrediting agency recognized by the Department of Education and be certified by the Department of Education as an eligible institution. Certification by the Department of Education carries with it an extensive set of regulations.

        Our institutions are also subject to regulation by educational licensing authorities in states where our institutions are physically located or conduct certain operations. State authorization, or exemption from it, in the states where a school is physically located is also a prerequisite for eligibility to participate in Title IV programs.

        We plan and implement our activities to comply with the standards of these regulatory agencies. We employ a full-time vice president of compliance who is responsible for regulatory matters relevant to student financial aid programs and reports to our General Counsel. Our Chief Executive Officer, Chief Financial Officer, Chief Academic Officer, Chief Administrative Officer and General Counsel also provide oversight designed to ensure that we meet the requirements of our regulated operating environment.

Accreditation

        Ashford University and the University of the Rockies have been institutionally accredited since 1950 and 2003, respectively, by the Higher Learning Commission. The Higher Learning Commission is one of six regional accrediting agencies that accredits colleges and universities in the United States. Most traditional, public and private non-profit, degree-granting colleges and universities are accredited by one of these six agencies. Accreditation by the Higher Learning Commission is recognized by the Department of Education as a reliable indicator of educational quality. Accreditation is a private, non-governmental process for evaluating the quality of an educational institution and its programs and an institution's effectiveness in carrying out its mission in areas including integrity, student

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performance, curriculum, educational effectiveness, faculty, physical resources, administrative capability and resources, financial stability and governance. To be recognized by the Department of Education, an accrediting agency, among other things, must adopt specific standards to be maintained by educational institutions, conduct peer-review evaluations of institutions' compliance with those standards, monitor compliance through periodic institutional reporting and the periodic renewal process and publicly designate those institutions that meet the agency's criteria. An accredited school is subject to periodic review by its accrediting agency to determine whether it continues to meet the performance, integrity, quality and other standards required for accreditation. An institution that is determined not to meet the standards of accreditation may have its accreditation revoked or not renewed.

        The Higher Learning Commission renewed Ashford University's accreditation in 2006 for the maximum period of ten years. The renewal followed a review process, including a change in ownership review resulting from our acquisition of the university in 2005, as well as a comprehensive evaluation in connection with the regularly scheduled renewal process following the university's previous ten-year grant of accreditation in 1995. In connection with this renewal, the Higher Learning Commission also approved (i) the university's online delivery of all programs already approved for campus-based offering, without seeking any further approval, (ii) an additional graduate degree (the Master of Arts in Organizational Management) in both campus-based and online delivery modalities and (iii) the university's awarding of up to 99 credits to students from transfer sources, including both credits earned at other educational institutions and through assessments of college-level learning experiences acquired outside the traditional university classroom. The Higher Learning Commission also directed the university to submit progress reports in June 2007 and June 2008 regarding success in meeting its enrollment, revenue and expense projections and in making capital improvements at the Iowa campus. Those reports were timely filed and the university was notified in October 2008 that no further financial reporting is required. The Higher Learning Commission has scheduled a visit for the 2009-2010 academic year to review financial performance and the outcomes of the increase in transfer credits. The Commission has scheduled the university for a comprehensive evaluation during the 2016-17 academic year in connection with the next regularly scheduled accreditation renewal process.

        The University of the Rockies' initial grant of accreditation from the Higher Learning Commission was in 2003, for a period of five years. Its accreditation was renewed by the Higher Learning Commission in 2008 for a period of seven years. The renewal followed a review process, including a change of ownership review resulting from our acquisition of the university in 2007, as well as a comprehensive evaluation in connection with the regularly scheduled renewal process following the university's previous five year grant of accreditation in 2003. The university has been scheduled to report to the Higher Learning Commission by May 31, 2011, concerning student learning assessments and institutional planning. The Higher Learning Commission has scheduled the university for a comprehensive evaluation during the 2015-16 academic year in connection with the next regularly scheduled accreditation renewal process.

        Our accreditation by the Higher Learning Commission is important to our institutions for the following reasons:

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it establishes comprehensive criteria designed to promote educational quality and effectiveness;

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it represents a public acknowledgement by a recognized independent agency of the quality and effectiveness of our institutions and their programs;

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it facilitates the transferability of educational credits when our students transfer to or apply for graduate school at other regionally accredited colleges and universities; and

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the Department of Education relies on accreditation as an indicator of educational quality and effectiveness in determining a school's eligibility to participate in Title IV programs, as do

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certain corporate and government sponsors in connection with tuition reimbursement and other student aid programs.

        We believe that regional accreditation is viewed favorably by certain students when choosing a school, by other schools when evaluating transfer and graduate school applications and by certain employers when evaluating the credentials of candidates for employment.

        In addition, by approving Ashford University's offerings of approved campus-based programs through online delivery modalities and by approving increased transfer credit allowance and prior learning assessments, accreditation by the Higher Learning Commission supports our mission of serving students by providing innovative online programs and allowing student accessibility through increased transfer of credit for prior traditional and non-traditional learning.

Regulation of Federal Student Financial Aid Programs

        To be eligible to participate in Title IV programs, an institution must comply with the Higher Education Act and regulations thereunder that are administered by the Department of Education. Among other things, the law and regulations require that an institution (i) be licensed or authorized to offer its educational programs by the states in which it is physically located, (ii) maintain institutional accreditation by an accrediting agency recognized for such purposes by the Department of Education and (iii) be certified to participate in Title IV programs by the Department of Education. Our institutions' participation in Title IV programs subjects us to extensive oversight and review pursuant to regulations promulgated by the Department of Education. Those regulations are subject from time to time to revision and amendment by the Department of Education. The Department's interpretation of its regulations likewise is subject to change. As a result, it is difficult to predict how Title IV program requirements will be applied in all circumstances.

Congressional action

        Congress must reauthorize the Higher Education Act on a periodic basis, usually every five to six years. It was reauthorized most recently in August 2008, extending Title IV programs through September 2014. The 2008 reauthorization revised a number of requirements governing Title IV programs, including provisions concerning the relationship between an institution and its students' private Title IV lenders, an institution's maximum permissible student loan default rates and the maximum percentage of revenue that an institution may derive from Title IV programs. In addition, Congress enacted legislation in 2007 that reduced interest rates on certain Title IV loans and reduced government subsidies to private lenders that participate in Title IV programs. In May 2008, Congress enacted additional legislation increasing by $2,000 the maximum annual loan for which students are eligible and aimed at ensuring that a sufficient number of private lenders will continue to provide Title IV loans to all eligible students seeking to obtain them.

        In addition, Congress determines the funding levels for Title IV programs annually through the budget and appropriations process.

Certification procedures; provisional certification

        The Department of Education certifies institutions to participate in Title IV programs for a fixed period of time, typically three years for a provisionally certified institution and six years in most other instances. The terms and conditions of an institution's participation in Title IV programs, including any special terms and conditions by virtue of a provisional certification, are set forth in a program participation agreement entered into between the Department of Education and the institution.

        The Department of Education automatically places an institution on provisional certification status when the institution is certified for the first time or when it undergoes a change in ownership. The

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Department of Education may also place an institution on provisional certification status under other circumstances, including if the institution fails to satisfy certain standards of financial responsibility or administrative capability. Students attending a provisionally certified institution are eligible to receive Title IV program funds to the same extent as if the institution's certification were not provisional. During a period of provisional certification, however, an institution must comply with any additional conditions imposed by the Department of Education and must seek and obtain the Department of Education's advance approval before adding a new location. In addition, the Department of Education may more closely review an institution that is provisionally certified if it applies for renewal of certification or approval to add an educational program, acquire another school or seek to make other significant changes. If the Department of Education determines that a provisionally certified institution is unable to meet its responsibilities under its program participation agreement, the Department of Education may seek to revoke the institution's certification to participate in Title IV programs without advance notice and without the same rights to due process in contesting the revocation as are afforded to institutions whose certification is not provisional.

        The Department of Education issued Ashford University's program participation agreement in December 2008. Because our composite score for the year ended December 31, 2007 was 0.6 and did not meet the 1.5 standard prescribed by the Department of Education (see Financial Responsibility on page 86), the institution was placed on provisional certification status and required to post a letter of credit in favor of the Department of Education equal to 10% of total Title IV funds received in 2007 and to receive certain Title IV funds under the heightened cash monitoring level one method of payment (pursuant to which an institution may not receive Title IV funds before disbursing them to students) rather than under the advance method of payment (pursuant to which an institution may receive Title IV program funds before disbursing them to students).

        The Department of Education issued the University of the Rockies' current program participation agreement in September 2007, following the change in ownership that occurred in connection with its September 2007 acquisition. Because of the change in ownership, the institution was placed on provisional certification status for a period of three years. The University of the Rockies' participation in Title IV programs is also conditioned on its having in place a letter of credit in favor of the Department of Education and on its receiving certain Title IV funds under the heightened cash monitoring level one method of payment.

        We do not currently have plans to establish new locations, acquire other schools or make other significant changes in our operations. In addition, we do not currently have plans to initiate new educational programs that would require approval of the Department of Education. Accordingly, we do not believe that the provisional certification of our institutions has had or will have a material impact on our day-to-day operations.

        An institution is required to apply for a renewal of its certification no later than three months before a scheduled expiration of certification. Our current provisional certification for Ashford University is scheduled to expire on June 30, 2011. Our current provisional certification for the University of the Rockies is scheduled to expire on September 30, 2010.

Compliance reviews and reports

        In addition to reviews in connection with periodic renewals of certification to participate in Title IV programs, our institutions are subject to announced and unannounced compliance reviews and audits by various external agencies, including the Department of Education, its Office of Inspector General (OIG), state licensing agencies, agencies that guarantee private lender Title IV program loans, the U.S. Department of Veterans Affairs and the Higher Learning Commission. In addition, as part of the Department of Education's ongoing monitoring of institutions' administration of Title IV programs, the Higher Education Act requires institutions to submit to the Department of Education an annual

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Title IV compliance audit conducted by an independent registered public accounting firm. In addition, to enable the Department of Education to make a determination of an institution's financial responsibility, each institution must annually submit audited financial statements prepared in accordance with GAAP and Department of Education regulations.

Audit by Office of the Inspector General

        The OIG is responsible for, among other things, promoting the effectiveness and integrity of the Department of Education's programs and operations. With respect to educational institutions that participate in Title IV programs, the OIG conducts its work primarily through an audit services division and an investigations division. The audit services division typically conducts general audits of schools to assess their administration of federal funds in accordance with applicable rules and regulations. The investigation services division typically conducts focused investigations of particular allegations of fraud, abuse or other wrongdoing against schools by third parties, such as a lawsuit filed under seal pursuant to the federal False Claims Act.

        The OIG audit services division is currently conducting a compliance audit of Ashford University which commenced in May 2008. We are working with the OIG to facilitate this audit. The period under audit is the Title IV award year commencing on July 1, 2006. Based on our conversations with the OIG, we believe it will issue a draft audit report sometime during the first half of 2009, to which we will have the opportunity to respond. We expect that the OIG will not issue a final report until several months thereafter. The final audit report would include any findings and any recommendations to the Department of Education's Federal Student Aid office based on those findings. Because of the ongoing nature of the OIG audit, we cannot predict with certainty the ultimate extent of the draft or final audit findings or recommendations or what effect any such findings might have on us and our business.

Administrative capability

        Department of Education regulations specify extensive criteria by which an institution must establish that it has the requisite administrative capability to participate in Title IV programs. To meet the administrative capability standards, an institution must, among other things:

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comply with all applicable Title IV program requirements;

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have an adequate number of qualified personnel to administer Title IV programs;

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have acceptable standards for measuring the satisfactory academic progress of its students;

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have procedures in place for awarding, disbursing and safeguarding Title IV funds and for maintaining required records;

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administer Title IV programs with adequate checks and balances in its system of internal control over financial reporting;

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not be, and not have any principal or affiliate who is, debarred or suspended from federal contracting or engaging in activity that is cause for debarment or suspension;

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provide financial aid counseling to its students;

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refer to the OIG any credible information indicating that any student, parent, employee, third-party servicer or other agent of the institution has engaged in any fraud or other illegal conduct involving Title IV programs;

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timely submit all required reports and financial statements; and

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not otherwise appear to lack administrative capability.

Financial responsibility

        The Higher Education Act and Department of Education regulations establish standards of financial responsibility which an institution must satisfy to participate in Title IV programs. The Department of Education evaluates compliance with these standards annually upon receipt of an institution's annual audited financial statements and also when an institution applies to the Department of Education to reestablish its eligibility to participate in Title IV programs following a change in ownership. One financial responsibility standard is based on the institution's composite score, which is derived from a formula established by the Department of Education that is a weighted average of three financial ratios:

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equity ratio, which measures the institution's capital resources, financial viability and ability to borrow;

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primary reserve ratio, which measures the institution's ability to support current operations from expendable resources; and

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net income ratio, which measures the institution's ability to operate at a profit or within its means.

        The formula defines each of the three ratios and assigns a strength factor and weighting percentage to each ratio. The weighted scores for the three ratios are then added to produce a composite score for the institution. The composite score is a number between negative 1.0 and positive 3.0. It must be at least 1.5 for the institution to be deemed financially responsible without the need for further Department of Education financial oversight. In addition to having an acceptable composite score, an institution must, among other things, provide the administrative resources necessary to comply with Title IV program requirements, meet all of its financial obligations (including required refunds to students and any Title IV liabilities and debts), be current in its debt payments and not receive an adverse, qualified or disclaimed opinion by its accountants in its audited financial statements.

        For the year ended December 31, 2007, our composite score of 0.6 did not meet the 1.5 standard prescribed by the Department of Education. As a result, each of our institutions has been required to participate in the Title IV programs under provisional certification, to post a letter of credit in favor of the Department of Education and to receive Title IV program funds pursuant to the heightened cash management level one method. As a result, (i) we may not draw down Title IV funds until the day we disburse them to our students, (ii) Ashford University has posted a letter of credit in the amount of $12.1 million, which will remain in effect through September 30, 2009, and (iii) the University of the Rockies has posted a letter of credit in the amount of $0.7 million, which will remain in effect through June 30, 2009.

Return of Title IV funds for students who withdraw

        If a student who has received Title IV funds withdraws, the institution must determine the amount of Title IV program funds the student has earned, pursuant to applicable regulations. If the student withdraws during the first 60% of any payment period (which, for our online students, typically is a 20-week term consisting of four five-week courses and, for our ground students, is a 16-week semester), the amount of Title IV funds that the student has earned is equal to a pro rata portion of the funds the student received or for which the student would otherwise be eligible for the payment period. If the student withdraws after the 60% threshold, then the student is deemed to have earned 100% of the Title IV funds received. If the student has not earned all of the Title IV funds disbursed, the institution must return the unearned funds to the appropriate lender or the Department of Education in a timely

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manner, which is generally no later than 45 days after the date the institution determined that the student withdrew. If an institution's annual financial aid compliance audit determines that 5% or more of such returns were not timely made, the institution must submit a letter of credit in favor of the Department of Education equal to 25% of the Title IV funds that the institution should have returned for withdrawn students in its most recently completed fiscal year.

        For the year ended December 31, 2007, Ashford University exceeded the 5% threshold for late refunds sampled due to human error. As a result, we are subject to the requirement to post a letter of credit in favor of the Department of Education equal to 25% of the total refunds in 2007. Ashford University notified the Department of Education of its intention to post this letter of credit, but was advised by the Department of Education that such posting was unnecessary because we had already posted a letter of credit due to our composite score which was in excess of the amount required for late funds. Although we have taken steps to reduce late refunds, we cannot ensure that such steps will be sufficient to address this issue.

The "90/10 rule"

        Pursuant to a provision of the Higher Education Act, as reauthorized in August 2008, a for-profit institution loses its eligibility to participate in Title IV programs if the institution derives more than 90% of its revenues (calculated on a cash basis in accordance with applicable Department of Education regulations) from Title IV program funds for two consecutive fiscal years, commencing with the institution's first fiscal year that ends after the new law's effective date of August 14, 2008. This rule is commonly referred to as the "90/10 rule." Any institution that violates the 90/10 rule becomes ineligible to participate in Title IV programs for at least two fiscal years. In addition, an institution whose rate exceeds 90% for any single year will be placed on provisional certification and may be subject to other enforcement measures. In 2007, Ashford University derived 83.9% and the University of the Rockies derived 61.9% of their respective revenues (calculated on a cash basis in accordance with applicable Department of Education regulations) from Title IV funds.

        Recent changes in federal law that increased Title IV grant and loan limits, and any additional increases in the future, may result in an increase in the revenues we receive from Title IV programs, which could make it more difficult for us to satisfy the 90/10 rule. However, such effects may be mitigated, at least on a temporary basis, by another provision in the rule that allows institutions to exclude (for three years) from their Title IV revenues when calculating their compliance the additional $2,000 per student in certain annual federal student loan amounts that became available starting in July 2008. Additionally, recent changes permit institutions to include in their calculation as non-Title IV revenues certain non-cash revenues, such as institutional loan proceeds under certain circumstances.

Student loan defaults

        Under the Higher Education Act, as in effect prior to its August 2008 reauthorization, an educational institution may lose its eligibility to participate in some or all Title IV programs if defaults by its students on the repayment of student loans exceed certain levels. For each federal fiscal year, the Department of Education calculates a rate of student defaults for each institution which is known as a "cohort default rate." An institution's cohort default rate for a federal fiscal year is calculated by determining the rate at which students who became subject to a repayment obligation in that federal fiscal year defaulted on such obligation by the end of the following federal fiscal year.

        If the Department of Education notifies an institution that its cohort default rates for each of the three most recent federal fiscal years are 25% or greater, the institution's participation in the FFEL, Direct Loan and Pell grant programs ends 30 days after that notification, unless the institution appeals that determination on specified grounds and according to specified procedures. In addition, an institution's participation in the FFEL and Direct Loan programs ends 30 days after notification by the

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Department of Education that its cohort default rate in its most recent fiscal year is greater than 40%, unless the institution timely appeals that determination on specified grounds and according to specified procedures. An institution whose participation ends under either of these provisions may not participate in the relevant Title IV programs for the remainder of the fiscal year in which the institution receives the notification and for the next two fiscal years. If an institution's cohort default rate equals or exceeds 25% in any single year, the institution may be placed on provisional certification status.

        Ashford University's cohort default rates for the 2004, 2005 and 2006 federal fiscal years, the three most recent years for which information is available, were 2.4%, 4.1% and 4.1%, respectively. The cohort default rates for the University of the Rockies for the 2004, 2005 and 2006 federal fiscal years, the three most recent years for which information is available, were 5.5%, 0.0% and 0.0%, respectively.

        The August 2008 reauthorization of the Higher Education Act includes significant revisions to the requirements concerning cohort default rates. Under the revised law, the period for which students' defaults on their loans are included in the calculation of an institution's cohort default rate has been extended by one additional year, which is expected to increase the cohort default rates for most institutions. That change will be effective with the calculation of institutions' cohort default rates for the federal fiscal year ending September 30, 2009, which rates are expected to be calculated and issued by the Department of Education in 2012. The Department of Education will not impose sanctions based on rates calculated under this new methodology until three consecutive years of rates have been calculated, which is expected to occur in 2014. Until that time, the Department of Education will continue to calculate rates under the old calculation method and impose sanctions based on those rates. The revised law also increases the threshold for ending an institution's participation in the relevant Title IV programs from 25% to 30%, effective in the federal fiscal year 2012.

Incentive compensation rule

        An institution that participates in Title IV programs may not provide any commission, bonus or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any person or entity engaged in any student recruitment, admissions or financial aid awarding activity. The Department of Education's regulations set forth 12 "safe harbors" which describe compensation arrangements that do not violate the incentive compensation rule, including the payment and adjustment of salaries and bonuses under certain conditions. The regulations clarify that the safe harbors are not a complete list of permissible practices under this law. The law and regulations do not establish clear criteria for compliance in all circumstances, and the Department of Education no longer reviews and approves compensation plans prior to their implementation. Although we cannot provide any assurances that the Department of Education would not find deficiencies in our compensation plans, we believe that our compensation policies comply with applicable law and regulations.

Potential effect of regulatory noncompliance

        The Department of Education can impose sanctions for violating the statutory and regulatory requirements of Title IV programs, including:

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transferring an institution from the advance method or the heightened cash monitoring level one method of Title IV payment, which permit the institution to receive Title IV funds before or concurrently with disbursing them to students, to the heightened cash monitoring level two method of payment or to the reimbursement method of payment, which delay an institution's receipt of Title IV funds until student eligibility has been verified;

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requiring an institution to post a letter of credit in favor of the Department of Education as a condition for continued Title IV certification;

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imposing a monetary liability against an institution in an amount equal to any funds determined to have been improperly disbursed;

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initiating proceedings to impose a fine or to limit, suspend or terminate an institution's participation in Title IV programs;

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taking emergency action to suspend an institution's participation in Title IV programs without prior notice or a prior opportunity for a hearing;

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failing to grant an institution's application for renewal of its certification to participate in Title IV programs; or

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referring a matter for possible civil or criminal prosecution.

In addition, the agencies that guarantee Title IV private lender loans for our students could initiate proceedings to limit, suspend or terminate our ability to obtain guarantees of our students' loans through that agency.

        If sanctions were imposed resulting in a substantial curtailment or termination of our participation in Title IV programs, our enrollments, revenues and results of operations would be materially and adversely affected. If we lost our eligibility to participate in Title IV programs, or if the amount of available Title IV program funds were reduced, we would seek to arrange or provide alternative sources of financial aid for students. We believe that one or more private organizations would be willing to provide financial assistance to our students, but there is no assurance of that. Additionally, the interest rate and other terms of such financial aid would likely not be as favorable as those for Title IV program funds, and we might be required to guarantee all or part of such alternative assistance or might incur other additional costs in connection with securing such alternative assistance. It is unlikely that we would be able to arrange alternative funding to replace all the Title IV funding our students receive. Accordingly, our loss of eligibility to participate in Title IV programs, or a reduction in the amount of available Title IV program funding for our students, would be expected to have a material adverse effect on our enrollments, revenues and results of operations, even if we could arrange or provide alternative sources of student financial aid.

        In addition to the actions that may be brought against us as a result of our participation in Title IV programs, we are also subject to complaints and lawsuits relating to regulatory compliance brought not only by our regulatory agencies but also by other government agencies and third parties, such as current or former students or employees and other members of the public, including lawsuits filed pursuant to the federal False Claims Act.

Uncertainties, increased oversight and changes in student loan environment

        During 2007 and 2008, student loan programs, including Title IV programs, came under increased scrutiny by the Department of Education, Congress, state attorneys general and other parties. Issues that have received extensive attention include allegations of conflicts of interest between some institutions or their employees and lenders that provide Title IV loans, inappropriate incentives given by lenders to some schools and school employees and allegations of deceptive practices in the marketing of student loans and in schools encouraging students to use certain lenders.

        The practices of numerous schools and lenders have been examined by government agencies at the federal and state level. Several of them have been cited for these problems and have paid several million dollars in the aggregate to settle those claims without admitting wrongdoing. As a result of this activity, Congress has passed new laws, the Department of Education has enacted regulations and several states have adopted codes of conduct or enacted state laws that further regulate the conduct of lenders, schools and school personnel. These new laws and regulations, among other things:

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limit schools' relationships with lenders;

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restrict the types of services that schools may receive from lenders;

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prohibit lenders from providing other types of funding to schools in exchange for Title IV loan volume;

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require schools to provide additional information to students concerning institutionally preferred lenders; and

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reduce the amount of federal payments to lenders who participate in Title IV loan programs.

        The cumulative impact of these developments and conditions, combined with market conditions affecting the availability of credit generally, have caused some lenders, including some lenders that have previously provided Title IV loans to our students, to cease providing Title IV loans to students. Other lenders have reduced the benefits and increased the fees associated with the Title IV loans they provide. In addition, the new regulatory refinements may result in higher administrative costs for schools, including us. If Congress increases interest rates on Title IV loans, or if private loan interest rates rise, our students would have to pay higher interest rates on their loans. Any future increase in interest rates will result in a corresponding increase in educational costs to our existing and prospective students.

        In May 2008, new federal legislation was enacted to attempt to ensure that all eligible students would be able to obtain Title IV loans and that a sufficient number of lenders will continue to provide Title IV loans. Among other things, the new legislation:

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increases the maximum annual amount of certain student loans by $2,000;

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authorizes the Department of Education to purchase Title IV loans from lenders, thereby providing capital to the lenders to enable them to continue making Title IV loans to students; and

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permits the Department of Education to designate institutions eligible to participate in a "lender of last resort" program, under which federally recognized student loan guaranty agencies will be required to make Title IV loans to all otherwise eligible students at those institutions.

        We cannot predict whether this legislation will be effective in ensuring students' access to Title IV loan funding through private lenders. These circumstances could result in our institutions' certifying loans through the Federal Direct Lending program (for which we are eligible to participate) rather than through Title IV private lending programs.

Adding teaching locations and implementing new educational programs

        The requirements and standards of accrediting agencies, state education agencies and the Department of Education limit our ability in certain instances to establish additional teaching locations or implement new educational programs. The Higher Learning Commission, the Colorado Commission on Higher Education and other state education agencies that may authorize or accredit us or our programs generally require institutions to notify them in advance of adding new locations or implementing new programs, and upon notification may undertake a review of the quality of the facility or the program and the financial, academic and other qualifications of the institution.

        If an institution participating in Title IV programs plans to add a new location or educational program, the institution must generally apply to the Department of Education to have the additional location or educational program designated as within the scope of the institution's Title IV eligibility. However, degree-granting institutions are not required to obtain the Department of Education's approval of additional programs that lead to a degree at the same or lower degree level as degree programs previously approved by the Department of Education. Similarly, an institution is not required to obtain advance approval for new programs that prepare students for gainful employment in the same

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or a related recognized occupation as an educational program that has previously been designated by the Department of Education as an eligible program at that institution if the program meets certain minimum-length requirements. If an institution that is required to obtain the Department of Education's advance approval for the addition of a new program or new location fails to do so, the institution may be liable for repayment of Title IV program funds received by the institution or by students in connection with that program or enrolled at that location.

Acquiring other schools

        If we were to seek to acquire an existing accredited institution participating in Title IV programs, we would need to obtain the approval of the state education agency that authorizes the school being acquired, any accrediting agency that accredits the school being acquired and the Department of Education. The level of review varies by individual state and by individual accrediting commission, with some requiring approval of such an acquisition before it occurs and with others only considering approval after the acquisition has occurred. The approval of the applicable state education agencies and accrediting agencies is a necessary prerequisite to the Department of Education's certifying the acquired school to participate in Title IV programs. In addition, the Department of Education's certification of a school following a change in ownership and control is always a provisional certification. The restrictions imposed by any of the applicable regulatory agencies could delay or prevent our acquisition of other schools in some circumstances.

Change in ownership resulting in a change in control

        The Department of Education and most states and accrediting agencies require institutions of higher education to report or obtain approval of certain changes in control and changes in other aspects of institutional organization or operations. The types of and thresholds for such reporting and approval vary among the states and among accrediting agencies. The Higher Learning Commission requires that an institution obtain its approval in advance of a change in ownership in order for the institution to retain its accredited status, and it requires an onsite evaluation within six months following the change in control in order to maintain the institution's accreditation. The Higher Learning Commission does not set specific standards for determining when a transaction constitutes a change in ownership of either of our institutions.

        Under Department of Education regulations, an institution that undergoes a change in ownership resulting in a change in control loses its eligibility to participate in Title IV programs and must apply to the Department of Education in order to reestablish such eligibility. If an institution files the required application and follows other procedures, the Department of Education may temporarily certify the institution on a provisional basis following the change in control so that the institution's students retain access to Title IV program funds while the Department of Education completes its full review. In addition, the Department of Education will extend such temporary provisional certification if the institution timely files other required materials, including, the approval of the change in control by its accrediting agency and the state authorizing agency in the state in which it is physically located and an audited balance sheet showing the financial condition of the institution or its parent corporation as of the date of the change in control. If the institution fails to meet any of these deadlines, its certification will expire and its students will become ineligible to receive Title IV funds until the Department of Education completes its full review, which commonly takes several months and may take longer. If the Department of Education approves the application after a change in control, it will certify the institution on a provisional basis, typically for a period of three years.

        For corporations that are neither publicly traded nor closely held, such as us prior to this offering, Department of Education regulations describe some transactions that constitute a change in ownership resulting in a change in control, including the transfer of a controlling interest in the voting stock of the corporation or its parent corporation. For such a corporation, the Department of Education will

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generally find that a transaction results in a change in control if a person acquires ownership or control of 25% or more of the outstanding voting stock and control of the corporation, or if a person who owns or controls 25% or more of the outstanding voting stock and controls the corporation ceases to own or control at least 25% of the outstanding voting stock or ceases to control the corporation. With respect to this offering, Warburg Pincus will continue to own or control more than 50% of our outstanding voting stock immediately following this offering. We have submitted a description of this offering to the Department of Education, which has confirmed that this offering is not a change in ownership resulting in a change in control under Department of Education regulations. We also intend to seek, before the closing of this offering, confirmation from the Higher Learning Commission and applicable state agencies whether this offering will constitute a change in control under their respective standards, and to determine what is required if any such agency does consider the offering to constitute a change in control. If any of those agencies deem this offering to be a change in control, we would have to apply for and obtain approval from that agency, in some cases in advance of this offering, according to its procedures.

        A change in control could also occur as a result of transactions in which we are involved following the consummation of this offering. Some corporate reorganizations and some changes in the board of directors constitute changes in control. In addition, Department of Education regulations provide that a change in control occurs for a publicly traded corporation, which we will be after this offering, if either (i) a person acquires such ownership and control of the corporation so that the corporation is required to file a current report on Form 8-K with the SEC disclosing a change in control, or (ii) the corporation's largest stockholder who owns at least 25% of the total outstanding voting stock of the corporation, ceases to own at least 25% of such stock or ceases to be the largest stockholder. A significant purchase or disposition of our voting stock in the future, including a disposition of voting stock by Warburg Pincus, could be determined by the Department of Education to be a change in control under this standard, in which case the regulatory procedures applicable to a change in ownership and control would have to be followed in connection with the transaction. Similarly, if such a disposition were deemed a change in control by the Higher Learning Commission or by any other accrediting agency or applicable state educational licensing agency, any required regulatory notifications and approvals would have to be made or obtained. The potential adverse effects of a change in control could influence future decisions by us and our stockholders regarding the sale, purchase, transfer, issuance or redemption of our stock. In addition, the adverse regulatory effect of a change in control also could discourage bids for shares of our common stock.

Privacy of student records

        The Family Educational Rights and Privacy Act of 1974, or FERPA, and the Department of Education's FERPA regulations require educational institutions to protect the privacy of students' educational records by limiting an institution's disclosure of a student's personally identifiable information without the student's prior written consent. FERPA also requires institutions to allow students to review and request changes to their educational records maintained by the institution, to notify students at least annually of this inspection right and to maintain records in each student's file listing requests for access to and disclosures of personally identifiable information and the interest of such party in that information. If an institution fails to comply with FERPA, the Department of Education may require corrective actions by the institution or may terminate an institution's receipt of further federal funds. In addition, educational institutions are obligated to safeguard student information pursuant to the Gramm-Leach-Bliley Act, or GLBA, a federal law designed to protect consumers' personal financial information held by financial institutions and other entities that provide financial services to consumers. GLBA and the applicable GLBA regulations require an institution to, among other things, develop and maintain a comprehensive, written information security program designed to protect against the unauthorized disclosure of personally identifiable financial information of students, parents or other individuals with whom such institution has a customer relationship. If an

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institution fails to comply with the applicable GLBA requirements, it may be required to take corrective actions, be subject to monitoring and oversight by the Federal Trade Commission, or FTC, and be subject to fines or penalties imposed by the FTC. For-profit educational institutions are also subject to the general deceptive practices jurisdiction of the FTC with respect to their collection, use and disclosure of student information.

State Education Licensure and Regulation

Iowa and Colorado

        Ashford University's campus is located in Iowa, and the institution is exempt from having to register as a postsecondary school with the Iowa Secretary of State. The University of the Rockies' campus is located in Colorado. The institution is licensed and authorized to deliver educational programs and to grant degrees and other credentials by the Colorado Commission on Higher Education. We do not have campuses in any states other than Iowa and Colorado. The Higher Education Act requires Ashford University to maintain its exemption from registration in Iowa (or become registered in its absence) and requires the University of Rockies to maintain its authorization from the Colorado Commission on Higher Education in order to participate in Title IV programs. To maintain our Colorado authorization, we must continuously meet standards relating to, among other things, educational programs, facilities, instructional and administrative staff, marketing and recruitment, financial operations, addition of new locations and educational programs and various operational and administrative procedures. Failure to maintain our Iowa exemption or our Colorado Commission on Higher Education authorization would cause Ashford University or the University of the Rockies, respectively, to lose their authorization to deliver educational programs and to grant degrees and other credentials and lose their eligibility to participate in Title IV programs.

Additional state regulation

        Most state education agencies impose regulatory requirements on educational institutions operating within their boundaries. Some states have sought to assert jurisdiction over out-of-state educational institutions offering online programs that have no physical location or other presence in the state but that have some activity in the state, such as enrolling or offering educational services to students who reside in the state, employing faculty who reside in the state or advertising to or recruiting prospective students in the state. In addition to Iowa and Colorado, we have determined that our activities in certain states constitute a presence requiring licensure or authorization under the requirements of the state education agency in those states, and in other states we have obtained state education agency approvals as we have determined necessary in connection with our marketing and recruiting activities. We review state licensure requirements when appropriate to determine whether our activities in those states constitute a presence or otherwise require licensure or authorization. Because we enroll students from all 50 states and from the District of Columbia, we may have to seek licensure or authorization in additional states in the future. State regulatory requirements for online education vary among the states, are not well developed in many states, are imprecise or unclear in some states and are subject to change. Consequently, a state education agency could disagree with our conclusion that we are not required to obtain a license or authorization in the state and could restrict one or more of our business activities in the state, including the ability to recruit or enroll students in that state or to continue providing services or advertising in that state. If we fail to comply with state licensing or authorization requirements for any state, we may be subject to the loss of state licensure or authorization by that state, or be subject to other sanctions, including restrictions on our activities in that state, fines and penalties. The loss of any required license or authorization in states other than Iowa and Colorado could prohibit us from recruiting prospective students or from offering services to current students in those states.

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MANAGEMENT

Directors and Executive Officers

        Our directors and executive officers and their ages and positions are as follows:

Name	Age		Position
Andrew S. Clark		43	Chief Executive Officer and Director
Daniel J. Devine		44	Chief Financial Officer
Christopher L. Spohn		49	Senior Vice President/Chief Admissions Officer
Jane McAuliffe		42	Senior Vice President/Chief Academic Officer
Rodney T. Sheng		42	Senior Vice President/Chief Administrative Officer
Ross Woodard		43	Senior Vice President/Chief Marketing Officer
Charlene Dackerman		49	Senior Vice President of Human Resources
Thomas Ashbrook		44	Senior Vice President/Chief Information Officer
Diane Thompson		53	Senior Vice President/General Counsel
Ryan Craig		37	Director
Dale Crandall		67	Director
Patrick T. Hackett		47	Director
Robert Hartman		60	Director
Adarsh Sarma		35	Director

Andrew S. Clark has served as our Chief Executive Officer and a director since November 2003. Mr. Clark also served from March 2005 to December 2008 on the Board of Trustees for Ashford University and currently serves on the University of the Rockies Board of Trustees, which he joined in September 2007. Prior to joining us in November 2003, Mr. Clark consulted with several private equity firms examining the postsecondary education sector. Prior to 2003, Mr. Clark worked for Career Education Corporation as Divisional Vice President of Operations and Chief Operating Officer for American InterContinental University in 2002. From 1992 to 2001, Mr. Clark worked for Apollo Group, Inc. (University of Phoenix), where he served in various management roles, culminating in his position as Regional Vice President for the Mid-West region from 1999 to 2001. Mr. Clark earned an M.B.A. from the University of Phoenix and a B.A. from Pacific Lutheran University.

Daniel J. Devine has served as our Chief Financial Officer since January 2004 and has over 20 years of senior finance experience. From March 2002 to December 2003, Mr. Devine served as the Chief Financial Officer of A-Life Medical. From 1994 to 2000, Mr. Devine served in various management roles for Mitchell International culminating in his position as Chief Financial Officer from 1998 to 2000. From 1987 to 1993, Mr. Devine served in various management roles for Foster Wheeler Corporation, culminating in his position of divisional Chief Financial Officer from 1990 to 1993. Mr. Devine earned a B.A. from Drexel University and is a certified public accountant.

Christopher L. Spohn joined us in January 2004 as the Vice President of Admissions and has served as our Senior Vice President/Chief Admissions Officer since October 2008. From 2002 to 2003, Mr. Spohn served as the Vice President of Marketing and Admissions for the University Division of Career Education Corporation. From 1996 to 2001, Mr. Spohn served in various management roles for Apollo Group, Inc. (University of Phoenix), culminating in his position as Senior Director of Enrollment for the Southern California Campus from 1999 to 2002. Mr. Spohn earned a B.S. from Azusa Pacific University.

Jane McAuliffe joined us in July 2005 and has served as Chancellor/President of Ashford University since that time. She also served as our Vice President of Academic Affairs from September 2007 until November 2008 at which time she assumed the title of Senior Vice President/Chief Academic Officer. From 2003 to 2005, Dr. McAuliffe served as President of Argosy University/Sarasota Campus in Sarasota, Florida. Prior to 2003, Dr. McAuliffe served in various management roles including Vice President for Academic Affairs at American InterContinental University in 2002, and prior to that

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Dean, Associate Dean and Program Director in the College of Education at the University of Phoenix from 1996 to 2002. Dr. McAuliffe earned a Ph.D., M.A. and B.A. from Arizona State University.

Rodney T. Sheng joined us in January 2004 and has served as our Senior Vice President/Chief Administrative Officer since November 2008. From January 2004 to November 2008, Mr. Sheng served as our Vice President of Operations. Mr. Sheng has 18 years of experience in the postsecondary sector, during which time he has worked for four different colleges and universities and served in a variety of management roles. From 1995 to 2003, Mr. Sheng worked for Apollo Group, Inc. (University of Phoenix). From 2000 to 2002, Mr. Sheng served as Vice President/Campus Director and opened two campuses for the University of Phoenix in the state of Ohio. In 2002, Mr. Sheng was responsible for the marketing and recruitment for 12 learning centers throughout the Los Angeles metropolitan area. Mr. Sheng earned an M.A. from the University of Phoenix and a B.A. from San Diego State University.

Ross Woodard joined us in June 2004 and has served as our Senior Vice President/Chief Marketing Officer since November 2008. From June 2004 to February 2005, Mr. Woodard served as our Director of E-Commerce and from March 2005 to October 2008 he served as our Vice President of Marketing. From June 1992 to May 2004, Mr. Woodard held multiple senior management positions with Road Runner Sports. From 1998 to 2004, Mr. Woodard served as Director of E-Commerce for Road Runner Sports and was responsible for the internet sales and marketing channel. From 1992 through 1997, Mr. Woodard served in various management roles with Road Runner Sports, including Director of Sales. From 1989 to 1992, he served as a Regional Manager for Nike Inc. in San Diego. Mr. Woodard earned a B.A. from San Diego State University.

Charlene Dackerman joined us in September 2004 and has served as our Senior Vice President of Human Resources since November 2008. From September 2004 to December 2005, Ms. Dackerman served as our Director of Human Resources, and from January 2006 to October 2008, she served as our Vice President of Human Resources. Ms. Dackerman has worked in the postsecondary sector for over 18 years. From 1986 to 2002, Ms. Dackerman served in various management roles for Kelsey Jenney College, including College Director, Campus Director, Dean and Director of Admissions. Ms. Dackerman earned an M.S. from National University and a B.S. from Humboldt State University.

Thomas Ashbrook joined us in November 2008 and has served as our Senior Vice President/Chief Information Officer since that time. From March 2005 to March 2008, Mr. Ashbrook served as the Divisional Information Officer for Fremont Investment & Loan, a California industrial bank and lending institution, where he led information technology strategy for the residential business. From 2001 to 2005, Mr. Ashbrook served as the Senior Vice President of Technology Solutions for Fidelity National Information Solutions, a subsidiary of Fidelity National Financial. Mr. Ashbrook earned a B.S. from California State University, Long Beach.

Diane Thompson joined us in December 2008 and has served as our Senior Vice President/General Counsel since that time. From September 1997 to November 2008, Ms. Thompson served in various management roles for Apollo Group, Inc. (University of Phoenix). From November 2000 to February 2006, Ms. Thompson served as Vice President/Counsel for Apollo Group, Inc. (University of Phoenix) and from March 2006 to November 2008, Ms. Thompson served as Chief Human Resources Officer. From October 1992 to July 1996, Ms. Thompson served as an attorney in the Pima County Attorney's Office in Tucson Arizona. Ms. Thompson earned a B.A. from St. Cloud University, an M.A. from Antioch University and a J.D. from the University of Arizona College of Law.

Ryan Craig has served as a director of our company since November 2003. Mr. Craig is the Founder and President of Wellspring, an organization providing treatment programs for overweight and obese adolescents. From 2001 to 2004, Mr. Craig was an Associate at Warburg Pincus in the education sector. From 1999 to 2001, Mr. Craig served as Vice President Business Development for Fathom, a consortium of universities, museums and libraries. From 1994 to 1996, he worked as a consultant with

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McKinsey & Company. Mr. Craig earned a B.A. from Yale University and a J.D. from Yale Law School.

Dale Crandall has served as a director of our company since December 2008. Mr. Crandall founded Piedmont Corporate Advisors, Inc., a private financial consulting firm, in 2003 and currently serves as its President. From March 2000 to June 2002, Mr. Crandall served as the President and Chief Operating Officer of Kaiser Foundation Health Plan Inc. and Kaiser Foundation Hospitals. From June 1998 to March 2000, Mr. Crandall served as the Senior Vice President and Chief Financial Officer of Kaiser Foundation Health Plan Inc. and Kaiser Foundation Hospitals. Mr. Crandall also serves as a director for Ansell Limited, Coventry Health Care, Inc. and Metavante Technologies, Inc. Mr. Crandall earned a B.A. from Claremont McKenna College, an M.B.A. from the University of California, Berkeley and is a certified public accountant.

        Patrick T. Hackett has served as a director of our company since March 2008. Mr. Hackett is a Managing Director and co-head of the Technology, Media and Telecommunications group at Warburg Pincus LLC, which he joined in 1990. Mr. Hackett also serves as a director of Nuance Communications, Inc. and four privately-held companies. Mr. Hackett earned a B.A. from the University of Pennsylvania and a B.S. from the Wharton School of Business at the University of Pennsylvania.

Robert Hartman has served as a director of our company since November 2006. From 1979 to September 2005, Mr. Hartman served in various management roles for Universal Technical Institute, including President, Chief Executive Officer and Chairman of the Board. Mr. Hartman still serves as a member of the board of directors of Universal Technical Institute. During the 1980's, Mr. Hartman served as Chairman of the Arizona State Board for Private Postsecondary Education and was Founder and Chairman of the Western Council of Private Career Schools. Mr. Hartman earned an M.B.A. from DePaul University and a B.A. from Michigan State University.

Adarsh Sarma has served as a director of our company since July 2005. Mr. Sarma is a Managing Director in the Technology, Media and Telecommunication group at Warburg Pincus LLC, which he joined as a Principal in 2005. From 2002 to early 2005, Mr. Sarma was a Principal at Chryscapital, a private equity firm. Mr. Sarma also serves as a director of Metavante Technologies, Inc. and one privately-held company. Mr. Sarma earned a B.A. from Knox College and an M.B.A. from the University of Chicago.

        In June 2003, Mr. Clark acquired and subsequently hired the management to operate Foundation College, an education provider which conducted campus-based training programs through the California Employment Training Panel. From November 2003 to August 2004, Ms. Dackerman served as President and Chief Financial Officer of Foundation College. Due to a significant decrease in state funding, the business filed for bankruptcy in December 2005.

Board Composition after this Offering

        Upon the closing of this offering, our board of directors will consist of six members. The certificate of incorporation and bylaws in effect immediately following this offering provide that the number of directors will be fixed from time to time by resolution of the board.

        All directors hold office until their successors have been elected and qualified or until their earlier death, resignation, disqualification or removal. Effective upon the closing of this offering, we will divide the terms of office of the directors into three classes:

•

Class I, whose term will expire at the annual meeting of stockholders to be held in 2010;

•

Class II, whose term will expire at the annual meeting of stockholders to be held in 2011; and

•

Class III, whose term will expire at the annual meeting of stockholders to be held in 2012.

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        Upon the closing of this offering, Class I will consist of Messrs. Craig and Hartman, Class II will consist of Messrs. Crandall and Sarma and Class III will consist of Messrs. Clark and Hackett. At each annual meeting of stockholders after the initial classification, the successors to directors whose terms then expire will serve from the time of election and qualification until the third annual meeting following election and until their successors are duly elected and qualified. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one third of the directors.

Director Independence

        Our board of directors has determined that Messrs. Craig, Crandall, Hackett, Hartman and Sarma are independent for purposes of NYSE rules.

        There are no family relationships between any of our directors and executive officers.

Board Committees

        Upon the closing of this offering, we will have an audit committee, a compensation committee and a nominating and governance committee. After this offering, our board and committees will generally meet at least quarterly, and we expect the board and committees will meet on a similar schedule.

Audit Committee

        Upon the closing of this offering, we anticipate our audit committee will consist of three directors, Messrs. Crandall, Craig and Hartman. The chair of the audit committee will be Mr. Crandall, whom the board of directors has determined is an audit committee financial expert. The functions of this committee include:

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selecting and overseeing the engagement of a firm to serve as an independent registered public accounting firm;

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helping to ensure the independence of our independent registered public accounting firm;

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overseeing the integrity of our financial statements;

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preparing an audit committee report as required by the SEC to be included in our annual proxy statement; and

•

overseeing our compliance with legal and regulatory requirements.

        We believe the composition of our audit committee will meet the criteria for independence under, and the functioning of our audit committee will comply with, applicable NYSE and SEC rules, including the requirement that the audit committee have at least one qualified financial expert. We intend for (i) at least one member of our audit committee to be independent as of the date of this prospectus, (ii) a majority of the members of our audit committee to be independent within 90 days after the date of this prospectus and (iii) all members of our audit committee to be independent no later than one year after the date of this prospectus.

Compensation Committee

        Upon the closing of this offering, we anticipate our compensation committee will consist of three directors, Messrs. Crandall, Hackett and Sarma. The chair of the compensation committee will be Mr. Hackett. The functions of this committee include:

•

evaluating and approving all compensation plans, policies and programs as they affect the Chief Executive Officer and other executive officers; and

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•

producing an annual report on executive compensation for our annual proxy statement or annual report.

        We believe that the composition of our compensation committee meets the criteria for independence under, and the functioning of our compensation committee will comply with, applicable NYSE and SEC rules. We intend for (i) at least one member of our compensation committee to be independent as of the date of this prospectus, (ii) a majority of the members of our compensation committee to be independent within 90 days after the date of this prospectus and (iii) all members of our compensation committee to be independent no later than one year after the date of this prospectus.

Nominating and Governance Committee

        Upon the closing of this offering, we anticipate our nominating and governance committee will consist of three directors, Messrs. Craig, Hartman and Sarma. The chair of the nominating and governance committee will be Mr. Sarma. The functions of this committee include:

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identifying, evaluating and recommending nominees to our board of directors and committees of our board of directors;

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evaluating the performance and independence of our board of directors and of individual directors;

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reviewing developments in corporate governance practices; and

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evaluating the adequacy of our corporate governance practices.

        We believe that the composition of our nominating and governance committee meets the criteria for independence under, and the functioning of our nominating and governance committee will comply with applicable NYSE and SEC rules. We intend for (i) at least one member of our nominating and governance committee to be independent as of the date of this prospectus, (ii) a majority of the members of our nominating and governance committee to be independent within 90 days after the date of this prospectus and (iii) all members of our nominating and governance committee to be independent no later than one year after the date of this prospectus.

Code of Ethics

        Upon the closing of this offering, we will adopt a written code of ethics applicable to our board of directors, officers and employees in accordance with the rules of the NYSE and the SEC. Our code of ethics will be designed to deter wrongdoing and to promote:

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honest and ethical conduct,

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full, fair, accurate, timely and understandable disclosure in reports and documents that we will file with the SEC and in our other public communications;

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compliance with applicable laws, rules and regulations, including insider trading compliance; and

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accountability for adherence to the code and prompt internal reporting of violations of the code, including illegal or unethical behavior regarding accounting or auditing practices.

Compensation Committee Interlocks and Insider Participation

        In 2008, none of the members of our compensation committee had a relationship with us other than as directors and stockholders and they were not (i) one of our officers or employees, (ii) a participant in a "related person" transaction or (iii) an executive officer of another entity where one of our executive officers serves on the board of directors.

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Compensation of Directors

        For 2008, no non-employee director received any compensation for their services as a director other than as discussed below. Directors who are one of our employees, such as Mr. Clark, do not receive any compensation for their services as our directors. Directors are reimbursed for travel and other expenses directly related to activities as directors. Directors are also entitled to the protection provided by the indemnification provisions in our current certificate of incorporation and bylaws, as well as the certificate of incorporation and bylaws that will be in effect upon the closing of this offering, and indemnification agreements.

        The following table provides compensation information for the non-employee directors for 2008.

Name	Fees earned or paid in cash ($)	Stock Awards ($) (1)		Option Awards ($) (1)		All Other Compensation ($)		Total ($)
Robert Hartman(2)				$	2,513	$	30,000	$	32,513
Dale Crandall(3)								$	0
Patrick Hackett(4)								$	0
Ryan Craig(5)		$	1,593,721					$	1,593,721
Adarsh Sarma								$	0

(1)

The amounts in these columns are the expenses recorded in our financial statements, excluding any assumed forfeitures, for the year ended December 31, 2008 according to Statement of Financial Accounting Standards No. 123(R) (SFAS 123R). Assumptions used to calculate these amounts are included in Note 12, "Stock-Based Compensation," to our consolidated financial statements, which are included elsewhere in this prospectus.

(2)

Mr. Hartman entered into an independent consulting agreement with us in November 2006, which was amended in January 2008. The agreement provided for an original one year term with one year automatic extensions unless either party gave notice that it did not want to so extend the agreement. The term of the agreement currently extends through November 28, 2009. His services include providing operational and strategic planning. The original agreement provided that Mr. Hartman was entitled to a fee of $20,000 per year, which could be reduced if he worked only a portion of the year. The January 2008 amendment increased this amount to $30,000 per year effective in 2008. On February 28, 2007, Mr. Hartman was awarded a time-based vesting nonqualified stock option to purchase up to 198,516 common shares at a per share exercise price of $0.09 which was equal to the fair market value of one of our common shares on the date of grant. This award had a SFAS 123R grant date fair value of $7,941. Mr. Hartman's option vests as follows: (i) 25% of the option vests on the first anniversary of the vesting commencement date, (ii) an additional 2% of the option vests on each monthly anniversary of the vesting commencement date for the thirty-three months following the first anniversary of the vesting commencement date and (iii) an additional 3% of the option vests on each of the 46th, 47th and 48th monthly anniversaries of the vesting commencement date. In addition, upon termination of Mr. Hartman's services by us without cause or due to termination of services because of death or disability, the vesting of the option will accelerate as if service had terminated twelve months later in time. In addition, the outstanding unvested portion of the option will become fully vested upon a change in control of us if the option is not assumed or replaced. No dividend equivalent payments will be provided on the stock option if we were to pay dividends on our common stock.

(3)

Mr. Crandall was appointed to our board of directors on December 11, 2008. We entered into an agreement with Mr. Crandall to serve as a member of our board and also to serve as the chair of our audit committee. For his services as a member of our board, Mr. Crandall will receive a $20,000 annual retainer to be paid in monthly installments for so long as he remains a member of our board. For his services on our audit committee, Mr. Crandall will receive a $5,000 annual retainer to be paid in monthly installments for so long as he remains a member of our audit committee. For his services as chair of our audit committee, Mr. Crandall will receive a $10,000 annual retainer to be paid in monthly installments for so long as he remains the audit committee chair. Additionally, per the agreement, effective with this offering, Mr. Crandall will be awarded a time-based vesting nonqualified stock option valued at $60,000. Mr. Crandall's option will vest as follows: (i) 25% of the option vests on the first anniversary of the vesting commencement date, (ii) an additional 2% of the option vests on each monthly anniversary of the vesting commencement date for the thirty-three months following the first anniversary of the vesting commencement date and (iii) an additional 3% of the option vests on each of the 46th, 47th and 48th monthly anniversaries of the vesting commencement date.

(4)

Mr. Hackett was appointed to our board of directors on March 11, 2008.

(5)

Mr. Craig entered into an agreement with Warburg Pincus in August 2004 to serve on our board of directors and to serve as a consultant in 2004 to us on behalf of Warburg Pincus. This agreement was amended in December 2008. Under this

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agreement, Warburg Pincus agreed to compensate Mr. Craig from its equity ownership of us. For his director services from August 2004 to August 2008, Mr. Craig earned the right to receive 198,516 shares of our common stock from Warburg Pincus. In his role as a consultant to us in 2004, Mr. Craig earned the right to receive 305,826 shares of our common stock from Warburg Pincus. In January 2009, Mr. Craig received the sum total of 504,342 of our common shares for his services.

        The below table reflects the aggregate number of stock option awards held by each of the non-employee directors as of December 31, 2008. No stock awards have been granted to the non-employee directors by us.

Name	Time-Based Vesting Nonqualified Stock Options (#)		Grant Date		Per Share Exercise Price		Expiration Date
Robert Hartman		198,516		2/28/07	$	0.09		9/15/16
Dale Crandall		0
Patrick Hackett		0
Ryan Craig		0
Adarsh Sarma		0

        The board of directors expects to adopt new compensation policies for non-employee directors in connection with the offering and effective in 2009. It is anticipated that directors will earn both cash and equity compensation for their services as directors. Our compensation committee will review director compensation annually, including fees, retainers and equity compensation, as well as total compensation and make recommendations to the board of directors.

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COMPENSATION DISCUSSION AND ANALYSIS

        The purpose of this compensation discussion and analysis section is to provide information about the material elements of compensation that are paid or awarded to, or earned by, our "named executive officers," who consist of our principal executive officer, principal financial officer, and the three other most highly compensated executive officers. For 2008, the named executive officers were:

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Andrew S. Clark, Chief Executive Officer;

•

Daniel J. Devine, Chief Financial Officer;

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Christopher L. Spohn, Senior Vice President/Chief Admissions Officer;

•

Rodney T. Sheng, Senior Vice President/Chief Administrative Officer; and

•

Ross L. Woodard, Senior Vice President/Chief Marketing Officer.

        This compensation discussion and analysis section addresses and explains the compensation practices that were followed in 2008, the numerical and related information contained in the summary compensation and related tables presented below and actions taken regarding executive compensation since December 31, 2008, that could reflect a fair understanding of a named executive officer's compensation during 2008.

Historical Compensation Decisions

        Prior to this offering, we were a privately-held company with a relatively small number of stockholders, including our principal investor, Warburg Pincus. As such, we have not been subject to stock exchange listing or SEC rules requiring a majority of our board of directors to be independent or relating to the formation and functioning of board committees, including audit, compensation and nominating committees. Most, if not all, of our prior compensation policies and determinations, including those made for 2008, have been the product of negotiations between the named executive officers and our compensation committee, although the compensation committee did discuss the compensation for other executive officers with Mr. Clark (who is also a director).

Overview, Objectives and Compensation Philosophy

        Our compensation committee is responsible for determining the compensation of the named executive officers. The committee oversees the compensation programs for these officers to ensure consistency with our corporate goals and objectives and is responsible for designing and executing our compensation program with respect to the named executive officers.

        The compensation committee reviews overall company and individual performance in connection with the review and determination of each named executive officer's compensation. For company performance, historically the focus has been principally on achievement of annual revenue and EBITDA levels. See "Selected Consolidated Financial and Other Data" for details on our recent financial performance. As an emerging growth company, the compensation committee believes that increasing revenue and profitability are the most direct ways to enhance stockholder value and therefore has specifically linked incentive compensation with company performance in these two fundamental financial areas. For individual performance, the compensation committee also reviews an executive's achievement of non-financial objectives and considers the recommendations of Mr. Clark (who is also a director).

        We believe that we have assembled an outstanding management team which has produced excellent results from 2004 to the present. There has been no turnover in any of our named executive officers since their commencement of employment with us. We believe our growth and management team retention demonstrate the success and effectiveness of our compensation policies.

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        Our annual revenue of $           million in 2008 was $          more than our annual revenue of $85.7 million in 2007 and $          more than our annual revenue in 2006. Our net income of $           million in 2008 was $          more than our net income of $3.3 million in 2007. We believe that the compensation amounts paid to our named executive officers for their services in 2008 were reasonable, appropriate and in our best interests.

Peer Group Information and Compensation Consultants Reports

        In 2007, the compensation committee engaged an independent outside compensation consultant, Pearl Meyer & Partners, or Pearl, to construct a peer group of companies, provide marketplace information, provide advice on competitive market practices and also support specific decisions regarding compensation for the named executive officers. Pearl had not previously and has not subsequently provided any other services to us. In 2008, the compensation committee engaged Mercer, LLC, or Mercer, to assess our executive organizational structure and job titles, construct a peer group of companies, provide marketplace information, provide advice on competitive market practices and support specific decisions regarding long-term equity incentive compensation for the named executive officers. Mercer had not previously provided any services to us. Mercer is currently providing overall compensation analysis and position leveling analysis to assist us in our 2009 compensation analysis.

        In 2007 Pearl selected the following publicly-held postsecondary education companies to be the peer group for purposes of examining our executive compensation programs:

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Apollo Group, Inc.

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Capella Education Co.

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Career Education Corp.

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Corinthian Colleges, Inc.

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DeVry, Inc.

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ITT Educational Services, Inc.

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Laureate Education, Inc.

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Lincoln Educational Services Corp.

•

Strayer Education, Inc.

•

Universal Technical Institute, Inc.

        Pearl selected publicly-held companies due to the greater availability of compensation data. Pearl performed a regression analysis to better calibrate market pay levels for a company of Bridgepoint's current and projected size. Pearl also utilized the following general industry survey information for purposes of evaluating compensation comparisons:

•

Mercer (subsidiary of Marsh & McLennan Companies, Inc.)—2006 Executive Benchmark Database;

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Watson Wyatt Worldwide, Inc.—2006 Top Management Report;

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Watson Wyatt Worldwide, Inc.—2006/7 Survey Report on College & University Personnel Compensation;

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Private Survey—2005 Executive Total Direct Compensation Survey; and

•

Private Survey—2006 Executive Compensation Databank.

        In addition to surveying external compensation information, Pearl examined the named executive officers' employment agreements and interviewed each of the named executive officers and one of our board members in order to better understand the internal perception of our business objectives and compensation arrangements. Pearl provided the compensation committee with a written report that summarized its findings and contained Pearl's compensation recommendations. The findings of the Pearl report were one factor that the compensation committee considered, but it was not the predominant basis for the compensation committee's executive compensation decisions, in part because

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the surveyed peer group companies were publicly traded entities whereas we were a privately-held company.

        In 2008, the compensation committee engaged an independent outside compensation consultant, Mercer, to construct a peer group and review and assess our compensation levels, organizational structure, and long-term equity incentive plan features. Mercer selected a peer group of similarly-sized public for-profit education companies for purposes of conducting its review, which was similar to the peer group selected by Pearl (identified above), except that it excluded Apollo Group, Inc., Laureate Education, Inc. and Career Education Corp. and instead included:

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Nobel Learning Communities;

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Learning Tree International; and

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Princeton Review.

        Mercer also utilized the following general industry survey information for purposes of its assessment:

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2008 Presidio Pay Advisors' Initial Public Offering Executive Compensation Survey;

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Publicly-filed proxy statements for the peer group companies; and

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Mercer, 2008/2009 U.S. Compensation Planning Survey for executives in the Education industry.

        In addition to surveying external compensation information, Mercer examined our compensation program, the Pearl report and the valuation of our equity compensation. Mercer also interviewed our senior executives for purposes of better understanding the long-term incentive/equity strategy. Mercer provided the compensation committee with a written report that summarized its findings.

Tax and Accounting Considerations

        In 2008, while the compensation committee generally considered the financial accounting and tax implications of its executive compensation decisions, neither element was a material consideration in the compensation awarded to our named executive officers during such fiscal year.

Components of Executive Compensation

        The compensation of the named executive officers has three primary components:

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an annual base salary;

•

an annual incentive bonus opportunity; and

•

long-term equity-based compensation.

        Perquisites, and benefits generally available to other employees, represent only a minor portion of the total compensation of the named executive officers.

Annual Base Salary and Annual Bonus

        The compensation committee sets base salaries primarily based on the abilities, performance and experience of the named executive officers. The compensation committee also reviews their past compensation and compensation data for comparable positions in the postsecondary education industry. The compensation committee seeks to set base salaries for the named executive officers at competitive levels.

        The compensation committee believes it is important to provide the named executive officers with an annual performance-based cash incentive bonus plan in order to further motivate the officers and

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provide compensation that is directly linked to achievement of corporate goals and objectives. As discussed further in the "Executive Employment Agreements" section, four of the five named executive officers are a party to an employment agreement with us, each of which provides that the named executive officer will be eligible for an annual discretionary incentive bonus based on attainment of company performance criteria. Each of the employment agreements also specifies an annual target bonus amount as a percentage of annual salary and that the actual bonus paid may be more or less than the target amount. In 2008, for each named executive officer with an employment agreement, their annual bonus was based on achievement of annual revenue and EBITDA goals with revenue receiving 65% of the weighting and EBITDA receiving the remaining 35%.

        Mr. Woodard is the only named executive officer who is not a party to an employment agreement with us. In November 2007, the compensation committee established Mr. Woodard's base salary and target annual bonus for 2008. The compensation committee used the same criteria it used for the named executive officers with employment agreements (described above) in order to determine Mr. Woodard's actual annual bonus amount for 2008.

        The annual bonus arrangements for 2008 are further described in the "Grants of Plan-Based Awards—2008" table below.

Amended and Restated 2005 Stock Incentive Plan

        We provide long-term equity incentive compensation to retain our named executive officers and to provide for a significant portion of their compensation to be at risk and linked directly with the appreciation of stockholder value. Long-term compensation has been generally provided through equity awards in the form of stock options with time and performance-based vesting conditions and under the terms and conditions of our Amended and Restated 2005 Stock Incentive Plan (the "2005 Plan"). We do not have a formal policy for when we grant stock options or other equity-based awards.

        The 2005 Plan was last amended and approved by our stockholders in November 2007 and is scheduled to expire in January 2016 unless terminated earlier by us. Effective with this offering, we will no longer make any new grants under the 2005 Plan and will instead issue equity compensation awards under our new 2009 Stock Incentive Plan, or the 2009 Plan, discussed below.

        The 2005 Plan is administered by the compensation committee, which has the authority, among other things, to:

•

determine eligibility to receive awards;

•

determine the types and number of shares of stock subject to awards;

•

determine the price and terms of awards and the acceleration or waiver of any vesting;

•

determine performance or forfeiture restrictions and other terms and conditions; and

•

construe and interpret the terms of the plan, award agreements, and other related documents.

        The 2005 Plan provides that we may grant awards to our employees, non-employee directors or consultants or those of our affiliates. We may award these individuals with either stock options and/or stock purchase rights.

        Stock options may be granted under the 2005 Plan, including incentive stock options, as defined under Section 422 of the Internal Revenue Code, as amended, or the Code, and nonqualified stock options. While we may grant incentive stock options only to employees, we may grant nonstatutory stock options or restricted stock purchase rights to any eligible participant. The option exercise price of all stock options granted under the 2005 Plan is determined by the compensation committee, except that any incentive stock option will not be granted at a price that is less than 100% of the fair market value of the stock on the date of grant. Stock options may be exercised as determined by the

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compensation committee, but in no event after the tenth anniversary of the date of grant. A stock purchase right award is the grant of shares of our common stock at a price determined by the compensation committee (including zero), that is nontransferable and is subject to a right of repurchase. No stock purchase rights have been awarded to any of the named executive officers.

        The named executive officers will not receive dividend equivalent payments on outstanding stock options granted under the 2005 Plan if we were to pay dividends on our common stock. The stock option grant agreements also generally provide for some or all of the unvested options to vest immediately when certain events occur, including a change in control of the company, the officer's death or disability and qualifying involuntary terminations of employment. The term "change in control" under the 2005 Plan is generally defined to include (i) the acquisition of at least 50% of our voting securities by any person other than an affiliate of ours or Warburg Pincus that holds our equity securities; or (ii) the sale or conveyance of all or substantially all of the company assets to a person who is not an affiliate of ours or Warburg Pincus. Unvested stock options are subject to forfeiture for non-qualifying terminations of employment.

        A total of 45,254,291 shares of common stock can be issued as stock options and stock purchase rights under the 2005 Plan and 4,954,000 shares remained available for issuance as of December 31, 2008.

        In 2008, the compensation committee granted no stock options under the 2005 Plan to the named executive officers. Details on previously granted awards under this 2005 Plan to the named executive officers are provided in the "Outstanding Equity Awards At Fiscal Year End—2008" table below.

        On December 11, 2008, our board of directors unanimously approved a form of the 2009 Plan to replace the 2005 Plan, subject to later allocating a specific number of shares to the 2009 Plan and obtaining stockholder approval of the 2009 Plan, such that, effective with this offering, we will no longer make any new grants under the 2005 Plan. Further details of the 2009 Plan are provided below under "2008 Compensation Decisions."

Employee Benefits and Perquisites

        We do not offer extensive or elaborate benefits to the named executive officers. We seek to compensate our named executive officers at levels that eliminate the need for perquisites and enable each individual officer to provide for his own needs. We offer other employee benefits to the named executive officers for the purpose of meeting current and future health and security needs for the officers and their families. These benefits, which are generally offered to all eligible employees, include medical, dental, and life insurance benefits; short-term disability pay; long-term disability insurance; flexible spending accounts for medical expense reimbursements; and a 401(k) retirement savings plan. The 401(k) retirement savings plan is a defined contribution plan established in accordance with Section 401(a) of the Code. Employees may make pre-tax contributions into the plan, expressed as a percentage of compensation, up to annual limits prescribed by the Internal Revenue Service and we may make matching contributions. To date, we have not provided any matching contributions under the 401(k) plan, although the compensation committee retains the ability to do this in the future.

Senior Management Benefit Plan

        We have a Senior Management Benefit Plan, referred to as the Benefit Plan, in which members of our senior management, including named executive officers, are eligible to participate.

        The Benefit Plan provides an annual benefit of up to $100,000 per participant (including the participant's eligible dependents) for unreimbursed medical expenses during a calendar year that are not covered by our major medical plan. The unreimbursed medical expenses covered under the Benefit Plan include deductibles, coinsurance amounts, special health equipment, annual physicals, dental care

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and vision care, among others. Additionally, the Benefit Plan provides worldwide medical assistance services, including locating the nearest medical facility, finding an attorney and making arrangements for emergency medical evacuation.

Change in Control and Severance

        In 2008, only the named executive officers that were a party to an employment agreement were eligible to have received contractually-provided severance benefits. These severance benefits were generally intended to match what is provided by our competitors and also intended to provide compensation while the officer searches for new employment after experiencing an involuntary termination of employment from us. We believe that providing severance protection for these named executive officers upon their involuntary termination of employment is an important retention tool that is necessary in the competitive marketplace for talented executives. We believe that the amounts of these payments and benefits and the periods of time during which they would be provided are fair and reasonable. We have not historically taken into account any amounts that may be received by a named executive officer following termination of employment when establishing current compensation levels. Our stock option grant agreements with each of the named executive officers also generally provide for some or all of the unvested options to vest immediately when certain events occur, including a change in control of the company, the officer's death or disability and qualifying involuntary terminations of employment.

Compensation of the Chief Executive Officer and Other Named Executive Officers

        The base salary, bonus and equity compensation for each of the named executive officers for 2008 is reported below under the "Summary Compensation Table." In addition, as four of the five named executive officers are a party to an employment agreement with us, additional information regarding their compensation is described below under the "Executive Employment Agreements" section.

        The Chief Executive Officer's compensation is greater than the other named executive officers' compensation because his responsibilities for the management and strategic direction of the company are significantly greater and he has substantial additional obligations as Chief Executive Officer. As our Chief Executive Officer and a board member, Mr. Clark has been our primary guiding force for several years. The difference between his and the other named executive officers' compensation is primarily derived from stock option awards that will only create value for Mr. Clark if our share value appreciates. The compensation committee believes it is desirable to provide a significant amount of at-risk, performance-based compensation to the Chief Executive Officer to continue to encourage and reward him for superior accomplishments.

        The compensation committee uses the same criteria to set compensation among each of the other named executive officers. The compensation committee's objective in setting their compensation is to provide them with an equitable level of compensation, taking into account (i) their performance, (ii) their responsibilities, (iii) their past compensation, (iv) their compensation relative to each other, (v) compensation levels at companies in the peer group and (vi) compensation levels of the next tier of management, as well as the Chief Executive Officer's recommendations. In general, the base salaries, bonus opportunities and long-term equity compensation awards of the other officers are substantially similar.

2008 Compensation Decisions

        In addition to setting 2008 salaries and the 2008 target annual bonuses for each of our named executive officers and granting additional stock options, in November 2007, the compensation committee decided to create further incentives for our management by awarding, in addition to other

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bonuses payable, a discretionary overachievement bonus for 2008. The compensation committee does not expect to award special overachievement bonuses to management in the future.

        In November 2008, the compensation committee approved increases in the named executive officers' salaries effective January 1, 2009 to reward them for their contributions to the many years of successful financial performance. In setting the 2009 salaries, the compensation committee also reviewed and considered the Mercer compensation survey report. The following table provides the salaries for each of the named executive officers for 2008 and 2009.

Name	FY08 Salary		FY09 Salary
Andrew S. Clark	$	325,000	$	375,000
Daniel J. Devine	$	220,000	$	250,000
Christopher L. Spohn	$	227,000	$	250,000
Rodney T. Sheng	$	227,000	$	250,000
Ross L. Woodard	$	216,000	$	230,000

        In December 2008, the board of directors adopted forms of the 2009 Stock Incentive Plan and Employee Stock Purchase Plan, subject to later allocating a specific number of shares to these plans and obtaining stockholder approval of these plans. Set forth below is information concerning these plans.

2009 Stock Incentive Plan

        Effective with this offering, the 2009 Plan will replace the 2005 Plan for all equity-based awards to the named executive officers. Awards granted under the 2009 Plan prior to stockholder approval of the 2009 Plan may not be exercised and no shares may be released to any participant until such stockholder approval is obtained. If our stockholders do not approve the 2009 Plan within twelve months of the board of directors' adoption of the 2009 Plan, then the 2009 Plan (and any outstanding awards granted) shall be null and void and any outstanding awards will be forfeited without consideration. The 2009 Plan will expire on the day before the tenth anniversary of the date that stockholders approve the 2009 Plan although the board of directors may earlier terminate the 2009 Plan.

        The board of directors adopted the 2009 Plan because it believed the new plan was appropriate to facilitate implementation of our future compensation programs as a public company. The 2009 Plan was approved by the board of directors with a view toward providing our compensation committee with maximum flexibility to structure an executive compensation program that provides a wider range of potential incentive awards to our named executive officers, and employees generally, on a going-forward basis. The compensation philosophy and objectives adopted by the compensation committee after we are a public company will likely determine the type and structure of awards granted by the compensation committee pursuant to the new 2009 Plan.

        The 2009 Plan will be administered by our compensation committee. The committee has the exclusive authority, among other things, to:

•

determine eligibility to receive awards;

•

determine the types and number of shares of stock subject to awards;

•

determine the price and terms of awards and the acceleration or waiver of any vesting;

•

determine performance or forfeiture restrictions and other terms and conditions; and

•

construe and interpret the terms of the plan, award agreements and other related documents.

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        Any of our employees, directors, non-employee directors, and consultants, as determined by the compensation committee, may be selected to participate in the 2009 Plan. We may award these individuals with one or more of the following types of awards and all awards will be evidenced by an executed agreement between us and the grantee:

•

stock options;

•

stock appreciation rights;

•

stock awards; or

•

stock units.

        Stock options may be granted under the 2009 Plan, including incentive stock options, as defined under Section 422 of the Code, and nonstatutory stock options. The exercise price of all stock options granted under the 2009 Plan will be determined by the compensation committee except that all options must have an exercise price that is not less than 100% of the fair market value of the underlying shares on the date of grant. The compensation committee may, in its discretion, subsequently reduce the exercise price of an option to the then-fair market value of the underlying shares as of the date of such price reduction. Stock options may be exercised as determined by the compensation committee, but in no event after the tenth anniversary of the date of grant.

        Stock appreciation rights entitle a participant to receive a payment equal in value to the difference between the fair market value of a share of stock on the date of exercise of the stock appreciation right over the exercise price of the stock appreciation rights. We may pay that amount in cash, in shares of our common stock, or in a combination of both. The exercise price of all stock appreciation rights granted under the 2009 Plan will be determined by the compensation committee except that all stock appreciation rights must have an exercise price that is not less than 100% of the fair market value of the underlying shares on the date of grant. The compensation committee may, in its discretion, subsequently reduce the exercise price of a stock appreciation right to the then-fair market value of the underlying shares as of the date of such price reduction.

        A stock award is the grant of shares of our common stock at a price determined by the compensation committee (including zero), and which may be subject to a substantial risk of forfeiture until specific conditions or goals are met. Conditions may be based on continuing employment or achieving performance goals. During the period of vesting, participants holding shares of restricted stock generally will have full voting and dividend rights with respect to such shares.

        A stock unit is a bookkeeping entry that represents the equivalent of a share of our common stock. A stock unit is similar to a restricted stock award except that participants holding stock units do not have any stockholder rights until the stock unit is settled with shares. Stock units represent an unfunded and unsecured obligation for us and a holder of a stock unit has no rights other than those of a general creditor.

        Subject to certain adjustments in the event of a change in capitalization or similar transaction, we may issue a maximum of          shares of our common stock under the 2009 Plan. Shares subject to awards that expire or are canceled will again become available for issuance under the 2009 Plan. To the extent that an award is intended to qualify as performance-based compensation under Section 162(m), then the maximum number of shares of common stock issuable in the form of each type of award under the 2009 Plan to any one participant during a fiscal year is shown in the table below (with the limits below doubled for a grantee's first year of employment).

Type of Award	Maximum Number of Shares
Stock Options
Stock Appreciation Rights
Stock Awards
Stock Units

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        The 2009 Plan provides that in the event there is a change in control and the applicable agreement of merger or reorganization provides for assumption or continuation of the awards, no acceleration of vesting shall occur. In the event that a change in control occurs with respect to us and there is no assumption or continuation of awards, all awards shall vest and become exercisable as of immediately before such change in control. The term "change in control" under the 2009 Plan is generally defined to include: (i) the acquisition of more than 50% of our voting securities by any person other than Warburg Pincus or its affiliates, (ii) the sale of all or substantially all of our assets or (iii) certain changes in the majority of the board members.

        We may not make any grants under the 2009 Plan after the tenth anniversary of the date that our stockholders approve the 2009 Plan. The board of directors may terminate, amend or modify the 2009 Plan at any time; however, stockholder approval will be obtained for any amendment to the extent necessary to comply with any applicable law, regulation or stock exchange rule.

Employee Stock Purchase Plan (ESPP)

        In December 2008, the board of directors approved a form of a new employee stock purchase plan (ESPP) that will become effective after the closing of this offering subject to the board of directors establishing a number of shares to be issuable under the ESPP and obtaining stockholder approval within twelve months of the board of directors' adoption of the ESPP. The ESPP is intended to comply with the requirements of Section 423 of the Code. Under the ESPP, our employees will have an opportunity to acquire our common shares at a specified discount from the fair market value as permitted by Section 423 of the Code. The compensation committee will administer the ESPP and the board of directors may amend or terminate the ESPP subject to obtaining any required stockholder approval.

        We will authorize and reserve a total of          shares of our common stock for issuance under the ESPP. We will make appropriate adjustments to the number of authorized shares and to outstanding purchase rights to prevent dilution or enlargement of participants' rights in the event of a stock split or other change in our capital structure. Shares subject to purchase rights which expire or are canceled will again become available for issuance under the ESPP.

        Our employees, and the employees of any future parent or subsidiary corporation or other affiliated entity, will be eligible to participate in the ESPP if they are customarily employed by us. As required by Section 423 of the Code, participants in the ESPP will generally all have the same rights and privileges. However we may exclude certain employees from being participants as permitted by Section 423 of the Code. In this regard, the compensation committee has determined that the named executive officers will not be participants in the ESPP when the ESPP commences its offering of shares to eligible employees. The compensation committee currently believes that the named executive officers should receive their equity compensation through the stock incentive plans which do not provide a discount from the option exercise price.

2009 Compensation Decisions

        In February 2009, our board of directors approved an Executive Severance Plan. Additionally, for the four named executive officers who were previously a party to an employment agreement, our compensation committee approved new employment agreements for such four executives to replace their prior employment agreements that had been effective during 2008. See "Executive Employment Agreements" section below. Mr. Woodard, the named executive officer who is not a party to an employment agreement, will participate in the Executive Severance Plan. Set forth below is information concerning the Executive Severance Plan.

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Executive Severance Plan

        We established the Executive Severance Plan to provide severance pay and other benefits to certain eligible management or highly compensated employees. Our board of directors may amend or terminate the Executive Severance Plan. However, the Executive Severance Plan cannot be amended to reduce benefits, except as may be required by law, without providing twelve months advance written notice to the covered employees.

        The compensation committee determines which employees are eligible to participate in the Executive Severance Plan. Only Mr. Woodard of the named executive officers is a participant in the Executive Severance Plan.

        If Mr. Woodard's employment is terminated by us without "cause" or by him for "good reason" (as defined in the Executive Severance Plan), he will be eligible to receive severance benefits under the Executive Severance Plan including (a) severance pay equal to six months of his base salary; and (b) Company-paid medical insurance premiums after termination for up to six months. If Mr. Woodard's employment is terminated by us without "cause" or by Mr. Woodard for "good reason" within twenty-four (24) months after a "change in control" (as defined in the Executive Severance Plan), then all of Mr. Woodard's unvested stock option awards will fully vest as of the termination date, in addition to receiving (a) and (b) described in the preceding sentence. We will condition the payment of such severance benefits upon Mr. Woodard providing us with a release of claims against us, our affiliates and related parties.

Executive Compensation

        Our executive officers are appointed by, and serve at the discretion of, our board of directors.

        The following tables provide information on compensation for the services of the named executive officers for 2008.

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Summary Compensation Table—2008

Name and Principal Position	Year		Salary ($)		Option Awards ($) (1)		Non-Equity Incentive Plan Compensation ($) (2)		All Other Compensation ($) (3)		Total ($)
Andrew S. Clark, Chief Executive Officer		2008 2007	$ $	325,000 227,936	$ $	35,989 44,901	$ $	875,500 227,000	$ $	13,412 5,255	$ $	1,249,901 505,092
Daniel J. Devine, Chief Financial Officer		2008 2007	$ $	220,000 205,817	$ $	13,230 11,771	$ $	325,000 154,500	$ $	4,236 5,588	$ $	562,466 377,676
Christopher L. Spohn, Senior Vice President/Chief Admissions Officer		2008 2007	$ $	227,000 200,403	$ $	13,230 11,771	$ $	323,500 170,000	$ $	11,785 5,528	$ $	575,515 387,702
Rodney T. Sheng, Senior Vice President/Chief Administrative Officer		2008 2007	$ $	227,000 200,403	$ $	13,230 11,771	$ $	323,500 100,000	$ $	6,358 3,156	$ $	570,088 315,330
Ross L. Woodard, Senior Vice President/Chief Marketing Officer		2008	$	216,000	$	26,406	$	291,000	$	12,690	$	546,096

(1)

Represents the expense recorded in our financial statements, excluding any assumed forfeitures, for the year ended December 31, 2008, according to SFAS 123R. Assumptions used to calculate these amounts are included in Note 12, "Stock-Based Compensation," to our consolidated financial statements for the year ended December 31, 2008, which are included elsewhere in this prospectus.

(2)

Represents the annual discretionary cash incentive bonus awards paid to each named executive officer as further described in the "Grants of Plan-Based Awards-2008" table. The below table shows the amounts earned for 2008 under the basic annual discretionary bonus opportunity and a special overachievement bonus, respectively.

2008	Annual Discretionary Bonus		Special Overachievement Bonus
Andrew S. Clark	$	227,500	$	648,000
Daniel J. Devine	$	110,000	$	215,000
Christopher L. Spohn	$	113,500	$	210,000
Rodney T. Sheng	$	113,500	$	210,000
Ross L. Woodard	$	108,000	$	183,000

(3)

Represents our payments for the named executive officer's medical and health insurance.

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        The following table provides information on cash-based performance awards granted in 2008 to the named executive officers.

Grants of Plan-Based Awards—2008

		Estimated future payouts under Non-equity incentive plan awards
Name	Grant date	Threshold ($)		Target ($)(1)		Maximum ($)
Andrew S. Clark	(2)	$	227,500	$	227,500	$	875,500
Daniel J. Devine	(2)	$	110,000	$	110,000	$	325,000
Christopher L. Spohn	(2) (3)	$ $	113,500 170,250	$ $	113,500 170,250	$ $	323,500 340,500
Rodney T. Sheng	(2)	$	113,500	$	113,500	$	323,500
Ross L. Woodard	(4)	$	108,000	$	108,000	$	291,000

(1)

The target amount for the annual discretionary cash incentive bonus award set for each of the named executive officers for 2008 by the compensation committee is shown in the table below. Such target bonus amount is determined as a percentage of annual salary with Mr. Clark's percentage set at 70% of salary and the other named executive officers set at 50% of salary.

(2)

Each of the named executive officers was eligible to earn a fiscal year performance-based cash bonus pursuant to his employment agreement as discussed below. The actual annual bonus payment could have been less than or greater than the target (specified in Note 1 to this table above) depending upon the degree of attainment of company performance criteria, which were weighted as to 65% for achievement of applicable revenue targets and as to 35% of applicable EBITDA targets. For the fiscal 2008 annual cash bonus, these targets were a fiscal 2008 revenue target of $165.0 million and a fiscal 2008 EBITDA of $15.8 million. In addition, the named executive officers were eligible to earn a special overachievement bonus for fiscal 2008. The overachievement bonus amount was determined by having a discretionary bonus pool of $1.0 million for achievement of EBITDA of 150% of the target and an additional discretionary bonus pool equal to $10,000 for every percentage point improvement of EBITDA above 150% of the target prior to the adjustment to account for the expense related to Mr. Craig's stock award expense of $1.6 million. The total distribution bonus pool was $1.9 million. The compensation committee, after considering recommendations from the Chief Executive Officer, then allocated portions of the bonus pool to the named executive officers. The amount of actual bonuses that were paid to the named executive officers for 2008 are reported in Note 2 to the Summary Compensation Table.

(3)

As described in the Executive Employment Agreements section below, Mr. Spohn was eligible for an additional bonus based on attainment of annual revenue. No portion of this additional bonus opportunity was earned for 2008.

(4)

Mr. Woodard was eligible to earn a fiscal year performance-based cash bonus. There was no specific threshold or maximum and the actual fiscal year performance-based cash payment could have been less than or greater than the target (specified in Note 1 to this table above) depending upon the degree of attainment of company performance criteria, which were weighted the same as for the other four named executive officers described in Note 2 above. Additionally, Mr. Woodard was also eligible to earn a special overachievement bonus for 2008. The determination and allocation of the special overachievement bonus amount was the same as that for the other four named executive officers described in Note 2 above. The amount of the actual bonuses paid to Mr. Woodard for 2008 is reported in Note 2 to the Summary Compensation Table.

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Executive Employment Agreements

        We had previously entered into employment agreements with four of the five named executive officers which were effective during 2008. In February 2009, we adopted new employment agreements to replace the prior employment agreements. Each of these employment agreements are on substantially similar terms and conditions with certain differences reflected in the two tables below.

        Mr. Woodard was not a party to an employment agreement during 2008 and he is not a party to an employment agreement at this point in time. Mr. Woodard will instead be subject to, and may receive benefits from, our Executive Severance Plan described above.

        Andrew S. Clark, Chief Executive Officer.    We entered into an employment agreement with Mr. Clark in November 2003, which was later amended in January 2006. In February 2009, we adopted a new employment agreement to replace the prior employment agreement. The new agreement provides that Mr. Clark will serve as Chief Executive Officer. Additionally, Mr. Clark will serve as a member of our board of directors during the time that our shares are not publicly traded and we have agreed to nominate him for election to our board at each annual meeting of stockholders following this offering. The term of the new agreement will extend through January 1, 2013.

        Daniel J. Devine, Chief Financial Officer.    We entered into an employment agreement with Mr. Devine in December 2003, which was later amended in January 2006. In February 2009, we adopted a new employment agreement to replace the prior employment agreement. The new agreement provides that Mr. Devine will serve as Chief Financial Officer. The term of the new agreement will extend through January 1, 2011.

        Christopher L. Spohn, Senior Vice President/Chief Admissions Officer.    We entered into an employment agreement with Mr. Spohn in December 2003, which was later amended in January 2006. In February 2009, we adopted a new employment agreement to replace the prior employment agreement. The new agreement provides that Mr. Spohn will serve as Senior Vice President/Chief Admissions Officer. The term of the new agreement will extend through January 1, 2011.

        Rodney T. Sheng, Senior Vice President/Chief Administrative Officer.    We entered into an employment agreement with Mr. Sheng in December 2003, which was later amended in January 2006. In February 2009, we adopted a new employment agreement to replace the prior employment agreement. The new agreement provides that Mr. Sheng will serve as Senior Vice President/Chief Administrative Officer. The term of the new agreement will extend through January 1, 2011.

        Each of the employment agreements that were effective during 2008 provided for time and performance-based stock options awards to the named executive officer in connection with their hire. Additionally, each of the employment agreements that were effective during 2008 provided that the named executive officer is entitled to participate in health, insurance, retirement and other benefits which are provided to our senior executives.

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        The following table highlights certain items contained in the employment agreements that were effective during 2008.

	Initial Term of Employment Agreement	Base Salary (1); Annual Target Bonus(2)	Acceleration of Vesting of Stock Options upon Death or "Disability"	Acceleration of Vesting of Stock Options in connection with a Change in Control	Severance Payments upon termination without "Cause"	Other
Andrew S. Clark	4 years	$200,000; 50%	(3)	(4)	12 months(5)	(6)
Daniel J. Devine	2 years	$185,000; 50%	(3)	(4)	6 months (5)	(7)
Christopher L. Spohn	2 years	$175,000; 50%	(3)	(4)	6 months (5)	(7)
Rodney T. Sheng	2 years	$175,000; 25%	(3)	(4)	5 months (5)	(7)

(1)

Each employment agreement provided that the annual base salary shall not be less than the amount listed in this column.

(2)

Each employment agreement provided that the named executive officer will be eligible for an annual discretionary incentive bonus based on attainment of company performance criteria. Each employment agreement provided for a target bonus amount as a percentage of annual salary with such target percentage reflected in this column. The actual bonus paid may be more or less than the target amount. For each named executive officer, the employment agreement provided that the annual bonus will based on achievement of annual revenue and EBITDA goals with revenue receiving 65% of the weighting and EBITDA receiving the remaining 35%. In addition to being a participant in our regular annual discretionary bonus plan, Mr. Spohn's agreement provided that he shall be eligible for an additional annual bonus which had a target bonus amount of 75% of his annual salary although the actual bonus paid may be less or more than the target amount up to a maximum of two times the target amount. Mr. Spohn's additional bonus opportunity was based on attaining annual revenue in excess of the budgeted target.

(3)

If the named executive officer's employment was terminated due to his death or disability then (i) his time-based stock options would become additionally vested as if his termination date had occurred twelve months later and (ii) the portion of his performance-based stock options that were scheduled to vest in the year of his termination would become additionally vested provided that the applicable performance criteria was satisfied for such year of termination of employment.

(4)

In the event of a change of control of the company, the named executive officer's exit options would vest if Warburg Pincus received proceeds from such transaction that were equal to or greater than four times their aggregate purchase price paid for our equity securities. If the named executive officer is subject to an involuntary termination within twelve (12) months after a change in control, then (i) the named executive officer's time-vested options shall fully vest and become exercisable on the date of the involuntary termination.

(5)

If we terminated the named executive officer's employment without cause (and in the case of Mr. Clark, if he is not re-elected to the board by stockholders), then the named executive officer would have received (a) continuation of base salary for the number of months reflected in this column and (b) company-paid COBRA health insurance benefits after termination for up to the number of months reflected in this column, as long as the named executive officer is eligible for and elects to continue his COBRA health insurance following the date of termination and (c) an acceleration of the vesting of his time-based options as if service terminated twelve months later. We were allowed to condition the payment of the severance benefits upon the named executive

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officer providing a release of claims against us, our affiliates and related parties. Additionally, Mr. Clark's employment agreement stated that he would have no obligation to mitigate any post-employment amounts that are owed to him nor will such amounts be subject to offset.

(6)

We were obligated to provide Mr. Clark with life insurance with a face amount of at least twice his annual base salary.

(7)

Each of the named executive officers were eligible to receive relocation expense reimbursements in connection with their hire. Mr. Sheng was provided with a reimbursement in connection with the early termination of his employment from his previous employer.

        The following table highlights certain items contained in the new employment agreements that were adopted in February 2009. Additionally, each of the new employment agreements provide that the named executive officer is entitled to participate in health, insurance, retirement and other benefits which are provided to our senior executives. The term of each of the new employment agreements will automatically extend for an additional year upon the end of the initial term and thereafter on each anniversary unless either party timely gives notice that it does want to so extend the agreement.

	Initial Term of New Employment Agreement	Base Salary(1); Annual Target Bonus(2)	Severance Payments upon Death	Severance Payments upon "Disability"	Severance Payments upon termination within the Change in Control Period	Severance Payments upon termination without "Cause" or "Good Reason"	Other
Andrew S. Clark	4 years	$375,000; 100%	(3)	(4)	(5)	(7)	(9)(10)
Daniel J. Devine	2 years	$250,000; 50%	(3)	(4)	(6)	(8)	(10)
Christopher L. Spohn	2 years	$250,000; 50%	(3)	(4)	(6)	(8)	(10)
Rodney T. Sheng	2 years	$250,000; 60%	(3)	(4)	(6)	(8)	(10)

(1)

Each employment agreement provides that the annual base salary shall be the amount listed in this column, which may be periodically reviewed and increased by our board of directors in its discretion.

(2)

Each employment agreement provides that the named executive officer will be eligible for an annual discretionary incentive bonus based on attainment of performance criteria. Each employment agreement provides for a target bonus amount as a percentage of annual salary with such target percentage reflected in this column. The actual bonus paid may be more or less than the target amount. In addition, upon any termination of Mr. Clark's employment other than for Cause, Mr. Clark will be eligible to be paid a pro-rata bonus for the fiscal year of termination based on the percentage of time he was employed in such fiscal year.

(3)

If a named executive officer's employment is terminated due to his death then (i) his outstanding unvested time-based stock options would become additionally vested as if his termination date had occurred twelve months later; (ii) twenty-five percent (25%) of his then outstanding unvested performance-based stock options would become additionally vested; (iii) his estate would receive an additional six (6) months base salary; and (iv) his dependents will receive an additional six (6) months of medical benefits. We will condition the payment of the severance benefits upon the named executive officer providing a release of claims against us, our affiliates and related parties.

(4)

If a named executive officer's employment is terminated due to his "disability" (as defined in the employment agreement) then (i) his outstanding unvested time-based stock options would become

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additionally vested as if his termination date had occurred twelve months later, and (ii) twenty-five percent (25%) of his then outstanding unvested performance based stock options would become additionally vested. We will condition the payment of the severance benefits upon the named executive officer providing a release of claims against us, our affiliates and related parties.

(5)

If Mr. Clark's employment is terminated by us without "cause" or by Mr. Clark for "good reason" within twenty-four (24) months after a "change in control," as defined in the employment agreement, then Mr. Clark will receive: (a) cash payments equal in the aggregate to twenty-four months of his base salary; (b) cash payments equal to two times Mr. Clark's annual target bonus, irrespective of achievement of performance goals; (c) company-paid medical insurance premiums after termination for up to 24 months; (d) all unvested stock option awards will fully vest as of the termination date; and (e) his annual bonus for the completed fiscal year prior to the year of termination, if not already paid. We will condition the payment of the severance benefits upon Mr. Clark providing a release of claims against us, our affiliates and related parties.

(6)

If the named executive officer's employment is terminated by us without "cause" or by the named executive officer for "good reason" within twenty-four (24) months after a "change in control," as defined in the employment agreement, then the named executive officer will receive: (a) cash payments equal in the aggregate to twelve months of his base salary; (b) cash payments equal to one times the named executive officer's annual target bonus, irrespective of achievement of performance goals; (c) company-paid medical insurance premiums after termination for up to 12 months; (d) all unvested stock option awards will fully vest as of the termination date; and (e) his annual bonus for the completed fiscal year prior to the year of termination, if not already paid. We will condition the payment of the severance benefits upon the named executive officer providing a release of claims against us, our affiliates and related parties.

(7)

If Mr. Clark's employment is terminated by us without "cause" or by Mr. Clark for "good reason," as defined in the employment agreement, then Mr. Clark will receive (a) cash payments equal in the aggregate to twenty-four months of his base salary; (b) cash payments equal to two times Mr. Clark's annual target bonus, irrespective of achievement of performance goals; (c) company-paid medical and life insurance premiums after termination for up to 24 months; (d) the vesting of time-based options will accelerate as if service had terminated twelve months later; and (e) his annual bonus for the completed fiscal year prior to the year of termination, if not already paid. We will condition the payment of the severance benefits upon Mr. Clark providing a release of claims against us, our affiliates and related parties.

(8)

If the named executive officer's employment is terminated by us without "cause" or by the named executive officer for "good reason," as defined in the employment agreement, then the named executive officer will receive (a) cash payments equal in the aggregate to twelve months of his base salary; (b) cash payments equal to one times the named executive officer's annual target bonus, irrespective of achievement of performance goals; (c) company-paid medical and life insurance premiums after termination for up to 12 months; (d) the vesting of time-based options will accelerate as if service had terminated twelve months later; and (e) his annual bonus for the completed fiscal year prior to the year of termination, if not already paid. We will condition the payment of the severance benefits upon the named executive officer providing a release of claims against us, our affiliates and related parties.

(9)

We are obligated to provide Mr. Clark with life insurance with a face amount of at least twice his annual base salary. In addition, Mr. Clark is eligible to receive up to $15,000 in legal fees he incurs in connection with the execution of this new employment agreement.

(10)

In the event the named executive officer has received payments that are subject to golden parachute excise taxes, then such payments will be reduced to a level that would not subject the named executive officer to golden parachute excise taxes unless, after comparing the value of the payments on an after-tax basis (including the golden parachute excise tax), the named executive

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officer would be in a better economic position by receiving all payments. In addition, upon the consummation of a change of control (as defined in the employment agreements), fifty percent (50%) of the named executive officer's unvested time-based stock options and performance-based stock options will become additionally vested, and the remaining unvested portion of the named executive officer's stock options will continue to vest pursuant to the original vesting schedule but at fifty percent (50%) of the original rate of vesting over the vesting period.

Equity Awards

        The following table shows the number of our common shares covered by stock options held by the named executive officers as of December 31, 2008. No named executive officer held any of our unvested restricted common shares or restricted stock units as of December 31, 2008.

Outstanding Equity Awards at Fiscal Year End—2008

	Option awards
Name	Number of securities underlying unexercised options (#) exercisable		Number of securities underlying unexercised options (#) unexercisable		Option exercise price ($)		Option expiration date
Andrew S. Clark		3,889,844 3,889,844 0 87,750 81,250 0		0 0 5,636,640 237,250 243,750 650,000	$ $ $ $ $ $	0.07 0.07 0.07 0.13 0.13 0.13		4/1/2014 4/1/2014 4/1/2014 11/27/2017 11/27/2017 11/27/2017	(1)(4) (1)(5) (1)(7) (2)(4) (2)(6) (2)(7)
Daniel J. Devine		1,005,994 1,005,994 0 33,750 31,250 0		0 0 268,411 91,250 93,750 375,000	$ $ $ $ $ $	0.07 0.07 0.07 0.13 0.13 0.13		4/1/2014 4/1/2014 4/1/2014 11/27/2017 11/27/2017 11/27/2017	(1)(4) (1)(5) (1)(7) (2)(4) (2)(6) (2)(7)
Christopher L. Spohn		1,005,994 1,005,994 0 33,750 31,250 0		0 0 671,029 91,250 93,750 375,000	$ $ $ $ $ $	0.07 0.07 0.07 0.13 0.13 0.13		4/1/2014 4/1/2014 4/1/2014 11/27/2017 11/27/2017 11/27/2017	(1)(4) (1)(5) (1)(7) (2)(4) (2)(6) (2)(7)
Rodney T. Sheng		1,005,994 1,005,994 0 33,750 31,250 0		0 0 671,029 91,250 93,750 375,000	$ $ $ $ $ $	0.07 0.07 0.07 0.13 0.13 0.13		4/1/2014 4/1/2014 4/1/2014 11/27/2017 11/27/2017 11/27/2017	(1)(4) (1)(5) (1)(7) (2)(4) (2)(6) (2)(7)
Ross L. Woodard		555,309 804,795 0 57,375 53,125 0		249,486 0 536,823 155,125 159,375 375,000	$ $ $ $ $ $	0.07 0.07 0.07 0.13 0.13 0.13		2/15/2016 2/15/2016 2/15/2016 11/27/2017 11/27/2017 11/27/2017	(3)(4) (3)(5) (3)(7) (2)(4) (2)(6) (2)(7)

(1)

These options were granted under the 2005 Plan on February 15, 2006, with an exercise price equal to the fair market value of one of our common shares on the date of grant. The vesting commencement date was April 1, 2004.

(2)

These options were granted under the 2005 Plan on November 27, 2007, with an exercise price equal to the fair market value of one of our common shares on the date of grant. The vesting commencement date was November 27, 2007.

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(3)

These options were granted under the 2005 Plan on February 15, 2006, with an exercise price equal to the fair market value of one of our common shares on the date of grant. The vesting commencement date was February 15, 2006.

(4)

These time-based options vest as follows: (i) 25% of the option vests on the first anniversary of the vesting commencement date, (ii) an additional 2% of the option vests on each monthly anniversary of the vesting commencement date for the thirty-three months following the first anniversary of the vesting commencement date and (iii) an additional 3% of the option vests on each of the 46th, 47th and 48th monthly anniversaries of the vesting commencement date. In addition, upon termination of employment by us without cause (as defined in the 2005 Plan) or due to termination of employment because of death or disability, the vesting of the option will accelerate as if service had terminated twelve months later in time. In addition, upon a "change in control," as defined in the stock option agreement us, fifty percent (50%) of the named executive officer's unvested time-based stock options will become additionally vested and the remaining unvested portion of the named executive officer's stock options will continue to vest pursuant to the original vesting schedule but at fifty percent (50%) of the original rate of vesting over the vesting period. Further, the outstanding unvested portion of the option will become fully vested upon an involuntary termination of the named executive officer's employment within the twelve (12) month period following a "change in control," as defined in the stock option agreement. Further, in the event of a corporate reorganization, merger, liquidation, spinoff, or agreement for the sale of substantially all of our assets and property in which the named executive officer's options are not substituted or assumed, then the named executive officer's time-based options shall fully vest and become exercisable on the date that immediately proceeds the effective date of such event.

(5)

These performance-based options vest as follows: (i) beginning with fiscal year 2005 and ending with fiscal year 2008, 25% of the option vests for each fiscal year in which our performance targets (as defined in the stock option award) based on our annual revenue and annual EBITDA were achieved, (ii) for any fiscal year in which the annual performance targets were not achieved, such portion will vest if in any subsequent fiscal year the cumulative revenue and EBITDA targets were achieved (the cumulative targets are defined in the stock option award). In addition, upon termination of the named executive officer's employment because of death or disability, the portion of the option eligible to vest in the year of termination will vest to the extent the performance targets were achieved in the year in which termination occurs. In addition, upon a "change in control," as defined in the stock option agreement us, fifty percent (50%) of the named executive officer's performance-based stock options will become additionally vested and the remaining unvested portion of the named executive officer's stock options will continue to vest pursuant to the original vesting schedule but at fifty percent (50%) of the original rate of vesting over the vesting period. Further, in the event of a corporate reorganization, merger, liquidation, spinoff, or agreement for the sale of substantially all of our assets and property in which the named executive officer's options are not substituted or assumed, then the named executive officer's the performance-based options will vest to the extent that the applicable performance targets have been satisfied. The targets for fiscal 2005 through fiscal 2008 were as shown in the below table:

	Fiscal Year 2005	Fiscal Year 2006	Fiscal Year 2007	Fiscal Year 2008
Annual EBITDA	($7,430,000) or greater	($238,000) or greater	$3,920,000	$5,880,000
Annual Revenue	$7,871,000	$21,808,000	$39,879,000	$49,000,000
Cumulative EBITDA	($7,430,000) or greater	($7,668,000) or greater	($3,748,000)	$2,132,000
Cumulative Revenue	$7,871,000	$29,679,000	$69,558,000	$118,558,000

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(6)

These performance-based options vest as follows: (i) beginning with fiscal year 2008 (shown in the following sentence) and ending with fiscal year 2011, 25% of the option vests for each fiscal year in which our performance targets (defined in the stock option award) based on our annual revenue and annual EBITDA were achieved, (ii) for any fiscal year in which the annual performance targets were not achieved, such portion will vest if in any subsequent fiscal year the cumulative revenue and EBITDA targets were achieved (the cumulative targets are defined in the stock option award). The target for fiscal year 2008 were: Annual EBITDA: $5,880,000; Annual Revenue: $49,000,000; Cumulative EBITDA: $5,880,000; and Cumulative Revenue: $49,000,000. The targets for fiscal year 2009 through fiscal year 2011 require significant yearly growth in revenue and EBITDA and will be challenging objectives for us to achieve. In addition, upon termination of the named executive officer's employment because of death or disability, the portion of the option eligible to vest in the year of termination will vest to the extent the performance targets were achieved in the year in which termination occurs. Further, in the event of a corporate reorganization, merger, liquidation, spinoff, or agreement for the sale of substantially all of our assets and property in which the named executive officer's options are not substituted or assumed, then the named executive officer's the performance-based options will vest to the extent that the applicable performance targets have been satisfied.

(7)

These exit options vest only upon (i) a change in control of the company or (ii) a "liquidity event," which is defined as a sale by Warburg Pincus of its equity securities of the company and which does not constitute a change in control (as defined in the option agreement) and (iii) the named executive officer's continued service through the date of the change in control or liquidity event. In order for the exit option to vest, Warburg Pincus must receive proceeds from such change in control or liquidity event that are equal to or greater than four times its aggregate purchase price paid for our equity securities as of the date of the transaction. The portion of the exit options that vest upon a liquidity event are determined by multiplying the number of shares underlying the exit option by the relative percentage of our equity securities that Warburg Pincus sells in connection with the liquidity event.

        No stock options were exercised by the named executive officers in 2008 and none of the named executive officers had any restricted stock that vested in 2008.

Potential Payments Upon Termination or Change-in-Control

Payments made upon resignation or termination for cause

        If a named executive officer resigns his employment or is terminated by us for cause, the named executive officer will be entitled only to any accrued and unpaid salary and vested benefits and no severance.

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Payments made upon involuntary termination by company without cause or by employee for good reason or due to death, disability, or change in control of company

        If a named executive officer's employment is involuntarily terminated either without cause by us (or by the employee due to a specified good reason), or due to death or disability, the named executive officer will generally be entitled to continuation of base salary and/or health benefits for a specified number of months and/or accelerated vesting of at least a portion of his unvested stock options as described above in the "Executive Employment Agreements" section. If there is a change in control of the company, then the exit options may receive accelerated vesting depending on whether the applicable performance conditions are attained as described above in the "Outstanding Equity Awards at Fiscal Year End-2008" table.

        For purposes of these events, the following definitions are generally applicable:

"Change in Control," as defined in the stock option agreements, means: (i) an acquisition of at least 50% of our voting securities by any person other than Warburg Pincus or its affiliates; or (ii) a transfer of all or substantially all of our total assets to a person who is not an affiliate of ours or Warburg Pincus.

"Cause," as defined in the employment agreements, generally means any of the following acts committed by the executive:

•

failure, neglect or refusal to perform his duties under his employment agreement;

•

willful or intentional act(s) that has the effect of materially injuring our reputation or business;

•

public or consistent drunkenness or illegal use of narcotics which is or could be materially injurious to our reputation or business;

•

arrest for the commission of a felony or a crime involving moral turpitude;

•

commission of an act of fraud, embezzlement or other material dishonesty, or misappropriation of our funds or property;

•

conviction of, or plea of guilty or nolo contendere to, any crime involving monies, property or regulations application to our business;

•

material breach of a fiduciary duty to us or any provision of the confidentiality agreement; or

•

aid to one of our competitors.

"Disability," as defined in the employment agreements, means any physical or mental disability or infirmity that prevents the performance of the named executive officer's duties for a period of either (i) ninety consecutive days or (ii) one hundred twenty non-consecutive days during any twelve month period.

"Involuntary Termination by Employee for good reason," as defined in the option agreements, means any of the following occurring without the employee's consent: (i) a material adverse change in the employee's title or responsibilities, (ii) a material reduction in salary or bonus opportunity or (iii) notice of relocation of workplace by more than 50 miles.

Hypothetical potential payment estimates

        The table below provides estimates for compensation payable to each named executive officer under hypothetical termination of employment and change in control scenarios under our compensatory arrangements other than nondiscriminatory arrangements generally available to salaried employees. The

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amounts shown in the table are estimates and assume the hypothetical involuntary termination, death or disability or change in control occurred on December 31, 2008, applying the provisions of the agreements that were in effect as of such date. Due to the number of factors and assumptions that can affect the nature and amount of any benefits provided upon the events discussed below, any amounts paid or distributed upon an actual event may differ.

        For purposes of the hypothetical payment estimates shown in the below table, some of the important assumptions were:

•

Officer's base salary for fiscal year 2008;

•

Cash out of all stock options (whose vesting is accelerated) at their then intrinsic value;

•

No acceleration of performance-based options applicable because fiscal 2008 performance targets are assumed to have already been achieved as of December 31, 2008;

•

Cash severance and health insurance continuation as provided under the officer's employment agreement;

•

Value for payment of health insurance continuation premiums, including dental, for 12 months assumed to be $18,000;

•

Change in control of the company occurring on December 31, 2008;

•

Termination of officer's employment occurring on December 31, 2008;

•

December 31, 2008 share price of $3.16; and

•

The officers' employment agreements in effect as of December 31, 2008 were utilized.

	Change in Control of Company		Involuntary Termination by Company without Cause		Involuntary Termination by Company without Cause within 12 Months of a Change in Control of Company		Involuntary Termination by Employee for good reason within 12 Months of a Change in Control of Company		Death or Disability
Andrew S. Clark
Base Salary Continuation	$	0	$	325,000	$	325,000	$	0	$	0
Continuation of Health Insurance Benefits	$	0	$	18,000	$	18,000	$	0	$	0
Acceleration of Vesting of Time-Based Stock Options	$	0	$	236,340	$	718,868	$	718,868	$	236,340
Acceleration of Vesting of Performance-Based Stock Options	$	0	$	0	$	0	$	0	$	0
Acceleration of Vesting of Exit Stock Options(1)	$	19,386,718	$	0	$	19,386,718	$	19,386,718	$	0
Total	$	19,386,718	$	579,340	$	20,448,586	$	20,105,586	$	236,340
Daniel J. Devine
Base Salary Continuation	$	0	$	110,000	$	110,000	$	0	$	0
Continuation of Health Insurance Benefits	$	0	$	9,000	$	9,000	$	0	$	0
Acceleration of Vesting of Time-Based Stock Options	$	0	$	90,900	$	276,488	$	276,488	$	90,900
Acceleration of Vesting of Performance-Based Stock Options	$	0	$	0	$	0	$	0	$	0
Acceleration of Vesting of Exit Stock Options(1)	$	1,965,640	$	0	$	1,965,640	$	1,965,640	$	0
Total	$	1,965,640	$	209,900	$	2,361,128	$	2,242,128	$	90,900

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	Change in Control of Company		Involuntary Termination by Company without Cause		Involuntary Termination by Company without Cause within 12 Months of a Change in Control of Company		Involuntary Termination by Employee for good reason within 12 Months of a Change in Control of Company		Death or Disability
Christopher L. Spohn
Base Salary Continuation	$	0	$	113,500	$	113,500	$	0	$	0
Continuation of Health Insurance Benefits	$	0	$	9,000	$	9,000	$	0	$	0
Acceleration of Vesting of Time-Based Stock Options	$	0	$	90,900	$	276,488	$	276,488	$	90,900
Acceleration of Vesting of Performance-Based Stock Options	$	0	$	0	$	0	$	0	$	0
Acceleration of Vesting of Exit Stock Options(1)	$	3,209,730	$	0	$	3,209,730	$	3,209,730	$	0
Total	$	3,209,730	$	213,400	$	3,608,718	$	3,486,218	$	90,900
Rodney T. Sheng
Base Salary Continuation	$	0	$	94,583	$	94,583	$	0	$	0
Continuation of Health Insurance Benefits	$	0	$	7,500	$	7,500	$	0	$	0
Acceleration of Vesting of Time-Based Stock Options	$	0	$	90,900	$	276,488	$	276,488	$	90,900
Acceleration of Vesting of Performance-Based Stock Options	$	0	$	0	$	0	$	0	$	0
Acceleration of Vesting of Exit Stock Options(1)	$	3,209,730	$	0	$	3,209,730	$	3,209,730	$	0
Total	$	3,209,730	$	192,983	$	3,588,301	$	3,486,218	$	90,900
Ross L. Woodard
Base Salary Continuation	$	0	$	0	$	0	$	0	$	0
Continuation of Health Insurance Benefits	$	0	$	0	$	0	$	0	$	0
Acceleration of Vesting of Time-Based Stock Options	$	0	$	776,234	$	1,240,940	$	1,240,940	$	776,234
Acceleration of Vesting of Performance-Based Stock Options	$	0	$	0	$	0	$	0	$	0
Acceleration of Vesting of Exit Stock Options(1)	$	2,795,033	$	0	$	2,795,033	$	2,795,033	$	0
Total	$	2,795,033	$	776,234	$	4,035,973	$	4,035,973	$	776,234

(1)

Based on an assumed change in control on December 31, 2008 with a price of $3.16 per share, Warburg Pincus would have received proceeds from such change in control that are equal to or greater than four times the aggregate purchase price it paid for our equity securities and the named executive officers' exit options would therefore have fully vested.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        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. This description does not cover (i) compensation arising from our executive officers' employment relationships or transactions or compensation to directors (including consulting fees) which are described elsewhere in this prospectus under "Management—Compensation of Directors" and "Compensation Discussion and Analysis" or (ii) compensation approved by our compensation committee that is earned by executive officers that are not named executive officers.

        It will be our policy upon the closing of this offering that all related party transactions must be reviewed and approved by our audit committee. When evaluating such transactions, our audit committee focuses on whether the terms of such transactions are at least as favorable to us as terms we would receive on an arm's-length basis from an unaffiliated third party. The policies and procedures for approving related party transactions will be set forth in our audit committee charter.

Amended and Restated Registration Rights Agreement

        We are a party to an amended and restated registration rights agreement with Warburg Pincus, Andrew S. Clark, Daniel J. Devine, Christopher L. Spohn, Jane McAuliffe, Rodney T. Sheng, Ross 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 conversion of our preferred stock, shares of common stock issuable upon the exercise of various warrants and shares of common stock issuable upon the exercise of certain employee stock options). For additional information, see "Description of Capital Stock—Registration Rights."

Indemnification Agreements

        Our current certificate of incorporation and bylaws, as well as the certificate of incorporation and bylaws that will be in effect upon the closing of this offering, 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 that require us to indemnify such persons, to the fullest extent authorized or permitted under Delaware law, against any and all costs and expenses (including attorneys', witness or other professional fees) actually and reasonably incurred by such persons in connection with the investigation, defense, settlement or appeal of any action, hearing, suit or other proceeding, whether pending, threatened or completed, to which any such person may be made a witness or a party by reason of (1) the fact that such person is or was a director, officer, employee or agent of our company or its subsidiaries, whether serving in such capacity or otherwise acting at the request of our company or its subsidiaries and (2) anything done or not done, or alleged to have been done or not done, by such person in that capacity. The indemnification agreements also require us to advance expenses incurred by directors and executive officers within 20 days after receipt of a written request, provided that such persons undertake to repay such amounts if it is ultimately determined that they are not entitled to indemnification. Additionally, the agreements set forth certain procedures that will apply in the event of a claim for indemnification thereunder, including a presumption that directors and executive officers are entitled to indemnification under the agreements and that we have the burden of proof to overcome that presumption in reaching any contrary determination. We are not required to provide indemnification under the agreements for certain matters, including: (1) indemnification beyond that permitted by Delaware law; (2) indemnification for liabilities for which the executive officer or director is reimbursed pursuant to such insurance as may exist for such person's benefit; (3) indemnification related to disgorgement of profits under Section 16(b) of the Securities Exchange

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Act of 1934; (4) in connection with certain proceedings initiated against us by the director or executive officer; or (5) indemnification for settlements the director or executive officer enters into without our written consent. The indemnification agreements require us to maintain directors' and executive officers' insurance in full force and effect while any director or executive officer continues to serve in such capacity and so long as any such person may incur costs and expenses related to indemnified legal proceedings.

Stockholders Agreement and Nominating Agreement

        In December 2003, we entered into a stockholders agreement with Warburg Pincus, Andrew S. Clark and all other holders of our common stock at that time. We subsequently added additional parties as they became holders of our common stock. The stockholders agreement, as amended, contains agreements among the parties with respect to the election of our directors and restrictions on the issuance or transfer of shares, including certain corporate governance provisions. Each of our current directors was appointed pursuant to the terms of the stockholders agreement. Upon the closing of this offering, the stockholders agreement will be terminated.

        In December 2008, the board of directors approved a nominating agreement to be entered into between us and 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 after the closing of this offering, 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.

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 June 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 is secured by 75,000 shares of Series A Convertible Preferred Stock held by Mr. Clark. Mr. Clark intends to repay the loan by March 31, 2009. While Warburg Pincus does not anticipate difficulty collecting from the executive and enforcing the full-recourse nature of this loan, Warburg Pincus is willing to pursue every available avenue to recover all amounts due under the terms of the loan should the executive not repay the loan.

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PRINCIPAL AND SELLING STOCKHOLDERS

        The following table sets forth information regarding the beneficial ownership of our common stock as of November 1, 2008, and as adjusted to reflect the sale of common stock being offered in this offering, for:

•

each person, or group of affiliated persons, known to us to own beneficially 5% or more of our outstanding common stock;

•

each of our directors;

•

each of our named executive officers;

•

all of our directors and executive officers as a group; and

•

each selling stockholder.

        The information in the following table has been presented in accordance with SEC rules. Under these rules, beneficial ownership of a class of capital stock includes any shares of such class as to which a person, directly or indirectly, has or shares voting power or investment power and also any shares as to which a person has the right to acquire such voting or investment power within 60 days through the exercise of any options, warrants or other rights. Shares subject to options, warrants or other rights are not deemed outstanding for the purpose of computing the percentage ownership of any other person. Except as indicated below and under applicable community property laws, we believe that the beneficial owners identified in this table have sole voting and investment power with respect to all shares shown.

        For the purpose of calculating the percentage of shares beneficially owned by any stockholder, (i) the number of shares of common stock deemed outstanding "prior to the offering" assumes the conversion of all outstanding shares of our Series A Convertible Preferred Stock into an aggregate of 201,624,486 shares of our common stock (resulting in a total of 216,632,420 shares of common stock outstanding after the conversion); (ii) the number of shares of common stock outstanding after this offering assumes the issuance by us of                shares of common stock to the underwriters at the closing of this offering, the issuance by us of                shares of common stock to selling stockholders upon the exercise of options and warrants at the closing of this offering, and no exercise of the underwriters' over-allotment option; and (iii) the number of shares of common stock outstanding after the over-allotment assumes that the underwriters' over-allotment option is exercised in full, and the issuance by us of                shares of common stock to selling stockholders upon the exercise of options and warrants at the closing of the over-allotment.

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        Unless otherwise indicated below, the address for each named director and executive officer is c/o Bridgepoint Education Inc., 13500 Evening Creek Drive North, Suite 600, San Diego California, 92128.

								Shares Beneficially Owned After this Offering
		Shares Beneficially Owned Prior to this Offering					Number of Shares to Be Sold in this Offering			Maximum Number of Shares to Be Sold in Over- Allotment	Shares Beneficially Owned After Over-Allotment
Name of Beneficial Owner		Number		%				Number	%		Number	%
Principal Stockholders
	Warburg Pincus Private Equity VIII, L.P.(1) c/o Warburg Pincus LLC 466 Lexington Avenue New York, NY 10017		197,084,670		91.0	%
All Directors and Executive Officers asa Group (13 Persons)			216,261,453		93.4	%
Directors and Executive Officers
	Andrew S. Clark(2)		8,203,230		3.7	%
	Ryan Craig		—		*
	Daniel J. Devine(3)		2,558,805		1.2	%
	Patrick T. Hackett(4) c/o Warburg Pincus LLC 466 Lexington Avenue New York, NY 10017		197,084,670		91.0	%
	Robert Hartman(5)		109,184		*
	Jane McAuliffe(6)		1,396,539		*
	Adarsh Sarma(7) c/o Warburg Pincus LLC 466 Lexington Avenue New York, NY 10017		197,084,670		91.0	%
	Rodney T. Sheng(8)		2,813,661		1.3	%
	Christopher L. Spohn(9)		2,528,223		1.2	%
	Ross Woodard(10)		1,420,164		*
	Charlene Dackerman(11)		146,977		*
	Dale Crandall		—		*
	Diane Thompson		—		*
	Thomas Ashbrook		—		*

*

Represents beneficial ownership of less than 1%.

(1)

The stockholder is Warburg Pincus Private Equity VIII, L.P. ("WP VIII") and two affiliated partnerships. Warburg Pincus Partners, LLC ("WP Partners"), a direct subsidiary of Warburg Pincus & Co. ("WP"), is the sole general partner of WP VIII. WP is the managing member of WP Partners. WP VIII is managed by Warburg Pincus LLC ("WP LLC"). WP VIII, WP Partners, WP and WP LLC are collectively referred to as the "Warburg Pincus Entities." Charles R. Kaye and Joseph P. Landy are each Managing General Partners of WP and Managing Members and Co-Presidents of WP LLC and may be deemed to control the Warburg Pincus Entities. Each of the Warburg Pincus Entities, Mr. Kaye and Mr. Landy have shared voting and investment control of all of the shares of stock referenced above. Each of Mr. Kaye, Mr. Landy, WP VIII, WP Partners, WP and WP LLC disclaims beneficial ownership of the stock except to the extent of any indirect pecuniary interest therein. The address of the Warburg Pincus Entities, Mr. Kaye and Mr. Landy is 466 Lexington Avenue, New York, New York 10017.

(2)

Consists of (i) 1,308,253 shares of common stock issuable upon conversion of Series A Convertible Preferred Stock; and (ii) 6,894,977 shares of common stock underlying options that are exercisable within 60 days of November 1, 2008. Mr. Clark has pledged 75,000 shares of Series A Convertible Preferred Stock (convertible into 764,565 shares of common stock) as security for a loan from WP VIII. Mr. Clark expects to repay such loan on March 10, 2009.

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(3)

Consists of (i) 764,565 shares of common stock issuable upon conversion of Series A Convertible Preferred Stock; and (ii) 1,794,240 shares of common stock underlying options that are exercisable within 60 days of November 1, 2008.

(4)

Mr. Hackett is a partner of WP and a Managing Director and member of WP LLC. All shares indicated as owned by Mr. Hackett are included because of his affiliation with the Warburg Pincus Entities. Mr. Hackett disclaims beneficial ownership of all shares owned by the Warburg Pincus Entities except to the extent of any indirect pecuniary interest therein.

(5)

Consists of 109,184 shares of common stock underlying options that are exercisable within 60 days of November 1, 2008.

(6)

Consists of (i) 203,884 shares of common stock issuable upon conversion of Series A Convertible Preferred Stock; and (ii) 1,192,655 shares of common stock underlying options that are exercisable within 60 days of November 1, 2008.

(7)

Mr. Sarma is a partner of WP and a Managing Director and member of WP LLC. All shares indicated as owned by Mr. Sarma are included because of his affiliation with the Warburg Pincus Entities. Mr. Sarma disclaims beneficial ownership of all shares owned by the Warburg Pincus Entities except to the extent of any indirect pecuniary interest therein.

(8)

Consists of (i) 1,019,421 shares of common stock issuable upon conversion of Series A Convertible Preferred Stock; and (ii) 1,794,240 shares of common stock underlying options that are exercisable within 60 days of November 1, 2008.

(9)

Consists of (i) 733,983 shares of common stock issuable upon conversion of Series A Convertible Preferred Stock; and (ii) 1,794,240 shares of common stock underlying options that are exercisable within 60 days of November 1, 2008.

(10)

Consists of (i) 203,884 shares of common stock issuable upon conversion of Series A Convertible Preferred Stock; and (ii) 1,216,280 shares of common stock underlying options that are exercisable within 60 days of November 1, 2008.

(11)

Consists of (i) 50,971 shares of common stock issuable upon conversion of Series A Convertible Preferred Stock; and (ii) 96,006 shares of common stock underlying options that are exercisable within 60 days of November 1, 2008.

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DESCRIPTION OF CAPITAL STOCK

General

        The following description of our capital stock summarizes provisions of our certificate of incorporation and our bylaws as they will be in effect upon the closing of this offering. As of the date of this prospectus, our authorized capital consists of 300,000,000 shares of common stock, $0.01 par value per share, and 19,850,000 shares of Series A Convertible Preferred Stock, $0.01 par value per share. Immediately after the closing of this offering, after giving effect to the conversion of our outstanding Series A Convertible Preferred Stock into common stock and the effectiveness of our fifth amended and restated certificate of incorporation, our authorized capital stock will consist of              shares of common stock, $0.01 par value per share, and             shares of undesignated preferred stock, $0.01 par value per share.

        The following description of the material provisions of our capital stock and our certificate of incorporation, bylaws and other agreements with and among our stockholders is only a summary, does not purport to be complete and is qualified by applicable law and the full provisions of our certificate of incorporation, bylaws and other agreements. You should refer to our certificate of incorporation, bylaws and related agreements as in effect upon the closing of this offering, which are included as exhibits to the registration statement of which this prospectus is a part.

Common Stock

        As of November 1, 2008, assuming the conversion of all outstanding Series A Convertible Preferred Stock into an aggregate of 201,624,486 shares of common stock, there were 216,632,420 shares of common stock outstanding, held of record by 26 stockholders.

Voting Rights

        Holders of common stock are entitled to one vote per share on any matter to be voted upon by stockholders. All shares of common stock rank equally as to voting and all other matters. The shares of common stock have no preemptive or conversion rights, no redemption or sinking fund provisions, are not liable for further call or assessment and are not entitled to cumulative voting rights.

Dividend Rights

        Subject to the prior rights of holders of preferred stock, for as long as such stock is outstanding, the holders of common stock are entitled to receive ratably any dividends when and as declared from time to time by the board of directors out of funds legally available for dividends. We have never declared or paid cash dividends. We currently intend to retain all future earnings for the operation and expansion of our business and do not anticipate paying cash dividends on the common stock in the foreseeable future.

Liquidation Rights

        Upon a liquidation or dissolution of our company, whether voluntary or involuntary, creditors and holders of our preferred stock with preferential liquidation rights will be paid before any distribution to holders of our common stock. After such distribution, holders of common stock are entitled to receive a pro rata distribution per share of any excess amount.

Undesignated Preferred Stock

        Under the certificate of incorporation that will be in effect upon the closing of this offering, the board of directors will have authority to issue undesignated preferred stock without stockholder approval, subject to applicable law and listing exchange standards. The board of directors may also

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determine or alter for each class of preferred stock the voting powers, designations, preferences and special rights, qualifications, limitations or restrictions as permitted by law. The board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock.

Options and Warrants to Purchase Common Stock

        As of November 1, 2008, we had 39,724,430 shares of common stock subject to options we have issued to our directors, officers, employees and consultants. As of November 1, 2008, we also had 7,100,595 shares of common stock subject to outstanding warrants, all of which are immediately exercisable.

Registration Rights

        In November 2003, we entered into a registration rights agreement with Warburg Pincus, Andrew S. Clark and certain other security holders. The registration rights agreement was amended and restated in January 2009 primarily (i) to grant registration rights to certain additional security holders, including all holders of Series A Convertible Preferred Stock, and (ii) to determine the registration rights of the members of our management team with respect to this offering.

        Under the amended and restated registration rights agreement, the holders of (i) 9,285,568 shares of common stock, (ii) 201,120,143 shares of common stock issuable upon conversion of Series A Convertible Preferred Stock, (iii) 6,195,095 shares of common stock issuable upon the exercise of certain warrants and (iv) 3,139,211 shares of common stock issuable upon the exercise of certain employee stock options, possess certain rights with respect to the registration of these shares under the Securities Act.

        Under the amended and restated registration rights agreement, each of Andrew S. Clark, Daniel J. Devine, Christopher L. Spohn, Jane McAuliffe, Rodney T. Sheng, Ross Woodard, Charlene Dackerman and certain other members of our management team may request to sell in this offering a number of shares of common stock up to and equaling, but not exceeding, 10% of the sum of (i) the total number of shares of common stock subject to employee stock options held by such person that will be vested as of April 30, 2009 (assuming, for purposes of this calculation, that any "exit options" held by such person will be fully vested at such time) plus (ii) the total number of shares of common stock which such person may acquire upon the conversion of Series A Convertible Preferred Stock or upon the exercise of various warrants held by such person.

Demand Registration Rights

        If we are eligible to file a registration statement, Warburg Pincus may request we effect such registration at any time, provided that anticipated aggregate public offering prices (before any underwriting discounts and commissions) will not be less than $7.5 million (or $15.0 million if such requested registration is the initial public offering). We are only required to effect two such registrations. We may postpone the filing of any such registration statement for up to 90 days once in any 12-month period. If during that 90 day period we file a registration statement and we are actively employing in good faith all reasonable efforts to cause such registration statement to become effective, then we may further postpone any demand registration until 180 days after the effective date of the currently filed registration statement. We may also postpone the filing of any such registration statement for up to 180 days once in any 12-month period if our board of directors determines in good faith that the filing would be seriously detrimental to our stockholders or us.

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Piggyback Registration Rights

        If we register any shares of common stock under the Securities Act in connection with a public offering, the stockholders with piggyback registration rights have the right to include in the registration shares of common stock held by them or which they can obtain upon the exercise or conversion of another security, subject to specified exceptions. The underwriters of any offering have the right to limit the number of shares registered by these stockholders due to marketing reasons. If the total amount of shares of common stock these stockholders wish to include exceeds the total amount of shares which the underwriters determine the stockholders may sell in the offering, the shares to be included in the registration will be subject to cutbacks as specified in the agreement.

Form S-3 Registration Rights

        If we are eligible to file a registration statement on Form S-3, Warburg Pincus may request that we register their shares of common stock for resale on a Form S-3 registration statement, provided that the total price of the shares to be offered is more than $5.0 million and that the request is not made within 180 days of the effective date of our most recent Form S-3 registration statement in which the securities held by the requesting stockholder could have been included for sale or distribution. We are also not obligated to file a Form S-3 registration statement in any jurisdiction where we would be required to execute a general consent to service of process in effecting the such registration, qualification or compliance, subject to certain restrictions. Warburg Pincus has the right to request an unlimited number of registrations on Form S-3.

Provisions of Delaware Law and our Certificate of Incorporation and Amended and Restated Bylaws with Anti-Takeover Implications

        In connection with this offering, we intend to amend and restate our fourth amended and restated certificate of incorporation and amend and restate our bylaws. Certain provisions of Delaware law, our certificate of incorporation and bylaws that will be in effect after this offering contain provisions that could have the effect of delaying, deferring or discouraging another party from acquiring control of us. These provisions, which are summarized below, are intended to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquiror outweigh the disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.

Section 203 of the Delaware General Corporation Law

        Upon the closing of this offering, we will be subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner. A "business combination" includes, among other things, a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. An "interested stockholder" is a person who, together with affiliates and associates, owns, or did own within three years prior to the determination of interested stockholder status, 15% or more of the corporation's voting stock. Under Section 203, a business combination

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between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions:

•

before the stockholder became interested, the board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

•

upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans, in some instances; or

•

at or after the time the stockholder became interested, the business combination was approved by the board of directors of the corporation and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.

        A Delaware corporation may opt out of this provision either with an express provision in its original certificate of incorporation or in an amendment to its certificate of incorporation or bylaws approved by its stockholders. However, we have not opted out, and do not currently intend to opt out, of this provision. The statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire us.

Certificate of Incorporation and Bylaw Provisions

        Our certificate of incorporation and bylaws will, upon the closing of this offering, contain some provisions that may be deemed to have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a stockholder might deem to be in the stockholder's best interest. The existence of these provisions could limit the price that investors might be willing to pay in the future for shares of our common stock. These provisions include:

        Board Composition and Filling Vacancies.    We will have a classified board of directors upon the closing of this offering. See "Management—Board Composition after the Offering." It will take at least two annual meetings of stockholders to elect a majority of the board of directors given our classified board. As a result, it may discourage third-party proxy contests, tender offers or attempts to obtain control of us even if such changes would be beneficial to us and our stockholders.

        Our bylaws will provide that directors may be removed only for cause by the affirmative vote of the holders of a majority of the voting power of the outstanding shares of common stock entitled to vote. Furthermore, any vacancy on our board of directors, however occurring, including a vacancy resulting from an increase in the size of our board, may only be filled by the affirmative vote of a majority of our directors then in office even if less than a quorum. We have also entered into a nominating agreement with Warburg Pincus regarding the election of directors. See "Certain Relationships and Related Transactions—Stockholders Agreement and Nominating Agreement."

        No Stockholder Action by Written Consent.    Our certificate of incorporation will provide that, subject to the rights of any holders of preferred stock to act by written consent instead of a meeting, stockholder action may be taken only at an annual meeting or special meeting of stockholders and may not be taken by written consent instead of a meeting, unless the action to be taken by written consent of stockholders and the taking of this action by written consent has been expressly approved in advance by the board of directors. Failure to satisfy any of the requirements for a stockholder meeting could delay, prevent or invalidate stockholder action.

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        Meetings of Stockholders.    Our bylaws will provide that only a majority of the members of our board of directors then in office or the Chief Executive Officer may call special meetings of the stockholders and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders. Our bylaws will limit the business that may be conducted at an annual meeting of stockholders to those matters properly brought before the meeting.

        Advance Notice Requirements.    Our bylaws will establish an advance notice procedure for stockholders to make nominations of candidates for election as directors or to bring other business before an annual meeting of our stockholders. The bylaws will provide that any stockholder wishing to nominate persons for election as directors at, or bring other business before, an annual meeting must deliver to our secretary a written notice of the stockholder's intention to do so. To be timely, the stockholder's notice must be delivered to or mailed and received by us not later than the 60th day nor earlier than the 90th day prior to the anniversary date of the preceding annual meeting, except that if the annual meeting is changed by more than 30 days from the date contemplated at the time of the previous year's proxy statement, we must receive the notice not earlier than the 90th day prior to such annual meeting and not later than the 60th day prior to such annual meeting. If a public announcement of the date of such annual meeting is made fewer than 70 days prior to the date of such annual meeting, then notice must be received by us no later than the tenth day following the public announcement of the date of the meeting. The notice must include the following information:

•

the name and address of the stockholder who intends to make the nomination and the name and address of the person or persons to be nominated or the nature of the business to be proposed;

•

a representation that the stockholder is a holder of record of our capital stock entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons or to introduce the business specified in the notice;

•

if applicable, a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons, naming such person or persons, pursuant to which the nomination is to be made by the stockholder;

•

such other information regarding each nominee or each matter of business to be proposed by such stockholder as would be required to be included in a proxy statement filed under the SEC's proxy rules if the nominee had been nominated, or intended to be nominated, or the matter had been proposed, or intended to be proposed, by the board of directors;

•

if applicable, the consent of each nominee to serve as a director if elected; and

•

such other information that the board of directors may request in its discretion.

        Amendment to Bylaws and Certificate of Incorporation.    As required by Delaware law, any amendment to our certificate of incorporation must first be approved by a majority of our board of directors and, if required by law or our certificate of incorporation, thereafter be approved by a majority of the outstanding shares entitled to vote on the amendment. Our bylaws may be amended by the affirmative vote of a majority of the directors then in office, subject to any limitations set forth in the bylaws, without further stockholder action.

        Blank Check Preferred Stock.    The board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. Issuing preferred stock provides flexibility in connection with possible acquisitions and other corporate purposes, but could also, among other things, have the effect of delaying, deferring or preventing a change in control of our company and may adversely affect the market price of our common stock and the voting and other rights of the holders of common stock.

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Limitations of Director Liability and Indemnification Directors, Officers and Employees

        As permitted by Delaware law, provisions in our certificate of incorporation and bylaws that will be in effect at the closing of this offering will limit or eliminate the personal liability of our directors. Consequently, directors will not be personally liable to us or our stockholders for monetary damages or breach of fiduciary duty as a director, except for liability for:

•

any breach of the director's duty of loyalty to us or our stockholders;

•

any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

•

any unlawful payments related to dividends or unlawful stock repurchases, redemptions or other distributions; or

•

any transaction from which the director derived an improper personal benefit.

        These limitations of liability do not alter director liability under the federal securities laws and do not affect the availability of equitable remedies, such as an injunction or rescission.

        Our certificate of incorporation and bylaws that will be in effect upon the closing of this offering also require us to indemnify our directors and officers to the fullest extent permitted by Delaware law and, as described under "Certain Relationships and Related Transactions," we have entered into indemnification agreements with each of our directors and officers.

        These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder's investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. We believe that these provisions, the indemnification agreements and the insurance are necessary to attract and retain talented and experienced directors and officers.

        At present, there is no pending litigation or proceeding involving any of our directors or officers where indemnification will be required or permitted. We are not aware of any threatened litigation or proceeding that might result in a claim for such indemnification.

New York Stock Exchange

        We will apply for quotation of shares of our common stock on the New York Stock Exchange under the symbol "BPI."

Transfer Agent and Registrar

        The transfer agent and registrar for our common stock is            .

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SHARES ELIGIBLE FOR FUTURE SALE

        Upon the closing of this offering, and assuming the conversion of all outstanding shares of our Series A Convertible Preferred Stock into                         shares of our common stock upon the closing of this offering, we will have             shares (or in the event the underwriter's over-allotment option is exercised,             shares) of our common stock outstanding. Of these shares,             shares (or in the event the underwriter's over-allotment is exercised,             shares) of our common stock sold in this offering will be freely tradable without restriction under the Securities Act, except for any shares of our common stock purchased by our "affiliates," as the term is defined in Rule 144 under the Securities Act, which would be subject to the limitations and restrictions described below.

        As a result of the contractual restrictions described below and the provisions of Rules 144 and 701, the restricted shares will be available for sale in the public market as follows:

•

shares will be eligible for sale upon the closing of this offering; and

•

shares will be eligible for sale upon the expiration of the lock-up agreements, described below, beginning 180 days after the date of this prospectus.

        In addition, upon the closing of this offering, we will have outstanding options to purchase an aggregate of             shares of common stock and outstanding warrants to purchase an aggregate of             shares of common stock.

Rule 144

        In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months (including any period of consecutive ownership of preceding non-affiliated holders) would be entitled to sell those shares, subject only to the availability of current public information about us. A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those shares without regard to the provisions of Rule 144.

        In general, under Rule 144 as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell upon expiration of the lock-up agreements described above, within any three-month period beginning 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:

•

1% of the number of shares of common stock then outstanding, which will equal approximately             shares immediately after this offering; or

•

The average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

        Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.

Rule 701

        Rule 701 of the Securities Act, as currently in effect, permits any of our employees, officers, directors or consultants who purchased or receive shares from us pursuant to a written compensatory plan or contract to resell such shares in reliance upon Rule 144, but without compliance with certain restrictions. Subject to any applicable lock-up agreements, Rule 701 provides that affiliates may sell their Rule 701 shares under Rule 144 beginning 90 days after the date of this prospectus without

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complying with the holding period requirement of Rule 144 and that non-affiliates may sell such shares in reliance on Rule 144 beginning 90 days after the date of this prospectus without complying with the holding period, public information, volume limitation or notice requirements of Rule 144.

Registration on Form S-8

        We intend to file one or more registration statements on Form S-8 under the Securities Act to register shares of common stock under our equity incentive plans. These registration statements are expected to be filed soon after the date of this prospectus and will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for resale in the public market, unless such shares are subject to vesting restrictions by us or are otherwise subject to the lock-up agreements and manner of sale and notice requirements that apply to our affiliates under Rule 144.

Lock-Up Agreements

        Holders of             shares of our common stock, on an as-converted basis, and holders of options and warrants exercisable for an aggregate of             shares of our common stock are subject to lock-up agreements under which they have agreed not to transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common stock, for a period of 180 days after the date of this prospectus, which is subject to extension in some circumstances.

        For a description of the lock-up agreements with the underwriters that restrict us, our directors, our executive officers and certain of our other stockholders, see "Underwriting."

Registration Rights

        For a description of registration rights with respect to our common stock, see "Description of Capital Stock—Registration Rights."

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MATERIAL U.S. FEDERAL TAX CONSEQUENCES
TO NON-U.S. HOLDERS OF COMMON STOCK

        The following is a general discussion of the material U.S. federal income and estate tax consequences to non-U.S. Holders with respect to the acquisition, ownership and disposition of our common stock. In general, a "Non-U.S. Holder" is any holder of our common stock other than the following:

•

a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the "substantial presence" test under section 7701(b)(3) of the Code;

•

a corporation (or an entity treated as a corporation) created or organized in the United States or under the laws of the United States, any state thereof, or the District of Columbia;

•

a partnership;

•

an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

•

a trust, if a U.S. court can exercise primary supervision over the administration of the trust and one or more U.S. persons can control all substantial decisions of the trust, or certain other trusts that have a valid election to be treated as a U.S. person pursuant to the applicable Treasury Regulations.

        This discussion is based on current provisions of the Internal Revenue Code, Treasury Regulations, judicial opinions, published positions of the Internal Revenue Service ("IRS"), and all other applicable administrative and judicial authorities, all of which are subject to change, possibly with retroactive effect. This discussion does not address all aspects of U.S. federal income and estate taxation or any aspects of state, local, or non-U.S. taxation, nor does it consider any specific facts or circumstances that may apply to particular Non-U.S. Holders that may be subject to special treatment under the U.S. federal income tax laws including, but not limited to, insurance companies, tax-exempt organizations, pass-through entities, financial institutions, brokers, dealers in securities and U.S. expatriates. If a partnership or other entity treated as a partnership for U.S. federal income tax purposes is a beneficial owner of our common stock, the treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. This discussion assumes that the Non-U.S. Holder will hold our common stock as a capital asset, which generally is property held for investment.

Prospective investors are urged to consult their tax advisors regarding the U.S. federal, state and local, and non-U.S. income and other tax considerations of acquiring, holding and disposing of shares of common stock.

Dividends

        In general, dividends paid to a Non-U.S. Holder (to the extent paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles) will be subject to U.S. withholding tax at a rate equal to 30% of the gross amount of the dividend, or a lower rate prescribed by an applicable income tax treaty, unless the dividends are effectively connected with a trade or business carried on by the Non-U.S. Holder within the United States. Any distribution not constituting a dividend will be treated first as reducing the Non-U.S. Holder's basis in its shares of common stock, and to the extent it exceeds the Non-U.S. Holders basis, as capital gain.

        Under applicable Treasury Regulations, a Non-U.S. Holder will be required to satisfy certain certification requirements, generally on IRS Form W-8BEN, directly or through an intermediary, in order to claim a reduced rate of withholding under an applicable income tax treaty. If tax is withheld in

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an amount in excess of the amount applicable under an income tax treaty, a refund of the excess amount may generally be obtained by filing an appropriate claim for refund with the IRS.

        Dividends that are effectively connected with such a U.S. trade or business generally will not be subject to U.S. withholding tax if the Non-U.S. Holder files the required forms, including IRS Form W-8ECI, or any successor form, with the payor of the dividend, but instead generally will be subject to U.S. federal income tax on a net income basis in the same manner as if the Non-U.S. Holder were a resident of the United States. A corporate Non-U.S. Holder that receives effectively connected dividends may be subject to an additional branch profits tax at a rate of 30%, or a lower rate prescribed by an applicable income tax treaty, on the repatriation from the United States of its "effectively connected earnings and profits," subject to adjustments.

Gain on Sale or Other Disposition of Common Stock

        In general, a Non-U.S. Holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other taxable disposition of the Non-U.S. Holder's shares of common stock unless:

•

the gain is effectively connected with a trade or business carried on by the Non-U.S. Holder within the United States (and, where an income tax treaty applies, is attributable to a U.S. permanent establishment of the Non-U.S. Holders), in which case such gain generally will be subject to U.S. federal income tax on a net income basis in the same manner as if the Non-U.S. Holder were a resident of the United States, and the branch profits tax may also apply if the Non-U.S. Holder is a corporation;

•

the Non-U.S. Holder is an individual who holds shares of common stock as capital assets and is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met; or

•

we are or have been a "U.S. real property holding corporation" for U.S. federal income tax purposes and the Non-U.S. Holder holds or has held, directly or indirectly, at any time within the shorter of the five year period preceding the disposition or the Non-U.S. Holder's holding period, more than 5% of the common stock..

        We believe that we are not, and we do not anticipate that we will become, a U.S. real property holding corporation.

Information Reporting and Backup Withholding

        Generally, we must report annually to the IRS the amount of dividends paid, the name and address of the recipient, and the amount, if any, of tax withheld. A similar report is sent to the recipient. These information reporting requirements apply even if withholding was not required because the dividends were effectively connected dividends or withholding was reduced by an applicable income tax treaty. Under income tax treaties or other agreements, the IRS may make its reports available to tax authorities in the recipient's country of residence.

        Dividends paid to a Non-U.S. Holder that is not an exempt recipient generally will be subject to backup withholding, currently at a rate of 28% of the gross proceeds, unless a Non-U.S. Holder certifies as to its foreign status, which certification may be made on IRS Form W-8BEN.

        Proceeds from the sale or other disposition of common stock by a Non-U.S. Holder effected by or through a U.S. office of a broker will be subject to information reporting and backup withholding, currently at a rate of 28% of the gross proceeds, unless the Non-U.S. Holder certifies to the payor under penalties of perjury as to, among other things, its name, address and status as a Non-U.S. Holder or otherwise establishes an exemption. Generally, U.S. information reporting and backup withholding will not apply to a payment of disposition proceeds if the transaction is effected outside the United

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States by or through a non-U.S. office. However, if the broker is, for U.S. federal income tax purposes, a U.S. person, a controlled foreign corporation, a foreign person who derives 50% or more of its gross income for specified periods from the conduct of a U.S. trade or business, specified U.S. branches of foreign banks or foreign insurance companies or a foreign partnership with various connections to the United States, information reporting but not backup withholding will apply unless:

•

the broker has documentary evidence in its files that the holder is a Non-U.S. Holder and certain other conditions are met; or

•

the holder otherwise establishes an exemption.

        Backup withholding is not an additional tax. Rather, the amount of tax withheld is generally applied as a credit to the U.S. federal income tax liability of persons subject to backup withholding. If backup withholding results in an overpayment of U.S. federal income taxes, a refund may be obtained, provided the required documents are timely filed with the IRS.

Estate Tax

        Our common stock owned or treated as owned by an individual who is not a citizen or resident of the United States (as specifically defined for U.S. federal estate tax purposes) at the time of death will be includible in the individual's gross estate for U.S. federal estate tax purposes and may be subject to U.S. federal estate tax, unless an applicable estate tax treaty provides otherwise.

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UNDERWRITING

        Under the terms and subject to the conditions contained in an underwriting agreement dated                                    , 2009, we and the selling stockholders have agreed to sell to the underwriters named below, for whom Credit Suisse Securities (USA) LLC and J.P. Morgan Securities Inc. are acting as representatives (the Representatives), the following respective numbers of shares of common stock:

Underwriter		Number of Shares
Credit Suisse Securities (USA) LLC
J.P. Morgan Securities Inc.
	Total

        The underwriting agreement provides that the underwriters are obligated to purchase all the shares of common stock in the offering if any are purchased, other than those shares covered by the over-allotment option described below.

        The selling stockholders have granted to the underwriters a 30-day option to purchase on a pro rata basis up to an aggregate of                        additional outstanding shares at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of common stock.

        The underwriters propose to offer the shares of common stock initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of $                        per share. The underwriters and selling group members may allow a discount of $                        per share on sales to other broker/dealers. After the initial public offering, the Representatives may change the public offering price and concession and discount to broker/dealers.

        The following table summarizes the compensation and estimated expenses we and the selling stockholders will pay:

	Per Share		Total
	Without Over-allotment	With Over-allotment	Without Over-allotment	With Over-allotment
Underwriting Discounts and Commissions paid by us	$	$	$	$
Expenses payable by us	$	$	$	$
Underwriting Discounts and Commissions paid by selling stockholders	$	$	$	$
Expenses payable by the selling stockholders	$	$	$	$

        The Representatives have informed us that they do not expect sales to accounts over which the underwriters have discretionary authority to exceed 5% of the shares of common stock being offered.

        We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the Securities Act of 1933 (the "Securities Act") relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of the Representatives for a period of 180 days after the date of this prospectus. However, in the event that either (1) during the last 17 days of any "lock-up" period, we release earnings results or material news or a material event relating to us occurs or (2) prior to the expiration of any "lock-up" period, we announce that we will release earnings results during the 16-day period beginning on the last day of

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any "lock-up" period, then in either case the expiration of any "lock-up" will be extended until the expiration of the 18-day period beginning on the date of the release of the earnings results or the occurrence of the material news or event, as applicable, unless the Representatives waive, in writing, such an extension.

        Our officers, directors and principal stockholders have agreed that they will not, subject to certain exceptions, offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of the Representatives for a period of 180 days after the date of this prospectus. Furthermore, in the event that either (1) during the last 17 days of any "lock-up" period, we release earnings results or material news or a material event relating to us occurs or (2) prior to the expiration of any "lock-up" period, we announce that we will release earnings results during the 16-day period beginning on the last day of any "lock-up" period, then in either case the expiration of any "lock-up" will be extended until the expiration of the 18-day period beginning on the date of the release of the earnings results or the occurrence of the material news or event, as applicable, unless the Representatives waive, in writing, such an extension.

        The underwriters have reserved for sale at the initial public offering price up to                        shares of the common stock for members of our boards of trustees of Ashford University and the University of the Rockies who express an interest in purchasing common stock in the offering. The number of shares available for sale to the general public in this offering will be reduced to the extent these persons purchase the reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same terms as the other shares.

        We and the selling stockholders have agreed to indemnify the underwriters against liabilities under the Securities Act or contribute to payments that the underwriters may be required to make in that respect.

        We will apply to list the shares of common stock on the New York Stock Exchange under the symbol "BPI."

        Prior to this offering, there has been no market for our common stock. The initial public offering price will be determined by negotiations between us, the selling stockholders and the underwriters and will not necessarily reflect the market price of the common stock following this offering. The principal factors that will be considered in determining the initial public offering price will include:

•

the information presented in this prospectus and otherwise available to the underwriters;

•

the history of, and the prospects for, the industry in which we will compete;

•

the ability of our management;

•

the prospects for our future earnings;

•

the present state of our development and our current financial condition;

•

the recent market prices of, and the demand for, publicly traded common stock of generally comparable companies; and

•

the general conditions of the securities markets at the time of this offering.

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        In connection with the offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Securities Exchange Act of 1934.

•

Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

•

Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or purchasing shares in the open market.

•

Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

•

Penalty bids permit the representative to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

        These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the New York Stock Exchange or otherwise and, if commenced, may be discontinued at any time.

        A prospectus in electronic format may be made available on the web sites maintained by one or more of the underwriters, or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. The representatives may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same basis as other allocations.

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INTERNATIONAL SELLING RESTRICTIONS

Notice to Canadian Residents

Resale Restrictions

        The distribution of the common stock in Canada is being made only on a private placement basis exempt from the requirement that we and the selling stockholders prepare and file a prospectus with the securities regulatory authorities in each province where trades of common stock are made. Any resale of the common stock in Canada must be made under applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the common stock.

Representations of Purchasers

        By purchasing common stock in Canada and accepting a purchase confirmation a purchaser is representing to us, the selling stockholders and the dealer from whom the purchase confirmation is received that:

•

the purchaser is entitled under applicable provincial securities laws to purchase the common stock without the benefit of a prospectus qualified under those securities laws,

•

where required by law, that the purchaser is purchasing as principal and not as agent,

•

the purchaser has reviewed the text above under Resale Restrictions, and

•

the purchaser acknowledges and consents to the provision of specified information concerning its purchase of the common stock to the regulatory authority that by law is entitled to collect the information.

        Further details concerning the legal authority for this information is available on request.

Rights of Action—Ontario Purchasers Only

        Under Ontario securities legislation, certain purchasers who purchase a security offered by this prospectus during the period of distribution will have a statutory right of action for damages, or while still the owner of the common stock, for rescission against us and the selling stockholders in the event that this prospectus contains a misrepresentation without regard to whether the purchaser relied on the misrepresentation. The right of action for damages is exercisable not later than the earlier of 180 days from the date the purchaser first had knowledge of the facts giving rise to the cause of action and three years from the date on which payment is made for the common stock. The right of action for rescission is exercisable not later than 180 days from the date on which payment is made for the common stock. If a purchaser elects to exercise the right of action for rescission, the purchaser will have no right of action for damages against us or the selling stockholders. In no case will the amount recoverable in any action exceed the price at which the common stock was offered to the purchaser and if the purchaser is shown to have purchased the securities with knowledge of the misrepresentation, we and the selling stockholders, will have no liability. In the case of an action for damages, we and the selling stockholders, will not be liable for all or any portion of the damages that are proven to not represent the depreciation in value of the common stock as a result of the misrepresentation relied upon. These rights are in addition to, and without derogation from, any other rights or remedies available at law to an Ontario purchaser. The foregoing is a summary of the rights available to an Ontario purchaser. Ontario purchasers should refer to the complete text of the relevant statutory provisions.

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Enforcement of Legal Rights

        All of our directors and officers as well as the experts named herein and the Selling Shareholders may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon us or those persons. All or a substantial portion of our assets and the assets of those persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada.

Taxation and Eligibility for Investment

        Canadian purchasers of common stock should consult their own legal and tax advisors with respect to the tax consequences of an investment in the common stock in their particular circumstances and about the eligibility of the common stock for investment by the purchaser under relevant Canadian legislation.

European Economic Area

        In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), each underwriter represents and agrees that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date) it has not made and will not make an offer of Securities to the public in that Relevant Member State prior to the publication of a prospectus in relation to the Securities which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of Securities to the public in that Relevant Member State at any time:

•

to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

•

to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43.0 million and (3) an annual net turnover of more than €50.0 million, as shown in its last annual or consolidated accounts;

•

to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the manager for any such offer; or

•

in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.

        For the purposes of this provision, the expression an "offer of Shares to the public" in relation to any Shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Shares to be offered so as to enable an investor to decide to purchase or subscribe the Shares, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

144

Notice to Investors in the United Kingdom

        Each of the underwriters severally represents, warrants and agrees as follows:

•

it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) to persons who have professional experience in matters relating to investments falling with Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 or in circumstances in which section 21 of FSMA does not apply to the company; and

•

it has complied with, and will comply with all applicable provisions of FSMA with respect to anything done by it in relation to the common stock in, from or otherwise involving the United Kingdom.

LEGAL MATTERS

        The validity of the shares of common stock offered by this prospectus and other legal matters will be passed upon for us by Sheppard, Mullin, Richter & Hampton LLP, San Diego, California. The underwriters have been represented by Cravath, Swaine & Moore LLP, New York, New York.

EXPERTS

        The consolidated financial statements as of December 31, 2006 and 2007 and for each of the three years in the period ended December 31, 2007, included in this prospectus have been so included in reliance on the report (which contains an explanatory paragraph relating to the restatement of our consolidated financial statements as described in Note 3, "Restatement of Consolidated Financial Statements," to our consolidated financial statements) of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

CHANGE IN ACCOUNTANTS

        On January 14, 2008, we retained PricewaterhouseCoopers LLP as our independent registered public accounting firm to audit our consolidated financial statements as of December 31, 2007, and for the year then ended and to reaudit our consolidated financial statements as of December 31, 2006, and for each of the two years in the period then ended. Another auditor had previously been engaged to audit our consolidated financial statements as of December 31, 2005 and 2006 and for each of the years ended December 31, 2005 and 2006. The decision to dismiss our former auditor was approved by our board of directors on January 14, 2008.

        The reports of our former auditor on our consolidated financial statements did not contain any adverse opinion or disclaimer of opinion, nor were such reports qualified or modified as to uncertainty, audit scope or accounting principles, except that the report for the year ended December 31, 2007 was modified to disclose that we had restated our financial statements for the years ended December 31, 2005 and 2006. We had no disagreements with our former auditor on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to its satisfaction, would have caused our former auditor to make reference in connection with its opinion to the subject matter of the disagreement. During the fiscal years ended December 31, 2006 and 2007, and through January 14, 2008, there were no "reportable events" as such term is defined in Item 304(a)(1)(v) of Regulation S-K.

        During the three years ended December 31, 2007, and through our retention of PricewaterhouseCoopers LLP as our independent registered public accounting firm in January 2008, we did not consult with PricewaterhouseCoopers LLP on matters that involved the application of

145

accounting principles to a specified transaction, the type of audit opinion that might be rendered on our financial statements or any other matter that was the subject of a disagreement or a reportable event.

        We have provided our former auditor with a copy of the above statements and have requested that it furnish a letter addressed to the Securities and Exchange Commission stating whether our former auditor agrees with those statements. A copy of that letter is filed as an exhibit to the registration statement of which this prospectus forms a part.

        Prior to this former auditor, another auditor had been engaged to audit our consolidated financial statements as of December 31, 2004, and for the two years then ended.

WHERE YOU CAN FIND MORE INFORMATION

        We have filed with the SEC a registration statement on Form S-1, which includes amendments and exhibits, under the Securities Act and the rules and regulations under the Securities Act for the registration of common stock being offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all the information that is in the registration statement and its exhibits and schedules. Certain portions of the registration statement have been omitted as allowed by the rules and regulations of the SEC. Statements in this prospectus that summarize documents are not necessarily complete, and in each case you should refer to the copy of the document filed as an exhibit to the registration statement. You may read and copy the registration statement, including exhibits and schedules filed with it, and reports or other information we may file with the SEC at the public reference facilities of the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. In addition, the registration statement and other public filings can be obtained from the SEC's Internet site at http://www.sec.gov.

        Upon the closing of this offering, we will become subject to information and periodic reporting requirements of the Exchange Act and we will file annual, quarterly and current reports, proxy statements and other information with the SEC.

146

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

BRIDGEPOINT EDUCATION, INC. AND SUBSIDIARIES

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2006 (restated) and 2007 (restated) and September 30, 2008 (unaudited)	F-3
Consolidated Statements of Operations for the years ended December 31, 2005 (restated), 2006 (restated) and 2007 (restated) and for the nine month periods ended September 30, 2007 and 2008 (restated)(unaudited)	F-4
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) for the years ended December 31, 2005 (restated), 2006 (restated) and 2007 (restated) and for the nine month period ended September 30, 2008 (unaudited)	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2005 (restated), 2006 (restated) and 2007 and for the nine month period ended September 30, 2007 and 2008 (unaudited)	F-6
Notes to Consolidated Financial Statements	F-7

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Bridgepoint Education, Inc.:

        In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, redeemable convertible preferred stock and stockholders' deficit and cash flows present fairly, in all material respects, the financial position of Bridgepoint Education, Inc. and its subsidiaries (the "Company") at 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. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        As discussed in Note 3, "Restatement of Consolidated Financial Statements: Restatement of Financial Statements Audited by Other Auditors," to the consolidated financial statements, the Company has restated its consolidated financial statements, which were previously audited by other accountants, as of December 31, 2006 and for the two years then ended to correct errors. In addition, as discussed in Note 3, "Restatement of Consolidated Financial Statements: Restatement of Redeemable Convertible Preferred Stock and Earnings Per Share," to the consolidated financial statements, the Company has restated its consolidated financial statements as of December 31, 2006 and 2007 and for each of the three years in the period ended December 31, 2007 to correct errors.

        As discussed in Note 12 to the consolidated financial statements, the Company changed the manner in which it accounts for stock-based compensation in 2006.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
San Diego, California
December 21, 2008, except for Note 3, "Restatement of Consolidated Financial Statements: Restatement of Redeemable Convertible Preferred Stock and Earnings Per Share," and Note 20, "Subsequent Events," which are as of February 16, 2009.

F-2

Bridgepoint Education, Inc.

Consolidated Balance Sheets

(In thousands, except share and per share data)

		As of December 31,						As of September 30, 2008
		2006			2007			Actual			Pro forma
		(Restated)(1)			(Restated)(1)			(Unaudited)			(Unaudited)
ASSETS
Current assets:
	Cash and cash equivalents	$	54		$	7,351		$	31,992
	Restricted cash		—			—			666
	Accounts receivable, net of allowance for doubtful accounts of $1,933 and $6,016 at December 31, 2006 and 2007, respectively, and $13,724 at September 30, 2008		5,090			14,630			30,160
	Inventories		209			194			273
	Loans receivable		277			277			277
	Current portion of deferred income taxes		—			—			863
	Prepaid expenses and other current assets		310			561			1,853
Total current assets			5,940			23,013			66,084
Property and equipment, net			9,037			13,240			21,878
Goodwill			—			76			76
Intangibles			1,402			1,821			1,821
Deferred income taxes			—			—			4,191
Other long-term assets			712			907			420
Total assets		$	17,091		$	39,057		$	94,470
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
	Accounts payable	$	1,330		$	2,721		$	5,705
	Accrued liabilities		3,506			6,036			13,832			40,392
	Deferred revenue		5,400			16,817			46,276
	Other liabilities		—			75			151
	Current portion of leases payable		125			133			188
	Current maturities of notes payable		697			1,580			74
	U.S. Governmental refundable loan funds		221			221			221
Total current liabilities			11,279			27,583			66,447
Leases payable, less current maturities			79			415			241
Notes payable, less current portion			3,292			3,545			180
Deferred tax liability			543			556			—
Rent liability			390			2,045			1,786
Total liabilities			15,583			34,144			68,654
Commitments and contingencies (see Note 18)
Redeemable convertible preferred stock:
	Series A convertible preferred stock, $0.01 par value: 19,850,000 shares authorized, 19,778,333 shares issued and outstanding at December 31, 2006, December 31, 2007 and September 30, 2008; none issued and outstanding on a pro forma basis at September 30, 2008		23,200			25,056			26,560			—
Stockholders' equity (deficit):
	Common stock, $0.01 par value: 300,000,000 shares authorized, 14,842,951 issued and outstanding at December 31, 2006, and 15,007,934 shares issued and outstanding at December 31, 2007 and September 30, 2008; 216,632,414 shares issued and outstanding on a pro forma basis at September 30, 2008		148			150			150			348
	Additional paid-in capital		354			—			—			—
	Accumulated deficit		(22,194	)		(20,293	)		(894	)		(1,092	)
Total stockholders' deficit			(21,692	)		(20,143	)		(744	)		(744	)
Total liabilities, redeemable convertible preferred stock and stockholders' deficit		$	17,091		$	39,057		$	94,470

(1)

See Note 3, "Restatement of Consolidated Financial Statements," to the consolidated financial statements.

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

F-3

Bridgepoint Education, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

		Year Ended December 31,									Nine Months Ended September 30,
		2005			2006			2007			2007			2008
		(Restated)(1)			(Restated)(1)			(Restated)(1)			(Unaudited)			(Unaudited) (Restated)(1)
Revenue		$	7,951		$	28,619		$	85,709		$	54,558		$	149,167
Costs and expenses:
	Instructional costs and services		5,498			12,510			29,837			19,154			42,050
	Marketing and promotional		4,078			12,214			35,997			24,532			54,490
	General and administrative		6,190			8,704			15,892			9,503			26,326
Total costs and expenses			15,766			33,428			81,726			53,189			122,866
Operating income (loss)			(7,815	)		(4,809	)		3,983			1,369			26,301
Interest (income)			(38	)		(10	)		(12	)		(1	)		(195	)
Interest expense			228			351			544			332			197
Income (loss) before income taxes			(8,005	)		(5,150	)		3,451			1,038			26,299
Income tax expense			—			—			164			50			5,521
Net income (loss)			(8,005	)		(5,150	)		3,287			988			20,778
Accretion of preferred dividends			1,344			1,718			1,856			1,392			1,503
Deemed dividend on redeemable convertible preferred stock			11,162			—			—			—			—
Net income available (loss attributable) to common stockholders		$	(20,511	)	$	(6,868	)	$	1,431		$	(404	)	$	19,275
Earnings (loss) per common share:
	Basic	$	(1.45	)	$	(0.48	)	$	0.00		$	(0.03	)	$	0.07
	Diluted	$	(1.45	)	$	(0.48	)	$	0.00		$	(0.03	)	$	0.02
Weighted average common shares outstanding used in computing earnings (loss) per common share:
	Basic		14,131			14,386			14,900			14,858			15,008
	Diluted		14,131			14,386			20,020			14,858			44,263
Pro forma earnings per common share (unaudited) (Note 10):
	Basic							$	0.02					$	0.10
	Diluted							$	0.01					$	0.08
Pro forma weighted average common shares outstanding used in computing pro forma earnings per common share (unaudited) (Note 10):
	Basic								216,524						216,632
	Diluted								221,645						245,887
Supplemental pro forma earnings per common share (unaudited) (Note 10):
	Basic							$						$
	Diluted							$						$
Supplemental pro forma weighted average common shares outstanding used in computing supplemental pro forma earnings per common share (unaudited) (Note 10):
	Basic
	Diluted

(1)

See Note 3, "Restatement of Consolidated Financial Statements," to the consolidated financial statements.

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

F-4

Bridgepoint Education, Inc.

Consolidated Statements of Redeemable Convertible Preferred Stock and
Stockholders' Deficit

(In thousands, except share data)

	Series A Convertible Preferred Stock
					Common Stock
									Additional Paid-in Capital			Accumulated Deficit
	Shares		Amount		Shares		Par Value								Total
			(Restated)(1)						(Restated)(1)			(Restated)(1)
Balance at December 31, 2004 (as reported)		9,166,333	$	9,526		14,125,236	$	141	$	3,042		$	(9,039	)	$	(5,856	)
Issuance of redeemable convertible preferred stock with beneficial conversion feature		—		—		—		—		2,951			—			2,951
Deemed dividends on redeemable convertible preferred stock		—		—		—		—		(2,951	)		—			(2,951	)
Balance at December 31, 2004 (as restated)(1)		9,166,333	$	9,526		14,125,236	$	141	$	3,042		$	(9,039	)	$	(5,856	)
Issuance of redeemable convertible preferred stock		10,612,000		10,612		—		—		—			—			—
Issuance of warrants		—		—		—		—		7			—			7
Issuance of common stock		—		—		11,749		—		1			—			1
Accretion of preferred dividends		—		1,344		—		—		(1,344	)		—			(1,344	)
Issuance of redeemable convertible preferred stock with beneficial conversion feature						—		—		11,162			—			11,162
Deemed dividend on redeemable convertible preferred stock		—		—		—		—		(11,162	)		—			(11,162	)
Net loss		—		—		—		—		—			(8,005	)		(8,005	)
Balance at December 31, 2005		19,778,333	$	21,482		14,136,985	$	141		1,706			(17,044	)		(15,197	)
Issuance of common stock		—		—		705,966		7		43			—			50
Stock-based compensation		—		—		—		—		323			—			323
Accretion of preferred dividends		—		1,718		—		—		(1,718	)		—			(1,718	)
Net loss		—		—		—		—		—			(5,150	)		(5,150	)
Balance at December 31, 2006		19,778,333	$	23,200		14,842,951		148		354			(22,194	)		(21,692	)
Issuance of common stock		—		—		164,983		2		10			—			12
Stock-based compensation		—		—		—		—		106			—			106
Accretion of preferred dividends		—		1,856		—		—		(470	)		(1,386	)		(1,856	)
Net income		—		—		—		—		—			3,287			3,287
Balance at December 31, 2007		19,778,333	$	25,056		15,007,934		150		—			(20,293	)		(20,143	)
Issuance of common stock		—		—		—		—		—			—			—
Stock-based compensation		—		—		—		—		125			—			125
Accretion of preferred dividends		—		1,504		—		—		(125	)		(1,379	)		(1,504	)
Net income		—		—		—		—		—			20,778			20,778
Balance at September 30, 2008 (unaudited)		19,778,333	$	26,560		15,007,934	$	150	$	—		$	(894	)	$	(744	)

(1)

See Note 3, "Restatement of Consolidated Financial Statements," to the consolidated financial statements.

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

F-5

Bridgepoint Education, Inc.

Consolidated Statements of Cash Flows

(In thousands)

		Year Ended December 31,									Nine Months Ended September 30,
		2005			2006			2007			2007			2008
		(Restated)(1)			(Restated)(1)						(Unaudited)
Cash flows from operating activities
Net income (loss)		$	(8,005	)	$	(5,150	)	$	3,287		$	988		$	20,778
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
	Provision for bad debts		860			960			4,082			3,015			8,772
	Depreciation and amortization		494			735			1,236			785			1,547
	Deferred income taxes		—			—			164			—			(5,054	)
	Stock-based compensation		1			323			106			96			125
	Warrants issued to lender in connection with credit agreement		7			—			—			—			—
	Gain on disposal of fixed assets		—			(3	)		—			—			—
Changes in operating assets and liabilities, net of effects of acquisitions:
	Accounts receivable		(1,799	)		(4,183	)		(13,563	)		(6,897	)		(24,302	)
	Inventories		(122	)		(88	)		16			99			(79	)
	Prepaid expenses and other current assets		157			(252	)		(203	)		(265	)		(1,292	)
	Loans receivable		35			(5	)		—			—			—
	Other long-term assets		1			(147	)		(150	)		(251	)		(69	)
	Accounts payable		538			484			1,389			822			1,855
	Accrued liabilities		(1,212	)		2,063			2,854			1,102			7,797
	Deferred revenue		1,478			3,893			11,270			1,466			29,459
	U.S. Governmental refundable loan funds		217			4			—			—			—
	Other liabilities		106			284			(121	)		702			(184	)
Net cash provided by (used in) operating activities			(7,244	)		(1,082	)		10,367			1,662			39,353
Cash flows from investing activities
Capital expenditures			(323	)		(1,381	)		(3,571	)		(3,428	)		(9,057	)
Proceeds from the sale of assets			—			8			—			—			—
Restricted cash			—			—			—			—			(666	)
Acquisitions, net of cash acquired			(7,697	)		—			635			635			—
Net cash used in investing activities			(8,020	)		(1,373	)		(2,936	)		(2,793	)		(9,723	)
Cash flows from financing activities
Proceeds from the issuance of preferred stock			10,612			—			—			—			—
Proceeds from the exercise of stock options			—			50			12			12			—
Payments on leases payable			(130	)		(160	)		(170	)		(57	)		—
Net borrowings (payments) on line of credit			(49	)		623			414			—			(118	)
Proceeds from notes payable			3,550			—			—			2,493			—
Payments on notes payable			(126	)		(167	)		(390	)		—			(4,871	)
Net cash provided by (used in) financing activities			13,857			346			(134	)		2,448			(4,989	)
Net increase (decrease) in cash and cash equivalents			(1,407	)		(2,109	)		7,297			1,317			24,641
Cash and cash equivalents at beginning of period			3,570			2,163			54			54			7,351
Cash and cash equivalents at end of period		$	2,163		$	54		$	7,351		$	1,371		$	31,992
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest		$	231		$	353		$	544		$	330		$	197
Income taxes		$	—		$	—		$	—		$	—		$	7,271
Supplemental disclosure of noncash investing and financing activities:
Purchase of property and equipment through capital lease obligations		$	—		$	119		$	1,580		$	148		$	—
Non cash purchases of property and equipment		$	24		$	201		$	361		$	352		$	1,128

(1)

See Note 3, "Restatement of Consolidated Financial Statements," to the consolidated financial statements.

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

F-6

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements

1. Nature of Business

        Bridgepoint Education, Inc. (together with its subsidiaries, the "Company"), incorporated in 1999, is a regionally accredited provider of postsecondary education services. Its wholly-owned subsidiaries, Ashford University and the University of the Rockies, offer associate's, bachelor's, master's and doctoral programs in the disciplines of business, education, psychology, social sciences and health sciences. The Company delivers programs online as well as at its traditional campuses located in Clinton, Iowa and Colorado Springs, Colorado.

        In March 2005, the Company acquired the assets of The Franciscan University of the Prairies and renamed it Ashford University. Founded in 1918 by the Sisters of St. Francis, a non-profit organization, The Franciscan University of the Prairies originally provided postsecondary education to individuals seeking to become teachers and later expanded to offer a broader portfolio of programs.

        In September 2007, the Company acquired the assets of the Colorado School of Professional Psychology and renamed it the University of the Rockies. Founded as a non-profit organization in 1998 by faculty from Chapman University, the school offers master's and doctoral programs primarily in psychology.

2. Summary of Significant Accounting Policies

Principles of Consolidation

        The consolidated financial statements include the accounts of Bridgepoint Education, Inc. and its wholly-owned subsidiaries. The results of operations for the years ended December 31, 2005, 2006 and 2007 and for the nine months ended September 30, 2007 and 2008 include the results of operations of Ashford University commencing on March 10, 2005 and the results of operations of the University of the Rockies commencing on September 13, 2007. Intercompany transactions have been eliminated in consolidation.

Unaudited Interim Consolidated Financial Information

        The accompanying consolidated balance sheet as of September 30, 2008, the consolidated statements of operations and of cash flows for the nine months ended September 30, 2007 and 2008 and the consolidated statement of redeemable convertible preferred stock and stockholders' equity (deficit) for the nine months ended September 30, 2008, are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company's financial position and results of operations and cash flows for the nine months ended September 30, 2007 and 2008. The financial data and other information disclosed in these notes to the consolidated financial statements related to the nine-month periods are unaudited. The results of the nine months ended September 30, 2008 are not necessarily indicative of the results to be expected for the year ending December 31, 2008 or for any other interim period or for any other future year.

Unaudited Pro Forma Stockholders' Equity

        The September 30, 2008, unaudited pro forma balance sheet data have been prepared assuming that the holders of redeemable convertible preferred stock exercise their rights under the optional conversion feature (i) to convert the redeemable convertible preferred stock outstanding into

F-7

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

201,624,486 shares of common stock and (ii) to receive in cash the accreted value of the redeemable convertible preferred stock in connection with such conversion. See Note 11, "Redeemable Convertible Preferred Stock (Series A Convertible Preferred Stock)."

Use of Estimates

        The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States, or GAAP, requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements. Actual results could differ from those estimates.

Cash and Cash Equivalents

        The Company invests cash in excess of current operating requirements in short term certificates of deposit and money market accounts. The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

Restricted Cash

        The Company has amounts restricted in relation to the letter of credit issued on behalf of the University of the Rockies.

Accounts Receivable and Allowance for Doubtful Accounts

        Accounts receivable consists of student accounts receivable, which represent amounts due for tuition, fees and room and board from currently enrolled and former students. Students generally fund their education through grants and/or loans under various Title IV programs, tuition assistance from their military and corporate employers or personal funds. Accounts receivable is stated at the amount management expects to collect from outstanding balances. An allowance for doubtful accounts is estimated by management based on an assessment of individual accounts receivable over a specific aging and amount, and all other balances on a pooled basis based on historical collection experience, consideration of the nature of the receivable accounts and potential changes in the economic environment. The provision for bad debts is recorded within the instructional costs and services line in the consolidated statements of operations.

Inventory

        Inventory consists of text books and school supplies and is stated at the lower of cost or market with cost determined on a first-in, first-out (FIFO) basis.

Property and Equipment

        Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method based on estimated useful lives of the related assets as follows:

Buildings	39 years
Furniture, office equipment and software	3-7 years
Vehicles	5 years

F-8

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

        Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful lives of the assets. Upon the retirement or disposition of property and equipment, the related costs and accumulated depreciation is removed and a gain or loss is recorded in the consolidated statements of operations. Repairs and maintenance costs are expensed in the period incurred.

Leases

        The Company accounts for its leases and subsequent amendments under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 13, Accounting for Leases, which requires that leases be evaluated and classified as operating or capital leases for financial reporting purposes. Leased property and equipment meeting certain criteria are capitalized, and the present value of the related lease payments is recorded as a liability on the consolidated balance sheets. Amortization of capitalized leased assets is computed on the straight-line method over the term of the lease or the life of the related asset, whichever is shorter.

        In connection with a lease of office space, the Company received tenant allowances from the lessor for certain improvements made to the leased property. In accordance with Financial Accounting Standards Board ("FASB") Technical Bulletin No. 88-1, these allowances were capitalized as leasehold improvements and a long-term liability was established. The leasehold improvements and the long-term liability are amortized on a straight-line basis over the corresponding lease term. In accordance with the FASB Technical Bulletin No. 85-3, Accounting for Operating Leases with Scheduled Rent Increases, the Company records rent expense on a straight-line basis over the initial term of a lease. The difference between the rent payment and the straight-line rent expense is recorded as a long-term liability.

Goodwill and Other Intangible Assets

        The Company accounts for goodwill and other intangible assets in accordance with SFAS No. 142 ("SFAS 142"), Goodwill and Other Intangible Assets. SFAS 142 requires that goodwill and other identifiable intangible assets with indefinite useful lives be tested for impairment at least annually. The Company tests goodwill and indefinite-lived intangible assets for impairment annually, in the fourth quarter of each fiscal year, or more frequently if events and circumstances warrant. There have been no impairment losses recognized by the Company to date.

        In evaluating the impairment of goodwill and indefinite-lived intangible assets, such assets are allocated to the carrying value of each of Ashford University and the University of the Rockies, which institutions are considered as separate reporting units. Determining the fair value of a reporting unit or an indefinite-lived purchased intangible asset is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions and determination of appropriate market comparables. We base our fair value estimates on assumptions we believe to be reasonable but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates.

F-9

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

Impairment of Long-Lived Assets

        The Company accounts for long-lived assets in accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets. The Company assesses potential impairment to its long-lived assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Any required impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds fair value and is recorded as a reduction in the carrying value of the related asset and a charge to operating results. There have been no impairment losses recognized by the Company to date.

Revenue and Deferred Revenue

        The Company's revenue consists of tuition, technology fees and other miscellaneous fees.

        Tuition revenue is deferred and recognized on a straight-line basis over the applicable period of instruction net of scholarships and expected refunds. The Company's online students generally enroll in a program that encompasses a series of five to six week courses which are taken consecutively over the length of the program, and the Company's ground students enroll in a program that encompasses a series of 16 week courses. Students are billed on a course-by-course basis when the student first attends a class, or at the beginning of each semester for ground students.

        If the commencement of the student's course of study precedes the receipt of cash from the student's source of funding, the Company establishes a receivable and corresponding deferred revenue for the amount of the student's tuition. Cash received either directly from the student or from the student's source of funding first reduces the balance of accounts receivable due from the student and then increases deferred revenue to the extent that cash received exceeds revenue recognized. The balance of accounts receivable that have been recognized for services that have not yet been provided and deferred revenue that has not yet been received in cash as of December 31, 2006 and 2007 and September 30, 2008 was $0.9 million, $2.1 million and $9.0 million, respectively.

        If a student withdraws from a program prior to a specified date, any paid but unearned tuition is refunded. The Company records a provision for expected refunds and reduces revenue to the amount that is not expected to be subsequently refunded. Provisions for expected refunds have not been material to any period presented.

        Technology fees are one-time start up fees charged to each new undergraduate online student. Technology fee revenue is recognized ratably over the average expected term of a student. Other miscellaneous fees include fees for textbooks and other services, such as commencements, and are recognized upon delivery of the goods or when the related service is performed.

Income Taxes

        The Company accounts for its income taxes using the liability method whereby deferred tax assets and liabilities are determined based on temporary differences between the bases used for financial reporting and income tax reporting purposes. Deferred income taxes are provided based on the enacted tax rates expected to be in effect at the time such temporary differences are expected to reverse. A

F-10

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

valuation allowance is provided for deferred tax assets if it is more likely than not that the Company will not realize those tax assets through future operations.

Stock-Based Compensation

        Effective January 1, 2006, the Company adopted the provisions of SFAS 123R ("SFAS 123R"), Share-Based Payment. SFAS 123R, which is a revision of SFAS 123, Accounting for Stock-Based Compensation, replaces the Company's previous accounting for share-based awards under Accounting Principles Board Opinion No. 25 ("APB 25"), Accounting for Stock Issued to Employees. The Company previously accounted for stock-based compensation using the intrinsic value method as defined in APB 25. Prior to January 1, 2006, no stock-based employee compensation cost was recorded under APB 25.

        The Company adopted SFAS 123R using the prospective method. Under this transition method, compensation cost recognized includes the cost for all stock options granted or modified after January 1, 2006. The cost for all stock-based awards granted subsequent to January 1, 2006 represents the grant-date fair value that was estimated, in accordance with the provisions of SFAS 123R. The cost for all share-based awards granted prior to January 1, 2006 and modified after January 1, 2006 was calculated based upon the increase in fair value of the options from the original grant date to the modification date. Outstanding stock options at January 1, 2006 that were measured at intrinsic value under APB 25 and that have not been modified shall continue to be measured at intrinsic value, until they are settled or modified. Compensation expense for options is recognized in the consolidated statement of operations, net of estimated forfeitures, using the graded vesting method over the requisite service period. Stock-based compensation expense totaled $323,000 and $106,000 for the years ended December 31, 2006 and 2007, respectively, and $106,000 and $125,000 for the nine months ended September 30, 2007 and 2008, respectively.

Comprehensive Income (Loss)

        There are no comprehensive income (loss) items other than net income (loss). Comprehensive income equals net income (loss) for all of the periods presented.

Instructional Costs and Services

        Instructional costs and services consist primarily of costs related to the administration and delivery of the Company's educational programs. This expense category includes compensation for faculty and administrative personnel, costs associated with online faculty, curriculum and new program development costs, bad debt expense, financial aid processing costs, technology license costs and costs associated with other support groups that provide services directly to the students. Instructional costs and services also include an allocation of facility and depreciation costs.

Marketing and Promotional

        Marketing and promotional expenses include compensation of personnel engaged in marketing and recruitment, as well as costs associated with purchasing leads and producing marketing materials. The Company's marketing and promotional expenses are generally affected by the cost of advertising media and leads, the efficiency of its marketing and recruiting efforts, compensation for its enrollment

F-11

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

personnel and expenditures on advertising initiatives for new and existing academic programs. Marketing and promotional expenses also include an allocation of facility and depreciation costs.

        Advertising costs are expensed as incurred. Advertising costs, which include marketing leads, events and promotional materials for the years ended December 31, 2005, 2006 and 2007 were $1.5 million, $5.0 million and $15.1 million, respectively, and for the nine months ended September 30, 2007 and 2008 were $10.8 million and $18.9 million, respectively.

General and Administrative

        General and administrative expenses include compensation of employees engaged in corporate management, finance, human resources, information technology, compliance and other corporate functions. General and administrative expenses also include professional services fees, travel and entertainment expenses and an allocation of facility and depreciation costs.

Earnings Per Share

        In accordance with SFAS No. 128, "Computation of Earnings Per Share" and EITF Issue 03-06, "Participating Securities and the Two-Class Method under FASB Statement No. 128" ("SFAS 128"), basic earnings (loss) per common share is calculated by dividing net income available (loss attributable) to common stockholders by the weighted average number of common shares outstanding for the period using the two-class method. Under the two-class method, net income is allocated between common shares and other participating securities based on their participating rights. Diluted earnings (loss) per common share is calculated by dividing net income available (loss attributable) to common stockholders by the weighted average number of common and potential dilutive securities outstanding during the period if the effect is dilutive. The numerator of diluted earnings per share is calculated by starting with income allocated to common shares under the two-class method and adding back income attributable to preferred shares to the extent they are dilutive. Potential common shares consist of incremental shares of common stock issuable upon the exercise of the stock options and warrants and upon conversion of preferred stock.

Segment Information

        The Company operates in one reportable segment as a single educational delivery operation using a core infrastructure that serves the curriculum and educational delivery needs of both its ground and online students regardless of geography. The Company's chief operating decision maker, its Chief Executive Officer, manages the Company's operations as a whole, and no revenue, expense or operating income information is evaluated by the chief operating decision maker on any component level.

Recent Accounting Pronouncements

        In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS 157"), which defines fair value, establishes a framework for measuring fair value and requires additional disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position ("FSP") FAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Pronouncements that Address Fair Value Measurements for Purpose of Lease Classification or Measurement under Statement 13, which amends SFAS 157 to exclude accounting pronouncements that address fair value

F-12

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

measurements for purposes of lease classification or measurement under SFAS 13, Accounting for Leases. In February 2008, the FASB also issued FSP FAS 157-2 Effective Date of FASB Statement No. 157, which delays the effective date of SFAS 157 until the first quarter of 2010 for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). SFAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. The Company adopted SFAS 157 for financial assets and liabilities on January 1, 2008, and such adoption did not have a material impact on its consolidated financial statements.

        In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115 ("SFAS 159"). SFAS 159 expands the use of fair value in accounting but does not affect existing standards which require assets or liabilities to be carried at fair value. If elected, SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company adopted SFAS 159 on January 1, 2008, and such adoption did not have a material impact on its consolidated financial statements.

        In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations ("SFAS 141R"). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its consolidated financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141R is effective for fiscal years beginning after December 15, 2008. The Company does not believe the adoption of SFAS 141R will have a material impact on its consolidated financial statements.

        In June 2008, the FASB ratified EITF Issue 07-5, "Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock" ("EITF 07-5"). Paragraph 11(a) of SFAS No. 133 ("SFAS 133"), Accounting for Derivatives and Hedging Activities, specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to such company's own stock and (b) classified in stockholders' equity in the statement of financial position would not be considered a derivative financial instrument. EITF 07-5 provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer's own stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception. EITF 07-5 will be effective for the first annual reporting period beginning after December 15, 2008, and early adoption is prohibited. Management is currently evaluating whether the adoption of EITF 07-5 will have an impact on the accounting for the conversion features embedded in the Company's redeemable convertible preferred stock. If management determines that the adoption of EITF 07-5 impacts the accounting for the redeemable convertible preferred stock, management may change its conclusion regarding whether the conversion features embedded in the redeemable convertible preferred stock are required to be bifurcated and accounted for separately under SFAS 133.

3. Restatement of Consolidated Financial Statements

        The Company has restated its previously issued consolidated financial statements as of and for the years ended December 31, 2005, 2006 and 2007 and for the nine month period ended September 30, 2008. There were two separate restatements. The first restatement, referred to as the "Restatement of

F-13

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Restatement of Consolidated Financial Statements (Continued)

Financial Statements Audited by Previous Auditors," primarily related to the Company's accounting for leasing transactions, revenue recognition, stock-based compensation and purchase accounting. The second restatement, referred to as the "Restatement of Redeemable Convertible Preferred Stock and Earnings Per Share," primarily relates to the Company's accounting for preferred dividends of redeemable convertible preferred stock, a beneficial conversion feature related to redeemable convertible preferred stock and earnings per share.

Restatement of Financial Statements Audited by Other Auditors

        The Company has restated its previously issued consolidated financial statements as of and for the years ended December 31, 2005 and 2006. The determination to restate these financial statements was made by the Company's management upon identification of errors subsequent to the issuance of the 2005 and 2006 financial statements. The nature of the related errors and adjustments are summarized as follows:

(a)   Leasing transaction:

        The Company was not properly expensing real estate lease rental payments on a straight-line basis in accordance with SFAS No. 13, Accounting for Leases. This error resulted in an understatement of rental expense and other liabilities of $390,000 in the year ended December 31, 2006.

(b)   Intangible assets and allocation of fair value of net assets purchased over purchase price to assets:

        The Company acquired The Franciscan University of the Prairies in early 2005. In connection with the purchase, the Company acquired certain intangible assets, including accreditation and Title IV participation rights, which were not previously recorded. In addition, this acquisition resulted in a fair value of net assets acquired in excess of cost. The difference between cost and fair value of net assets acquired was not properly allocated to assets purchased. This resulted in an understatement of intangible assets of $1.4 million, and an overstatement of property and equipment of $1.4 million and accounts receivable of $32,000 at December 31, 2005 and 2006. The overstatement of property and equipment for these years also resulted in the overstatement of accumulated depreciation and depreciation expense by $185,000 for the year ended December 31, 2005 and the overstatement of accumulated depreciation and depreciation expense by $428,000 and $243,000, respectively, for the year ended December 31, 2006.

(c)   Recognition of technology revenues:

        The Company incorrectly recognized revenue for technology fees at the time the fee was assessed to students. The Company determined that this one-time up-front charge to students should be deferred and recognized ratably over the average expected term of a student. This resulted in the overstatement of revenues for the years ended December 31, 2005 and 2006 of $190,000 and $234,000, respectively, and the understatement of deferred revenues of $145,000 and $423,000 at December 31, 2005 and 2006, respectively and the understatement of accounts receivable of $44,000 at December 31, 2005.

F-14

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Restatement of Consolidated Financial Statements (Continued)

(d)   Calculation of stock-based compensation:

        The Company incorrectly recognized stock-based compensation expense on options granted to employees prior to the grant date of the options. Options were granted to employees in February 2006; however, the expense was recorded in 2005. An entry was necessary in order to remove the expense from the 2005 consolidated financial statements. This resulted in an overstatement of compensation expense and additional paid-in capital of $178,000 for the year ended December 31, 2005. The stock-based compensation expense and additional paid-in capital for the year ended December 31, 2006, was increased by $107,000.

(e)   Scholarships:

        The Company offers scholarships to certain students. Tuition revenue should be shown net of the scholarships. However, in 2006 and 2005, the Company incorrectly recognized scholarships as instructional costs and services expense. Adjustments of $128,000 and $669,000 for the years ended December 31, 2005 and 2006, respectively, were necessary to properly report tuition revenues net of scholarships.

(f)    Other non-material items:

        The Company recorded other adjustments that were not considered material (both individually and in the aggregate) but for which the Company believed it was appropriate to revise its previously reported consolidated financial statements in connection with the restatement. In 2005, the combined impact of these adjustments resulted in the reduction of cash and cash equivalents and the increase of general and administrative expenses of $1,000. In 2006, the combined impact of these adjustments included an increase in cash, accounts receivable, property and equipment, accrued liabilities and deferred revenue of $30,000, $33,000, $7,000, $104,000, and $77,000, respectively, and a reduction in accounts payable of $1,000. These adjustments also resulted in the increase of general and administrative expenses of $93,000.

Restatement of Redeemable Convertible Preferred Stock and Earnings Per Share

        The Company has restated its previously issued consolidated financial statements as of December 31, 2006 and 2007 and for the years ended December 31, 2005, 2006 and 2007 and for the nine month period ended September 30, 2008. The nature of the related errors and adjustments are summarized as follows:

(a)   Preferred dividends:

        The Company determined that in prior periods the carrying amount of its redeemable convertible preferred stock was improperly presented on the consolidated balance sheet as it did not include amounts related to accreted dividends. The Company has adjusted the carrying value of the redeemable convertible preferred stock for the years ended December 31, 2005, 2006 and 2007 to increase the redeemable convertible preferred stock for the accreted dividends, with a corresponding reduction of retained earnings and additional paid-in-capital. The effect of this adjustment increased the carrying value of the redeemable convertible preferred stock and increased stockholders' deficit by $1.7 million, $3.4 million and $5.3 million as of December 31, 2005, 2006 and 2007, respectively.

F-15

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Restatement of Consolidated Financial Statements (Continued)

(b)   Beneficial conversion feature:

        The Company determined that a beneficial conversion feature should have been recorded upon the issuance of its redeemable convertible preferred stock during the year ended December 31, 2005 due to the existence of an optional conversion feature that the holders can exercise at any time which allowed them to receive 201,624,486 shares of common stock. This beneficial conversion feature was measured as the excess of the fair value of the common shares into which the preferred shares are convertible over the accounting conversion price as determined in accordance with EITF 98-5 and EITF 00-27. The adjustment is reflected as an increase of additional paid-in-capital to reflect the beneficial conversion feature upon issuance, with a corresponding reduction of additional paid-in-capital for the related deemed dividend. This adjustment has no impact on total stockholder's deficit as of December 31, 2005, 2006 and 2007 and September 30, 2008, respectively.

(c)   Earnings per share:

        The Company determined that it incorrectly excluded the impact of the deemed dividend related to the above beneficial conversion feature and the potential common shares related to the payment of the accreted value in shares associated with the redeemable convertible preferred stock, as disclosed in Note 11, "Redeemable Convertible Preferred Stock (Series A Convertible Preferred Stock)," from the numerator and denominator, respectively, in its calculation of earnings (loss) per share and also did not correctly apply the two-class method of determining earnings per share under SFAS 128 in periods of net income, for the years ended December 31, 2005 and 2007 and for the nine months ended September 30, 2008.

        The following tables present the adjustments to restate the Company's previously issued consolidated financial statements as of December 31, 2006, and for the years ended December 31, 2005, 2006 and 2007 and for the nine months ended September 30, 2008. There was no impact on the consolidated balance sheet at Decemer 31, 2007 as a result of the restatements (in thousands, except share and per share data):

			As of December 31, 2006
			As Reported		Adjustments			As Restated
ASSETS
Current assets:
	Cash and cash equivalents		$	23	$	31		$	54
	Accounts receivable, net of allowance for doubtful accounts			5,089		1			5,090
	Inventories			209		—			209
	Loans receivable			277		—			277
	Prepaid expenses and other current assets			294		16			310
		Total current assets		5,892		48			5,940
Property and equipment, net				9,972		(935	)		9,037
Intangibles				—		1,402			1,402
Other long-term assets				169		543			712
		Total assets	$	16,033	$	1,058		$	17,091

F-16

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Restatement of Consolidated Financial Statements (Continued)

			As of December 31, 2006
			As Reported			Adjustments			As Restated
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDER'S DEFICIT
Current liabilities:
	Accounts payable		$	1,331		$	(1	)	$	1,330
	Accrued liabilities			3,403			103			3,506
	Deferred revenue			4,899			501			5,400
	Current portion of leases payable			122			3			125
	Current maturities of notes payable			697			—			697
	U.S. Governmental refundable loan funds			221			—			221
		Total current liabilities		10,673			606			11,279
Leases payable, less current maturities				82			(3	)		79
Notes payable, less current portion				3,292			—			3,292
Deferred tax liability				—			543			543
Rent liability				—			390			390
		Total liabilities		14,047			1,536			15,583
Commitments and contingencies (see Note 18)
Redeemable convertible preferred stock				23,200			—			23,200
Stockholders' deficit:
Common stock				148			—			148
Additional paid-in capital				425			(71	)		354
Accumulated deficit				(21,787	)		(407	)		(22,194	)
		Total stockholders' deficit		(21,214	)		(478	)		(21,692	)
		Total liabilities, redeemable convertible preferred stock and stockholders' deficit	$	16,033		$	1,058		$	17,091

F-17

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Restatement of Consolidated Financial Statements (Continued)

		Year ended December 31, 2005
		As Reported			Adjustments			As Restated
Revenue		$	8,269		$	(318	)	$	7,951
Costs and expenses
	Instructional costs and services		5,626			(128	)		5,498
	Marketing and promotional		4,078			—			4,078
	General and administrative		6,551			(361	)		6,190
	Total costs and expenses		16,255			(489	)		15,766
Operating loss			(7,986	)		171			(7,815	)
Other expense, net			(190	)		—			(190	)
	Net loss	$	(8,176	)	$	171		$	(8,005	)
Accretion of preferred dividends						1,344			1,344
Deemed dividend on redeemable convertible preferred stock			—			11,162			11,162
Net loss attributable to common stockholders		$	(8,176	)	$	(12,335	)	$	(20,511	)
Loss per common share
	Basic	$	(0.57	)	$	(0.88	)	$	(1.45	)
	Diluted	$	(0.57	)	$	(0.88	)	$	(1.45	)
Weighted average common shares outstanding used in computing loss per common share:
	Basic		14,131			—			14,131
	Diluted		14,131			—			14,131

F-18

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Restatement of Consolidated Financial Statements (Continued)

		Year ended December 31, 2006
		As Reported			Adjustments			As Restated
Revenue		$	29,521		$	(902	)	$	28,619
Costs and expenses
	Instructional costs and services		13,178			(668	)		12,510
	Marketing and promotional		12,214			—			12,214
	General and administrative		8,359			345			8,704
	Total costs and expenses		33,751			(323	)		33,428
Operating loss			(4,230	)		(579	)		(4,809	)
Other expense, net			(341	)		—			(341	)
	Net loss	$	(4,571	)	$	(579	)	$	(5,150	)
Accretion of preferred dividends						1,718			1,718
Net loss attributable to common stockholders		$	(4,571	)	$	(2,297	)	$	(6,868	)
Loss per common share
	Basic	$	(0.36	)	$	(0.12	)	$	(0.48	)
	Diluted	$	(0.36	)	$	(0.12	)	$	(0.48	)
Weighted average common shares outstanding used in computing loss per common share:
	Basic		14,386			—			14,386
	Diluted		14,386			—			14,386

		Year ended December 31, 2007
		As Reported		Adjustments			As Restated
Net income		$	3,287	$	—		$	3,287
Accretion of preferred dividends					1,856			1,856
Net income available to common stockholders		$	3,287	$	(1,856	)	$	1,431
Earnings per common share
	Basic	$	0.22	$	(0.22	)	$	0.00
	Diluted	$	0.01	$	(0.01	)	$	0.00
Weighted average common shares outstanding used in computing loss per common share:
	Basic		14,900		—			14,900
	Diluted		20,020		—			20,020

F-19

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Restatement of Consolidated Financial Statements (Continued)

		Nine months ended September 30, 2008
		As Reported		Adjustments			As Restated
Net income available to common stockholders		$	19,275		—		$	19,275
Earnings per common share
	Basic	$	1.28	$	(1.21	)	$	0.07
	Diluted	$	0.08	$	(0.06	)	$	0.02
Weighted average common shares outstanding used in computing loss per common share:
	Basic		15,008		—			15,008
	Diluted		44,263		—			44,263

F-20

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Restatement of Consolidated Financial Statements (Continued)

				Year ended December 31, 2005									Year ended December 31, 2006
				As Reported			Adjustments			As Restated			As Reported			Adjustments			As Restated
Cash flows from operating activities
Net loss				$	(8,177	)	$	172		$	(8,005	)	$	(4,571	)	$	(579	)	$	(5,150	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities, net of effects of Acquisitions:
	Depreciation and amortization				679			(185	)		494			978			(243	)		735
	Provision for bad debt				762			98			860			927			33			960
	Warrants issued to lender in connection with credit agreement				7			—			7			—			—			—
	Stock-based compensation				179			(178	)		1			217			106			323
	Gain on disposal of fixed assets				—			—			—			(3	)		—			(3	)
	Common stock issued				—			—			—			50			(50	)		—
	Changes in operating assets and liabilities:
		Accounts receivable			(1,746	)		(53	)		(1,799	)		(4,073	)		(110	)		(4,183	)
		Inventories			(122	)		—			(122	)		(88	)		—			(88	)
		Prepaid expenses and other current assets			157			—			157			(235	)		(17	)		(252	)
		Loans receivable			35			—			35			(5	)		—			(5	)
		Other long-term assets			1			—			1			(147	)		—			(147	)
		Accounts payable			537			1			538			485			(1	)		484
		Accrued liabilities			(850	)		(362	)		(1,212	)		1,959			104			2,063
		Deferred revenue			1,320			158			1,478			3,538			355			3,893
		U.S. Government refundable loans funds			(28	)		245			217			4			—			4
		Other liabilities			2			104			106			(106	)		390			284
			Net cash used in operating activities		(7,244	)		—			(7,244	)		(1,070	)		(12	)		(1,082	)

F-21

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Restatement of Consolidated Financial Statements (Continued)

		Year ended December 31, 2005									Year ended December 31, 2006
		As Reported			Adjustments			As Restated			As Reported			Adjustments			As Restated
Cash flows from investing activities
Capital expenditures			(323	)		—			(323	)		(1,493	)		112			(1,381	)
Proceeds from the sale of assets			(7,697	)		—			(7,697	)		8			—			8
	Net cash used in investing activities		(8,020	)		—			(8,020	)		(1,485	)		112			(1,373	)
Cash flows from financing activities
Proceeds from issuance of preferred stock			10,612			—			10,612			—			—			—
Proceeds from exercise of stock options			—			—			—			—			50			50
Payments on leases payable			(175	)		45			(130	)		(161	)		1			(160	)
Borrowings on leases payable			(130	)		130			—			120			(120	)		—
Net borrowings (payments) on line of credit			—			(49	)		(49	)		—			623			623
Proceeds from notes payable			3,550			—			3,550			671			(671	)		—
Payments on notes payable			—			(126	)		(126	)		(216	)		49			(167	)
	Net cash used in financing activities		13,857			—			13,857			414			(68	)		346
	Net decrease in cash and cash equivalents		(1,407	)		—			(1,407	)		(2,141	)		32			(2,109	)
Cash and cash equivalents at beginning of period			3,570			—			3,570			2,164			(1	)		2,163
Cash and cash equivalents at end of period		$	2,163		$	—		$	2,163		$	23		$	31		$	54
Supplemental disclosures of cash flow information
Cash paid for interest		$	231		$	—		$	231		$	353		$	—		$	353
Supplemental disclosure of noncash investing and financing activities
Purchase of property and equipment		$	—		$	—		$	—		$	—		$	119		$	119

F-22

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

4. Business Combinations

Colorado School of Professional Psychology

        On September 13, 2007, the Company acquired all of the assets and assumed certain liabilities of the Colorado School of Professional Psychology for approximately $0.9 million and subsequently renamed it the University of the Rockies. The acquisition was accounted for as a purchase and, accordingly, the results of operations are included in the consolidated financial statements beginning September 13, 2007, the effective date of the acquisition. The acquisition was funded by the issuance of a note payable to the seller.

        The purchase agreement allowed for an adjustment to the purchase price based on any cash shortfall experienced by the Company as a result of the operations of the University of the Rockies from the date of purchase through December 31, 2007. A cash shortfall of $0.6 million was experienced and the purchase price was adjusted to $0.3 million.

        The purchase price was allocated to the acquired assets and assumed liabilities on the basis of their estimated fair values as of the date of acquisition, as summarized below (in thousands):

Cash		$	636
Accounts receivable, net			60
Prepaid expenses and other current assets			48
Property and equipment			287
Security deposits and other assets			32
Intangible assets—accreditation and Title IV program participation rights			419
Goodwill			76
	Total assets acquired		1,558
Other current liabilities			(391	)
Current leases payable			(55	)
Debt assumed			(791	)
	Total liabilities assumed		(1,237	)
Purchase price (note payable to seller)		$	321

        Pro forma results of operations for the acquisition have not been presented because the effects of the acquisition were not material to our consolidated financial statements.

The Franciscan University of the Prairies

        On March 10, 2005, the Company purchased substantially all the assets and assumed certain liabilities of The Franciscan University of the Prairies for $9.0 million and renamed it Ashford University. The acquisition was accounted for as a purchase and, accordingly, the results of operations are included in the consolidated financial statements beginning March 10, 2005, the effective date of the acquisition.

F-23

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

4. Business Combinations (Continued)

        The purchase price was allocated to the acquired assets and assumed liabilities on the basis of their estimated fair values as of the date of acquisition, as summarized below (in thousands):

		(Restated)
Cash		$	1,303
Accounts receivable, net			377
Prepaid expenses			82
Loan receivable			306
Building and leasehold improvements			6,815
Land			327
Vehicles			12
Furniture and equipment			1,066
Other assets			565
Intangible assets—accreditation and Title IV program participation rights			1,402
	Total assets acquired		12,255
Other current liabilities			(2,283	)
Deferred tax liabilities			(565	)
Debt assumed			(407	)
	Total liabilities assumed		(3,255	)
Purchase price		$	9,000

        The following unaudited pro forma information assumes the acquisition of Ashford University had occurred as of January 1, 2005, the earliest date for which the information is presented below (in thousands except per share data):

	For the year ended December 31,
	2005
	(Unaudited)
Revenue	$	8,990
Net loss		(8,461	)
Basic and diluted earnings per common share	$	(0.60	)

Goodwill and Intangible Assets

        As a result of the purchase of the University of the Rockies, the Company recorded $76,000 in goodwill. Intangible assets were acquired in the purchase of Ashford University in 2005 and the University of the Rockies in 2007. These intangible assets consist of accreditation and Title IV program participation rights ("accreditation") and are considered to have indefinite useful lives. These assets were determined to have indefinite useful lives in accordance with SFAS 142 because the accreditation may be renewed indefinitely at little cost to the Company and the Company intends to renew the accreditation indefinitely. Intangible assets totaled $1.4 million and $1.8 million at December 31, 2006 and 2007, respectively, and $1.8 million at September 30, 2008. The $1.8 million at December 31, 2007 and September 30, 2008 is comprised of $1.4 million relating to Ashford University and $0.4 million relating to the University of the Rockies.

F-24

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

5. Prepaid and Other Current Assets

        Prepaid and other current assets, consist of the following (in thousands):

		As of December 31,
						As of September 30, 2008
		2006		2007
						(Unaudited)
Prepaid expenses		$	182	$	261	$	742
Prepaid licenses			77		153		756
Prepaid insurance			6		12		70
Other current assets			45		135		285
	Total prepaid and other current assets	$	310	$	561	$	1,853

        Included in prepaid expenses as of September 30, 2008 are capitalizable expenses relating to the Company's potential initial public offering. Included in prepaid licenses are the license fee and annual software maintenance costs relating to Blackboard and CampusVue software. Other current assets include certain short term rent deposits and employee advances.

6. Property and Equipment

        Property and equipment, net, consist of the following (in thousands):

		As of December 31,
								As of September 30, 2008
		2006			2007
								(Unaudited)
Land		$	327		$	327		$	327
Buildings			6,109			6,109			6,109
Furniture, office equipment and software			2,999			6,768			16,668
Leasehold improvements			905			2,543			2,825
Vehicles			12			43			46
	Total property and equipment		10,352			15,790			25,975
Less accumulated depreciation and amortization			(1,315	)		(2,550	)		(4,097	)
	Property and equipment, net	$	9,037		$	13,240		$	21,878

        Depreciation and amortization expense associated with property and equipment, including assets under capital lease, totaled $0.5 million, $0.7 million and $1.2 million for the years ended December 31, 2005, 2006 and 2007, respectively, and $0.8 million and $1.5 million for the nine months ended September 30, 2007 and 2008, respectively.

F-25

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

7. Accrued Liabilities

        Accrued liabilities consist of the following (in thousands):

		As of December 31,
						As of September 30, 2008
		2006		2007
						(Unaudited)
Accrued salaries and wages		$	1,275	$	2,097	$	4,566
Accrued vacation			180		585		1,176
Accrued expenses			2,051		3,190		4,767
Accrued income taxes payable			—		164		3,323
	Total accrued liabilities	$	3,506	$	6,036	$	13,832

8. Notes Payable and Long-Term Debt

        In April 2004, the Company entered into a credit agreement ("Credit Agreement") with Comerica Bank that provides for a revolving credit facility ("Revolving Credit Facility") of $6.0 million, which includes a letter of credit sub-limit ("LC Sub-limit") of $3.7 million. The Credit Agreement also provides for an equipment line of credit ("Equipment Line") not to exceed $200,000 and allows the Company to borrow up to $3.0 million from the Company's majority stockholder.

        In March 2005, pursuant to the terms of the Credit Agreement, the Company obtained a term loan ("Term Loan") of $3.5 million with a maturity date of March 9, 2008. Borrowings under the Term Loan require 36 monthly principal installments of $14,000, with the balance due at maturity. The Term Loan bears interest, payable monthly, at a rate equal to 1.00% above the prime rate.

        In March 2008, the Credit Agreement was amended to (i) reduce the maximum available borrowing capacity under the Revolving Credit Facility from $6.0 million to $5.0 million and reduce the LC Sub-limit from $3.7 million to $2.1 million, (ii) extend the maturity date for the Revolving Credit Facility from March 9, 2008 to March 1, 2011 and (iii) require principal payments on outstanding borrowings under the Term Loan as of the date of the amendment to be made in 36 monthly installments based on a ten-year amortization schedule, with the balance due at maturity.

        In June 2008, the Credit Agreement was further amended to (i) increase the LC Sub-limit from $2.1 million to $5.0 million and (ii) extend the maturity date of the LC Sub-limit from June 12, 2008 to June 12, 2010.

        In October 2008, the Credit Agreement was further amended to (i) increase the maximum available borrowing capacity under the Revolving Credit Facility from $5.0 million to $15.0 million, (ii) increase the LC Sub-limit from $5.0 million to $14.2 million and (iii) modify the maturity date of the LC Sub-limit from June 12, 2010 to October 31, 2009.

        As of December 31, 2006 and 2007, the Company had borrowings outstanding under the Revolving Credit Facility of $0.5 million and $1.0 million, respectively. The Company had no borrowings outstanding under the Revolving Credit Facility as of September 30, 2008. The Company caused the bank to issue letters of credit aggregating to $5.2 million as of September 30, 2008. As of December 31, 2006 and 2007, the Company had borrowings outstanding under the Equipment Line of $199,000 and $114,000, respectively. The Company had no borrowings outstanding under the Equipment Line as of September 30, 2008.

F-26

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

8. Notes Payable and Long-Term Debt (Continued)

        The Company had outstanding borrowings under the Term Loan of $3.3 million and $3.1 million as of December 31, 2006 and 2007, respectively. As of September 30, 2008, the Company had repaid the Term Loan in full.

        Under the Credit Agreement, the Company is subject to certain limitations including limitations on its ability to incur additional debt, make certain investments or acquisitions and enter into certain merger and consolidation transactions, among other restrictions. The Company is also required to maintain compliance with a minimum tangible net worth financial covenant. As of December 31, 2006, 2007 and September 30, 2008, the Company was in compliance with the financial covenant in its Credit Agreement.

        On September 13, 2007, in connection with the acquisition of the Colorado School of Professional Psychology, the Company entered into a non-interest bearing note payable agreement. The agreement provided for a note payable to the sellers in a principal amount of $0.9 million. In addition, the agreement allowed for an adjustment to the consideration paid based upon a projected cash flow shortfall on a dollar for dollar basis from the date of purchase through December 31, 2007. A cash shortfall was experienced of $0.6 million and the purchase price and resulting note were adjusted to $0.3 million. The note is to be paid monthly in equal installments over a 4-year term. The outstanding balances as of December 31, 2007 and September 30, 2008 were $321,000 and $254,000, respectively.

        The Company has also entered into other long-term debt arrangements that are immaterial.

        At December 31, 2007 there is no material difference between the fair value and the carrying amount of the Company's note payable and long-term debt.

        As of December 31, 2007, future annual principal payments of outstanding debt obligations are as follows (in thousands):

Years Ending December 31,
2008	$	1,580
2009		508
2010		497
2011		497
2012		416
Thereafter		1,627
		5,125
Less: current portion		(1,580	)
	$	3,545

9. Lease Obligations

        The Company leases certain office facilities and office equipment under non-cancelable operating lease arrangements that expire at various dates through March 2015. The office leases contain certain renewal options. Rent expense under non-cancelable operating lease arrangements is accounted for on a straight-line basis and totaled $0.1 million, $0.9 million and $3.0 million for the years ended

F-27

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

9. Lease Obligations (Continued)

December 31, 2005, 2006 and 2007, respectively. Rent expense totaled $2.2 million and $3.5 million for the nine months ended September 30, 2007 and 2008, respectively.

        The following table summarizes the appropriate future minimum rental payments under non-cancelable operating lease arrangements in effect at December 31, 2007 (in thousands):

Years Ending December 31,
2008	$	5,682
2009		9,316
2010		8,895
2011		8,331
2012		8,584
Thereafter		48,844
Total minimum payments	$	89,652

        In January 2008, the Company entered into a non-cancelable lease agreement to rent certain office space in San Diego, California for a ten year period through July 2018. The Company has the option to extend the term of the lease for two additional 60 month periods. Total minimum lease payments required under the lease agreement are $75.6 million.

        The Company also leases office equipment under capital leases expiring in various years through October 2012. The assets are included in the equipment classification of property and equipment and totaled $0.5 million, $0.9 million and $1.0 million, as of December 31, 2006 and 2007 and September 30, 2008, respectively. Accumulated depreciation on equipment under capital leases totaled $0.3 million, $0.4 million and $0.5 million at December 31, 2006 and 2007 and as of September 30, 2008, respectively.

        Future minimum lease payments under capital leases at December 31, 2007 are as follows (in thousands):

Years Ending December 31,
2008		$	177
2009			162
2010			121
2011			81
2012			56
	Total minimum payments	$	597
Less: Amount representing interest			(49	)
	Present value of minimum lease payments	$	548

F-28

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

10. Earnings Per Share

        The following table sets forth the computation of the basic and diluted earnings per share for the periods indicated (in thousands, except share and per share data):

		Year Ended December 31,									Nine Months Ended September 30,
		2005			2006			2007			2007			2008
											(Unaudited)
Numerator:
	Net income (loss)	$	(8,005	)	$	(5,150	)	$	3,287		$	988		$	20,778
	Effect of preferred dividends		(1,344	)		(1,718	)		(1,856	)		(1,392	)		(1,503	)
	Deemed dividend on preferred stock		(11,162	)		—			—			—			—
	Net income (loss attributable) to common stockholders	$	(20,511	)	$	(6,868	)	$	1,431		$	(404	)	$	19,275
Denominator:
	Weighted average common shares outstanding		14,131			14,386			14,900			14,858			15,008
	Effect of dilutive options		—			—			5,120			—			24,419
	Effect of dilutive warrants		—			—			—			—			4,836
	Diluted weighted average common shares outstanding		14,131			14,386			20,020			14,858			44,263
Earnings (loss) per share:
Basic		$	(1.45	)	$	(0.48	)	$	0.00		$	(0.03	)	$	0.07
Diluted		$	(1.45	)	$	(0.48	)	$	0.00		$	(0.03	)	$	0.02

        The computation of dilutive shares outstanding excludes the following securities:

(a)

Redeemable convertible preferred stock:

        The computation of dilutive shares outstanding excludes the equivalent common shares that would be related to both the accreted value and the optional conversion feature of the redeemable convertible preferred stock for the periods indicated as they were in periods of loss, or the effect of applying the two-class method was anti-dilutive.

	Year Ended December 31,						Nine Months Ended September 30,
	2005		2006		2007		2007		2008
							(Unaudited)
Redeemable convertible preferred stock		448,733		508,510		442,222		442,222		272,008

(b)

Option and warrants:

        The computation of dilutive shares outstanding excludes stock options and warrants to purchase shares of common stock for the periods indicated as they were either in periods of loss or as the

F-29

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

10. Earnings Per Share (Continued)

exercise price were greater than the average market price of our common stock and therefore the effect would be anti-dilutive.

	Year Ended December 31,						Nine Months Ended September 30,
	2005		2006		2007		2007		2008
							(Unaudited)
Options		11,043		15,886		—		23,770		—
Warrants		7,067		7,101		7,101		7,101		173

        The Company calculated earnings per share using the two-class method under the guidelines of FAS 128 to reflect the participation rights of each class and series of stock. Under FAS 128, basic net income is computed for common stock outstanding during the period by dividing net income allocated to the participation rights of each class by the weighted average number of common shares outstanding during the period.

        The following presents the net income allocated to each class of common stock in the calculation of basic earnings per share for the year ended December 31, 2007 and for the nine month period ended September 30, 2008:

	December 31, 2007		September 30, 2008
Net income attributable to common stock	$	1,431	$	19,275
Income allocated to redeemable convertible preferred stock	$	1,856	$	1,503
Net income	$	3,287	$	20,778

December 31, 2007:	Weighted Avg Shares		Income Allocation
Common stock		14,900	$	47
Redeemable convertible preferred stock		442,222	$	1,384
Total			$	1,431

September 30, 2008:	Weighted Avg Shares		Income Allocation
Common stock		15,008	$	1,008
Redeemable convertible preferred stock		272,008	$	18,267
Total			$	19,275

        The numerator of diluted earnings per share is computed by starting with the numerator of basic earnings per share and adding back income attributable to the participation rights of redeemable convertible preferred stock to the extent such shares are dilutive.

        The denominator of diluted earnings per share includes the incremental potential common shares issuable upon the following events to the extent their effect is dilutive:

(i)

Exercise of stock options and warrants;

F-30

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

10. Earnings Per Share (Continued)

(ii)

Optional conversion of all outstanding shares of Series A Convertible Preferred Stock with each share of Series A Convertible Preferred Stock being converted into 10.194210419 shares of Common Stock upon the closing of this offering; and



(iii)

Issuance of            shares of Common Stock at the assumed offering price of            per share in payment of the accreted value of $            on the redeemable convertible preferred stock to the holders of Series A Convertible Preferred Stock.

        There was no difference between income allocated to the participation rights of the various classes in computing basic and diluted earnings per share as all potential common shares of redeemable convertible preferred stock were anti-dilutive.

Unaudited pro forma earnings per share

        Pro forma basic earnings per share has been calculated assuming the optional conversion of all outstanding shares of the redeemable convertible preferred stock into shares of common stock immediately prior to the closing of the Company's initial public offering, with each share of the redeemable convertible preferred stock converting into 10.194210419 shares of common stock. See Note 11, "Redeemable Convertible Preferred Stock (Series A Convertible Preferred Stock)." Pro forma diluted earnings per share further includes the incremental shares of common stock issuable upon the exercise of stock options and warrants.

        The following table sets forth the computation of unaudited pro forma basic and diluted earnings per share for the periods indicated (in thousands, except share and per share data):

		Year Ended December 31, 2007		Nine Months Ended September 30, 2008
Numerator:
	Net income	$	3,287	$	20,778
Denominator:
	Weighted average number of common shares outstanding		14,900		15,008
	Add: Pro forma adjustments to reflect assumed weighted average effect of conversion of redeemable convertible preferred stock		201,624		201,624
Denominator for pro forma basic earnings per share			216,524		216,632
	Add: Pro forma adjustments to reflect assumed weighted average effect of exercise of common stock options and shares subject to repurchase		5,120		24,419
	Add: Pro forma adjustments to reflect assumed exercise of outstanding warrants		—		4,836
Denominator for pro forma diluted earnings per share			221,645		245,887
Pro forma earnings per share, basic		$	0.02	$	0.10
Pro forma earnings per share, diluted		$	0.01	$	0.08

F-31

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

10. Earnings Per Share (Continued)

Unaudited supplemental pro forma earnings per share

        Supplemental basic pro forma earnings per share has been calculated assuming (i) the optional conversion of all outstanding shares of the redeemable convertible preferred stock into shares of common stock immediately prior to the closing of the Company's initial public offering, with each share of the redeemable convertible preferred stock converting into 10.194210419 shares of common stock, and (ii) the issuance of            shares of common stock at the assumed initial public offering price of $            per share in payment of the accreted value of $            on the redeemable convertible preferred stock to the holders thereof. See Note 11, "Redeemable Convertible Preferred Stock (Series A Convertible Preferred Stock)." Supplemental pro forma diluted earnings per share further includes the incremental shares of common stock issuable upon the exercise of stock options and warrants.

        The following table sets forth the computation of supplemental pro forma basic and diluted earnings per share (in thousands, except per share data):

		Year Ended December 31, 2007		Nine Months Ended September 30, 2008
Numerator:
	Net income	$	3,287	$	20,778
Denominator:
	Weighted average number of shares outstanding		14,900		15,008
	Add: Pro forma adjustments to reflect assumed weighted average effect of conversion of redeemable convertible preferred stock		201,624		201,624
	Add: Pro forma adjustments to reflect the portion of this offering and the application of the net proceeds therefrom necessary to pay the accreted value of $      on the outstanding shares of redeemable convertible preferred shares
Denominator for supplemental pro forma basic earnings per share
	Add: Pro forma adjustments to reflect assumed weighted average effect of conversion of common stock options and shares subject to repurchase
	Add: Pro forma adjustments to reflect assumed net exercise of outstanding warrants
Denominator for supplemental pro forma diluted earnings per share
Supplemental pro forma earnings per share, basic		$		$
Supplemental pro forma earnings per share, diluted		$		$

11. Redeemable Convertible Preferred Stock (Series A Convertible Preferred Stock)

        The Company's certificate of incorporation, which includes the terms of the redeemable convertible preferred stock, was last amended July 29, 2005. The discussion below reflects the terms of redeemable convertible preferred stock set forth in the most recent amendment.

F-32

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

11. Redeemable Convertible Preferred Stock (Series A Convertible Preferred Stock) (Continued)

Ranking

        The redeemable convertible preferred stock ranks senior to any other future class of preferred stock and to common stock.

Dividends

        The holders of redeemable convertible preferred stock shall not be entitled to any dividends except in the event that the Company shall declare, set aside or pay any dividend on the common stock (other than dividends payable solely in additional shares of common stock), in which case holders of the redeemable convertible preferred stock will participate in any such dividends on a per share as-converted basis.

        Such dividends are payable when and as declared by the Company's board of directors. No preferred stock dividends have been declared by the Company's board of directors at December 31, 2006, 2007 and September 30, 2008.

Voting Rights

        Each issued and outstanding share of redeemable convertible preferred stock shall be entitled to the number of votes equal to the number of shares of common stock into which each such share of redeemable convertible preferred stock is convertible with respect to matters presented to the stockholders of the Company for their action or consideration.

Optional Conversion Feature

        Each share of redeemable convertible preferred stock is convertible, at the option of the holder, at any time into shares of common stock at a conversion rate of 10.194210419 shares of common stock per share of redeemable convertible preferred stock. The applicable conversion rate is subject to adjustment from time to time. As of December 31, 2007 and September 30, 2008, 201.6 million shares of common stock would be issued upon optional conversion of all outstanding shares of redeemable convertible preferred stock.

        Upon an optional conversion, the holder is entitled to receive shares of common stock as discussed above in addition to the payments discussed under "Preferred Dividends: Payments upon optional conversion." The Company recorded a deemed dividend of $11.2 million related to the optional conversion feature associated with grants of redeemable convertible preferred stock issued in 2005. This beneficial conversion feature was measured at the excess of the fair value of the common shares into which the preferred shares are convertible over the accounting conversion price as determined in accordance with EITF 98-5 and EITF 00-27. The Company has not issued redeemable convertible preferred stock since 2005.

Preferred Dividends

(a)   Payments upon liquidation, dissolution or winding up of the Company:

        Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of redeemable convertible preferred stock are entitled to receive an amount equal to the sum of (i) the "accreted value" (as defined below) of the shares of redeemable convertible preferred stock plus (ii) any dividends declared but unpaid on the shares of redeemable convertible preferred stock. The term "accreted value" means an amount equal to the sum of (i) the "stated value" (as defined

F-33

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

11. Redeemable Convertible Preferred Stock (Series A Convertible Preferred Stock) (Continued)

below) for a share of redeemable convertible preferred stock plus (ii) 8% per year of the stated value, compounding annually and commencing on the date of issuance of such share. The term "stated value" means $1.00 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, stock distribution or combination with respect to the redeemable convertible preferred stock. The amount by which the accreted value exceeds the stated value for any share of redeemable convertible preferred stock is referred to as the "accreted dividend" for such share. At the option of the holder, the accreted value may be paid in cash or shares of common stock valued at current fair market value.

        With respect to the payment of amounts described in the preceding paragraph, each of the following events is deemed to be a "liquidation, dissolution or winding up" of the Company: (i) the consolidation with or into another corporation in which the stockholders of record of the Company own less than 50% or the voting securities of the surviving corporation; (ii) the sale of substantially all the assets of the Company; (iii) the sale of securities of the Company representing more than 50% of the voting securities (other than a qualified public offering); and (iv) a sale to Warburg Pincus, the majority stockholder of the Company, or its successors or assigns.

(b)   Payments upon optional conversion:

        Upon an optional conversion of shares of redeemable convertible preferred stock, the holder of such shares is entitled to receive (in addition to the common stock acquirable upon conversion of such shares) an amount equal to (i) the accreted value of such shares plus (ii) any dividends declared but unpaid on such shares. At the option of the holder, the accreted value may be paid in cash or shares of common stock valued at current fair market value.

        The Company has recorded preferred dividends of $1.3 million, $1.7 million, $1.9 million, $1.4 million and $1.5 million for the years ended 2005, 2006 and 2007 and for the nine month periods ended September 30, 2007 and 2008, respectively. At December 31, 2006, 2007 and September 30, 2008, the amount of the accreted dividends was $3.4 million, $5.3 million and $6.8 million, respectively. At December 31, 2006, 2007 and September 30, 2008, the accreted value (carrying value) of the redeemable convertible preferred stock was $23.2 million, $25.0 million and $26.6 million, respectively. No dividends have been declared to date on the shares of redeemable convertible preferred stock.

Mandatory Conversion

        If not earlier converted pursuant to the optional conversion feature, each share of the redeemable convertible preferred stock will automatically convert into shares of common stock at its then effective conversion rate (10.194210419 shares of common stock per share of redeemable convertible preferred stock at December 31, 2007 and September 30, 2008), upon the closing of an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933 in which the net proceeds to the Company are not less than $25.0 million and the shares of common stock are designated for trading on the New York Stock Exchange, the Nasdaq National Market or the American Stock Exchange, or at any time upon the vote to so convert of the holders of at least a majority of the redeemable convertible preferred stock.

Redemption

        If, after seven years of the initial issuance of the redeemable convertible preferred stock, the Company has not consummated a liquidity event or a qualified public offering and the optional conversion feature has not been exercised, the holders of a majority of the redeemable convertible

F-34

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

11. Redeemable Convertible Preferred Stock (Series A Convertible Preferred Stock) (Continued)

preferred stock will have the right to require the Company to redeem any or all of their redeemable convertible preferred stock at a price in cash equal to the accreted value, plus any declared, but unpaid dividends.

12. Stock-Based Compensation

        In January 2006, the Company adopted its 2005 Stock Incentive Plan ("2005 Plan") pursuant to which it may award stock options and other stock-based awards. The board of directors of the Company determines eligibility, vesting schedules and exercise prices for options granted under the 2005 Plan. The exercise price of options granted under the 2005 Plan is equal to the fair market value of the Company's common stock as of the date of grant or modification. Options are typically exercisable for a period of ten years after the date of grant, subject to continuing service to the Company.

        With respect to vesting:

•

Stock options issued to founders of the Company ("founders' options") become exercisable ratably over a two-year period from the date of grant.

•

Time vested options become exercisable as follows: 25% on the first anniversary of the grant date, 2% on each monthly anniversary from months 13 through 45, and 3% on each monthly anniversary from months 46 through 48.

•

Performance vested options become exercisable 25% in each year over a four year period if certain performance targets are met by the Company.

•

Exit vested options become exercisable only if an "exit event" or "change in control", as defined by the option agreements, occurs.

        All options granted in 2006, 2007 and 2008 were pursuant to the 2005 Plan, except for options to purchase an aggregate of 295,088 shares of common stock granted to certain members of management in February 2006.

        The Company has recorded $323,000 and $106,000 of compensation expense related to stock options for the years ended December 31, 2006 and 2007, and $106,000 and $125,000 for the nine months ended September 30, 2007 and 2008 respectively, in accordance with SFAS 123R. As of December 31, 2006 and 2007, there was $59,000 and $146,000, respectively, of unrecognized compensation costs related to time vested options. As of December 31, 2006 and 2007, there was $188,000 and $252,000, respectively, of unrecognized compensation costs related to performance vested options. As of December 31, 2006 and 2007, there was $365,000 and $365,000, respectively, of unrecognized compensation costs related to exit vested options. As of September 30, 2008, there was $134,000, $136,000 and $365,000 unrecognized compensation costs related to time vested options, performance vested options and exit vested options, respectively. Unearned stock-based compensation is being amortized over the vesting term using an accelerated graded method in accordance with FASB Interpretation No. 28 (FIN 28). These costs are expected to be recognized over a weighted average period of 2.59 and 3.11 years, at December 31, 2006 and 2007, and 3.63 years at September 30, 2008, respectively.

F-35

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

12. Stock-Based Compensation (Continued)

        Stock option activity is summarized as follows:

		Options Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Balance at December 31, 2005			25,518,179		$	0.25
	Granted		7,044,381		$	0.07
	Exercised		(705,966	)	$	0.07
	Forfeitures		(678,282	)	$	0.07
Balance at December 31, 2006			31,178,312		$	0.07
	Granted		8,978,516		$	0.13
	Exercised		(164,983	)	$	0.07
	Forfeitures		(237,415	)	$	0.07
Balance at December 31, 2007			39,754,430		$	0.08		7.32	$	1,456,951
	Granted		—		$	—
	Exercised		—		$	—
	Forfeitures		(30,000	)	$	0.13
Balance at September 30, 2008			39,724,430		$	0.08		6.56	$	95,203,006
Vested and expected to vest at December 31, 2007			39,037,625		$	0.08		5.19	$	1,436,995
Exercisable at December 31, 2007			15,860,936		$	0.07		6.48	$	791,737
Vested and expected to vest at September 30, 2008			39,131,576		$	0.08		6.01	$	93,791,813
Exercisable at September 30, 2008			19,962,622		$	0.07		5.98	$	48,037,127

        The fair value of the options vested at December 31, 2007 and September 30, 2008 is $1.9 million and $49.5 million, respectively.

        The weighted average grant-date estimated fair value of options granted during the years ended December 31, 2006 and 2007 was $0.04 and $0.05 per share, respectively. No options were granted during the nine months ended September 30, 2008. As of September 30, 2008 no options issued under the plan have expired.

        During 2006 and 2007, 532,935 and 114,683 time vested options and 173,031, and 50,300 performance vested options, respectively, were exercised. These options had a total intrinsic value at the time of exercise of $14,000 and $8,000 in 2006 and 2007, respectively. The Company received $50,000 and $12,000 in cash from the exercise of options as of December 31, 2006 and 2007, respectively. No options were exercised in the nine months ended September 30, 2008. During 2006 and 2007, and the nine month period ended September 30, 2008, respectively, 678,282, 237,415 and 30,000, time and performance vested options were forfeited.

        The Company has reserved 44,383,342 shares of common stock for the exercise of existing stock options and stock options available for grant as of both December 31, 2007 and September 30, 2008.

F-36

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

12. Stock-Based Compensation (Continued)

        The fair value of each option award granted during the years ended December 31, 2006 and 2007 was estimated on the date of grant using the Black-Scholes option pricing model. The Company's determination of the fair value of share-based awards is affected by the Company's common stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the expected stock price volatility over the expected life of the awards and actual and projected employee stock option exercise behavior with the following weighted average assumptions:

	2006			2007
	(restated)
Risk free interest rate		4.65	%		3.55	%
Expected dividend yield		—			—
Expected volatility		48.14	%		40.72	%
Expected life (in years)		6.1			6.1

        The risk-free interest rate is based on the currently available rate on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the option converted into a continuously compounded rate. The expected volatility of stock options is based on an average of expected option terms disclosed by a peer group of publicly traded companies comparable to the Company. In evaluating comparability, the Company considered factors such as industry, stage of life cycle and size. The expected life of the Company's options is based on management's estimate. The dividend yield reflects the fact that the Company has never declared or paid any cash dividends and does not currently anticipate paying cash dividends in the future.

        No options were granted in 2005. During 2006, the Company modified certain option awards granted in previous years to 15 individuals by reducing the exercise price from $0.25 to $0.07. No other terms of the awards were modified. The fair value of each option award modified during the year ended December 31, 2006 was estimated on the date of modification based upon the increase in fair value from the original grant date, as calculated using the Black-Scholes option pricing model. The total incremental compensation cost recorded as a result of the modification was $228,000 and $52,000 for the years ended December 31, 2006 and 2007, respectively.

        Prior to adopting the provisions of SFAS 123R, the Company recorded compensation expense for employee stock options based upon their intrinsic value on the date of grant pursuant to APB Opinion No. 25. Options granted in 2003 and 2004 had no intrinsic value on the date of grant and thus no compensation cost was recorded. Had compensation expense for employee stock options been determined based on the fair value of the options on the date of grant, the Company's net loss would have been as follows (in thousands):

	2005
	(Restated)
Net loss, as reported	$	(8,005	)
Stock-based employee compensation expense under the fair value method		(406	)
	$	(8,411	)

        Both the basic and diluted net loss per share due to the impact of this additional net loss for the year ended December 31, 2005 were $0.69.

F-37

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

12. Stock-Based Compensation (Continued)

Common Stock Valuations

        The exercise prices of stock options granted prior to January 2008 were determined by the Company's board of directors based on the estimated fair value of the underlying common stock. The common stock valuations were based on the combination of an income approach and a market value approach, which were used to estimate the total value of the company. The income approach is an estimate of the present value of the future monetary benefits expected to flow to the owners of a business. It requires a projection of the cash flows that the business is expected to generate. These cash flows are converted to a present value, using a rate of return that accounts for the time value of money after factoring in certain risks inherent in the business. Under the market approach, the value of the Company is estimated by comparing our business to similar businesses whose securities are actively traded in public markets. Valuation multiples are derived from the prices at which the securities trade in public markets and the companies' underlying financial metrics. The valuation multiples are then applied to the equivalent financial metrics of our business. Valuation multiples may be adjusted to account for differences between our company and similar companies for such factors as company size, growth prospects or diversification of operations. The Company then used that enterprise value to estimate the fair value of its common stock in the context of the capital structure as of each valuation date. The valuations were based on estimates and assumptions. If different estimates and assumptions had been used, the valuations could have been different.

        During 2006 and 2007, the Company granted options to purchase the Company's common stock on dates that generally fell on or near the dates of the valuations.

13. Warrants

        From time to time, the Company has issued common stock purchase warrants to various consultants, licensors and lenders. Each warrant represents the right to purchase one share of common stock. The Company issued 180,000 warrants in 2005. The fair value of each warrant granted in 2005 was $0.03. No warrants were granted during the years ended December 31, 2006 and 2007 or during the nine month period ended September 30, 2008.

        The following table summarizes information with respect to all warrants outstanding as of December 31, 2007 and September 30, 2008:

Exercise Price	Warrants outstanding		Expiration Date
$0.25		3,324,741		2013-2015
$0.50		1,302,547		2013
$0.63		1,375,000		2013
$0.65		175,000		2013
$1.00		750,000		2013
$2.00		173,307		2013

        As of December 31, 2007 and September 30, 2008, all 7,100,595 outstanding warrants were exercisable.

F-38

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

14. Income Taxes

        Under SFAS No. 109, Accounting for Income Taxes, the asset and liability method is used in accounting for taxes. Under this method, deferred income tax assets and liabilities result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in tax and deductions in future years.

        The components of income tax expense are as follows (in thousands):

		Year Ended December 31,						For the Nine Months Ended September 30,
		2005		2006		2007		2007		2008
Current:
	Federal		—		—	$	123	$	37	$	4,220
	State		—		—		41		13		1,301
			—		—	$	164	$	50	$	5,521

        There were no deferred items in the income tax expense for the year ended December 31, 2007. No current or deferred provision was recorded for the years ended December 31, 2005 and 2006 due to net operating losses in these years.

        Deferred tax assets and liabilities are comprised of the following (in thousands):

			As of December 31,
			2005			2006			2007
			(Restated)			(Restated)
Deferred tax asset:
	Net operating loss		$	5,730		$	7,495		$	5,072
	Fixed assets			543			371			225
	Bad debt			392			377			616
	Other			29			3			14
	Vacation accrual			—			70			230
	Stock-based compensation			3			125			172
	Deferred rent			—			151			804
	Tax credits			—			—			150
	Contribution carry forward			—			12			—
		Total Deferred Tax Assets		6,697			8,604			7,283
		Valuation allowance		(6,697	)		(8,604	)		(7,283	)
		Net deferred tax assets		—			—			—
Deferred tax liabilities:
	Intangibles			(565	)		(543	)		(556	)
		Total net deferred tax liabilities	$	(565	)	$	(543	)	$	(556	)

        The Company periodically assesses the likelihood that it will be able to recover its deferred tax assets. The Company considers all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible profits. At December 31, 2007, principally because of the lack of consistent

F-39

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

14. Income Taxes (Continued)

earnings history, the Company had concluded that it was more-likely-than-not that its net deferred tax assets would not be realized. However, based upon the earnings results at March 31, 2008, as well as the projected income for the remainder of 2008 and 2009, the Company concluded that it is more-likely-than-not that its net deferred tax assets will be realized. Accordingly, the total valuation allowance of $7.3 million at December 31, 2007 will be fully reversed by December 31, 2008, as a reduction of income tax expense. The valuation allowance has been reversed by $5.8 million as of September 30, 2008.

        At December 31, 2007, the Company had federal net operating loss carry forwards of $13.1 million and state net operating loss carry forwards of $11.5 million, which are available to offset future taxable income. The federal net operating loss carry forwards will begin to expire in 2020. The state net operating loss carry forwards will begin to expire in 2010. During 2008 the State of California enacted legislation which limits the use of operating loss and tax credit carryforwards to offset income for years 2008 and 2009.

        Pursuant to Internal Code Section 382, use of our net operating loss carryforwards may be limited if a cumulative change in ownership of more than 50% occurs within a three-year period. We have performed a Section 382 analysis through December 31, 2007 and have determined that there is no material effect on our net operating loss carryforwards.

        A reconciliation of the income tax (benefit) expense computed using the U.S. federal statutory tax rate (34%) and the Company's provision for income taxes follows (in thousands):

	As of December 31,
	2005			2006			2007
Computed expected federal tax (benefit) expense	$	(2,722	)	$	(1,751	)	$	1,174
State taxes, net of federal benefit		(503	)		(244	)		184
Permanent differences		17			50			149
Other		130			39			(24	)
Intangible assets		(565	)		—			—
Valuation allowance		3,643			1,906			(1,319	)
	$	—		$	—		$	164

        The Company adopted FAS Interpretation 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"), at the beginning of fiscal year 2008. The Company had no material additions to reserves for uncertain tax positions as a result of the implementation of FIN 48.

        The Company and its subsidiaries are subject to U.S. federal income tax and multiple state jurisdictions. The tax years 2003 through 2007 remain open to examination by some or all of the major taxing jurisdictions to which we are subject.

        The Company's continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company expects no material changes in its unrecognized tax benefits for tax positions taken within the next twelve months.

F-40

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

15. Regulatory

        The Company is subject to extensive regulation by federal and state governmental agencies and accrediting bodies. In particular, the Higher Education Act and the regulations promulgated thereunder by the Department of Education subject the Company to significant regulatory scrutiny on the basis of numerous standards that schools must satisfy in order to participate in the various federal student financial assistance programs under Title IV of the Higher Education Act.

        To participate in Title IV programs, an institution must be authorized to offer its programs of instruction by the relevant agency of the state in which it is located, accredited by an accrediting agency recognized by the Department of Education and certified as eligible by the Department of Education. The Department of Education will certify an institution to participate in Title IV programs only after the institution has demonstrated compliance with the Higher Education Act and the Department of Education's extensive regulations regarding institutional eligibility. An institution must also demonstrate its compliance to the Department of Education on an ongoing basis. As of December 31, 2007 and September 30, 2008, management believes the Company is in compliance with the applicable regulations in all material respects.

        The Higher Education Act requires accrediting agencies to review many aspects of an institution's operations in order to ensure that the education offered is of sufficiently high quality to achieve satisfactory outcomes and that the institution is complying with accrediting standards. Failure to demonstrate compliance with accrediting standards may result in the imposition of probation, the requirements to provide periodic reports, the loss of accreditation or other penalties if deficiencies are not remediated or other penalties.

        For each federal fiscal year, the Department of Education calculates a rate of student defaults for each educational institution which is known as a "cohort default rate." An institution may lose its eligibility to participate in some or all Title IV programs if, for each of the three most recent federal fiscal years, 25% or more of its students who became subject to a repayment obligation in that federal fiscal year defaulted on such obligation by the end of the following federal fiscal year. In addition, an institution may lose its eligibility to participate in some or all Title IV programs if its cohort default rate exceeds 40% in the most recent federal fiscal year for which default rates have been calculated by the Department of Education. Ashford University's cohort default rates for the 2004, 2005 and 2006 federal fiscal years, the three most recent years for which information is available, were 2.4%, 4.1% and 4.1%, respectively. The cohort default rates for the University of the Rockies for the 2004, 2005 and 2006 federal fiscal years, the three most recent years for which information is available, were 5.5%, 0.0% and 0.0%, respectively.

        The Department of Education calculates the institution's composite score for financial responsibility based on its (i) equity ratio, which measures the institution's capital resources, ability to borrow and financial viability; (ii) primary reserve ratio, which measures the institution's ability to support current operations from expendable resources; and (iii) net income ratio, which measures the institution's ability to operate at a profit. An institution that does not meet the Department of Education's minimum composite score may demonstrate its financial responsibility by posting a letter of credit in favor of the Department of Education and possibly accepting other conditions on its participation in the Title IV programs. For the year ended December 31, 2007, Ashford University did not meet the composite score standard prescribed by the Department of Education and was required to post a letter of credit in favor of the Department of Education equal to 10% of total Title IV funds received in 2007, to accept provisional certification to participate in Title IV programs and to conform

F-41

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

15. Regulatory (Continued)

to the regulations of heightened cash monitoring level one method of payment. Under the heightened cash monitoring level one method of payment, the Company may not draw down Title IV funds until they are disbursed to our students. Ashford University has posted the required letter of credit in the amount of $12.1 million, which will remain in effect through September 30, 2009. For the fiscal year ended July 31, 2007, the University of the Rockies did not meet the composite score standard prescribed by the Department of Education and was required to post a letter of credit in favor of the Department of Education equal to 30% of total Title IV funds received in the fiscal year ending July 31, 2007, to accept provisional certification to participate in Title IV programs and to conform to the regulations of heightened cash monitoring level one method of payment. The University of the Rockies has posted the required letter of credit in the amount of $0.7 million, which will remain in effect through June 30, 2009.

        In 2007, Ashford University derived 83.9% and the University of the Rockies derived 61.9% of their respective revenues (in each case calculated on a cash basis in accordance with applicable Department of Education regulations) from Title IV programs.

        An institution participating in Title IV programs must correctly calculate the amount of unearned Title IV program funds that have been disbursed to students who withdraw from their educational programs before completion and must return those unearned funds in a timely manner, generally within 45 days of the date the school determines that the student has withdrawn. Under Department of Education regulations, failure to make timely returns of Title IV program funds for 5% or more of students sampled on the institution's annual compliance audit can result in an institution's having to post a letter of credit in an amount equal to 25% of its prior year Title IV returns. If unearned funds are not properly calculated and returned in a timely manner, an institution is also subject to monetary liabilities or an action to impose a fine or to limit suspend or terminate its participation in Title IV programs.

        For the year ended December 31, 2007, Ashford University exceeded the threshold of 5% for late refunds sampled due to human error. As a result, the Company is required to post a letter of credit in favor of the Department of Education equal to 25% of the total refunds in 2007. Ashford University notified the Department of Education of its intention to post this letter of credit, but was advised by the Department of Education that such posting was unnecessary because the existing letter of credit was in excess of the amount required for late funds.

        Because the Company operates in a highly regulated industry, it, like other industry participants, may be subject from time to time to investigations, claims of noncompliance or lawsuits by governmental agencies or third parties, which allege statutory violations, regulatory infractions or common law causes of action. While there can be no assurance that regulatory agencies or third parties will not undertake investigations or make claims against the Company, or that such claims, if made, will not have a material adverse effect on the Company's business, results of operations or financial condition, management believes it has materially complied with all regulatory requirements.

16. Related Party Transactions

Director Agreement

        Ryan Craig, a director of the Company, entered into an agreement with Warburg Pincus in August 2004 to serve on the Company's board of directors and to serve as a consultant in 2004 to the

F-42

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

16. Related Party Transactions (Continued)

Company on behalf of Warburg Pincus. This agreement was amended in December 2008. Under this agreement, Warburg Pincus agreed to compensate Mr. Craig from its equity ownership in the Company. For his director services from August 2004 to August 2008, Mr. Craig earned the right to receive 198,516 shares of the Company's common stock from Warburg Pincus. In his role as a consultant to the Company in 2004, Mr. Craig earned the right to receive 305,826 shares of the Company's common stock from Warburg Pincus. Mr. Craig received an aggregate amount of 504,342 shares of the Company's common stock in January 2009 from Warburg Pincus. The Company will incur an expense in December 2008, equal to the value of these shares. Based on the valuation of the Company on September 30, 2008, the Company estimates the charge will be $1.3 million.

November 2003 Loan from Warburg Pincas to the Company's Chief Executive Officer

        In November 2003, Warburg Pincus loaned $75,000 to Andrew Clark the Company's Chief Executive Officer to finance Mr. Clark's purchase of 75,000 shares of redeemable convertible preferred stock from the Company. 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 is secured by 75,000 shares of Series A Convertible Preferred Stock held by Mr. Clark. While Warburg Pincus does not anticipate difficulty collecting from the executive and enforcing the full-recourse nature of this loan, Warburg Pincus is willing to pursue every available avenue to recover all amounts due under the terms of the loan should the executive not repay the loan.

Line of Credit with Warburg Pincus

        In March 2007, the Company entered into a line of credit with Warburg Pincus under which we could borrow and repay 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% per annum. 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 $98,000 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 the Company's obligations to such college arising from an agreement the Company 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 $500,000 from June 2006 to December 2006. Since January 2007, the maximum amount payable under the guarantee is $100,000. The Company has not recorded a liability for this guarantee as of December 31, 2006 or 2007.

Indemnification Agreements

        The Company's certificate of incorporation and bylaws require the Company to indemnify its directors and executive officers to the fullest extent permitted by Delaware law. Subsequent to

F-43

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

16. Related Party Transactions (Continued)

September 30, 2008, the Company has entered into indemnification agreements with each of its directors and executive officers.

17. Qualified Retirement Plan

        The Company maintains an employee savings plan that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the savings plan, participating employees may contribute a portion of their pre-tax earnings up to the Internal Revenue Service annual contribution limit. Additionally, the Company may elect to make matching contributions into the savings plan at its sole discretion. The Company's total contributions to the 401(k) plan were $37,000, $110,000 and $119,000 for the years ended December 31, 2005, 2006 and 2007, respectively, and were $91,000 and $21,000 for the nine months ended September 30, 2007 and 2008.

18. Commitments and Contingencies

        From time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. The Company is not at this time a party, as plaintiff or defendant, to any legal proceedings which, individually or in the aggregate, would be expected to have a material adverse effect on the Company's business, financial condition, results of operations or cash flows. When the Company becomes aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company records a liability for the loss. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible and the amount involved is material.

19. Concentration of Risk

Concentration of Credit Risk

        In 2007, Ashford University derived 83.9% and the University of the Rockies derived 61.9% of their respective revenues (in each case calculated on a cash basis in accordance with applicable Department of Education regulations) from Title IV programs. Title IV programs are subject to political and budgetary considerations and are subject to extensive and complex regulations. The Company's administration of these programs is periodically reviewed by various regulatory agencies. Any regulatory violation could be the basis for the initiation of potentially adverse actions including a suspension, limitation, or termination proceeding, which could have a material adverse effect on the Company's enrollments, revenues and results of operations.

        Students obtain access to federal student financial aid through a Department of Education prescribed application and eligibility certification process. Student financial aid funds are generally made available to students at prescribed intervals throughout their predetermined expected length of study. Students typically apply the funds received from the federal financial aid programs first to pay their tuition and fees. Any remaining funds are distributed directly to the student.

Concentration of Sources of Supply

        The Company is dependent on a third party provider for its online platform, which includes a learning management system, which stores, manages and delivers course content, enables assignment

F-44

Bridgepoint Education, Inc.

Notes to Consolidated Financial Statements (Continued)

19. Concentration of Risk (Continued)

uploading, provides interactive communication between students and faculty and supplies online assessment tools. The partial or complete loss of this source may have a material adverse effect on the Company's consolidated financial statements.

20. Subsequent Events

        In October 2008, the Company entered into a non-cancelable lease commitment to rent certain office space in San Diego, California for a 12 year period through 2020. Total minimum lease payments required under the lease agreement are $109.7 million.

        As disclosed in Note 16, "Related Party Transactions," Ryan Craig's agreement with the Company's majority shareholder, Warburg Pincus, was amended in December 2008. The Company estimates it will incur an expense of $1.3 million in conjunction with this amendment in December 2008.

        Two holders of the Company's common stock have asserted that the Company took various actions in violation of their legal rights which resulted in an unfair dilution of their interests as holders of shares of common stock. The Company is engaged in discussions with the stockholders, through counsel, in an effort to resolve the concerns of the stockholders without litigation. While the Company believes the claims of the stockholders are without merit and intends to defend vigorously any litigation that is commenced, no assurance can be given that this matter will not have a material adverse effect on the Company's financial condition, results of operation or cash flows.

F-45

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.    Other Expenses of Issuance and Distribution

        The following table sets forth an estimate of the fees and expenses relating to the issuance and distribution of the securities being registered hereby, other than underwriting discounts and commissions, all of which shall be borne by the registrant. All of such fees and expenses, except for the SEC registration fee, are estimated:

SEC registration fee	$	9,039
FINRA filing fee		23,500
NYSE listing fee		*
Transfer agent's fees and expenses		*
Legal fees and expenses		*
Printing fees and expenses		*
Accounting fees and expenses		*
Miscellaneous fees and expenses		*
Total		*

*

Estimate

Item 14.    Indemnification of Directors and Officers

        Section 145 of the Delaware General Corporation Law provides for the indemnification of officers, directors and other corporate agents in terms sufficiently broad to indemnify such persons under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933, as amended. The registrant's current certificate of incorporation and bylaws, as well as the certificate of incorporation and bylaws that will be in effect upon the closing of the registrant's initial public offering, will require the registrant to indemnify its directors and officers to the fullest extent permitted by Delaware law.

        Additionally, as permitted by Delaware law, the registrant has entered into indemnification agreements with each of its directors and officers that require the registrant to indemnify such persons, to the fullest extent authorized or permitted under Delaware law, against any and all costs and expenses (including attorneys', witness or other professional fees) actually and reasonably incurred by such persons in connection with the investigation, defense, settlement or appeal of any action, hearing, suit or other proceeding, whether pending, threatened or completed, to which any such person may be made a witness or a party by reason of (1) the fact that such person is or was a director, officer, employee or agent of the registrant or its subsidiaries, whether serving in such capacity or otherwise acting at the request of the registrant or its subsidiaries and (2) anything done or not done, or alleged to have been done or not done, by such person in that capacity. The indemnification agreements also require the registrant to advance expenses incurred by directors and officers within 20 days after receipt of a written request, provided that such persons undertake to repay such amounts if it is ultimately determined that they are not entitled to indemnification. Additionally, the agreements set forth certain procedures that will apply in the event of a claim for indemnification thereunder, including a presumption that directors and officers are entitled to indemnification under the agreements, and that the registrant has the burden of proof to overcome that presumption in reaching any contrary determination. The registrant is not required to provide indemnification under the agreements for certain matters, including: (1) indemnification beyond that permitted by Delaware law; (2) indemnification for liabilities for which the officer or director is reimbursed pursuant to such insurance as may exist for such person's benefit; (3) indemnification related to disgorgement of profits

II-1

under Section 16(b) of the Securities Exchange Act of 1934; (4) in connection with certain proceedings initiated against the registrant by the director or officer; or (5) indemnification for settlements the director or officer enters into without the registrant's written consent. The indemnification agreements require the registrant to maintain directors' and officers' insurance in full force and effect while any director or officer continues to serve in such capacity, and so long as any such person may incur costs and expenses related to legal proceedings as described above.

Item 15.    Recent Sales of Unregistered Securities.

        Set forth below is information regarding securities sold by the registrant in the past three years which were not registered under the Securities Act.

Stock Option Awards

•

As of November 1, 2008, under its 2005 Amended and Restated Stock Incentive Plan, or 2005 Plan, the registrant had outstanding stock options to directors, officers, employees and consultants to purchase an aggregate of 39,429,342 shares of common stock with a weighted average exercise price of $0.08 per share and had issued 870,949 shares of common stock for an aggregate purchase price of $60,966 upon exercise of options awarded under the 2005 Plan. The stock option grants and the common stock issuances described in this paragraph were made pursuant to written compensatory plans or agreements in reliance on the exemption provided by Rule 701 promulgated under the Securities Act.

•

As of November 1, 2008, the registrant had outstanding stock options issued outside of the 2005 Plan to certain employees to purchase an aggregate of 295,088 shares of common stock with an exercise price of $0.07 per share. The registrant concluded each of such employees qualified as an accredited investor under Rule 501(a) of Regulation D promulgated under the Securities Act based on representations made by the employees at the time of award. The stock option grants were made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.

With respect to the stock option grants that were made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder: (i) no underwriters were involved in the issuances of securities; (ii) each security holder represented to us in connection with the grant of stock options that the security holder was acquiring the securities for investment and not distribution, that security holders could bear the risks of the investment and could hold the securities for an indefinite period of time; (iii) the security holders received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration or an available exemption from such registration; and (iv) the issuance of these securities were made without general solicitation or advertising.

II-2

Item 16.    Exhibits and Financial Statement Schedules

(a)

Exhibits.

Exhibit Number	Description of Document
1.1*	Form of Underwriting Agreement.
2.1	Purchase and Sale Agreement dated December 3, 2004, as amended, among The Franciscan University of the Prairies, the Sisters of St. Francis and the registrant.
2.2	Asset Purchase and Sale Agreement dated September 12, 2007 between the Colorado School of Professional Psychology and the registrant.
3.1**	Fourth Amended and Restated Certificate of Incorporation of the registrant as currently in effect.
3.2**	Form of Fifth Amended and Restated Certificate of Incorporation of the registrant to be effective upon completion of this offering.
3.3**	Amended and Restated Bylaws of the registrant, as amended to date, and currently in effect.
3.4**	Form of Second Amended and Restated Bylaws of the registrant to be effective upon completion of this offering.
4.1*	Specimen of Stock Certificate.
4.2**	Registration Rights Agreement dated November 26, 2003 among Warburg Pincus, Andrew S. Clark, the registrant and other persons named therein.
4.3**	Stockholders' Agreement dated November 26, 2003, as amended, among Warburg Pincus, Andrew S. Clark, the registrant and other persons named therein.
4.4*	Amended and Restated Registration Rights Agreement dated January 7, 2009, along with a Form of Adoption Agreement, among the registrant and the other persons named therein.
5.1*	Opinion of Sheppard, Mullin, Richter & Hampton LLP.
10.1**	Amended and Restated 2005 Stock Incentive Plan.
10.2	2005 Stock Incentive Plan—Form of Stock Option Agreement and Notice of Option Grant for Founders.
10.3	2005 Stock Incentive Plan—Form of Stock Option Agreement and Notice of Option Grant for Charlene Dackerman, Jane McAuliffe, Ross Woodard and other non-executive employees.
10.4	2005 Stock Incentive Plan—Form of Stock Option Agreement and Notice of Option Grant for Andrew S. Clark, Daniel J. Devine, Rodney T. Sheng and Christopher L. Spohn.
10.5*	2009 Stock Incentive Plan.
10.6*	Employee Stock Purchase Plan.
10.7**	Independent Contractor Agreement, as amended, between Robert Hartman and the registrant.
10.8**	Form of Indemnification.
10.9**	Loan and Security Agreement dated April 12, 2004, as amended, among Comerica Bank, Bridgepoint Education Real Estate Holdings, LLC and the registrant.
10.10**	Grid Note dated March 12, 2007 between Warburg Pincus Private Equity VIII, L.P. and the registrant.
10.11	Nominating Agreement between Warburg Pincus and the registrant.
10.12	2005 Stock Incentive Plan—Form of Stock Option Agreement and Notice of Option Grant for Robert Hartman.
10.13*	Amended and Restated 2005 Stock Incentive Plan—Form of Stock Option Agreement and Notice of Option Grant for Charlene Dackerman, Jane McAuliffe, Ross Woodard and other non-executive employees.
10.14*	Amended and Restated 2005 Stock Incentive Plan—Form of Stock Option Agreement and Notice of Option Grant for Andrew S. Clark, Daniel J. Devine, Rodney T. Sheng and Christopher L. Spohn.

II-3

Exhibit Number	Description of Document
10.15*	Office Lease dated January 31, 2008 between Kilroy Realty, L.P. and the registrant related to the 13480 Evening Creek, San Diego, California address.
10.16*	Office Lease and Sublease Agreements related to the 13500 Evening Creek, San Diego, California address.
10.17*	Standard Form Modified Gross Office Lease dated October 22, 2008, and addendum, between Sunroad Centrum Office I, L.P. and the registrant related to the Spectrum Center Lane, San Diego, California address.
10.18*	Office Lease and amendments related to the University of the Rockies Campus located in Colorado Springs, Colorado.
10.19*	Commercial Net Lease dated January 26, 2007, as amended, between Frye Development, Inc. and Center Leaf Partners,  LLC.
10.20*	Blackboard License and Services Agreement dated December 23, 2003, as amended, between Blackboard, Inc. and Ashford University,  LLC (formerly the registrant).
10.21*	Software License Agreement and Campuscare Support Agreement between Campus Management Corp. and the registrant.
10.22*	General Services Agreement dated January 1, 2009 between Affiliated Computer Services, Inc. and Ashford University,  LLC.
10.23*	General Services Agreement dated January 1, 2009 between Affiliated Computer Services, Inc. and University of the Rockies,  LLC.
16.1**	Letter from Clifton Gunderson LLP, Independent registered Public Accounting Firm.
21.1**	List of subsidiaries of the registrant.
23.1*	Consent of Sheppard, Mullin, Richter & Hampton LLP.
23.2	Consent of Independent Registered Public Accounting Firm.
24.1**	Power of Attorney.

*

To be filed by amendment.

**

Previously filed.

II-4

(b)

Financial Statement Schedules.

        Below is Schedule II—Valuation and Qualifying Accounts. All other consolidated financial statement schedules are omitted because they are not applicable or the information is included in the consolidated financial statements or related notes.

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule

To the Board of Directors and Stockholders of Bridgepoint Education, Inc.:

        Our audits of the consolidated financial statements referred to in our report dated December 21, 2008, except for Note 3, "Restatement of Consolidated Financial Statements: Restatement of Redeemable Convertible Preferred Stock and Earnings Per Share," and Note 20, "Subsequent Events," which are as of February 16, 2009, appearing in the registration statement on Amendment No. 1 to Form S-1 of Bridgepoint Education, Inc. also included an audit of the financial statement schedule listed in Schedule II of this registration statement on Amendment No. 1 to Form S-1. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
San Diego, California
December 21, 2008, except for Note 3, "Restatement of Consolidated Financial Statements: Restatement of Redeemable Convertible Preferred Stock and Earnings Per Share," and Note 20, "Subsequent Events," which are as of February 16, 2009.

SCHEDULE II

Valuation and Qualifying Accounts

	Balance at Beginning of Year		Charged to Expense		Deductions(1)			Balance at End of Year
	(in thousands)
Allowance for doubtful accounts receivable:
Year ended December 31, 2005	$	113		860		—		$	973
Year ended December 31, 2006	$	973		971		(11	)	$	1,933
Year ended December 31, 2007	$	1,933		4,731		(648	)	$	6,016
Nine months ended September 30, 2008	$	6,016		8,772		(1,064	)	$	13,724
Valuation allowance for deferred tax assets:
Year ended December 31, 2005	$	3,054		3,643		—		$	6,697
Year ended December 31, 2006	$	6,697		1,907		—		$	8,604
Year ended December 31, 2007	$	8,604		—		(1,321	)	$	7,283
Nine months ended September 30, 2008	$	7,283		—		(5,848	)	$	1,435

(1)

Deductions represent accounts written off, net of recoveries.

II-5

Item 17.    Undertakings

        The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denomination and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

        Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issues.

        The undersigned registrant hereby undertakes that:

(1)

for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and



(2)

for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-6

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Amendment No. 1 to Form S-1 Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Diego, State of California, on February 17, 2009.

BRIDGEPOINT EDUCATION, INC.
By:	/s/ ANDREW S. CLARK Andrew S. Clark Chief Executive Officer

        Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to Form S-1 Registration Statement has been signed by the following persons in the capacities and on the date indicated.

Name		Title	Date
/s/ ANDREW S. CLARK Andrew S. Clark		Chief Executive Officer (Principal Executive Officer) and a Director	February 17, 2009
/s/ DANIEL J. DEVINE Daniel J. Devine		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	February 17, 2009
Directors:
Ryan Craig Dale Crandall Patrick T. Hackett Robert Hartman Adarsh Sarma
By:	/s/ ANDREW S. CLARK Andrew S. Clark Attorney-in-Fact		February 17, 2009

II-7

INDEX TO EXHIBITS

Exhibit Number	Description of Document
1.1*	Form of Underwriting Agreement.
2.1	Purchase and Sale Agreement dated December 3, 2004, as amended, among The Franciscan University of the Prairies, the Sisters of St. Francis and the registrant.
2.2	Asset Purchase and Sale Agreement dated September 12, 2007 between the Colorado School of Professional Psychology and the registrant.
3.1**	Fourth Amended and Restated Certificate of Incorporation of the registrant as currently in effect.
3.2**	Form of Fifth Amended and Restated Certificate of Incorporation of the registrant to be effective upon completion of this offering.
3.3**	Amended and Restated Bylaws of the registrant, as amended to date, and currently in effect.
3.4**	Form of Second Amended and Restated Bylaws of the registrant to be effective upon completion of this offering.
4.1*	Specimen of Stock Certificate.
4.2**	Registration Rights Agreement dated November 26, 2003 among Warburg Pincus, Andrew S. Clark, the registrant and other persons named therein.
4.3**	Stockholders' Agreement dated November 26, 2003, as amended, among Warburg Pincus, Andrew S. Clark, the registrant and other persons named therein.
4.4*	Amended and Restated Registration Rights Agreement dated January 7, 2009, along with a Form of Adoption Agreement, among the registrant and the other persons named therein.
5.1*	Opinion of Sheppard, Mullin, Richter & Hampton LLP.
10.1**	Amended and Restated 2005 Stock Incentive Plan.
10.2	2005 Stock Incentive Plan—Form of Stock Option Agreement and Notice of Option Grant for Founders.
10.3	2005 Stock Incentive Plan—Form of Stock Option Agreement and Notice of Option Grant for Charlene Dackerman, Jane McAuliffe, Ross Woodard and other non-executive employees.
10.4	2005 Stock Incentive Plan—Form of Stock Option Agreement and Notice of Option Grant for Andrew S. Clark, Daniel J. Devine, Rodney T. Sheng and Christopher L. Spohn.
10.5*	2009 Stock Incentive Plan.
10.6*	Employee Stock Purchase Plan.
10.7**	Independent Contractor Agreement, as amended, between Robert Hartman and the registrant.
10.8**	Form of Indemnification.
10.9**	Loan and Security Agreement dated April 12, 2004, as amended, among Comerica Bank, Bridgepoint Education Real Estate Holdings, LLC and the registrant.
10.10**	Grid Note dated March 12, 2007 between Warburg Pincus Private Equity VIII, L.P. and the registrant.
10.11	Nominating Agreement between Warburg Pincus and the registrant.
10.12	2005 Stock Incentive Plan—Form of Stock Option Agreement and Notice of Option Grant for Robert Hartman.
10.13*	Amended and Restated 2005 Stock Incentive Plan—Form of Stock Option Agreement and Notice of Option Grant for Charlene Dackerman, Jane McAuliffe, Ross Woodard and other non-executive employees.
10.14*	Amended and Restated 2005 Stock Incentive Plan—Form of Stock Option Agreement and Notice of Option Grant for Andrew S. Clark, Daniel J. Devine, Rodney T. Sheng and Christopher L. Spohn.
10.15*	Office Lease dated January 31, 2008 between Kilroy Realty, L.P. and the registrant related to the 13480 Evening Creek, San Diego, California address.
10.16*	Office Lease and Sublease Agreements related to the 13500 Evening Creek, San Diego, California address.

Exhibit Number	Description of Document
10.17*	Standard Form Modified Gross Office Lease dated October 22, 2008, and addendum, between Sunroad Centrum Office I, L.P. and the registrant related to the Spectrum Center Lane, San Diego, California address.
10.18*	Office Lease and amendments related to the University of the Rockies Campus located in Colorado Springs, Colorado.
10.19*	Commercial Net Lease dated January 26, 2007, as amended, between Frye Development, Inc. and Center Leaf Partners,  LLC.
10.20*	Blackboard License and Services Agreement dated December 23, 2003, as amended, between Blackboard, Inc. and Ashford University,  LLC (formerly the registrant).
10.21*	Software License Agreement and Campuscare Support Agreement between Campus Management Corp. and the registrant.
10.22*	General Services Agreement dated January 1, 2009 between Affiliated Computer Services, Inc. and Ashford University,  LLC.
10.23*	General Services Agreement dated January 1, 2009 between Affiliated Computer Services, Inc. and University of the Rockies,  LLC.
16.1**	Letter from Clifton Gunderson LLP, Independent registered Public Accounting Firm.
21.1**	List of subsidiaries of the registrant.
23.1*	Consent of Sheppard, Mullin, Richter & Hampton LLP.
23.2	Consent of Independent Registered Public Accounting Firm.
24.1**	Power of Attorney.

*

To be filed by amendment.

**

Previously filed.

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TABLE OF CONTENTS
Dealer Prospectus Delivery Obligation
PROSPECTUS SUMMARY
Summary Consolidated Financial and Other Data
RISK FACTORS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
USE OF PROCEEDS
DIVIDEND POLICY
CAPITALIZATION
DILUTION
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS
REGULATION
MANAGEMENT
COMPENSATION DISCUSSION AND ANALYSIS
Summary Compensation Table—2008
Grants of Plan-Based Awards—2008
Outstanding Equity Awards at Fiscal Year End—2008
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PRINCIPAL AND SELLING STOCKHOLDERS
DESCRIPTION OF CAPITAL STOCK
SHARES ELIGIBLE FOR FUTURE SALE
MATERIAL U.S. FEDERAL TAX CONSEQUENCES TO NON-U.S. HOLDERS OF COMMON STOCK
UNDERWRITING
INTERNATIONAL SELLING RESTRICTIONS
LEGAL MATTERS
EXPERTS
CHANGE IN ACCOUNTANTS
WHERE YOU CAN FIND MORE INFORMATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS BRIDGEPOINT EDUCATION, INC. AND SUBSIDIARIES
Report of Independent Registered Public Accounting Firm
Bridgepoint Education, Inc. Consolidated Balance Sheets (In thousands, except share and per share data)
Bridgepoint Education, Inc. Consolidated Statements of Operations (In thousands, except per share data)
Bridgepoint Education, Inc. Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Deficit (In thousands, except share data)
Bridgepoint Education, Inc. Consolidated Statements of Cash Flows (In thousands)
Bridgepoint Education, Inc. Notes to Consolidated Financial Statements
PART II INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution
Item 14. Indemnification of Directors and Officers
Item 15. Recent Sales of Unregistered Securities.
Item 16. Exhibits and Financial Statement Schedules

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule
SCHEDULE II Valuation and Qualifying Accounts

Item 17. Undertakings

SIGNATURES
INDEX TO EXHIBITS

EX-2.1

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Exhibit 2.1

PURCHASE AND SALE AGREEMENT

BETWEEN

BRIDGEPOINT EDUCATION, INC.,
a Delaware corporation

AND

THE FRANCISCAN UNIVERSITY OF THE PRAIRIES,
an Iowa non-profit corporation

and

the SISTERS OF ST. FRANCIS, CLINTON, IOWA,
an Iowa non-profit corporation

TABLE OF CONTENTS

			Page
ARTICLE 1 PURCHASE AND SALE			1
ARTICLE 2 PURCHASE AND SALE OF ASSETS			1
	2.1	University Assets	1
	2.2	Sisters Assets	3
	2.3	Excluded Assets	3
	2.4	Liabilities	3
ARTICLE 3 PURCHASE AND SALE OF STOCK			4
	3.1	Conversion to Iowa Business Corporation	4
	3.2	Purchase and Sale of Shares	4
	3.3	Sisters Assets	4
ARTICLE 4 PURCHASE PRICE			4
	4.1	Purchase Price	4
	4.2	Purchase Price Adjustment	4
	4.3	Lease of Property	5
	4.4	Payment of Liabilities	5
ARTICLE 5 CLOSING			5
	5.1	Closing Date	5
	5.2	Deliveries by the Sellers at Closing	5
	5.3	Deliveries by Buyer at Closing	7
	5.4	Further Assurances	7
ARTICLE 6 DUE DILIGENCE AND COMPLETION OF SCHEDULES			8
	6.1	Buyer's Due Diligence Investigation	8
	6.2	Confidentiality	10
	6.3	Completion of Schedules and Exhibits	10
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF SELLER			10
	7.1	Organization; Authority; Due Authorization; Good Standing and Capital Stock	10
	7.2	Authority to Execute and Perform Agreements	11
	7.3	Due Authorization, Enforceability	11
	7.4	No Violation	11
	7.5	Regulatory Approvals and Other Consents	11
	7.6	Financial Condition/Financial Statements	12
	7.7	No Undisclosed Liabilities	12
	7.8	Compliance with Laws, Governmental Matters	12
	7.9	Litigation	13
	7.10	University's Personal Property	14
	7.11	Agreements	15
	7.12	Labor and Employment Matters	16
	7.13	Pension and Benefit Plan	17
	7.14	Insurance	18
	7.15	Full Disclosure	18
	7.16	Compliance with the Department of Education and Other Applicable Governmental Rules	19
	7.17	Tax Matters	19
	7.18	Real Property	19
	7.19	Brokers	20

i

			Page
	7.20	Subsidiaries	20
	7.21	Absence of Certain Developments	20
	7.22	Condition of Properties	21
	7.23	Illegal or Unauthorized Payments; Political Contributions	21
	7.24	Liabilities on Assets Acquired	21
	7.25	Suppliers	21
	7.26	Distributed Funds	21
	7.27	Material Facts	21
ARTICLE 8 REPRESENTATIONS AND WARRANTIES OF BUYER			21
	8.1	Due Formation	21
	8.2	Authority to Execute and Perform Agreements	21
	8.3	Due Authorization	21
	8.4	No Violation	22
	8.5	Regulatory Approvals	22
	8.6	No Broker	22
	8.7	Sufficient Funds	22
ARTICLE 9 COVENANTS AND AGREEMENTS OF SELLER			22
	9.1	Conduct of Business	22
	9.2	Conditions	24
	9.3	Examinations and Investigations	24
	9.4	Expenses	24
	9.5	Insurance	24
	9.6	Tax Returns	24
	9.7	Pre-Approval with the Department of Education	24
	9.8	Access	24
	9.9	Assistance to Buyer	25
	9.10	University Employees	25
	9.11	Regis Hall	25
ARTICLE 10 COVENANTS AND AGREEMENTS OF BUYER			25
	10.1	Conditions	25
	10.2	University's Religious Mission	25
	10.3	University in Clinton, Iowa	25
	10.4	Change of Institutional Name	25
	10.5	Existing Employees	25
	10.6	Expenses	26
ARTICLE 11 CONDITIONS TO THE OBLIGATIONS OF SELLER			26
ARTICLE 12 CONDITIONS TO THE OBLIGATIONS OF BUYER TO CLOSE			26
ARTICLE 13 NOTICE OF EXCLUSIVITY			28
	13.1	Exclusivity	28
ARTICLE 14 INDEMNIFICATION; SURVIVAL; RISK OF LOSS			28
	14.1	Obligation to Indemnify	28
	14.2	Notice of Asserted Liability	28
	14.3	Opportunity to Defend	29
	14.4	Exclusive Remedy	29
	14.5	Sellers' Tax Indemnity	29
	14.6	Limitation of Liability	30

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			Page
	14.7	Sellers' Additional Financial Responsibilities	30
	14.8	Statute of Limitations	30
	14.9	Risk of Loss	30
ARTICLE 15 TERMINATION OF AGREEMENT			30
	15.1	Termination	30
ARTICLE 16 MISCELLANEOUS			31
	16.1	Notices	31
	16.2	Entire Agreement	32
	16.3	Waivers and Amendments; Non-Contractual Remedies	32
	16.4	Governing Law, Reference to U.S. Dollars	32
	16.5	Binding Effect, Assignment	32
	16.6	No Third Party Beneficiaries	33
	16.7	Counterparts	33
	16.8	Schedules and Exhibits	33
	16.9	Headings	33
	16.10	Severability	33
	16.11	Time of Essence	33
	16.12	Attorneys' Fees	33
ARTICLE 17 DEFINITIONS			34

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EXHIBITS

Exhibit "A"	Cemetery Easement
Exhibit "B"	Sports Fields Lease
Exhibit "C"	Regis Hall Lease
Exhibit "D"	Bill of Sale
Exhibit "E"	Assignment and Assumption Agreement
Exhibit "F"	Deeds
Exhibit "G"	Memo of Lease with Respect to the Volleyball, the Soccer Fields and the Speech and Hearing Center

SCHEDULES

Schedule 2.1(a)(ii)	Description of Land and Buildings
Schedule 2.1(a)(vi)	Contracts with the University
Schedule 2.1(b)	Stated Liabilities and Permitted Liens
Schedule 2.3	Other Excluded Assets
Schedule 2.4(a)	Assumed Liabilities
Schedule 2.49(b)	Excluded Liabilities
Schedule 4.2	Estimated Budget and Final Budget

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PURCHASE AND SALE AGREEMENT

        This PURCHASE AND SALE AGREEMENT, dated as of December 3, 2004 (this "Agreement"), is entered into by and among Bridgepoint Education, Inc., a Delaware corporation ("Buyer"), The Franciscan University of the Prairies, an Iowa non-profit corporation (the "University"), and the Sisters of St. Francis, Clinton, Iowa, an Iowa non-profit corporation (the "Sisters"). The University and the Sisters are each referred to herein as a "Seller" and are collectively referred to as the "Sellers"). Capitalized terms used and not otherwise defined herein shall have the meanings given to such terms in Article 17 hereof.

RECITALS

        A.    The University is engaged in the business of operating a university with its primary location in Clinton, Iowa (the "Business") (the location in Clinton, Iowa hereinafter may be referred to as the "Campus").

        B.    The Sisters own the buildings and the land utilized by the University in connection with the operation of the Business and the University owns the other operating Assets listed in Section 2.1 hereof.

        C.    The Sellers desire to sell, and Buyer desires to purchase, either (i) substantially all of the assets of the Sellers used in connection with the operation of the Business or (ii) all of the outstanding capital stock of the University, subject to the terms and conditions set forth herein.

AGREEMENT

        NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree hereby as follows:

ARTICLE 1
PURCHASE AND SALE

        The acquisition of the Business by Buyer may be accomplished through either (a) the purchase and sale of substantially all of the assets of the University and specified assets of the Sisters (an "Asset Purchase") or (b) the purchase and sale of all of the outstanding capital stock of the University and specified assets of the Sisters (a "Stock Purchase"), at the election of Buyer. Buyer shall notify the Sellers of its election to consummate the acquisition of the Business through either an Asset Purchase or a Stock Purchase no later than January 3, 2005 or forty-five (45) days prior to the Closing. If Buyer elects an Asset Purchase, the transactions contemplated by this Agreement shall be consummated in accordance with the terms and conditions set forth in Articles 2 and 4 - 17, and if Buyer elects a Stock Purchase, the transactions contemplated by this Agreement shall be consummated in accordance with the terms and conditions set forth in Articles 3 - 17.

ARTICLE 2
PURCHASE AND SALE OF ASSETS

        2.1    University Assets.

        (a)   Subject to the terms and conditions set forth herein, at the Closing, the University shall sell, convey, assign, transfer and deliver to Buyer, free and clear of all liabilities and Liens (except for the Stated Liabilities and Permitted Liens), and Buyer shall purchase, acquire and take assignment and delivery of, for the consideration specified in Article 4, all properties, assets, and right, title and interest of every kind and nature, owned or leased by the University (including indirect or any other forms of beneficial ownership) as of the Closing Date, whether tangible or

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intangible, real or personal and wherever located and by whomever possessed, including, without limitation, all of the assets reflected in the University's May 31, 2004 Statement of Financial Position and all of the following assets, but excluding the Excluded Assets (all of the assets to be sold, assigned, transferred and delivered to Buyer as described herein and hereafter in this Section 2.1 are herein called the "University Assets"):

          (i)  all cash (including, without limitation, checking account balances, certificates of deposit, other time deposits and petty cash) related to any unearned tuition for services to be provided on or after the Closing Date (computed in accordance with GAAP);

         (ii)  all of the University's right, title and interest in the land and buildings used in association with the University ("Land and Buildings") more fully described in Schedule 2.1(a)(ii).

        (iii)  all accounts and notes receivable (whether current or noncurrent), including, without limitation, student receivables, and causes of action specifically pertaining to the collection of the foregoing, that are related to any unearned tuition for services to be provided on or after the Closing Date;

        (iv)  all promotional allowances, vendor rebates and similar items;

         (v)  all intellectual property, including without limitation rights to the University's Internet domain name "www.tfu.edu" (the "Domain Name"), the name "The Franciscan University of the Prairies" either alone or in conjunction with other words or names in the context of the operation of a school or other learning institution, all names of all units of the University, athletic team names, mascot names, and all curricula for all courses and programs, including degree programs;

        (vi)  all Contracts, including those listed on Schedule 2.1(a)(vi), and all outstanding offers or solicitations made by or to the University to enter into any contract;

       (vii)  all office supplies, equipment, spare parts, and other miscellaneous supplies;

      (viii)  all deposits, advances, prepaid and other current assets;

        (ix)  all rights to receive and retain mail, accounts receivable payments and other communications related to the University;

         (x)  all data and records, including without limitation, student and customer lists, research and development reports, personnel records, service and warranty records, equipment and logs, operating guides and manuals, financial and accounting records, creative materials, advertising, marketing and promotional materials, and all other printed or written materials;

        (xi)  to the extent transferable, and if not transferable all rights to deal with, affect, alter, modify or change, all permits, licenses, certifications, and approvals from all permitting, licensing, accrediting and certifying agencies, and the rights to all data and records held by such permitting, licensing and certifying agencies;

       (xii)  all goodwill as a going concern and other intangible properties;

      (xiii)  all telephone numbers used by the University;

      (xiv)  all warranties and indemnities that relate to the University Assets or the University on and after the Closing Date;

       (xv)  all rights to proceeds under insurance policies to the extent related to or payable in connection with any of the University Assets, the Stated Liabilities or the University on or after the Closing Date;

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      (xvi)  all security deposits related to the Contracts;

     (xvii)  all claims of the University against third parties relating to the University Assets whether choate or inchoate, known or unknown, contingent or fixed; and

    (xviii)  all books, documents and other items of whatsoever kind or nature contained in the University library collection.

        (b)   All of the University Assets will be sold, assigned, transferred, conveyed and delivered to Buyer free and clear of all liens (including liens for Taxes), encumbrances, including, without limitation, any leasehold interests, licenses or other rights in favor of a third party, the University or the Sisters to use any portion of the University Assets (except the Regis Hall Lease as hereinafter defined), claims, security interests, of whatever kind or nature, mortgages, pledges, restrictions, charges, instruments, licenses, encroachments, options, rights of recovery, judgments, orders and decrees of any court or governmental authority, interest, products and Taxes, in each case of any kind or nature, whether secured or unsecured, choate or inchoate, filed or unfiled, scheduled or unscheduled, noticed or unnoticed, recorded or unrecorded, contingent or fixed, material or non-material, known or unknown, and including all claims based on any theory that Buyer is a successor, transferee or continuation of University or the University (each a "Lien" and collectively "Liens"), in each case, other than the "Stated Liabilities" and "Permitted Liens," set forth and defined on Schedule 2.1(b).

        2.2    Sisters Assets.    Subject to the terms and conditions set forth herein, at the Closing, the Sisters shall sell, convey, assign, transfer and deliver to Buyer, free and clear of any Liens (except Permitted Liens), and Buyer shall purchase, acquire and take assignment and delivery of, for the consideration specified in Article 4, all of the Sisters' right, title and interest in the Land and Buildings more fully described in Schedule 2.2 (the "Sisters Assets").

        2.3    Excluded Assets.    Notwithstanding anything to the contrary contained herein, the following assets are not to be acquired by Buyer hereunder and shall be retained by the Sellers (the "Excluded Assets"):

        (a)   the icons and religious artwork located within the Chapel in Clare Hall and otherwise in and on the Land and Buildings;

        (b)   the Endowment;

        (c)   all gifts, bequests, legacies, residuary interests, or donations in the name, or for the benefit or interest of The Franciscan University, The Franciscan University of the Prairies or Mount St. Clare College that have been created or arise at any time and are received or mature on or after the Closing Date;

        (d)   the soccer field and the recreational volleyball court currently owned by the Sisters, which may be leased to Buyer as described below in Section 4.3;

        (e)   those other assets all as listed on Schedule 2.3; and

        (f)    The lawsuit brought by the University against selected family members of the Larry Subcleff Family regarding a donation that was rescinded.

        Furthermore, there shall be excluded from the Sisters Assets a perpetual easement in favor of the Sisters for the use of and access to and from the cemetery that is presently located on the real property that is included in the Land and Buildings, as more fully described on Exhibit A hereto (the "Cemetery Easement").

        2.4    Liabilities.    Upon the terms and subject to the conditions contained herein, at the Closing Date, Buyer shall assume all financial obligations and liabilities of the University ("Assumed

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Liabilities") except those liabilities that are specifically listed on Schedule 23 (the "Excluded Liabilities"). All Excluded Liabilities, including, without limitation, those listed on Schedule 23, shall be retained by the University except as otherwise provided herein.

ARTICLE 3
PURCHASE AND SALE OF STOCK

        3.1    Conversion to Iowa Business Corporation.    In the event that Buyer elects a Stock Purchase, the University and the Sisters shall take all such actions and make all such filings as may be necessary to convert the University from an Iowa non-profit corporation to an Iowa business corporation (the "Conversion"). Without in any way limiting the generality of the foregoing, the University and the Sisters shall (i) restate the articles of incorporation of the University pursuant to Chapter 490 of the Iowa Code (the Iowa Business Corporation Act), (ii) issue shares of the University's capital stock to the Sisters and to no other party, (iii) terminate the University's status as an organization described in Section 501(c)(3) of the Code, (iv) make all necessary tax filings at the federal, state and local levels and (v) take any and all other actions requested by Buyer to properly effect the Conversion. As a result of the Conversion, the Sisters shall own 100% of the University's issued and outstanding capital stock (the "Shares").

        3.2    Purchase and Sale of Shares.    Following the Conversion and subject to the terms and conditions set forth herein, the Sisters shall sell to Buyer, and Buyer shall purchase from the Sisters, all of the right, title and interest of the Sisters in and to the Shares at the Closing.

        3.3    Sisters Assets.    Subject to the terms and conditions set forth herein, at the Closing, the Sisters shall also sell, convey, assign, transfer and deliver to Buyer, free and clear of any Liens (except Permitted Liens), and Buyer shall purchase, acquire and take assignment and delivery of, for the consideration specified in Article 4, all of the Sisters' right, title and interest in the Sisters Assets.

ARTICLE 4
PURCHASE PRICE

        4.1    Purchase Price.    Buyer, in its sole discretion, has the option to purchase the Assets or the Stock, as the case may be at a Purchase Price of Nine Million Dollars ($9,000,000), all cash to be paid to the Sisters and the University in the amounts set forth on Schedule 4.1 as a sales price allocation between the Sellers.

        4.2    Purchase Price Adjustment.    Concurrently with the execution and delivery of this Agreement, the University shall deliver to Buyer a reasonably detailed projection of all operating revenues and expenses of the Business (determined in accordance with GAAP) for the period beginning on January 1, 2005 and ending on May 31, 2005 (inclusive of such dates) (the "Spring 2005 Semester"), which shall be set forth on Schedule 4.2 hereto (the "Estimated Budget"). On or before January 24, 2005, Buyer and the University shall review and revise the Estimated Budget in such manner as may be necessary to accurately reflect the actual operating expenses and revenues of the Business (determined in accordance with GAAP) for the Spring 2005 Semester, which shall be set forth on an updated Schedule 4.2 to this Agreement (the "Final Budget"). To the extent that the total operating expenses of the Business, as reflected in the Final Budget, exceed the total operating revenues of the Business, as reflected in the Final Budget the cash Purchase Price shall be reduced by an amount equal to such excess ("Reduction Amount") and the balance of the Purchase Price shall, at Closing be transferred to the Sisters; except that to the extent the graduate revenues projected in the final Budget are less than those projected in the Estimated Budget ("Graduate Revenue Decrement"), then, the Reduction Amount shall be reduced by the Graduate Revenue Decrement and that amount shall be placed in an escrow ("Escrow Reserve") to be held by the Escrow Agent. A final accounting of Spring 2005 Semester graduate enrollments and related revenues earned after December 31, 2004 but prior to

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May 31, 2005 shall be completed by the University and certified by its chief financial officer and its president to the Buyer and the Sisters no later than June 15, 2005. In the event that the actual graduate enrollment related revenues are less than those contained in the Final Budget, the difference may, no later than July 15, 2005, be withdrawn by the Buyer from the Escrow Reserve, up to the maximum of the Escrow Reserve. Any funds remaining in the Escrow Reserve after July 15, 2005 shall be dispersed to or as directed by the Sisters. All reports prepared in pursuit of this provision shall be prepared in accordance with GAAP. Buyer and the University agree that all student accounts receivable, as reflected in the Estimated Budget and the Final Budget, shall be appropriately discounted (in accordance with GAAP) to reflect their historic collection rate.

        4.3    Lease of Property.    The Sisters shall lease to Buyer the soccer field and the recreational volleyball court, pursuant to a lease agreement, in substantially the form attached hereto as Exhibit D (the "Sports Fields Lease"), if Buyer notifies the Sisters within fifteen (15) days prior to the Closing of its intention to enter into the Sports Fields Lease. In addition, Buyer shall lease to the Sisters that portion of Regis Hall identified in Exhibit E pursuant to a lease agreement in substantially the form attached hereto as Exhibit E (the "Regis Hall Lease").

        4.4    Payment of Liabilities.    At the Closing, Sellers shall use a portion of the cash from the Purchase Price to satisfy in full all of the Excluded Liabilities.

ARTICLE 5
CLOSING

        5.1    Closing Date.    The closing ("Closing") of the transactions provided for herein shall take place at the offices of Ahlers & Cooney, P.C. in Des Moines, Iowa, at 10:00 a.m. on February 15, 2005, or at such other place, time or date as the parties may mutually agree to in writing, or as promptly as practicable after receiving regulatory change of control approvals as set forth in Article 12 hereof, such date being referred to herein as the "Closing Date"; provided, however, that the Closing shall not occur until each of the conditions set forth in Articles 11 and 12 hereto have been satisfied or waived by the benefited party even if the Closing Date is extended beyond February 15, 2005.

        5.2    Deliveries by the Sellers at Closing.    At the Closing, the following deliveries will be made to Buyer by the Sellers:

        5.2.1In the event of an Asset Purchase:    

        (a)   physical possession of all of the University Assets and the Land and Buildings capable of passing by delivery to Buyer with the intent that title to such University Assets and the Land and Buildings shall pass by and upon delivery to Buyer;

        (b)   a bill of sale, substantially in the form attached hereto as Exhibit F ("Bill of Sale"), conveying in the aggregate all of the University Assets, duly executed by the University;

        (c)   an assignment and assumption agreement, substantially in the form attached hereto as Exhibit G ("Assignment and Assumption Agreement"), pursuant to which the Sellers will assign to Buyer, and Buyer will agree to assume, all of the Assumed Liabilities and all Contracts (including, without limitation, all faculty employment contracts);

        (d)   one more Warranty Deeds, substantially in the form attached hereto as Exhibit H ("Deeds"), conveying the Land and Buildings (but reserving the Cemetery Easement), duly executed by the Sisters and the University as their interests may appear;

        (e)   an assignment of all of the University's bank accounts, duly executed by the University;

        (f)    fully executed intellectual property assignments, each in recordable form to the extent necessary to assign such rights;

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        (g)   all Books and Records;

        (h)   such other deeds, bills of sale, assignments, documents and other instruments of transfer and conveyance as may reasonably be requested by Buyer, each in form and substance satisfactory to Buyer and its legal counsel and duly executed by the Sellers;

        (i)    A completed and executed Groundwater Hazard Statement and a Declaration of Value.

        5.2.2In the event of a Stock Purchase:    

        (a)   one or more certificates representing the Shares, duly endorsed (or accompanied by duly executed irrevocable stock powers) for transfer to Buyer;

        (b)   physical possession of the Sisters Assets capable of passing by delivery to Buyer with the intent that title to such Sisters Assets shall pass by and upon delivery to Buyer; and

        (c)   one more Warranty Deeds, conveying the Land and Buildings (but reserving the Cemetery Easement), duly executed by the Sisters as its interests may appear.

        (d)   a completed and executed Groundwater Hazard Statement and a Declaration of Value.

        5.2.3In the event of an Asset Sale or a Stock Purchase:    

        (a)   a certificate executed by the President and Secretary of each Seller, dated as of the Closing Date, certifying that the conditions to be fulfilled by it as set forth in Article 12 have been fulfilled;

        (b)   a certificate issued by the Secretary of State of the State of Iowa indicating that each of the Sellers is in good standing, dated as of a date no earlier than five business days prior to the Closing;

        (c)   a copy of the resolutions of the Board of Trustees and members (to the extent necessary) of each of the Sellers, approving the execution and delivery of this Agreement and the other Transaction Documents and the consummation of all of the transactions contemplated hereby and thereby, duly certified by an appropriate officer;

        (d)   the Sports Fields Lease, duly executed by the Sisters, if Buyer has elected to enter into the Sports Fields Lease;

        (e)   the Regis Hall Lease, duly executed by the Sisters;

        (f)    a "bring-down" certificate executed by each of the Sellers, certifying the accuracy of its representations and warranties as of the Closing Date; and

        (g)   a cancellation of the existing lease between the University and the Sisters for the use of the Land and Buildings.

        (h)   evidence, reasonably satisfactory to Buyer, that the Sellers have acquired all such policies of insurance as may be necessary or appropriate to the fulfillment of the Seller's obligations hereunder.

        (i)    one or more duly executed releases signed by the holders of any debt obligation of the University or the Sisters that is secured by any of the Assets acknowledging that such debts have been satisfied in full and that all related security interests in any Assets have been released.

        (j)    wiring instructions executed by the Sisters authorizing that a portion of the cash component of the Purchase Price be used to pay the following Excluded Liabilities and a satisfaction and release with respect to each such Excluded Liability and any security interest

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related thereto in a form reasonably acceptable to Buyer duly executed by the holder of such Excluded Liability:

          (i)  payment in full of the principal and interest and all other amounts outstanding under the University's existing promissory note to Clinton National Bank, in the approximate amount of Three Million Three Hundred Thousand Dollars ($3,300,000), which amount is secured by certain real property owned by the Sisters;

         (ii)  payment of the intrafund loan from the University General Fund to the Permanently Restricted Fund in the amount finally established by the Board of Trustees of the University and confirmed by an independent auditing firm;

        (iii)  payment in full of all amounts outstanding under the University's line of credit from Clinton National Bank, which amount relates to the expenses of the Fall 2004 Semester and is secured by certain assets of the University; and

        (iv)  payment in full of the principal and interest and all other amounts outstanding on the IHELA bonds.

        (k)   An Assignment of the Springdale Cemetery Company Lease including the consent of the landlord.

        (l)    Assignment by the Franciscan University of Stubenville of the Settlement Agreement with the University over the use of the name of the University.

        (m)  Termination of that certain Agreement between the Franciscan University and Quincy University dated August 29, 2003.

        5.3    Deliveries by Buyer at Closing.    At the Closing, the following deliveries will be made to the Sellers by Buyer, in the event of an Asset Purchase or a Stock Purchase:

        (a)   a certificate executed by the President and Secretary of Buyer, dated as of the Closing Date, certifying that the conditions to be fulfilled by it as set forth in Article 11 have been fulfilled;

        (b)   the Purchase Price and all related documentation;

        (c)   the Sports Fields Lease, duly executed by Buyer, if Buyer has elected to enter into the Sports Fields Lease;

        (d)   the Regis Hall Lease, duly executed by Buyer;

        (e)   a "bring-down" certificate duly executed by Buyer, certifying that the representations and warranties of Buyer are accurate as of the Closing Date;

        (f)    a copy of the resolutions adopted by the board of directors and shareholders (if necessary), approving the execution and delivery of this Agreement and the other Transaction Documents and the consummation of all of the transactions contemplated hereby and thereby, duly certified by an appropriate officer.

        5.4    Further Assurances.    At any time or from time to time after the Closing, at Buyer's request and without further consideration, each of the Sellers shall execute and deliver to Buyer such other instruments of sale, transfer, conveyance, assignment and confirmation, provide such materials and information and take such other actions as Buyer may reasonably deem necessary or desirable in order more effectively to transfer, convey and assign to Purchaser, and to confirm Purchaser's title to, all of the Assets or the Shares, as the case may be, and, to the fullest extent permitted by law, to put Buyer in actual possession and operating control of the Business and the Assets or the Shares, as the case may be, and to assist Buyer in exercising all rights with respect thereto, and otherwise to cause each of the Sellers to fulfill its obligations under this Agreement and the Transaction Documents.

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ARTICLE 6
DUE DILIGENCE AND COMPLETION OF SCHEDULES

        6.1    Buyer's Due Diligence Investigation.    Buyer's due diligence investigation shall be divided into two phases, as follows:

        (a)   Phase I Due Diligence.    Buyer shall have until the date hereof to complete the first phase of its due diligence investigation ("Phase I"), which shall include (subject to Buyer's future additional requests for documentation) review of the following which shall be delivered and/or made available (as determined by Buyer) to Buyer by the University (or from the Sisters if specifically so designated below or in the request) with respect to the University and its Subsidiaries, if any:

          (i)  All audited financial statements for the years 2003, 2002, 2001 and 2000 and the 2004 year-to-date unaudited financials.

         (ii)  Tax returns for the years 2003, 2002, 2001 and 2000.

        (iii)  Copies of bank statements for the year 2004 to date and all bank statements for 2003, 2002, 2001, and 2000.

        (iv)  All Department of Education and national and regional accreditation certificates from the United States, licenses and all written correspondence with such bodies for the period from 2000 to present date.

         (v)  Copies of all financial debt agreements.

        (vi)  Copies of all leases.

       (vii)  Copies of all Material Contracts and all contracts that involve obligations (contingent or otherwise) of, or payments to, the University in excess of $10,000 during the term of the contract.

      (viii)  Copies of all benefits plans.

        (ix)  Copies of all materials pertaining to intellectual property owned or licensed by the University and used in (or relevant to) the Business.

         (x)  Copies of all litigation documents for the last past five (5) years, including current and pending (or threatened) litigation.

        (xi)  Access to student files to the extent permitted under the Family Educational Rights and Privacy Act.

       (xii)  Copies of all curricula for all courses offered by the University.

      (xiii)  Access to admission files.

      (xiv)  Access to faculty personnel files.

       (xv)  Access to IT department files.

      (xvi)  Copies of the last five years insurance policies and the last five years claims history.

     (xvii)  Access to personnel files.

    (xviii)  Copies of promotional and advertising materials for the University.

      (xix)  All documents setting forth the policies and procedures of the University pertaining to students, including, but not limited to, (A) course lists, (B) student handbook, (C) catalog, (D) annual security report containing crime statistics, (E) application for enrollment and

8

policies and procedures pertaining thereto, and (F) application for financial aid and policies and procedures pertaining thereto.

       (xx)  Copies of all annual reports provided to or filed with the Iowa College Student Aid Commission for the last three years.

      (xxi)  Copies of all registration materials and disclosures made to the Iowa Secretary of State, if any, for the last three years.

     (xxii)  Copies of all agreements with the Iowa College Student Aid Commission that are currently in force and effect.

    (xxiii)  All annual reports provided to the United States Department of Education for the last three years.

    (xxiv)  To the extent not already requested, copies of all reports within the last three years provided to state or federal agencies as required by the Iowa College Student Aid Commission, the Iowa Secretary of State and the United States Department of Education.

      (xxv)  Copies of all correspondence from state or federal agencies or authorities, during the last three years, which correspondence indicate or allege that the University is or was not in compliance with any law or regulation.

        Buyer's execution of this Agreement shall be its certification that it has obtained satisfactory access to all such Phase I documentation and that any contingencies related to the Phase I due diligence items have been satisfactorily resolved or any deficiencies have been noticed in writing to the Sellers. Notwithstanding the foregoing, the Buyer's satisfaction of the contingencies is subject to the completion of the Schedules and Exhibits described in Section 6.3 to the satisfaction of the Buyer as provided for therein.

        (b)   Phase II Due Diligence.    After this Agreement is signed, Buyer shall have until January 15, 2005 to complete the second phase of its due diligence investigation ("Phase II") on the following matters and with respect to the following documents to be supplied by the Sisters and the University:

          (i)  Title policies or abstracts for all real property to be acquired by Buyer hereunder.

         (ii)  Copies of any and all correspondence, reports, investigations, complaints, requests for information, permits or other materials regarding environmental matters, at or about the real property to be acquired by Buyer hereunder, including but not limited to Phase I or Phase II Environmental Site Assessments, asbestos surveys, lead paint surveys, lead in drinking water surveys, and radon surveys.

        (iii)  Copies of any and all surveys, plot plans and other information regarding the real property to be acquired by Buyer hereunder.

        (iv)  A draft, completed Iowa groundwater hazard statement.

         (v)  A list of any known environmental concerns on or about the real property to be acquired by Buyer hereunder, including but not limited to, institutional controls and/or engineering controls related to such real property.

        (vi)  Any mechanical, electrical, plumbing, structural, asbestos and similar studies or reports with respect to the real property that are in possession of the University or the Sisters.

       (vii)  Proof of compliance with all applicable zoning regulations for the University and its operations.

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      (viii)  Receipt of the unaudited financials of the University and its subsidiaries, if any, for the most recently audited full academic fiscal year.

        During Buyer's Phase II due diligence investigation, Buyer shall order, at its cost, additional reports on the items described in Sections 6.1(b)(i) to (iv) in order to complete its due diligence investigation. The University and the Sisters (where applicable for those items listed in Sections 6.1(b)(i) to (iv)) shall nevertheless deliver or make available this documentation to Buyer immediately upon execution hereof notwithstanding the fact that Buyer shall have until January 15, 2005 to approve or waive any contingencies related to its Phase II due diligence investigation. The Sellers shall provide Buyer and its representatives with access to the real property to be acquired by Buyer hereunder and any and all requested records for the purpose of Buyer's due diligence investigation, and shall cooperate fully with Buyer and its representatives in performing such due diligence investigation.

        Buyer's consummation of the transactions contemplated in this Agreement at Closing shall be its certification that it has obtained satisfactory access to all such Phase II documentation and that any contingencies related to the Phase II due diligence items have been satisfactorily resolved or any deficiencies have been noticed in writing to the Sellers.

        6.2    Confidentiality.    All confidential information obtained by Buyer's representatives in the course of their investigations of each Seller, whether obtained before or after the date of this Agreement (the "Evaluation Material"), will be kept strictly confidential, and will not be disclosed to any third party (except for third parties that are instructed to abide by the confidentiality agreement between Buyer and Sellers) unless this transaction is consummated or such information is or becomes publicly available through no fault of Buyer or its representatives.

        6.3    Completion of Schedules and Exhibits.    Buyer and the Sellers acknowledge that the schedules to this Agreement, including, without limitation, the Disclosure Schedule (collectively, the "Schedules") and the exhibits to this Agreement (collectively, the "Exhibits"), will not be completed prior to the execution and delivery hereof. Each of the Sellers agrees that, following the execution and delivery of this Agreement, the Sellers shall complete and submit all of the Schedules and Exhibits to Buyer for its review on or prior to the 20th day following the date on which this Agreement is executed and delivered by Buyer and each of the Sellers (the "Delivery Date"). Upon Buyer's receipt and review of the Schedules, Buyer and the Sellers shall negotiate in good faith so that the Schedules shall be in such form and substance as is mutually agreeable to Buyer and the Sellers on or before the 21st day following the Delivery Date.

ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF SELLER

        Except as otherwise set forth in a disclosure schedule (the "Disclosure Schedule") delivered to Buyer in accordance with Section 6.3, the University and the Sisters hereby, to the extent a provision hereinafter so requires, represent and warrant to Buyer as follows:

        7.1    Organization; Authority; Due Authorization; Good Standing and Capital Stock.    The University is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation; has all requisite power and authority to own, lease and operate its assets, properties and business and to carry on its business as now conducted and as presently contemplated to be conducted and is duly qualified or licensed to do business as a foreign corporation and is in good standing in every jurisdiction in which the nature of its business or the location of its properties or operations requires such qualification or licensing. The Sisters is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation; has all requisite power and authority to own, lease and operate its assets, properties and business and to carry on its business as now conducted and as presently contemplated to be conducted and is duly qualified or licensed to

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do business as a foreign corporation and is in good standing in every jurisdiction in which the nature of its business or the location of its properties or operations requires such qualification or licensing.

        Solely in the event of a Stock Purchase, the Sisters represent and warrant to Buyer that (a) the authorized capital stock of the University, as of the Closing Date, will consist solely of one thousand (1,000) shares of common stock, no par value per share, of which only the Shares will be issued and outstanding; (b) the Shares will be duly authorized, validly issued, fully paid and nonassessable; (c) the Sisters will own the Shares, beneficially and of record, free and clear of all Liens; (d) there will be no outstanding options, warrants or other rights to purchase any shares of the University's capital stock; and (e) the delivery of a certificate or certificates at the Closing representing the Shares in the manner provided in Section 5.2.2 will transfer to Buyer good and valid title to the Shares, free and clear of all Liens.

        7.2    Authority to Execute and Perform Agreements.    The University and the Sisters have all requisite power, authority and approvals required to enter into, execute and deliver this Agreement and all Ancillary Agreements (collectively, the "Transaction Documents") and to perform fully the University's and the Sisters' obligations hereunder and thereunder.

        7.3    Due Authorization, Enforceability.    Each of the Sellers has taken all actions necessary to authorize it to enter into and perform fully its obligations under this Agreement and the other Transaction Documents and to consummate the transactions contemplated herein and therein. The University and the Sisters have authorized the execution, delivery, and performance of this Agreement and the other Transaction Documents and each of the transactions and agreements contemplated hereby and thereby with regard to their respective interests, obligations and undertakings. No other corporate action is necessary to authorize such execution, delivery and performance of the Transaction Documents, and upon such execution and delivery each of the Transaction Documents shall constitute the valid and binding obligation of the University and the Sisters, enforceable against the University and the Sisters in accordance with the terms, except that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and general principles of equity.

        7.4    No Violation.    Neither the execution nor delivery by the University nor the Sisters of this Agreement or any of the Schedules or Exhibits hereto nor the consummation of the transactions contemplated herein or therein will knowingly: (a) violate any provision of the Articles of Incorporation, bylaws or other charter documents of the University or the Sisters; (b) violate, conflict with or constitute a default under, permit the termination or acceleration of, or cause the loss of any rights or options under, any Contract; (c) require any authorization, consent or approval of, exemption or other action by, or notice to, any party to any Material Contract; (d) result in the creation or imposition of any lien or other encumbrance upon any of the assets of the University or the Sisters; (e) violate or require any consent or notice under any law or order to which the University or the Sisters is subject; or (f) violate any permits or licenses of the University or the Sisters.

        7.5    Regulatory Approvals and Other Consents.    Section 7.5 of the Disclosure Schedule sets forth, to the best of the Seller's knowledge, a complete and accurate description of each consent, approval, authorization, notice, filing, exemption or other requirement, whether or not prescribed by the Articles of Incorporation, by-laws or other charter document of the University and the Sisters, whether prescribed by law or administrative rule or order, or whether required pursuant to the terms of any contract, which must be obtained from any Person or which must otherwise be satisfied by the University and the Sisters in order that (i) the execution and delivery by the University and the Sisters of this Agreement or any Schedules or Exhibits hereto and (ii) the consummation of the transactions contemplated herein and therein will not cause any breach of the representations and warranties contained in Article 7. Each such consent, approval, authorization or other requirement will be obtained or satisfied prior to the Closing.

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        7.6    Financial Condition/Financial Statements.    Section 7.6 of the Disclosure Schedule sets forth the audited consolidated balance sheets of the University as of May 31, 2004, 2003, 2002 and 2001, the unaudited consolidated balance sheets of the University for the most recent interim period, as the case may be, and the related consolidated statements of financial position and the related statements of changes of financial position or cash flows for the twelve month periods then ended, audited or reviewed by the University's independent certified public accountants, whose reports thereon are included therewith. Said financial statements (a) were prepared in accordance with the books and records of the University; (b) were prepared in accordance with generally accepted accounting principles consistently applied; (c) fairly present the University's financial condition and the results of its operations as of the relevant dates thereof and for the periods covered thereby; and (d) include the accrual of all unpaid Employment Related Liabilities.

        7.7    No Undisclosed Liabilities.    Except for (i) those liabilities specifically accrued or reserved against on the University's balance sheet, (ii) those current liabilities for trade or business obligations incurred since the Balance Sheet Date in connection with the purchase of goods or services in the ordinary course of the business and consistent with past practices, (none of which is, individually or in the aggregate, material and none of which is for breach of contract, breach of warranty, tort or infringement) (iii) those liabilities arising under any contract (none of which liabilities is for breach of contract, breach of warranty, tort or infringement) or (iv) those liabilities otherwise specifically disclosed in Section 7.7 of the Disclosure Schedule, the University has, as of the date hereof, no direct or indirect indebtednesses, liabilities (including, without limitation, all employment-related liabilities), claims, losses, damages, deficiencies, obligations or responsibilities, known or suspected, liquidated or unliquidated, accrued, absolute, contingent or otherwise, and whether or not of a kind required by generally accepted accounting principles to be set forth on a financial statement, which individually or in the aggregate are material to the condition (financial or otherwise), assets, liabilities, business or operations of the University.

        7.8    Compliance with Laws, Governmental Matters.

        7.8.1    General.    The University has in all material respects complied with, and is now in all material respects in compliance with, all laws and orders applicable to the University or its assets or the operation of its Business, and, at time of Closing, no unbudgeted capital expenditures are required in order to insure continued compliance therewith; Section 7.8.1 of the Disclosure Schedule sets forth each Permit, together with its date of expiration; except for the Permits already held by the University as disclosed in Section 7.8.1 of the Disclosure Schedule, no other franchise, license, permit, order or approval of any governmental authority is material to or necessary for the conduct of the Business as previously conducted during the twelve (12) month period prior to the date hereof and as presently conducted; each Permit is in full force and effect; the University is now and has at all times in the past been in all material respects in full compliance with each such Permit, no violations are or have in the last five (5) years been recorded by any governmental authority in respect of any such Permit, and no proceeding is pending or, threatened to revoke, amend or limit any such Permit; there are no known pending or threatened proceedings by or before any governmental authority which involves new special assessments, assessment districts, bonds, taxes, condemnation actions, laws or orders or similar matters which, if instituted, could reasonably be expected to have a Material Adverse Effect upon the condition (financial or otherwise), assets, liabilities, business or prospects of the Business or the value or utility of the Assets.

        7.8.2    Environmental and Industrial Hygiene Compliance.    Except as disclosed in Section 7.8.2 of the Disclosure Schedule and to the best knowledge of the University and the Sisters, (a) none of the Sellers nor any of the assets used in the Business has ever been or is now in any material respect in violation of any applicable environmental laws or orders; (b) none of the Sellers nor any third party hired by it has, prior to the date hereof, ever used,

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generated, manufactured, treated, stored or disposed of on, under or about the premises of the University or transported to or from the premises of the University any Hazardous Materials; (c) each of the Sellers has obtained and now holds all permits, licenses and other authorizations which are required to be held by it under all applicable environmental laws and orders; (d) each of the Sellers is in compliance in all material respects with all terms and conditions of any and all required permits, licenses and authorizations and all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in or required by all applicable environmental laws and orders, and any notice or demand letter issued, entered, promulgated or approved thereunder; (e) no past or present events or conditions interfere with or prevent continued material compliance by the any Seller with, or give rise to any material present or potential legal, common law or statutory liability of any Seller under, any applicable environmental law or order; (f) there is no pending civil or criminal litigation, notice of violation or administrative proceeding involving any of the Sellers and relating in any way to any environmental law or order (including notices, demand letters or claims under the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.), Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.) ("RCRA"), Safe Drinking Water Act (21 U.S.C. § 349, 42 U.S.C. § 300f-300j-26), Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), Clean Air Act (42 U.S.C. § 7401 et seq.), Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.) ("CERCLA"), or any other similar federal, state or local law of similar effect, each as amended), other than rule-making proceedings, if any; and (g) there has been no direct disposal by any Seller of any materials or wastes to, on or in any site currently listed or formally proposed to be listed on the National Priorities List under CERCLA or any site listed or formally proposed to be listed as a major or priority cleanup site under any comparable state or foreign law. For purposes of this Section 7.8.2, "Hazardous Materials" means any chemical, compound, mixture, substance, material, condition or waste that is hazardous to human health, safety, or the environment due to its radioactivity, ignitability, corrosivity, flammability, toxicity or properties including but not limited to (i) substances now or at any time hereafter defined as "hazardous substances," "hazardous materials," or "toxic substances" in CERCLA, the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq. or RCRA, as the same may be amended from time to time, or in the regulations adopted and publications promulgated pursuant to said laws from time to time, (ii) those substances now or at anytime hereafter defined "hazardous substances" in Iowa Code Section 455B.381, as the same may be amended from time to time, or in the regulations adopted and publications promulgated pursuant to said laws from time to time, (iii) petroleum, (iv) PCB, and (v) asbestos in any form.

        7.9    Litigation.    Except as set forth in Section 7.9 of the Disclosure Schedule, there is no litigation, action, suit, proceeding or investigation (collectively, "Actions") presently pending against either Seller or affecting its assets, property or Business, nor does either Seller have any knowledge of any Actions threatened against it or affecting its properties or restricting or prohibiting the consummation of the transactions contemplated by this Agreement and the other Transaction Documents before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign. Section 7.9 of the Disclosure Schedule sets forth an accurate and complete description of every known pending or threatened adverse claim, dispute, governmental investigation, suit, action (including, without limitation, nonjudicial real or personal property foreclosure actions), arbitration, legal, administrative or other proceeding of any nature, domestic or foreign, criminal or civil, at law or in equity, by or against or otherwise affecting the University, and with respect to the Land and Buildings, the Sisters, the Business or the Assets. The University and the Sisters have delivered to Buyer copies of all relevant court papers and other documents relating to the

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matters referred to in Section 7.9 of the Disclosure Schedule. Except as disclosed in Section 7.9 of the Disclosure Schedule:

        (a)   no such matter or matters, if decided adversely to the University or the Sisters, could reasonably be expected to adversely affect the condition (financial or otherwise), assets, liabilities, Business, operations or prospects of the University, or the value or utility of the Assets or the other assets of the University;

        (b)   the University is not in default with respect to any order by which it is bound or to which its property is subject and there exists no order enjoining or requiring the University or the Sisters to take any action of any kind with respect to the Business or the Assets;

        (c)   neither the University nor the Sisters nor any current officer, director or employee of the University or the Sisters, has been permanently or temporarily enjoined by any order from engaging in or continuing any conduct or practice in connection with the Business or the Assets; and

        (d)   no basis exists for any claim, investigation, suit or proceeding which, if decided adversely to the University or the Sisters, could reasonably be expected to have an adverse effect upon the condition (financial or otherwise), assets, liabilities, Business, operations or prospects of the University or the value or utility of the Assets.

        7.10    University's Personal Property.

        7.10.1    Tangible Personal Property.    Section 7.10.1 of the Disclosure Schedule sets forth, as of the date hereof, (i) a description, including the location, of each item of the tangible personal property owned by the University having either a depreciated book value or estimated fair market value per unit in excess of $5,000, or not owned by the University but in the possession of the University or used in the Business and having rental payments therefor in excess of $5,000 per year; and (ii) a description of the owner of, and any contract or other agreement relating to the use of each such item of tangible personal property not owned by the University and the circumstances under which such property is used. Except as disclosed in Section 7.10.1 of the Disclosure Schedule as of the date hereof:

        (a)   the University has good and marketable title to each item of tangible personal property, free and clear of all Liens except for liens, if any, for personal property taxes not due and liens of repairmen or bailees or other similar liens incurred in the ordinary course of business in respect of obligations which are not overdue, and all leaseholds in tangible personal property leased by the University as lessee are good and transferable; and

        (b)   the operation of each item of the tangible personal property during the twelve (12) month period prior to the date hereof, as presently conducted and as proposed to be conducted is not in any material respect in violation of any applicable building code, zoning ordinance or other law including, without limitation, applicable environmental protection and occupational health and safety laws and regulations.

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        (c)   during the past three (3) years, there has not been any significant interruption in the operations of the University due to inadequate maintenance of any item of tangible personal property.

        7.10.2    Intangible Personal Property.    Section 7.10.2 of the Disclosure Schedule sets forth, as of the date hereof, (i) a true and accurate identification of each registered fictitious business name, trademark, service mark, trade name and slogan, and each registration and registration application for any of the foregoing, constituting a part of the intangible personal property of the Business; (ii) a true and complete schedule of each registered copyright, and each registration and application therefor constituting a part of the intangible personal property; (iii) a true and complete schedule of each patent and patent application, registered industrial design and description of any material technical information, documentation or manuals currently used in the Business; (iv) each item of material "software" (which is not comprised of desktop applications generally commercially available to third parties for lease fees of less than $1,000 per license) and associated documentation constituting a part of the intangible personal property; and (v) a true and complete list of each contract or other agreement to which the University is a party with respect to the Business either as licensee or licensor or otherwise relating to any item of the intangible personal property. Except as indicated in Section 7.10.2 of the Disclosure Schedule, as of the date hereof:

        (a)   the University is the owner of all right, title and interest in and to each item of the intangible personal property, free and clear of all liens and other encumbrances;

        (b)   all patents, copyrights and other state and federal registrations and all applications therefor listed in Section 7.10.2 of the Disclosure Schedule are valid and in full force and effect and are not subject to any taxes, maintenance fees or actions falling due within ninety (90) days after the date hereof,

        (c)   there are no known pending claims, actions, judicial or other adversary proceedings, disputes or disagreements involving the University concerning any item of intangible personal property, and no such action, proceeding, dispute or disagreement is threatened;

        (d)   the University has the right and authority to use each item of the intangible personal property in connection with the conduct of the Business; such use did not and will not knowingly conflict with, infringe upon, or violate any patent or other proprietary right of any other Person, and the University has not knowingly infringed and is not now knowingly infringing any proprietary right belonging to any other Person; and

        (e)   the University have taken all reasonable security measures to protect the secrecy, confidentiality and value of its trade secrets.

        7.11    Agreements.    Section 7.11 of the Disclosure Schedule sets forth a true and correct list of each contract and other agreement now in effect except (i) any contract or other agreement which is specifically identified elsewhere in the Disclosure Schedule or which would be required to be disclosed therein but for specific exemptions contained therein; (ii) purchase or sales orders made in the ordinary course of business and not involving a commitment for a duration greater than one year or an aggregate amount in excess of $10,000; and (iii) any other contract or other agreement made in the ordinary course of business and not providing for a duration in excess of six months or involving aggregate payments or potential liabilities in excess of $10,000 for such six (6) months. Except as disclosed in Section 7.11 of the Disclosure Schedule, as of the date hereof:

        (a)   to the best of University's knowledge, each contract is the valid and binding obligation of the other contracting party, enforceable in all material respects in accordance with its terms against the other contracting party and is in full force and effect, and all rights of the University thereunder are owned free and clear of any lien or other encumbrance;

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        (b)   no event has occurred or condition exists that, with due notice or lapse of time or both, would constitute a default under any contract;

        (c)   no other contracting party to any contract is now in material breach thereof or has breached the same in any material respect within the twelve-month period prior to the date hereof, there is no anticipated material breach thereof by any such party; and there are not now, nor have there been in the twelve (12) month period prior to the date hereof, any written disagreements or disputes between the University and any other party to any contract relating to the validity or interpretation of such contract or to the performance by any party thereunder that has been disclosed to University in writing;

        (d)   the University has fulfilled all material obligations required pursuant to each Contract to have been performed by it prior to the date hereof, and the University has no reason to believe, as of the date of Closing, that the University would not be able to fulfill, when due, all of its obligations under each contract which remain to be performed after the date hereof,

        (e)   the University has not received any notice that any party to any contract intends to cancel or terminate any such contract or to exercise or not to exercise any option or extension right thereunder;

        (f)    the University is not a party to, nor bound by, any contract or other agreement or any provision of its respective Articles of Incorporation or By-laws which (i) restricts the conduct of its Business anywhere in the world or (ii) contains any unusual or burdensome provisions which could reasonably be expected to have a Material Adverse Effect upon the condition (financial or otherwise), assets, liabilities, Business, operations or prospects of University, or the value or utility of the Assets;

        (g)   the contracts include all of the contracts and agreements necessary for the conduct of the Business as conducted during the twelve-month period prior to the date hereof, as presently conducted by the University and as proposed to be conducted as of the date of Closing, and include substantially all of the contracts and other agreements actually in force during the twelve-month period prior to the date hereof, and

        (h)   except as contemplated in this Agreement, the University has not engaged in the past six months (i) in any substantive discussion with any Person or Persons in connection with, or in any manner encourage a merger or other business combination transaction involving University, or the assets of the University or any interest therein (directly or indirectly) other than non-essential or excess assets sold in the ordinary course of business, with any other person or entity, or any financing in connection with any of the foregoing, or provide any information to any other person or entity in connection therewith, or (ii) disclosed to any other person (other than the directors of the University, their counsel and financial advisors, all of whom shall also maintain the confidentiality thereof) the contents of this Agreement or the existence and terms or status of any proposals, negotiations or offers with or by Buyer, or (iii) operated the Business other than in the ordinary course of business.

        7.12    Labor and Employment Matters.    Section 7.12 of the Disclosure Schedule sets forth a true and current list of all of the labor agreements with any labor organization representing or purporting to represent any employees of the University now in effect. Section 7.12 of the Disclosure Schedule also includes a true and complete schedule listing the names, total annual compensation, total accrued vacation and other fringe benefits of each person employed by the University with respect to the Business presently receiving compensation aggregating in excess of $5,000 per year.

        7.12.1Except as disclosed in Section 7.12.1 of the Disclosure Schedule, as of the date hereof:    

        (a)   all employees of the University are employees at will or for a definite term.

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        (b)   there are no labor disputes pending or, threatened against the University with respect to the Business. The University has not experienced any labor dispute, strike, picketing, handbilling, work slowdown, work stoppage or other concerted labor difficulty at any time from and after January 1, 2003.

        (c)   no application or petition for certification of a collective bargaining agent is pending and none of the employees of the University are or have been represented by any union or other bargaining representative and no union has attempted to organize any group of the University's employees, and no group of the University's employees has sought to organize themselves into a union or similar organization for the purpose of collective bargaining.

        7.12.2    Compliance With Labor Laws and Agreements.    Except as disclosed in Section 7.12.2 of the Disclosure Schedule, as of the date hereof:

        (a)   no charge or complaint of employment discrimination against the University related to the Business or their subsidiaries is pending or threatened before the Equal Employment Opportunity Commission or any other federal, state, or local agency, court or tribunal;

        (b)   no charge or complaint against the University related to the Business is pending or threatened for payment of wages or other benefits under the Fair Labor Standards Act, as amended, or under any similar state or local employment standards law;

        (c)   no charge or complaint against the University related to the Business or is pending or threatened before the Occupational Safety and Health Administration or any similar state or local agency;

        (d)   there is no complaint or action against the University related to the Business by any current or former employee of the University, including, but not limited to, a complaint or action alleging breach of an employment contract, wrongful discharge, or breach of a duty of good faith and fair dealing in the employment relationship is pending before any federal, state or local agency, court or tribunal;

        (e)   there are no pending claims against the University related to the Business for workers' compensation, unemployment insurance, or disability benefits under federal, state, or local law; or

        (f)    as of the Closing Date, the University will have withheld all amounts required by currently applicable law or by written agreement to be withheld from the wages, salaries and other payments to its employees involved in the Business.

        7.13    Pension and Benefit Plan.    Section 7.13 of the Disclosure Schedule sets forth a correct and complete list of the pension plans and welfare plans that the University and its ERISA affiliates maintain, as of the date hereof. Except as disclosed in Section 7.13 of the Disclosure Schedule, as of the date hereof:

        (a)   Each ERISA plan conforms in all material respects to all applicable laws, including ERISA and the Code. All material notices, reports, returns, applications and disclosures have been timely made which are required to be made to the Internal Revenue Service and the U.S. Department of Labor;

        (b)   the University and its ERISA affiliates have made or provided for (with fully-funded reserves) all contributions heretofore required to have been made under all ERISA plans, and will, by the Closing Date, have made or provided for (with fully-funded reserves) all contributions required to be made on or before the Closing Date under all such plans;

        (c)   No ERISA plan nor any trust created thereunder, nor any trustee or administrator thereof has engaged in a transaction which may subject any of such ERISA plans, any such trust,

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or any party dealing with such ERISA plans or any such trust, to the tax or penalty on prohibited transactions imposed by Section 4975 of the Code or to a civil penalty imposed by Section 502 of ERISA;

        (d)   There are no actions, claims or lawsuits which have been asserted or instituted against the assets of any of the trusts under the ERISA plans, and no basis for such action, claim or lawsuit exists, and no such action, claim or lawsuit has been threatened; and

        (e)   True, correct and complete copies of the following documents, with respect to each of the ERISA plans, have been made available to Buyer:

          (i)  Each ERISA plan document.

         (ii)  The most recent summary plan description of each ERISA plan for which a summary plan description is required under ERISA and summaries of material modifications thereto.

        (iii)  All instruments under which the assets of any ERISA plan are held or managed and benefits provided, including, but not limited to, insurance contracts, trust agreements, custodial contracts and investment management agreements.

        (iv)  The two most recent Forms 5500, 5500-C or 5500-R for each ERISA plan for which such filing is required, with all attachments and schedules thereto.

         (v)  The two most recent annual financial statements for each ERISA plan, if not included with such Form 5500 (5500-C or 5500-R); and

        (vi)  With respect to each ERISA plan that has received a determination letter under Section 401(a) of the Code, and any voluntary employee benefit association trust that has received a determination letter under Section 501(c) of the Code, the most recent Internal Revenue Service determination letter (including any letter concerning the tax-exempt status of any trust under Section 501 (a) of the Code).

        7.14    Insurance.    Section 7.14 of the Disclosure Schedule sets forth a true and correct list of all policies or binders of fire, liability, workers' compensation, vehicular or other insurance held by or on behalf of the University and the Sisters specifying the insurer, the policy number or covering note number with respect to binders, and describing each pending claim thereunder of more than $5,000. Such policies and binders are in full force and effect. There are no outstanding unpaid claims under any such policy or binder. Neither the University nor the Sisters has received any notice of cancellation or non-renewal of any such policy or binder. There is no inaccuracy in any application for such policies or binders, any failure to pay premiums when due, or any similar state of facts which may form the basis for termination of any such insurance. In the last five years neither the University nor the Sisters has ever been refused any insurance with respect to its properties or operations, nor has its insurance coverage ever been limited. Neither the University nor the Sisters is aware of any facts which, if known to any such insurer, may result in a cancellation or termination of any such policy or binder. The rating of the insurance companies insuring all of the policies is not less than BB+.

        7.15    Full Disclosure.    The University has heretofore made all of its books and records available to Buyer for its inspection and has heretofore delivered to Buyer copies of all agreements and documents referred to in the Disclosure Schedule. All documents and other papers delivered to Buyer by or on behalf of the University in connection with this Agreement and the transactions contemplated herein are accurate, complete and authentic. Furthermore, the information furnished to Buyer by or on behalf of the University in connection with this Agreement and the transactions contemplated herein does not to the knowledge of the University, contain any untrue statement of a material fact and does not omit to state any material fact necessary to make the statements made, in the context in which they are made, not false or misleading. There is no known fact which the University has not disclosed to Buyer in writing which could reasonably be expected to have a Material Adverse Effect upon the

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condition (financial or otherwise), assets, liabilities, business, operations, properties or prospects of the University, the value or utility of its Assets or the ability of the University to consummate the transaction contemplated herein.

        7.16    Compliance with the Department of Education and Other Applicable Governmental Rules.    The University has complied in all material respects (i.e., which would not result in a penalty, debarment or repayment liability) with the Department of Education Rules during the University's ownership of the Business with respect to receipt of Title IV funds for its students and has complied with all applicable rules and compliance standards. None of the Title IV funds have been disbursed in violation of the laws and regulations pertaining to such funds prior to the Closing.

        7.17    Tax Matters.

        (a)   The University has filed all tax returns that it was required to file, such tax returns were correct and complete in all material respects, and all taxes owing have been paid (whether or not showing on such tax returns).

        (b)   The University has not waived any statute of limitations in respect of taxes or agreed to any extension of time with respect to a tax assessment or deficiency.

        (c)   There are no outstanding liens for taxes upon the assets of the University.

        (d)   The University has not received any written notice of deficiency or assessment from any taxing or other governmental authority with respect to income taxes or any written notice of material deficiency or assessment from any taxing or other governmental authority concerning any taxes nor any material audit by any taxing or other governmental authority concerning any other taxes.

        (e)   During the last five (5) years, no written notice has been received by the University from an authority in a jurisdiction where the University does not file tax returns that it is or may be subject to taxation by that jurisdiction.

        (f)    The University has withheld and paid all taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, or other third party.

        (g)   The Sisters hold all necessary and appropriate exemptions as a non-profit entity for federal and state tax purposes and all such exemptions are valid.

        7.18    Real Property.

        (a)   Section 7.18(a) of the Disclosure Schedule lists all real property owned by the University (the "Owned Property") and all real property that the University holds under a lease or sublease with the Sisters (the "Leased Property"). The University have delivered to Buyer correct and complete copies of the leases and subleases listed in Section 7.18 of the Disclosure Schedule. Each lease and sublease listed in Section 7.18 of the Disclosure Schedule is, in the opinion of the University, legal, valid, binding, enforceable, and in full force and effect, except where the illegality, invalidity, nonbinding nature, unenforceability, or ineffectiveness would not have a Material Adverse Effect on the University's use of the real property covered by such lease or sublease in the ordinary course of business. No lessor under any of the leases set forth on Section 7.18(a) of the Disclosure Schedule has taken action in respect of any lease or threatened to terminate any lease before the expiration date specified in such lease. The Leased Property and the Owned Property constitutes all real property used by the University in the conduct of the Business, there is no known pending or threatened condemnation, eminent domain or similar proceeding with respect to any real property occupied by or owned by the University. To the best of the University's knowledge, each real property occupied by the Sisters is in compliance in all material respects with all building, zoning, subdivision, health, safety and other applicable foreign,

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federal, state and local laws and regulations. All Owned Properties and Leased Properties have received all required approvals of governmental authorities (including, without limitation, permits and a certificate of occupancy or other similar certificate permitting lawful occupancy thereof) required in connection with the operation thereof and have been operated and maintained in accordance with applicable laws, rules and regulations.

        (b)   Section 7.18(b) of the Disclosure Schedule lists all the real property owned by the Sisters that is being sold to the Buyer (the "Sister-Owned Property"), consisting of approximately 17.397 acres of real property and nine buildings. The Sisters have delivered to Buyer correct and complete copies of the leases and subleases listed in Section 7.18(b) of the Disclosure Schedule. Each lease and sublease listed in Section 7.18(b) of the Disclosure Schedule is, in the opinion of the Sisters, legal, valid, binding, enforceable, and in full force and effect, except where the illegality, invalidity, nonbinding nature, unenforceability, or ineffectiveness would not have a Material Adverse Effect on the Sisters' use of the real property covered by such lease or sublease in the ordinary course of business. No lessor under any of the leases set forth on Section 7.18(b) of the Disclosure Schedule has taken action in respect of any lease or threatened to terminate any lease before the expiration date specified in such lease. The Leased Property and the Owned Property constitutes all real property used by the Sisters in the conduct of the Business, there is no known pending or threatened condemnation, eminent domain or similar proceeding with respect to any real property occupied by or owned by the Sisters. To the best of the Sisters' knowledge, each real property occupied by the Sisters is in compliance in all material respects with all building, zoning, subdivision, health, safety and other applicable foreign, federal, state and local laws and regulations. All Owned Properties and Leased Properties have received all required approvals of governmental authorities (including, without limitation, permits and a certificate of occupancy or other similar certificate permitting lawful occupancy thereof) required in connection with the operation thereof and have been operated and maintained in accordance with applicable laws, rules and regulations.

        7.19    Brokers.    The Sellers shall fully discharge all of their respective obligations to brokers and finders engaged by them which in any way relate or pertain to the transactions contemplated by this Agreement and the other Transaction Documents.

        7.20    Subsidiaries.    Except as set forth in the Disclosure Schedule, the University has no subsidiaries and no interests or investments in any partnership, trust or other entity or organization.

        7.21    Absence of Certain Developments.    Since the Balance Sheet Date, there has been no (i) Material Adverse Change in the condition, financial or otherwise, of the University or its assets, liabilities, properties, or business or prospects, (ii) Material Loss, destruction or damage to any property of the University, whether or not insured, (iii) acceleration or prepayment of any indebtedness for borrowed money or the refunding of any such indebtedness, (iv) labor trouble involving the University or any material change in its personnel or the terms and conditions of employment, (v) known waiver of any valuable right, whether by contract or otherwise, (vi) loan or extension of credit to any officer or employee of the University, (vii) change in accounting methods, principles or practices used in preparing the University's financial statements (viii) acquisition or disposition of any material assets (or any contract or arrangement therefore), or any other material transaction by the University otherwise than for what is in the University's opinion fair value in the ordinary course of business; (ix) increase in or incurrence of a material liability; (xii) incurrence of material liens or other encumbrances on the Assets; (xiii) failure to satisfy an obligation or a default or breach under a material obligation; (xiv) increase in employee compensation; (xv) any increase in capital expenditures in excess of $5,000 individually or $10,000 in the aggregate.

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        7.22    Condition of Properties.    All material facilities, machinery, equipment, fixtures, vehicles and other properties owned, leased or used by the University and the Sisters in the Business are in reasonable operating condition and repair in relationship to their reasonable useful life.

        7.23    Illegal or Unauthorized Payments; Political Contributions.    The University has not, directly or indirectly, made or authorized any payment, contribution or gift of money, property, or services, whether or not in contravention of applicable law, (a) as a kickback or bribe to any Person or (b) to any political organization, or the holder of or any aspirant to any elective or appointive public office except for personal political contributions not involving the direct or indirect use of funds of the University.

        7.24    Liabilities on Assets Acquired.    Section 7.24 of the Disclosure Schedule lists the liabilities that encumber the Assets.

        7.25    Suppliers.    To the best of its knowledge, Section 7.25 of the Disclosure Schedule lists the names of all suppliers of merchandise and/or services for the University within the last twelve (12) months in excess of Ten Thousand Dollars ($10,000.00).

        7.26    Distributed Funds.    Except as set forth on Section 7.26 of the Disclosure Schedule, to the best of its knowledge the University has not used any temporary or recently restricted funds to fund unrestricted operations of the University or for any other unauthorized or non-permitted use that is contrary to the restricted nature of such funds. Furthermore, the transfer of the restricted funds as contemplated by this transaction shall not result in any liability to the Buyer.

        7.27    Material Facts.    This Agreement, the Schedules and the Exhibits and the other agreements, documents, certificates or written statements furnished or to be furnished to the Buyer through the Closing Date by or on behalf of the University and the Sisters in connection with the transactions contemplated hereby taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein or herein, in light of the circumstances in which they were made, not misleading. There is no fact which is known to the University or the Sisters that has not been disclosed herein or would otherwise be reasonably expected to have a Material Adverse Effect. The materials, information and projections presented to Buyer have been prepared in a good faith effort by the University and the Sisters to describe the University's present and proposed, operations neither the University nor the Sisters is aware of any materially misleading statement or omissions therein.

ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF BUYER

        Buyer represents and warrants to Sellers as follows:

        8.1    Due Formation.    Buyer is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of formation and has all requisite power and authority to own, lease and operate its assets, properties and business and to carry on its business as now conducted.

        8.2    Authority to Execute and Perform Agreements.    Buyer has all requisite power, authority and approval required to enter into, execute and deliver this Agreement and the other Transaction Documents and to perform fully its obligations hereunder and thereunder.

        8.3    Due Authorization.    Buyer has taken all actions necessary to authorize it to enter into and perform its obligations under this Agreement and all other Transaction Documents and to consummate the transactions contemplated herein and therein. This Agreement is, and as of the Closing Date, such other Transaction Documents will be, the legal, valid and binding obligations of Buyer, enforceable in accordance with their respective terms.

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        8.4    No Violation.    Neither the execution and delivery of this Agreement nor any of the other Transaction Documents nor the consummation of the transactions contemplated herein and therein will (a) violate any provision of the Certificate of Incorporation with a resulting Material Adverse Change or a Material Loss; (b) violate, conflict with, or constitute a default under any contract or other lease agreement or other instrument to which Buyer is a party or by which Buyer or its property is bound with a resulting Material Adverse Change or a Material Loss; (c) require the consent of any party to any Material Contract or other agreement to which Buyer is a party or by which its property is bound; or (d) violate any laws or orders to which Buyer or its property is subject with a resulting Material Adverse Change or a Material Loss.

        8.5    Regulatory Approvals.    All consents, approvals, authorizations and other requirements prescribed by any law or order which must be obtained or satisfied by Buyer and which are necessary for the execution and delivery by Buyer of this Agreement and all other Transaction Documents and the consummation of the transactions contemplated in this Agreement will be obtained and satisfied prior to the Closing.

        8.6    No Broker.    Except for Robert Peck, no broker, finder, agent or similar intermediary has acted for or on behalf of Buyer in connection with this Agreement or the transactions contemplated hereby, and no broker, finder, agent or similar intermediary is entitled to any broker's, finder's, or similar fee or other commission in connection therewith based on any agreement, arrangement or understanding with Buyer or any action taken by Buyer. Buyer shall fully discharge all obligations to brokers or finders engaged by Buyer to raise capital to consummate the transactions which are the subject of his Agreement.

        8.7    Sufficient Funds.    That it has, or will have obtained prior to Closing a binding commitment from a qualified financial institution or investor to provide the funds necessary to consummate the transactions contemplated in this Agreement once all of the conditions to closing have been satisfied.

ARTICLE 9
COVENANTS AND AGREEMENTS OF SELLER

        9.1    Conduct of Business.    University agrees that from the date hereof to the Closing Date, University will conduct the Business in the ordinary course and substantially in the manner in which it is presently conducted. University shall not attempt to collect the University's receivables other than in the ordinary course of business and shall not provide any discounts, other than as ordinarily provided, to the University's debtors in order to collect such receivables.

        9.1.1University shall not (without the prior written consent of Buyer):    

        (a)   incur any indebtedness except in the ordinary course of business;

        (b)   pay or commit to pay any bonus to any officer, director, employee, sales representative, agent or consultant or grant or commit to grant to any officer, director, employee, sales representative, agent, consultant or affiliate any other increase in, or additional, compensation in any form;

        (c)   enter into, institute, adopt or materially amend or commit to enter into, institute, adopt or materially amend any material employment, consulting, retention, change-in-control, collective bargaining, bonus or other incentive compensation, profit-sharing, health or other welfare, pension, retirement, vacation, severance, deferred compensation or other employment, compensation or benefit plan, policy, agreement, trust fund or arrangement in respect of or for the benefit of any officer, director, employee, sales representative, agent or consultant or affiliate, by this Agreement, or as required under applicable law, the Code or ERISA;

        (d)   sell, transfer, assign, mortgage, pledge, hypothecate, grant any security interest in, or otherwise subject to any other lien, any of the Assets, other than (i) in the ordinary course of

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business, and (ii) in accordance with existing agreements, it being understood by the parties that this Section 9.1.1(d) shall apply to both the University and the Sisters;

        (e)   enter into or assume any contract providing for the payment by the University of an amount in excess of $5,000 per year, or enter into or permit any amendment, supplement, waiver or other modification in respect thereof other than in the ordinary course of business;

        (f)    cause or permit any amendment, supplement, waiver or modification to its certificate of incorporation, by-laws or other organizational documents except as required to implement the terms and provisions of this Agreement;

        (g)   merge or consolidate with, or agree to merge or consolidate with, or purchase substantially all of the assets of, or otherwise acquire any business, business organization or division of any other Person;

        (h)   acquire any additional assets or properties outside the ordinary course of business; not accelerate, terminate, make material modifications to, or cancel any contract to which the University is a party or by which it is bound, except in the ordinary course of business;

        (i)    make any capital expenditures or commitments in excess of $5,000.00 in the aggregate per month or otherwise in accordance with the University's capital expenditure budget or business plan currently in effect;

        (j)    grant any license or sublicense of any rights under or with respect to any intellectual property;

        (k)   settle, release or forgive any material claim or material litigation or waive any material right in such litigation;

        (l)    make any changes in any method of accounting or accounting principles, other than as required to comply with GAAP;

        (m)  make any expenditure not approved in the operating budget; or

        (n)   agree or otherwise commit to take any of the actions described in the foregoing paragraphs (a) through (n);

        9.1.2University shall:    

        (a)   use commercially reasonable efforts to keep in full force and effect insurance comparable in amount and scope of coverage to insurance carried by it as of the date hereof;

        (b)   maintain its books of account and records in the ordinary course of business;

        (c)   maintain its properties and facilities in as good working order and condition as at present, ordinary wear and tear excepted;

        (d)   cooperate with Buyer in making the application to the Department of Education and any other applicable regulatory bodies;

        (e)   cooperate with the Buyer in preparing the paperwork necessary to amend the status of the University to a for-profit entity from a non-profit entity;

        (f)    cooperate with Buyer in making the application described in Section 9.7 hereof;

        (g)   file all tax returns required to be filed;

        (h)   not terminate any material business relationship in effect at the time of the execution of this Agreement; and

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        (i)    operate the Business in the ordinary course, consistent with past practice and in accordance with the Estimated Budget.

        9.2    Conditions.    Sellers agree that from the date hereof to the Closing Date, they will use their best efforts:

        (a)   To satisfy the conditions precedent to consummation of the transactions contemplated by this Agreement to the extent they are to be performed by them, their agents or representatives;

        (b)   To reasonably cooperate with Buyer, to the extent cooperation on their part is helpful, in Buyer's efforts to obtain the consents required in this Agreement; and

        (c)   To use their commercially reasonable efforts to obtain any consents referred to in this Agreement that are required to be obtained by Sellers.

        9.3    Examinations and Investigations.    Prior to the Closing Date, Buyer shall be entitled and shall have reasonable access to appropriate management, through Buyer's employees and representatives, to make such investigation of the assets, liabilities, properties, business and operations of the University, and such examination of the books, records and financial condition of the University, as Buyer reasonably determines is necessary and to again update such records immediately before the Closing Date.

        9.4    Expenses.    Except as otherwise provided herein, the University shall bear all expenses incurred on behalf of the University in connection with the preparation, execution and performance of this Agreement, including but not limited to attorneys' fees and costs and the transactions contemplated hereby, including, without limitation, all fees and expenses of its agents, representatives, counsel, actuaries and accountants even if the transaction contemplated by this Agreement does not close.

        9.5    Insurance.    From the date hereof through the Closing Date, each of the Sellers shall use its best efforts to maintain in force (including necessary renewals thereof) any insurance policies in force at the date of the execution of this Agreement (listed in Section 7.14 of the Disclosure Schedule), except to the extent that they may be replaced with materially equivalent policies appropriate to insure the assets, properties and business of the University and the Sisters to the same extent as currently insured.

        9.6    Tax Returns.    The University shall promptly file all tax returns for the fiscal year in which the transaction occurs and shall deliver a copy of the proposed tax return to Buyer at least fifteen (15) days prior to the due date for the filing of such return(s).

        9.7    Pre-Approval with the Department of Education.    Buyer shall have the right to submit to the Department of Education an application for pre-approval of the change of ownership of University after this Agreement is executed and the University shall cooperate with Buyer in making that submittal and working with the regulatory agencies. University shall be entitled to review and approve all filings with the U.S. Department of Education before their delivery to that department.

        9.8    Access.    The University and the Sisters shall provide Buyer with access to the University's and the Sisters' facilities, Books and Records and those matters specified in Article 6 of this Agreement and shall cause the Representatives of the University and the Sisters to cooperate fully with Buyer and Buyer's Representatives in connection with Buyer's due diligence investigation of the University, the Assets, and the University's contracts, liabilities, operations, records and other aspects of the Business. Buyer shall be under no obligation to continue with its due diligence investigation or to consummate the transactions contemplated by this Agreement if, at any time, the results of its due diligence investigation are not satisfactory to Buyer for any reason in its sole discretion. Buyer shall immediately notify the Sellers if it determines not to consummate the transactions contemplated by this Agreement.

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        9.9    Assistance to Buyer.    The University and the Sisters shall, at Buyer's expense, use commercially reasonable efforts to assist Buyer to secure the consents and the necessary governmental approvals and authorizations contemplated by this Agreement and the transaction.

        9.10    University Employees.    Following the Closing, the Sellers shall be solely liable for any and all employment related claims arising from or in connection with incidents occurring prior to the Closing Date and not reserved against in the financial statements of the University.

        9.11    Regis Hall.    Following the Closing, (i) the administrative office space and (ii) the residential living space in Regis Hall currently occupied by the Sisters shall both be vacated by the Sisters as to the residential space no later than June 30, 2005 and by December 31, 2005 as to the office space. The Lease for such space shall provide that the Sisters shall indemnify and hold harmless the Buyer from any liability incurred by the Sisters with respect to such space. The Sisters shall have insurance on the space naming the Buyers as an additional insured. A Memorandum of the Lease is attached as Exhibit G.

ARTICLE 10
COVENANTS AND AGREEMENTS OF BUYER

        10.1    Conditions.    Buyer agrees that from the date hereof to the end of the Phase I Due Diligence Period, it will use its best efforts:

        (a)   To satisfy the conditions precedent to consummation of the transactions contemplated in this Agreement to the extent they are to be performed by it, its agents or representatives;

        (b)   To cooperate with Sellers, to the extent cooperation on its part is helpful, in Sellers' efforts to obtain the consents required in this Agreement; and

        (c)   To obtain the consents referred to in this Agreement.

        10.2    University's Religious Mission.    Following the Close, Buyer shall, on request of the President of the Sisters, continue to make allowance for the conduct of the following activities on the campus as long as there is no expense or liability to the Buyer with respect to such activities: (a) Freshman experience (orientation); (b) Cortona Lecture Series; (c) Founder's Day; (d) Holy Days—Blessing of the Pets, Feast of St. Francis and St. Clare; and (e) Baccalaureate Mass. The statues if requested by the President of the Sisters that belong to the Sisters shall remain in place following the Closing. In the event that the Buyer shall need to have the statues moved for business purposes or for renovation, Buyer shall notify the Sisters and the statues shall be promptly removed at the expense of the Sisters. Notwithstanding anything herein to the contrary, a breach or default by Buyer of its obligations under this Section 10.2 shall not constitute a breach of any other part of this Agreement or of this Agreement in its entirety and this Agreement shall continue in full force and effect in accordance with its terms, notwithstanding the occurrence of such breach or default.

        10.3    University in Clinton, Iowa.    Following the Closing, Buyer shall maintain degree-granting, regionally accredited operations at the Campus to the extent necessary to allow all students enrolled at the University as of the Closing Date to complete their programs of study for those students who desire to continue their programs, who maintain good academic and financial standing, and who pursue their program continuously in accordance with regular academic processes.

        10.4    Change of Institutional Name.    Buyer shall have the right to change the name of the Business to a name deemed suitable by Buyer for its business operations.

        10.5    Existing Employees.    Buyer agrees to assume the existing one-year contract agreements(or remaining part thereof) between the teaching faculty and the University and shall assume all other employment obligations with employees of the University according to their terms except as provided in Section 9.10.

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        10.6    Expenses.    Buyer shall bear all expenses incurred on behalf of Buyer in connection with the preparation, execution and performance of this Agreement and its obligations thereunder, including but not limited to attorneys' fees and costs and the transactions contemplated hereby, including, without limitation, all fees and expenses of its agents, representatives, counsel, actuaries and accountants, even if the transaction contemplated by this Agreement does not close. Buyer shall also pay any out-of-pocket costs necessarily incurred by the Sellers pursuant to any provisions of this Agreement that require the Sellers to assist the Buyer; provided, that such out-of-pocket costs shall not, under any circumstances, include attorneys' fees and costs or costs incurred by any Seller in connection with the performance of its obligations under Section 3.1 hereof, and that any such out-of-pocket costs in excess of $1,000 must be previously approved by Buyer.

ARTICLE 11
CONDITIONS TO THE OBLIGATIONS OF SELLER

        The obligation of Sellers to enter into and complete the Closing is subject to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of which may be waived by it, to the extent permitted by law:

        (a)   Buyer shall have delivered to the Sellers the Purchase Price;

        (b)   Buyer shall not have defaulted in its obligations under this Agreement;

        (c)   The representations and warranties of Buyer shall be true and correct on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Date;

        (d)   All of the deliveries to be made by Buyer at the Closing, as provided in Section 5.3, shall have been made; and

        (e)   All necessary governmental approvals, over which Seller has no control, necessary to allow the consummation of the transactions contemplated by this Agreement and the other Transaction Documents shall been received.

ARTICLE 12
CONDITIONS TO THE OBLIGATIONS OF BUYER TO CLOSE

        The obligation of the Buyer to enter into and complete the Closing is subject to the fulfillment on or to the Closing Date of the following conditions, any one or more of which may be waived prior to the extent permitted by law:

        (a)   The academic accreditation of the University from the Higher Learning Commission of the North Central Association of Colleges and Schools ("North Central") shall remain in full force and effect.

        (b)   All regulatory approvals with respect to the State of Iowa shall have been secured with respect to the transactions contemplated by this Agreement and the other Transaction Documents.

        (c)   Pre-approval of the transactions contemplated by this Agreement shall have been received from the Department of Education.

        (d)   Approval of the change in ownership of the Assets shall have been received from North Central.

        (e)   No loss of Title IV status as presently authorized under the University's program participation agreement.

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        (f)    The representations and warranties of the University and the Sisters shall be true and correct on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Date.

        (g)   Buyer shall have received the results of a UCC-1 search for liens and encumbrances against the Assets which indicate that there are no material liens or encumbrances other than Permitted Liens.

        (h)   All of the deliveries to be made by the Sellers at the Closing, as provided in Section 5.2, shall have been made.

        (i)    Buyer shall have received a tax clearance certificate, if available, for the University, the Sisters and any subsidiaries.

        (j)    Receipt or continuance of all necessary Permits to own and operate the facilities comprising the Business.

        (k)   No Material Adverse Change in the financial or business conditions of the University or the Business.

        (l)    Buyer's satisfaction with respect to the Assumed Liabilities and proof of the payment or satisfaction in full by the University of the Excluded Liabilities required to be paid by the Sellers at or prior to Closing.

        (m)  Satisfactory completion (as determined by Buyer in its sole and absolute discretion) of Buyer's due diligence investigation; provided, that, notwithstanding anything herein to the contrary, such review shall have no effect whatsoever on the liability of the Sellers to Buyer under this Agreement or otherwise for breach of any representations, warranties, or covenants of the Sellers hereunder.

        (n)   No violation of any Material Contracts.

        (o)   No material change in the University's Business or Assets (including, without limitation, the composition of the faculty as of the Closing).

        (p)   The Board of Trustees and the members (to the extent necessary) of each of the Sellers shall have approved the transactions contemplated by this Agreement and the other Transaction Documents.

        (q)   Receipt of any other necessary regulatory, governmental or other third party consents or approvals.

        (r)   Any other approvals reasonably determined to be appropriate by the Buyer after completion of due diligence.

        (s)   The Schedules (including the Disclosure Schedule) shall have been completed to the mutual agreement and satisfaction of the parties hereto and shall have been updated at the Closing to the satisfaction of Buyer and any changes between the date that the Schedules were initially prepared and the Closing Date shall not disclose any Material Adverse Change in any of the information set forth therein.

        (t)    The execution and delivery of the Sports Facilities Lease by the Sisters if requested by Buyer.

        (u)   Receipt of approval of the Iowa Student Aid Commission for the University's students to continue to participate in the Iowa Tuition Grant program.

        (v)   The performance by the University and the Sisters of their obligations under this Agreement.

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        (w)  The absence of any order or injunction that prohibits the consummation of the transactions contemplated by this Agreement and the other Transaction Documents.

        (x)   The existing lease of the Land and Buildings between the University and the Sisters shall have been terminated.

        In the event that the Buyer determines not to proceed based upon a failure of any of the contingencies to be satisfied, the Buyer shall have no liability of any kind to the Seller for such failure to close.

ARTICLE 13
NOTICE OF EXCLUSIVITY

        13.1    Exclusivity.    For a period beginning with the date of execution hereof by both parties and until the earlier of (i) June 30, 2005, (ii) ten days after receipt of the Department of Education pre-approval for the transfer of ownership of the Assets, and (iii) termination of this Agreement, in accordance with the provisions hereof, Buyer will have a period of exclusivity, during which neither the University nor the Sisters shall, directly or indirectly, through any Representative or otherwise, solicit or entertain offers from, negotiate with or in any manner encourage, discuss, accept or consider any proposal of any other person relating to the University, the Assets or the Business, in whole or in part, whether through direct purchase, merger, consolidation or other business combination. If the University or the Sisters receives an offer, proposal or inquiry with respect to any of the foregoing transactions with respect to the Business, the Assets or the University, the Sellers will promptly notify Buyer of the same, including the identity of the person making the offer or proposal and the terms thereof (and provide a copy of any such written offer, proposal or inquiry to Buyer).

ARTICLE 14
INDEMNIFICATION; SURVIVAL; RISK OF LOSS

        14.1    Obligation to Indemnify.

        (a)   The University and the Sisters jointly and severally agree to indemnify, defend and hold harmless Buyer its officers, directors and affiliates from and against all Losses resulting from or arising out of (i) obligations arising from the conduct of the Business prior to the Closing unless it is an Assumed Liability, and/or (ii) a breach of any of its representations, warranties, covenants and agreements contained herein, and (iii) any action brought by any donors against the University or the Sisters or the Buyer for the failure of the University or the Sisters to maintain an appropriate composition of assets in amounts needed to comply with all donor restrictions.

        (b)   Buyer agrees to indemnify, defend and hold harmless the University, the Sisters and their officers, directors and affiliates from and against all Losses resulting from or arising out of (i) obligations arising from the conduct of the Business subsequent to Closing and (ii) a breach of any term or provision of this Agreement including without limitation any of its representations and warranties, covenants and agreements, and (iii) failure to pay an Assumed Liability.

        (c)   The term "Losses" as used in this Article 14 is not limited to matters asserted by third parties against Sellers or Buyer, but includes Losses incurred or sustained by any of them in the absence of third party claims and also include any fines, interest, or payments owed to the Department of Education or other applicable governmental agencies for improper use of funds. Payments by a party of amounts for which such party is indemnified hereunder shall not be a condition precedent to recovery.

        14.2    Notice of Asserted Liability.    Promptly after Buyer or any of the Sellers becomes aware of any fact, condition or event that may give rise to Losses for which indemnification may be sought under this Article 14 the party becoming aware of such facts, condition or event shall notify the other party in

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the manner provided in Section 16.1 of this Agreement (the "Claims Notice") to the other party. All Claims Notices must be delivered within the time periods set forth in Section 14.5 and if delivered within the applicable time period, the expiration of such time period will not affect the validity thereof or the claim for Losses described therein. The party entitled to indemnification ("Indemnitee") shall deliver the Claims Notice to the other party ("Indemnitor"). The Claims Notice shall include a description in reasonable detail of any claim or the commencement (or threatened commencement) of any action, proceeding or investigation (an "Asserted Liability") against Indemnitee, and shall indicate the amount (estimated, if necessary) of the Losses that have been or may be suffered by Indemnitee. Failure of Indemnitee to promptly give notice hereunder shall not affect rights to indemnification hereunder, except to the extent that Indemnitor demonstrates actual damage caused by such failure. Upon Indemnitor's request, Indemnitee shall provide Indemnitor with such reasonable documentation as Indemnitor shall request pertaining to any claim(s) made by Indemnitee. Claims may only be brought by delivery of the Claims Notice during the periods set forth in Section 14.5 hereof.

        14.3    Opportunity to Defend.    Indemnitor may elect to compromise or defend, at its own expense and by its own counsel, any Asserted Liability; provided, however, that Indemnitor may not compromise or settle any Asserted Liability without the consent of Indemnitee, such consent not to be unreasonably withheld, unless such compromise or settlement requires no more than a monetary payment for which Indemnitee and any other indemnifiable parties hereunder are fully indemnified or involves other matters not binding upon Indemnitee or such other indemnifiable parties. If Indemnitor elects to compromise or defend such Asserted Liability, it shall within 15 days (or sooner, if the nature of the Asserted Liability so requires) notify Indemnitee of its intent to do so and Indemnitee shall cooperate in the compromise of, or defense against, such Asserted Liability. If Indemnitor elects not to compromise or defend any Asserted Liability, fails to notify Indemnitee of its election as herein provided or contests its obligation to indemnify, Indemnitee may pay, compromise or defend such Asserted Liability without prejudice to any right it may have hereunder. In any event, each of Buyer and Sellers may participate, at its own expense, in the defense of any Asserted Liability in respect of which it may have an indemnification obligation under Section 14.1. If either party chooses to defend or participate in the defense of any Asserted Liability, it shall have the right to receive from the other party any books, records or other documents within such party's control that are reasonably necessary or appropriate for such defense.

        14.4    Exclusive Remedy.    The indemnification provided for herein shall be the exclusive remedy of all parties to this Agreement with respect to the alleged breach of any of the representation or warranties contained in Articles 7 or 8 of this Agreement.

        14.5    Sellers' Tax Indemnity.    The University shall indemnify and hold Buyer harmless from and against the entirety of any Taxes which the University is responsible or required to pay under any provision of this Agreement and from and against any Losses that Buyer may suffer resulting from, arising out of, relating to, in the nature of or caused by any liability of Buyer for any such Taxes; any liability with respect to any such Taxes arising from any changes made on examination or audit; any liability of the University for Taxes of any person other than the University, whether (A) under Treasury Regulation §1.1502-6 (or any similar provision of state, local or foreign law), (B) as a transferee or successor, (C) by contract, or (D) otherwise; and any liability for Taxes which would not be owed if all warranties and representations of the Sellers hereunder had been true, complete and correct in all respects. Any indemnification pursuant hereto shall also include reasonable costs incurred by Buyer (including reasonable fees and disbursements of attorneys, accountants and expert witnesses) in connection with such indemnification claim. Any indemnification payable by the Sellers pursuant hereto shall be paid within the later of fifteen (15) days of Buyer's request therefor and five (5) days prior to the date on which the liability upon which the indemnification is based is required to be satisfied.

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        14.6    Limitation of Liability.    The indemnification obligations of the Sisters shall be subject to a maximum liability of One Million Five Hundred Thousand Dollars ($1,500,000) ("Indemnification Limit"). The shall be liable for payment of any and all Losses up to the Indemnification Limit, provided that if the Sisters shall have obtained, prior to the Closing, such polices of insurance as may be necessary or appropriate (including, without limitation, a policy insuring against any breach of the representations and warranties of the Sellers and a "tail" policy insuring against any claims or liabilities relating to incidents occurring prior to the Closing date) to adequately indemnify Buyer against any of the Losses then the Indemnification Limit shall be reduced by the dollar amount of the said insurance proceeds received. Buyer shall be solely responsible for any and all employment related claims and liabilities that arise from or in connection with incidents occurring on or after the Closing Date.

        14.7    Sellers' Additional Financial Responsibilities.    Notwithstanding Section 14.6, the Seller's obligations shall not be limited to the Indemnity Limit with respect to any Losses suffered by the Buyer, its officers, directors or affiliates as a result of or arising from (a) improper use of any permanently restricted funds by the University or the Sisters, (b) worker's compensation claims that relate to incidents occurring or before February 15, 2004 and (c) Employment Related Claims and liabilities that arise from or are in connection with incidents occurring prior to the Closing Date.

        14.8    Statute of Limitations.    Except for Sections 7.1, 7.2, 7.3, 7.10, 7.18, 10.2, 10.3, 10.4 and 10.5, the representations, warranties and covenants shall each survive for 18 months from and after the Closing Date. The representations and warranties in Sections 7.1, 7.2, 7.3, 7.10 and 7.18 shall survive indefinitely. The covenants set forth in Section 10.2, 10.3, 10.4 and 10.5 shall survive for the term provided for in each such Section.

        14.9    Risk of Loss.    From the date hereof through the Closing Date, all risk of loss or damage to the property included in the Assets shall be borne by the Sellers, and thereafter shall be borne by Buyer. If any portion of the Assets is destroyed or damaged by fire or any other cause on or prior to the Closing Date, other than use, wear or loss in the ordinary course of the Business, the Sellers shall give written notice to Buyer as soon as practicable after, but in any event within five calendar days of, discovery of such damage or destruction, the amount of insurance, if any, covering such Assets and the amount, if any, which the Sellers are otherwise entitled to receive as a consequence. Prior to the Closing, Buyer shall have the option, which shall be exercised by written notice to the Sellers within 10 calendar days after receipt of Seller's notice or if there is not 10 calendar days prior to the Closing Date, as soon as practicable prior to the Closing Date, of (a) accepting such Assets in their destroyed or damaged condition in which event Buyer shall be entitled to the proceeds of any insurance or other proceeds payable with respect to such loss and to such indemnification for any uninsured portion of such loss pursuant to this Article 14, and the Purchase Price shall be reduced by an amount equal to the amount by which the portion of the Purchase Price allocated to such Assets exceeds the insurance proceeds, (b) excluding such Assets from this Agreement, in which event the Purchase Price shall be reduced by the amount allocated to such Assets, as mutually agreed between the parties or (c) terminating this Agreement in accordance with Article 15. If Buyer accepts such Assets, then after the Closing, any insurance or other proceeds shall belong, and shall be assigned to, Buyer without any reduction in the Purchase Price; otherwise, such insurance proceeds shall belong to the Sellers.

ARTICLE 15
TERMINATION OF AGREEMENT

        15.1    Termination.    This Agreement may be terminated prior to the Closing as follows:

        (a)   at the election of Sellers, if any one or more of the conditions to its obligation to close has not been fulfilled as of March 15, 2005, unless the delay in the Closing is due to a continuing inability to secure the necessary governmental or regulatory approvals for the transfer of

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ownership, in which case the Closing may be delayed until such approvals are received but no later than June 30, 2005;

        (b)   at the election of Buyer, if any one or more of the conditions to its obligation to close has not been fulfilled as of March 15, 2005, unless the delay in the Closing is due to a continuing inability to secure the necessary governmental or regulatory approvals for the transfer of ownership, in which case the Closing may be delayed until such approvals are received but no later than June 30, 2005; or

        (c)   at any time on or prior to the Closing Date, by mutual written consent of Sellers and Buyer.

        In the event that Buyer or Sellers, as the case may be, elects to terminate this Agreement pursuant to Section 15.1(a) and (b), hereof, the terminating party shall deliver a notice to the other party or parties to this Agreement declaring its election to so terminate this Agreement in accordance with the provisions of Section 15.l (a) and (b), as the case may be, and setting forth in detail therein the basis for such termination.

        If this Agreement so terminates, it shall become null and void and have no further force or effect, except as provided in Sections 9.4 and 10.6 which provisions shall remain in full force and effect until the obligations of Buyer and the Sellers to the other thereunder have been fully satisfied.

ARTICLE 16
MISCELLANEOUS

        16.1    Notices.    Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, or by certified U.S. Mail postage prepaid, sent and shall be deemed given when so delivered personally, or two (2) days after being so mailed, to the respective addresses as follows:

        If to Buyer, to:

Bridgepoint Education, Inc.
13880 Stowe Drive
Poway, California 92064-8826
Fax: (858) 513-9239
Attention: Chief Executive Officer

        with a copy to:

Sheppard, Mullin, Richter & Hampton LLP
12544 High Bluff Drive, Suite 300
San Diego, California 92130-3051
Fax: (858) 509-3691
Attention: Richard L. Kintz

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        If to the University, to:

The Franciscan University of the Prairies
400 North Bluff Boulevard
Clinton, Iowa 82732
Attention: President

        If to the Sisters, to:

The Sisters of St. Francis, Clinton, Iowa
588 North Bluff Blvd.
Clinton, IA 52732
Attention: President

        with a copy to:

David Figuli, Esq.
8697 Blue Creek Road
Evergreen, CO 80439
Fax: (303) 679-1971

        Any party may by notice given in accordance with this Section 16.1 to the other parties designate another address or person for receipt of notices hereunder.

        16.2    Entire Agreement.    This Agreement (including the Schedules and Exhibits hereto) contains the entire agreement with respect to the transactions contemplated herein and, generally, the subject matter hereof, and supersedes all prior agreements written or oral with respect thereto.

        16.3    Waivers and Amendments; Non-Contractual Remedies.    This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by each of the parties or, in the case of a waiver, by the party waiving compliance. The failure of either party to insist, in any one or more instances at any one or more times, upon performance of the terms or conditions of this Agreement shall not be construed as a waiver or relinquishment of any right granted hereunder or of the future performance of any such term, covenant or condition. No waiver on the part of any party of any right, power or privilege, nor any single or partial exercise of any such right, power or privilege, shall preclude any further exercise thereof or the exercise of any other such right, power or privilege. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies that any party may otherwise have at law or in equity. The rights and remedies of any party based upon, arising out of or otherwise in respect of any inaccuracy in or breach of any representation, warranty, covenant or agreement contained in this Agreement shall in no way be limited by the fact that the act, omission, occurrence or other state of facts upon which any claim of any such inaccuracy or breach is based may also be the subject matter of any other representation, warranty, covenant or agreement contained in this Agreement (or in any other agreement between the parties) as to which there is no inaccuracy or breach.

        16.4    Governing Law, Reference to U.S. Dollars.    This Agreement shall be governed by and construed in accordance with the substantive and procedural laws of the State of Iowa applicable to agreements made and to be performed entirely within such State. All references in this Agreement to amounts of money expressed in dollars are references to United States dollars, unless express reference is made to currency of another country.

        16.5    Binding Effect, Assignment.    This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns and legal representatives. Neither this Agreement, nor any right hereunder, may be assigned by any party without the written consent of the other party hereto; provided, however, that Buyer, in its sole discretion, may assign this Agreement (and all of Buyer's rights and obligations hereunder), in whole or in part, to any wholly owned

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subsidiary of Buyer without the prior consent or approval of the Sellers. Any assignment or attempted assignment in violation of this Section shall be void.

        16.6    No Third Party Beneficiaries.    Nothing in this Agreement is intended or shall be construed to give any person any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. Without limiting the generality of the foregoing, no provision in this Agreement shall create any third party beneficiary or other right in any employee or student or former employee or student of University (including any beneficiary or dependent thereof) in respect of continued employment (or resumed employment) or continued matriculation or the right to any particular academic program, credential or course of study with Buyer or University or in respect of any benefits that may be provided, directly or indirectly, under any Employee Benefit Plan.

        16.7    Counterparts.    This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all of the parties hereto.

        16.8    Schedules and Exhibits.    The Schedules and Exhibits are a part of this Agreement as if fully set forth herein. All references herein to Articles, Sections, paragraphs and Schedules shall be deemed references to such parts of this Agreement unless otherwise specified.

        16.9    Headings.    The headings in this Agreement are for reference only, and shall not affect the interpretation of this Agreement.

        16.10    Severability.    Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement.

        16.11    Time of Essence.    Time is of the essence for each and every provision of this Agreement.

        16.12    Attorneys' Fees.    If any legal action or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys' fees, court costs, costs of litigation and other costs incurred in that action or proceeding, in addition to any other relief to which it may be entitled.

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ARTICLE 17
DEFINITIONS

        As used herein, the terms below shall have the following meanings. Any of such terms, unless the context otherwise requires, may be used in the singular or plural, depending upon the reference.

        "Ancillary Agreements" shall mean those agreements, instruments and other documents that are Exhibits to this Agreement.

        "Assets" means, collectively, the University Assets and the Sisters Assets.

        "Balance Sheet Date" means May 31, 2004.

        "Books and Records" means originals or copies of all of the University's books and records relating to the Business, including books of account, minute books, and accounting records, sales data, customer lists, information relating to customers, supplier lists, mailing lists, brochures, advertising materials, business and marketing plans, and operating records of every kind.

        "Code" means the Internal Revenue Code of 1986, as amended.

        "Contract" means any agreement, contract (including, without limitation, all faculty employment contracts), note, loan, evidence of indebtedness, purchase order, letter of credit, franchise agreement, undertaking, covenant not to compete, employment agreement, license, lease, royalty agreement, confidentiality agreement, marketing agreement, distribution agreement, sales representative agreement, agency agreement, registration rights agreement, instrument, obligation or commitment to which the University is a party or is bound, whether oral or written.

        "Department of Education" means the United States Department of Education.

        "Employment Related Liabilities" means those liabilities related to the employees of the University due to applicable wage and hour laws, vacations, sick leave and other employee benefits.

"Escrow Reserve" means the escrow required by Section 4.2 established at U.S. Bank, Attention: Stephanie R. Smith, Personnel Trust Department, 520 Walnut Street, Des Moines, Iowa 50309; Telephone: (515) 245-6233; Facsimile: (515) 245-6313.

        "GAAP" means generally accepted accounting principles in the United States of America.

        "Liability" or "Liabilities" means, with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise and whether or not the same is required to be accrued on the financial statements of such Person.

        "Losses" means all losses, costs, claims, liabilities, damages, lawsuits, deficiencies, demands and expenses (whether or not arising out of third-party claims), including without limitation interest, penalties, costs of litigation, losses in connection with any Environmental Law (including without limitation any clean-up, remedial, corrective or responsive action), lost profits and other losses resulting from any shut down or curtailment of operations, damages to the environment, attorneys' fees, and all amounts paid in the investigation, defense or settlement of any of the foregoing that arises as a result of those matters described in Section 14.1 hereof.

        "Material Adverse Effect" or "Material Adverse Change" means a change that is $10,000 or greater.

        "Material Loss" means a loss in excess of $10,000.

        "Material Contract" means a contract having an annual value in excess of $10,000.

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        "Permits" means all licenses, permits, franchises, approvals, authorizations, consents or orders of, or filings with, any Governmental Authority, whether foreign, federal, state or local, or any other person, necessary or desirable for the past, present or anticipated conduct of, or relating to the operation of the Business.

        "Person" means an individual, corporation, partnership, association, trust, estate or other entity or organization, including a Governmental Authority.

        "Representative" means any officer, director, principal, attorney, agent, employee or representative.

        "Tax" or "Taxes" means (whether or not disputed) taxes of any kind, levies or other like assessments, customs, duties, imposts, charges or fees, including, without limitation, income taxes, gross receipts, ad valorem, value added, excise, real property, personal property, occupancy, asset, sales, use, license, payroll, transaction, capital, capital stock, net worth, estimated, withholding, employment, social security, unemployment, unemployment compensation, workers' compensation, disability, utility, severance, production, environmental, energy, business, occupation, mercantile, franchise, premium, profits, windfall profits, documentary, stamp, registration, transfer and gains taxes, toll charges (for example, toll charges under Sections 367 and 1492 of the Code), or other taxes of any kind whatsoever, imposed by or payable to the United States, or any state, country, local or foreign government or subdivision, instrumentality, authority or agency thereof or under any treaty, convention or compact between or among any of them, and in each instance such term shall include any interest (including interest on deferred tax liability under Section 453A(c) of the Code and "look-back" interest under Section 460 of the Code and similar amounts of interest imposed by the Code), penalties, additions to tax or similar charges imposed in lieu of a Tax or attributable to any Tax.

[SIGNATURE PAGE FOLLOWS]

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        IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written.

"BUYER"
Bridgepoint Education, Inc., a Delaware corporation
By:	/s/ ANDREW S. CLARK
Its:	Chief Executive Officer
Date:	12-1-04
"UNIVERSITY"
The Franciscan University of the Prairies
By:	/s/ MICHAEL E. KAELKE
Its:	Secretary for Board of Trustees
Date:	12-3-04
"SISTERS"
Sisters of St. Francis, Clinton, Iowa
By:	/s/ JANICE CEBULA, OSF
Its:	President
Date:	12-3-04

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FIRST AMENDMENT TO
PURCHASE AND SALE AGREEMENT

        This First Amendment to Purchase and Sale Agreement ("First Amendment") is made and entered into as of February 24, 2005, by and among Bridgepoint Education, Inc., a Delaware corporation ("Bridgepoint"), The Franciscan University of the Prairies, an Iowa non-profit corporation ("Franciscan") and the Sisters of St. Francis, Clinton, Iowa, an Iowa non-profit corporation (together with Franciscan the "Sellers").

        A.    Sellers and Bridgepoint entered into that certain Purchase and Sale Agreement dated as of December 3, 2004 (the "Purchase Agreement"), relating to the acquisition of that certain university located in Clinton, Iowa and the buildings and land used in connection therewith (the "Business"). All capitalized terms used in this First Amendment and not defined shall have the meanings set forth in the Purchase Agreement.

        B.    Sellers and Bridgepoint now desire to amend the Purchase Agreement as provided below.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Sellers and Bridgepoint hereby agree to amend the Purchase Agreement as follows:

1.     Assignment of Contractual Rights.    The Sellers hereby approve of the execution of the Assignment of Contractual Rights Agreement between Bridgepoint, Bridgepoint Education Real Estate Holdings, LLC, an Iowa limited liability company ("BEREH") and Ashford University, LLC, an Iowa limited liability company ("Ashford") attached hereto as Exhibit A, under which Bridgepoint is assigning (a) to BEREH its rights and interests to, and obligations under and relating to, the Purchase Agreement with respect to the land and buildings; and to (b) Ashford its rights and interests to, and obligations under and relating to, the Purchase Agreement with respect to all other assets of the Business.

2.     Memorandum of the Lease.    Exhibit G in Section 9.11 is hereby renamed Exhibit I.

3.     Other Excluded Assets.    Section 2.3 is hereby amended by the addition of subsection (g) as follows: "The following assets owned by the University: The pledge receivables, the assets held in the charitable remainder trust, and the life insurance policy, as those items appear on the audited Franciscan Financial Statements for the seven months ended December 31, 2004." Section 2.3 is further amended by the deletion in the entirety of the last paragraph, to be replaced with the following: "Furthermore, there shall be excluded from the Sister's Assets that portion of the Land that comprises the cemetery (that is presently located on the real property that is included in the Land and Buildings), as well as a perpetual easement across the Land in favor of the Sisters for access to and from the cemetery ("Cemetery Easement") as such cemetery easement is more fully described on Schedule 2.1(a)(ii) pursuant to the following language:

RESERVING unto the Grantor and its successors an easement for the purpose of ingress and egress over, across and through a twenty-two (22) foot strip of land lying eleven (11) feet on each side of the following described centerline, Commencing at the Northwest corner of the Southwest Quarter (SW ¹/4) of said Section 6; thence North 89 Degrees 09 Minutes 51 Seconds East, along the North line thereof, a distance of 395.31 feet; thence South 13 Degrees 20 Minutes 44 Seconds West, a distance of 63.11 feet to the Point of Beginning of the hereinafter described Centerline; thence South 48 Degrees 18 Minutes 33 Seconds East, a distance of 53.62 feet; thence South 60 Degrees 49 Minutes 50 Seconds East, a distance of 135.67 feet; thence South 85 Degrees 23 Minutes 58 Seconds East, a distance of 54.67 feet; thence North 85 Degrees 48 Minutes 03 Seconds East, a distance of 57.71 feet; thence South 83 Degrees 39 Minutes 18 Seconds East, a distance of 27.72 feet; thence South 69 Degrees 37

1

Minutes 20 Seconds East, a distance of 55.24 feet to the Northwesterly Right-of-Way line of Bluff Road, and the Point of Termination of said Centerline."

4.     Covenants.    Section 9.1.2 is hereby amended by the addition of subsection (j) as follows: "to the maximum extent possible, use the pledge receivables, the assets held in the charitable remainder trust, and the life insurance policy, as those items appear on the audited Franciscan Financial Statements for the seven months ended December 31, 2004, for student aid for students attending the Ashford campus in Clinton, Iowa."

5.     Liabilities.    Section 2.4 is hereby deleted in its entirety and replaced with the following: "Upon the terms and subject to the conditions contained herein, at the Closing Date, Buyer shall assume all financial obligations and liabilities of the University ("Assumed Liabilities") except those liabilities that are specifically listed on Schedule 2.4 (the "Excluded Liabilities"). All Excluded Liabilities shall be retained by the University except as otherwise provided herein."

6.     Table of Contents.    The list of Exhibits and the list of Schedules on page iv of the Table of Contents are hereby amended as follows:

EXHIBITS
Exhibit A	(intentionally left blank)
Exhibit B	(intentionally left blank)
Exhibit C	(intentionally left blank)
Exhibit D	Sports Fields Lease
Exhibit E	Regis Hall Lease
Exhibit F	Bill of Sale
Exhibit G	Assignment and Assumption Agreement
Exhibit H	Deeds
Exhibit I	Memo of Lease w/ respect to Volleyball and Soccer Field and Speech and Hearing

SCHEDULES
Schedule 2.1(a)(ii)	Description of Land and Buildings
Schedule 2.1(a)(vi)	Contracts with the University
Schedule 2.1(b)	Stated Liabilities and Permitted Liens
Schedule 2.2	Sister Assets
Schedule 2.3	Other Excluded Assets
Schedule 2.4	Excluded Liabilities
Schedule 4.1	Sales Price Allocation among Sellers
Schedule 4.2	Estimated Budget and Final Budget

7.     Schedule 2.1(a)(ii).    Schedule 2.1(a)(ii) of the Purchase Agreement is hereby attached as Exhibit B to this First Amendment.

8.     Schedule 4.1.    Schedule 4.1 of the Purchase Agreement is hereby attached as Exhibit C to this First Amendment.

9.     Termination of the University Retirement Equity Fund.    Franciscan will prepare and submit the necessary papers in order to terminate its existing University Retirement Equity Fund with the Travelers Insurance Company and the Teachers Insurance Annuity Association, as of the date of closing or as soon as possible thereafter, consistent with securing the appropriate regulatory approvals unless otherwise directed by Bridgepoint prior to Closing.

10.   Section 5.2.3(k).    "Intentionally Deleted".

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11.   Limitation of Liability.    Section 14.6 is hereby deleted in its entirety and replaced with the following: " The aggregate indemnification obligations of the Sisters shall be subject to a maximum liability of One Million Five Hundred Thousand Dollars ($1,500,000) ("Indemnification Limit"). The Sisters shall be liable for payment of any and all Losses up to the Indemnification Limit, provided that if the Sisters shall have obtained, prior to the Closing, such polices of insurance as may be necessary or appropriate (including, without limitation, a policy insuring against any breach of the representations and warranties of the Sellers and a "tail" policy insuring against any claims or liabilities relating to incidents occurring prior to the Closing Date) to adequately indemnify Buyer against any of the Losses then the Indemnification Limit shall be reduced by the dollar amount of the said insurance proceeds received by Buyer. Buyer shall be solely responsible for any and all employment related claims and liabilities that arise from or in connection with incidents occurring on or after the Closing Date."

12.   Seller's Additional Financial Responsibility.    Section 14.7 is hereby deleted in its entirety and replaced with the following: "Notwithstanding Section 14.6, the Seller's obligations shall not be limited to the Indemnity Limit with respect to any Losses suffered by the Buyer, its officers, directors or affiliates as a result of or arising from (a) improper use of any permanently restricted funds by the University or the Sisters, (b) worker's compensation claims that relate to incidents occurring on or before February 15, 2004 and (c) Employment Related Claims and liabilities that arise from or are in connection with incidents occurring prior to the Closing Date."

13.   Purchase Price Adjustment.    The Buyer and the Sisters hereby agree that the purchase price adjustment shall be $1,263,943, which shall be deposited into Bank Account number 103705 at Clinton National Bank on the day of the Closing for the benefit of Buyer. This is the Reduction Amount. As a result, the Final Budget is eliminated and the final accounting is eliminated and there shall be no Escrow Reserve, and no further adjustment to the Purchase Price pursuant to Section 4.2.

14.   Full Force and Effect.    Except as amended hereby, the Purchase Agreement shall remain in full force and effect. To the extent of any inconsistency between this Amendment and the Purchase Agreement, the terms and conditions of this Amendment shall control.

3

IN WITNESS WHEREOF, this First Amendment has been executed as of the day and year first above written.

SELLERS
The Franciscan University of the Prairies, an Iowa non-profit corporation
By:	/s/ MICHAEL E. KAELKE
Its:	Secretary for Board of Trustees
The Sisters of St. Francis, Clinton, Iowa, an Iowa non-profit corporation
By:	/s/ JANICE CEBULA, OSF
Its:	President
BUYER
Bridgepoint Education, Inc., a Delaware corporation
By:	/s/ ANDREW S. CLARK
Name:	Andrew S. Clark
Title:	Chief Executive Officer

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Exhibit 2.1

PURCHASE AND SALE AGREEMENT
BETWEEN
BRIDGEPOINT EDUCATION, INC., a Delaware corporation
AND
THE FRANCISCAN UNIVERSITY OF THE PRAIRIES, an Iowa non-profit corporation
and
the SISTERS OF ST. FRANCIS, CLINTON, IOWA, an Iowa non-profit corporation
TABLE OF CONTENTS
PURCHASE AND SALE AGREEMENT
RECITALS
AGREEMENT
ARTICLE 1 PURCHASE AND SALE
ARTICLE 2 PURCHASE AND SALE OF ASSETS
ARTICLE 3 PURCHASE AND SALE OF STOCK
ARTICLE 4 PURCHASE PRICE
ARTICLE 5 CLOSING
ARTICLE 6 DUE DILIGENCE AND COMPLETION OF SCHEDULES
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF SELLER
ARTICLE 8 REPRESENTATIONS AND WARRANTIES OF BUYER
ARTICLE 9 COVENANTS AND AGREEMENTS OF SELLER
ARTICLE 10 COVENANTS AND AGREEMENTS OF BUYER
ARTICLE 11 CONDITIONS TO THE OBLIGATIONS OF SELLER
ARTICLE 12 CONDITIONS TO THE OBLIGATIONS OF BUYER TO CLOSE
ARTICLE 13 NOTICE OF EXCLUSIVITY
ARTICLE 14 INDEMNIFICATION; SURVIVAL; RISK OF LOSS
ARTICLE 15 TERMINATION OF AGREEMENT
ARTICLE 16 MISCELLANEOUS
ARTICLE 17 DEFINITIONS
FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT

EX-2.2

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Exhibit 2.2

ASSET PURCHASE AND SALE AGREEMENT

BY AND BETWEEN

BRIDGEPOINT EDUCATION, INC.

AND

THE COLORADO SCHOOL OF PROFESSIONAL PSYCHOLOGY

SEPTEMBER 12, 2007

TABLE OF CONTENTS

			Page
ARTICLE 1 PURCHASE OF ASSETS			1
	1.1	Purchase of Assets	1
	1.2	Excluded Assets	2
	1.3	Liabilities	2
	1.4	Consideration	3
	1.5	Adjustment to Consideration	3
	1.6	Cash Flow Adjustment	4
	1.7	Pro-rations	4
ARTICLE 2 CLOSING			4
	2.1	Closing Date	4
	2.2	Deliveries by Seller at Closing	4
	2.3	Deliveries by Buyer at Closing	5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE SELLER			6
	3.1	Organization	6
	3.2	Authority to Execute and Perform Agreement	6
	3.3	Enforceability	6
	3.4	No Violation	6
	3.5	Regulatory Approvals and Other Consents	6
	3.6	Financial Condition/Financial Statements	6
	3.7	No Undisclosed Liabilities	7
	3.8	Compliance with Laws, Governmental Matters	7
	3.9	Litigation	8
	3.10	Personal Property	8
	3.11	Intellectual Property	8
	3.12	Contracts	9
	3.13	Labor and Employment Matters; Consultants	10
	3.14	Pension and Benefit Plan	12
	3.15	Insurance	12
	3.16	Compliance with the U.S. Department of Education and Other Applicable Governmental Rules	13
	3.17	Tax Matters	13
	3.18	Real Property	15
	3.19	No Broker	15
	3.20	Subsidiaries	15
	3.21	Capitalization	15
	3.22	Absence of Certain Developments	15
	3.23	Condition of Properties	16
	3.24	Transactions with Related Parties	16
	3.25	Interest in Competitors	16
	3.26	Illegal or Unauthorized Payments; Political Contributions	16
	3.27	Internal Accounting Controls	16
	3.28	Suppliers	17
	3.29	Distributed Funds	17
	3.30	Solvency	17
	3.31	Full Disclosure	17

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			Page
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER			17
	4.1	Due Formation	17
	4.2	Authority to Execute and Perform Agreements	17
	4.3	Due Authorization	17
	4.4	No Violation	17
	4.5	Regulatory Approvals	18
	4.6	No Broker	18
ARTICLE 5 COVENANTS AND AGREEMENTS OF SELLER			18
	5.1	Operation of the Business	18
	5.2	Notification	18
	5.3	Reasonable Efforts	19
	5.4	Employees	19
	5.5	Seller's Expenses	19
	5.6	Tax Returns	19
	5.7	Pre-approval with U.S. Department of Education	19
	5.8	Access	20
	5.9	Completion of Schedules and Exhibits	20
ARTICLE 6 COVENANTS AND AGREEMENTS OF BUYER			20
	6.1	Existing Faculty Contracts and Degree Programs	20
	6.2	Reasonable Efforts	20
ARTICLE 7 CONDITIONS TO THE OBLIGATIONS OF SELLER			20
ARTICLE 8 CONDITIONS TO THE OBLIGATIONS OF BUYER TO CLOSE			21
ARTICLE 9 NOTICE OF EXCLUSIVITY			22
	9.1	Exclusivity	22
ARTICLE 10 POST-CLOSING COVENANTS			22
	10.1	Further Assurances	22
	10.2	Mail	22
	10.3	Sales Tax	22
	10.4	Students and other Business Relationships	22
	10.5	Confidentiality	22
	10.6	Tax Returns	22
	10.7	U of R Foundation	23
	10.8	Transitional Activity	23
ARTICLE 11 INDEMNIFICATION			23
	11.1	Obligation to Indemnify	23
	11.2	Notice of Asserted Liability	24
	11.3	Opportunity to Defend	24
	11.4	Exclusive Remedy	25
	11.5	Statute of Limitations	25
	11.6	Risk of Loss	25
ARTICLE 12 TERMINATION OF AGREEMENT			25
	12.1	Termination	25
ARTICLE 13 MISCELLANEOUS			26
	13.1	Notices	26
	13.2	Entire Agreement	26

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			Page
	13.3	Waivers and Amendments Non-Contractual Remedies	26
	13.4	Governing Law	27
	13.5	Jurisdiction; Service of Process	27
	13.6	Binding Effect, Assignment	28
	13.7	No Third Party Beneficiaries	28
	13.8	Counterparts	28
	13.9	Schedules	28
	13.10	Headings	28
	13.11	Severability	28
	13.12	Time of Essence	28
	13.13	Attorneys' Fees	28
	13.14	Parties' Expenses	28
	13.15	Public Announcements	28
	13.16	Further Assurances	29
	13.17	Bulk Sales Laws	29
	13.18	Consultation with Counsel; Negotiated Agreement	29
ARTICLE 14 DEFINITIONS			29

LIST OF EXHIBITS

Exhibit A	Bill of Sale
Exhibit B	Assignment and Assumption Agreement
Exhibit C	Promissory Note
Exhibit D	Operating Agreement of University of the Rockies, LLC

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ASSET PURCHASE AND SALE AGREEMENT

        This ASSET PURCHASE AND SALE AGREEMENT (the "Agreement") is entered into on September 12, 2007, by and between Bridgepoint Education, Inc., a Delaware corporation ("Bridgepoint" and together with its permitted assigns, "Buyer") and The Colorado School of Professional Psychology, a Colorado non-profit corporation ("Seller"). Buyer and Seller are individually referred to as a "Party" and collectively, as the "Parties." Capitalized terms used and not otherwise defined herein shall have the meanings given to such terms in Article 14 hereof.

RECITALS

        A.    Seller is a not-for-profit graduate school accredited by The Higher Learning Commission of the North Central Association of Colleges and Schools ("HLC"), located in Colorado Springs, Colorado, with a mission of providing ethical, scholarly, and personalized graduate education that prepares individuals for practice in the applications of psychology (the "Business").

        B.    Seller desires to sell, and Buyer desires to purchase from Seller all of the Assets (as defined below) of the Seller used in connection with the operation of the Business. Buyer is purchasing such Assets subject to only certain liabilities of the Seller as described below.

        C.    Buyer is a Delaware corporation which prior to the Closing, will be forming a wholly-owned subsidiary under the name University of the Rockies, LLC (or any other available name) (the "Subsidiary"), which Subsidiary will make the acquisition of the Assets and the Assumed Liabilities (as defined below).

AGREEMENT

        NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, the Parties hereby agree as follows:

ARTICLE 1
PURCHASE OF ASSETS

        1.1    Purchase of Assets.    On the terms and subject to the conditions set forth in this Agreement, Seller hereby agrees to sell, convey, transfer, assign and deliver to Buyer, and Buyer hereby agrees to purchase from Seller, all of Seller's assets of any kind and nature (including those assets used by the Counseling Center (as defined in Section 5.7 hereof)) other than the Excluded Assets (as defined in Section 1.2 below), used or useful in the Business. The Assets acquired hereunder shall be free and clear of all Encumbrances and shall include, without limitation, the following properties and assets, including such items acquired, added or replaced by Seller or coming into existence on or before the Closing Date, (collectively, the "Assets"):

        (a)   all cash, including, without limitation, checking account balances, certificates of deposit (including Seller's certificate of deposit with Air Academy Credit Union for the amount of $600,000.00, used as a security related to various U.S. Department of Education student loan programs), other time deposits and petty cash related to any unearned tuition for services to be provided on or after the Closing Date (computed in accordance with GAAP);

        (b)   all accounts and notes receivable (whether current or non-current), including, without limitation, student receivables, and causes of action specifically pertaining to the collection of the foregoing, that are related to any unearned tuition for services to be provided on or after the Closing Date;

        (c)   all promotional allowances, vendor rebates and similar items;

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        (d)   all Intellectual Property and Intellectual Property Assets, including without limitation rights to Seller's Internet domain name "www.cospp.edu " (the "Domain Name"), either alone or in conjunction with other words or names in the context of the operation of a school or other learning institution, all names of all units of Seller, athletic team names, mascot names, and all curricula for all courses and programs, including degree programs;

        (e)   all Contracts (including the lease for the Leased Property and any leasehold improvements thereon), written employment agreements and arrangements and outstanding offers or solicitations made by or to Seller to enter into any contract listed on Schedule 3.12(a);

        (f)    all Fixtures and Equipment;

        (g)   all deposits, advances, prepaid and other current assets;

        (h)   all rights to receive and retain mail, accounts receivable payments and other communications related to the Seller;

        (i)    all data and records, including without limitation, student and customer lists, research and development reports, personnel records, service and warranty records, equipment and logs, operating guides and manuals, financial and accounting records, creative materials, advertising, marketing and promotional materials, and all other printed or written materials;

        (j)    to the extent transferable, and if not transferable all rights to deal with, affect, alter, modify or change, all permits, licenses, certifications, and approvals from all permitting, licensing, accrediting and certifying agencies, and the rights to all data and records held by such permitting, licensing and certifying agencies;

        (k)   all goodwill as a going concern and other intangible properties;

        (l)    all telephone numbers used by the Seller;

        (m)  all warranties and indemnities that relate to the Assets or the Business;

        (n)   all rights to proceeds under insurance policies to the extent related to or payable in connection with any of the Assets;

        (o)   all security deposits related to the Contracts;

        (p)   all claims of the Seller against Third Parties relating to the Assets whether choate or inchoate, known or unknown, contingent or fixed; and

        (q)   all books, documents and other items of whatsoever kind or nature (hard copies and electronic forms) contained in the Seller library collection.

        1.2    Excluded Assets.    Notwithstanding anything to the contrary contained herein, personal property, grant funds and the Counseling Center logo listed on Schedule 1.2 are not to be acquired by Buyer hereunder and shall be retained by the Sellers (the "Excluded Assets").

        1.3    Liabilities.    Upon the terms and subject to the conditions contained herein, at the Closing, Buyer shall assume only the following Liabilities of the Seller, collectively the "Assumed Liabilities": (x) Liabilities relating to the Assets, (y) Employees' Accrued Liabilities and (z) Liabilities of the Business which have been incurred exclusively in the ordinary course of the conduct of the Business, all which Assumed Liabilities are set forth on Schedule 1.3 attached hereto. Except for the Assumed Liabilities, Buyer shall not assume, or otherwise be responsible for, and Seller shall be and remain responsible for any and all other Liabilities of the Seller, including, without limitation: (i) any obligations relating to any breaches of the Contracts that occurred prior to the Closing Date, (ii) Liabilities related to the Excluded Assets, (iii) any pre-Closing Liabilities relating to or arising from the operation of the Counseling Center (as defined in Section 5.7 and as provided for in Section 10.7 below) and/or the Business, (iv) appraisal fees and any attorneys' fees and expenses incurred by Seller

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in connection with the transactions contemplated herein, (v) the Employees' Excluded Liabilities (as defined in Section 5.4(a) below), (vi) Liabilities relating to Seller's failure to timely return certain students' stipends or excess funds, as required by the U.S. Department of Education Rules and regulations, (vii) the Shareholders' Loans and any other Liabilities relating thereto, or (viii) any unknown or undisclosed Liabilities (all the foregoing collectively are referred to as the "Excluded Liabilities"). All Excluded Liabilities shall be retained by the Seller. Seller shall timely pay, perform and discharge the Excluded Liabilities. If after the Closing Date any Excluded Liabilities are not so paid when due and thereafter the Seller fails to pay such Excluded Liabilities within ten (10) days of receipt of written notice from Buyer, or Buyer reasonably determines that the failure of Buyer to promptly pay such Excluded Liabilities will result in an adverse effect to Buyer, Buyer may elect to make any or all such payments directly (but shall have no obligation to do so) and require immediate reimbursement from the Seller.

        1.4    Consideration.    In consideration for the Assets, Buyer agrees to deliver to Seller at Closing the amount of Two Million One Hundred Thousand Dollars ($2,100,000.00) (the "Consideration") payable as follows:

        (a)   Buyer will assume the Assumed Liabilities; and

        (b)   The difference between $2,100,000.00 and the Assumed Liabilities will be paid to Seller in cash, in equal monthly installments over a 4-year period, in accordance with the terms of a non-transferable promissory note ("Note") to be issued by Buyer's Subsidiary substantially in the form attached as Exhibit C. The Note shall bear no interest and shall be secured solely with the Assets. Until such time as the procedure set forth in Section 1.6 below has been completed, the Parties hereto agree that the original Note will be kept in escrow by an independent third party escrow agent mutually acceptable to the Parties hereto, and such third party escrow agent will only release the Note upon receipt of jointly signed instructions by Seller and Buyer.

        The Consideration shall be subject to adjustment as provided in Sections 1.5 and 1.6 below, as Seller hereby acknowledges and agrees that: (i) in no event the Consideration to be paid by Buyer (taking into account the Assumed Liabilities) shall exceed $2,100,000.00 and (ii) the Consideration has been determined based upon Seller's representation that Seller's Business is operating on a cash flow break even basis through December 31, 2007.

        1.5    Adjustment to Consideration.

        (a)   Within ten (10) days prior to the Closing Date, Seller shall prepare and deliver to Buyer a balance sheet of the Seller (the "Closing Balance Sheet") certified as true, complete and accurate, by an authorized officer of Seller. The Closing Balance Sheet shall be prepared in accordance with the same principles applied in preparation of the Financial Statements, and shall fairly and accurately present the assets, Liabilities (including reserves) and financial position of the Seller, as of the Closing Date. Buyer shall have five (5) business days following delivery of the Closing Balance Sheet to notify Seller in writing of any objections to the Closing Balance Sheet.

        (b)   If Buyer does not object to the Closing Balance Sheet, it shall cause its Subsidiary to issue at Closing, the Note in the principal amount resulting from the difference between $2,100,000.00 minus the Projected Cash Shortfall Amount and the Assumed Liabilities, which liabilities shall be reflected on the Closing Balance Sheet.

        (c)   If Buyer does object to any item in the Closing Balance Sheet, it shall notify Seller in writing prior to Closing, and Buyer and Seller shall use reasonable efforts to resolve any differences with respect to the Closing Balance Sheet. In the event Seller and Buyer are unable to reach agreement prior to Closing, the Parties shall proceed with the Closing and shall submit the disputed items for resolution post-Closing to an independent accounting firm of nationally or regionally recognized standing selected by both Parties (a "Qualified Accountant"). The Qualified

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Accountant's determination on the items on dispute on the Closing Balance Sheet (the "Final Balance Sheet") and the pro-rata allocation of its fees, expenses and costs (as hereinafter set forth) shall be final and binding on Buyer and Seller. The fees, expenses and costs of the Qualified Accountant shall be borne by Seller and Buyer in inverse proportion as each of them may prevail on the matters resolved by the Qualified Accountant, which pro-rata allocation will also be determined by the Qualified Accountant and be included in its final decision. Upon receipt of the Final Balance Sheet, Buyer shall cause its Subsidiary to issue the Note in the principal amount resulting from the difference between $2,100,000.00 and the Assumed Liabilities as reflected in the Final Balance Sheet, which Note shall be subject to further adjustment as set forth in Section 1.6 below.

        1.6    Cash Flow Adjustment.    As of the date of this Agreement, the Parties have projected that tuitions expected to be collected for the months of September 2007 and October 2007 will not cover certain liabilities due and payable on these same months in the estimated amount of $550,000.00 (the "Projected Cash Shortfall Amount"). Within ninety (90) days after the Closing, Buyer shall conduct and complete a review of enrollments and related tuition and fees for the starts in August 2007 and October 2007, and if upon completion of such review, Buyer determines that the Business will not provide a break even cash based operating statement for the remainder of 2007 (the "Cash Flow Determination"), Buyer (or its Subsidiary's authorized officer) shall deliver the Cash Flow Determination to Seller. If Seller fails to object to the Cash Flow Determination within five (5) days from receipt thereof, the principal amount of the Note shall be adjusted up or down on a dollar-for-dollar basis based on the cash flow of Seller for the remainder of 2007 as reflected in the Cash Flow Determination; provided, however, that in the event of an upward adjustment, the sum of the principal amount of the Note plus the Assumed Liabilities shall not exceed in any event $2,100,000.00. The original Note shall be cancelled and replaced with a new Note reflecting such principal amount. If Seller timely objects to the Cash Flow Determination, the dispute shall be submitted to a Qualified Accountant as provided in Section 1.5(c) above and upon receipt of the Qualified Accountant's final and binding decision (which shall also include a determination on payment of fees and expenses), a new Note reflecting the principal amount determined by the Qualified Accountant's final and binding decision shall be issued by the Subsidiary and upon receipt of the same Seller shall deliver to Buyer the original Note marked cancelled.

        1.7    Pro-rations.    All revenues received by Seller through the Closing corresponding to the school year in which the Closing occurs shall be used by the Seller to pay its operating expenses and liabilities through the Closing. All expenses incurred for the present school term of the Seller shall be prorated five (5) days prior the Closing. Five (5) days prior to the Closing, the Seller shall submit the provided revenues and expenses to the Buyer for its approval. These pro-rations shall be made on an accrual basis.

ARTICLE 2
CLOSING

        2.1    Closing Date.    The closing of the transactions provided for herein ("Closing") shall take place at the offices of Seller located at 555 East Pikes Peak Avenue, Suite 108, Colorado Springs, Colorado, at 10:00 a.m. local time on September 12, 2007, or at such other place, later time or date as the Parties may mutually agree to in writing, such date being referred to herein as the "Closing Date"; provided, however, that the Closing shall not occur until after each of the conditions set forth in Articles 7 and 8 hereto have been satisfied or waived by the benefited Party even if the Closing Date is extended beyond September 12, 2007, as provided herein.

        2.2    Deliveries by Seller at Closing.    At the Closing, Seller will deliver to Buyer:

        (a)   physical possession of all of Seller's Assets and the Real Property;

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        (b)   a bill of sale, substantially in the form attached hereto as Exhibit "A" ("Bill of Sale"), conveying in the aggregate all of Seller's Assets, duly executed by the Seller;

        (c)   an assignment and assumption agreement, substantially in the form attached hereto as Exhibit "B" ("Assignment and Assumption Agreement"), pursuant to which the Seller will assign to Buyer's Subsidiary, and Buyer's Subsidiary will agree to assume, all of the Assumed Liabilities and all Contracts (including, without limitation, all faculty employment contracts);

        (d)   an assignment of all Seller's bank accounts, duly executed by an appropriate officer of the Seller;

        (e)   fully executed intellectual property assignments, each in recordable form to the extent necessary to assign such rights;

        (f)    all Books and Records;

        (g)   a copy of the resolutions of the Board of Directors of Seller and its members (if any, and to the extent necessary), approving the execution and delivery of this Agreement and the other Transaction Documents and the consummation of all of the transactions contemplated hereby and thereby, duly certified by an appropriate officer;

        (h)   a Seller's Closing Certificate duly executed by an authorized officer of Seller;

        (i)    a certificate issued by the Secretary of State of the State of Colorado indicating that Seller is in good standing, and a certificate issued by the Colorado's taxing authority indicating that no Taxes are due by Seller, each dated no earlier than five (5) business days prior to the Closing;

        (j)    a duly executed employment agreement for Dr. Emory G. Cowan, Jr., Ph.D. ("Cowan Employment Agreement"), with terms and conditions mutually agreeable between the Parties hereto; and

        (k)   such documents and other instruments of transfer and conveyance as may reasonably be requested by Buyer to consummate the transaction contemplated herein, each in form and substance satisfactory to Buyer and its legal counsel and duly executed by the Seller.

        2.3    Deliveries by Buyer at Closing.    At the Closing, Buyer will deliver or cause its Subsidiary to deliver (as applicable) to Seller:

        (a)   signed counterpart to the Assignment and Assumption Agreement executed by the Subsidiary;

        (b)   signed counterpart to intellectual property assignments executed by the Subsidiary;

        (c)   signed counterpart to the Cowan Employment Agreement;

        (d)   a Buyer's Closing Certificate duly executed by an authorized officer of Buyer;

        (e)   a signed copy of the Operating Agreement of the Subsidiary, in the form attached hereto as Exhibit D; and

        (f)    a copy of the resolutions adopted by the Board of Directors of Buyer, approving the execution and delivery of this Agreement and the other Transaction Documents and the consummation of all of the transactions contemplated hereby and thereby, duly certified by an appropriate officer.

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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER

        Except as otherwise set forth in a disclosure schedule delivered to Buyer by Seller pursuant to this Agreement (the "Disclosure Schedule"), Seller hereby represents and warrants to Buyer that the statements contained in this Article 3 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date.

        3.1    Organization.    Seller is a non-profit corporation duly organized, validly existing and in good standing under the laws of the State of Colorado; it has all requisite power and authority to own, lease and operate the Assets, properties and business and to carry on the Business as now conducted and as presently contemplated to be conducted and is duly qualified or licensed to do business as a foreign corporation and is in good standing in every jurisdiction in which the nature of its business or the location of its properties or operations requires such qualification or licensing.

        3.2    Authority to Execute and Perform Agreement.    Seller has all requisite power, authority and approvals required to enter into, execute and deliver this Agreement and all the Transaction Documents and to perform fully its obligations hereunder and thereunder.

        3.3    Enforceability.    This Agreement and the other Transaction Documents shall constitute the valid and binding obligation of Seller, enforceable against the Seller in accordance with the terms, except that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and general principles of equity.

        3.4    No Violation.    The execution and delivery by Seller of this Agreement or any of the Transactions Documents hereto nor the consummation of the transactions contemplated herein or therein will knowingly: (a) violate any provision of the Articles of Incorporation, bylaws or other charter documents of Seller; (b) violate, conflict with or constitute a default under, permit the termination or acceleration of, or cause the loss of any rights or options under, any Contract; (c) require any authorization, consent or approval of, exemption or other action by, or notice to, any party to any Contract; (d) result in the creation or imposition of any Encumbrance upon any of the Assets of the Seller; (e) violate or require any consent or notice under any law or order to which Seller is subject; or (f) violate any permits or licenses of the Seller.

        3.5    Regulatory Approvals and Other Consents.    Section 3.5 of the Disclosure Schedule sets forth a complete and accurate description of each consent, approval, authorization, notice, filing, exemption or other requirement, whether or not prescribed by the Articles of Incorporation, or other charter document of the Seller, whether prescribed by law or order or whether required pursuant to the terms of any Contract, which must be obtained from any Person or which must otherwise be satisfied by the Seller ("Required Consents") in order that (i) the execution and delivery by Seller of this Agreement or the Transaction Documents and (ii) the consummation of the transactions contemplated herein and therein will not cause any breach of the representations and warranties contained in Article 3. Each such consent, approval, authorization or other requirement will be obtained or satisfied by Seller prior to the Closing.

        3.6    Financial Condition/Financial Statements.    Attached as Section 3.6 of the Disclosure Schedule are the following (collectively, the "Financial Statements"): (i) audited balance sheets as of July 31, 2003, 2004, 2005 and 2006 and the related unaudited statements of income, for each of the fiscal years then ended, (ii) the unaudited balance sheet of Seller as of the fiscal year ending July 31, 2007, (collectively, the "Interim Balance Sheet"), and the related unaudited statements of income, for the fiscal year ending on July 31, 2007, (the "Interim Balance Sheet Date") (as applicable), including monthly profit and loss statements, aged Accounts Receivable and detail of property assets. The Financial Statements fairly present the financial condition and the results of operations and changes in

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equity of Seller as of the respective dates of and for the periods referred to in such financial statements, have been prepared in accordance with GAAP on a consistent basis throughout the periods covered by the Financial Statements.

        3.7    No Undisclosed Liabilities.    Except for (i) those Liabilities specifically accrued or reserved against on the Seller's Interim Balance Sheet (ii) those current liabilities for trade or business obligations incurred since the Interim Balance Sheet Date in connection with the purchase of goods or services in the ordinary course of the business and consistent with past practices, (none of which is, individually or in the aggregate, material and none of which is for breach of contract, breach of warranty, tort or infringement) (iii) Liabilities arising under any Contract (none of which liabilities is for breach of contract, breach of warranty, tort or infringement) or (iv) those Liabilities otherwise specifically disclosed in Section 3.7 of the Disclosure Schedule, Seller has, as of the date hereof, no other Liabilities and there is no existing condition, situation or set or circumstances which could reasonably be expected to result in undisclosed Liabilities.

        3.8    Compliance with Laws, Governmental Matters.

        (a)    General.    Seller has complied with, and is now in compliance with, all laws and orders applicable to the Seller, its Assets and the operation of its Business, and, at time of Closing, no capital expenditures are required in order to insure continued compliance therewith. Section 3.8(a) of the Disclosure Schedule sets forth each Permit, together with its date of expiration. Except for the Permits already held by the Seller as disclosed in Section 3.8(a) of the Disclosure Schedule, no other franchise, license, permit, order or approval of any Governmental Authority is material to or necessary for the conduct of the Business as previously conducted during the twelve (12) month period prior to the date hereof and as presently conducted. Each Permit is in full force and effect; Seller is now and has at all times in the past been in all material respects in full compliance with each such Permit, no violations are or have in the last five (5) years been recorded by any Governmental Authority in respect of any such Permit, and no proceeding is pending or, threatened to revoke, amend or limit any such Permit. There are no known pending or threatened Proceedings by or before any Governmental Authority which involves new special assessments, assessment districts, bonds, Taxes, condemnation actions, laws or orders or similar matters which, if instituted, could reasonably be expected to have a Material Adverse Effect upon the condition (financial or otherwise), assets, liabilities, business or prospects of the Business or the value or utility of the Assets.

        (b)    Environmental and Industrial Hygiene Compliance.    Except as disclosed in Section 3.8(b) of the Disclosure Schedule, (i) Seller, its Assets and the Business has not been or is now in violation of any applicable Environmental Law or Order; (ii) Seller has not, prior to the date hereof, ever used, generated, manufactured, treated, stored or disposed of on, under or about the Real Property transported to or from the premises of the Real Property any Hazardous Materials (as defined below), flammables, explosives, radioactive materials, hazardous wastes, toxic substances or related materials; (iii) Seller has obtained and now hold all Permits which are required to be held by it under all applicable Environmental Law or Order; (iv) Seller is in compliance with all terms and conditions of any and all required Permits and all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in or required by all applicable Environmental Law or Order, and any notice or demand letter issued, entered, promulgated or approved thereunder; (v) no past or present events or conditions interfere with or prevent continued compliance by the Seller, or give rise to any material present or potential legal, common law or statutory liability of the Seller, any applicable Environmental Law or Order; (vi) there is no pending civil or criminal litigation, notice of violation or administrative proceeding involving the Seller relating in any way to any Environmental Law or Order (including notices, demand letters or claims under RCRA, CERCLA and similar state or local laws), other than rule-making proceedings, if any. For the purpose of this

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Section 3.8, "Hazardous Materials" means any chemical, compound, mixture, substance, material, condition or waste that is hazardous to human health, safety, or the environment due to its radioactivity, ignitability, corrosivity, flammability, toxicity or properties including but not limited to (i) substances now or at any time hereafter defined as "hazardous substances," "hazardous materials," or "toxic substances" in CERCLA, the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq. or RCRA, as the same may be amended from time to time, or in the regulations adopted and publications promulgated pursuant to said laws from time to time, (ii) those substances now or at anytime hereafter defined as "hazardous wastes" under applicable state law in Colorado, or in the regulations adopted and publications promulgated pursuant to said laws from time to time, (iii) petroleum, (iv) PCB, and (v) asbestos in any form.

        3.9    Litigation.    Section 3.9 of the Disclosure Schedule sets forth an accurate and complete description of every known pending or threatened adverse claim, dispute, governmental investigation, suit, action, arbitration or other proceeding, legal, administrative or other proceeding of any nature (the "Proceeding"), against or otherwise affecting the Seller, its Assets, Business or any of its directors and officers and key employees. To Seller's knowledge, no event has occurred or circumstance exists that is reasonably likely to give rise to or serve as a basis for the commencement of any such Proceeding. No Proceeding, if decided adversely to the Seller, could reasonably be expected to adversely affect the condition (financial or otherwise), Assets, Liabilities, Business, operations or prospects of the Seller.

        3.10    Personal Property.

        (a)    Tangible Personal Property.    Section 3.10(a) of the Disclosure Schedule sets forth, as of the date hereof, (i) a description, including the location, of each item of the tangible personal property owned by the Seller having either a depreciated book value or estimated fair market value per unit in excess of $5,000, or not owned by the Seller but in its possession or used in the Business and having rental payments therefor in excess of $5,000 per year; and (ii) a description of the owner of, and any contract or other agreement relating to the use of each such item of tangible personal property not owned by the Seller and the circumstances under which such property is used.

        (b)   Except as disclosed in Section 3.10(b) of the Disclosure Schedule as of the date hereof:

        (1)   Seller has good and marketable title to each item of tangible personal property, all transferable leaseholds in tangible personal property leased by the Seller, free and clear of all Encumbrances except for liens, if any, for personal property Taxes not due and liens of repairmen or bailees or other similar liens incurred in the ordinary course of business in respect of obligations which are not overdue; and

        (2)   the operation of each item of the tangible personal property during the twelve (12) month period prior to the date hereof, as presently conducted and as proposed to be conducted is not in any material respect in violation of any applicable building code, zoning ordinance or other law including, without limitation, applicable environmental protection and occupational health and safety laws and regulations.

        (3)   during the past three (3) years, there has not been any significant interruption in the operations of the Seller due to inadequate maintenance of any item of tangible personal property.

        3.11    Intellectual Property.

        (a)   Section 3.11(a) of the Disclosure Schedule sets forth: (i) a true and accurate identification of each registered fictitious business name, trademark, service mark, trade name and slogan, domain names, and each registration and registration application for any of the foregoing,

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constituting a part of the intangible personal property of the Business; (ii) a true and complete schedule of each registered copyright, and each registration and application therefor constituting a part of the intellectual property; (iii) a true and complete schedule of each patent and patent application registered industrial design and description of any material technical information, documentation or manuals currently used in the Business; (iv) each item of material "software" (which is not comprised of desktop applications generally commercially available to Third Parties for lease fees of less than $1,000 per license) and associated documentation constituting a part of the intellectual property; (v) processes and know-how, (v) a true and complete list of each Contract to which Seller is a party with respect to the Business either as licensee or licensor or otherwise relating to any item of the intangible personal property and (vi) other intangible personal property and proprietary information ("Intellectual Property") owned by the Seller or licensed to or used by the Seller and necessary to conduct its Business as currently conducted and continue the Business as hereto conducted ("Intellectual Property Assets").

        (b)   Except as indicated in Section 3.11(b) of the Disclosure Schedule, as of the date hereof:

        (1)   Seller is the owners of all right, title and interest in and to each the Intellectual Property Assets, free and clear of all Encumbrances;

        (2)   all patents, trademarks copyrights and other state and federal registrations and all applications therefor listed in Section 3.11 of the Disclosure Schedule are valid and in full force and effect and are not subject to any Taxes, maintenance fees or actions falling due within ninety (90) days after the date hereof,

        (3)   there are no known pending Proceedings concerning any Intellectual Property and Intellectual Property Assets, and no such Proceeding, dispute or disagreement is threatened;

        (4)   Seller has have the right and authority to use the Intellectual Property Assets; such use did not and will not knowingly conflict with, infringe upon, or violate any patent or other proprietary right of any other Person, and Seller has not knowingly infringed and is not now knowingly infringing any proprietary right belonging to any other Person;

        (5)   Seller has all reasonable security measures to protect the secrecy, confidentiality and value of its trade secrets; and

        (6)   The consummation of the transactions contemplated hereby will not alter or impair any of the Intellectual Property rights or Buyer's ability to use the Intellectual Property Assets in the conduct of the Business by the Seller or as proposed to be conducted by the Buyer.

        3.12    Contracts.

        (a)   Section 3.12(a) of the Disclosure Schedule sets forth a true and correct list of each written Contract and Section 3.12(b) sets forth a true and correct list of the terms of each oral contract, agreement or arrangement to which Seller is a party, except (i) any contract or other agreement which can be cancelled on 30-days notice or which would be required to be disclosed therein but for specific exemptions contained therein; (ii) purchase or sales orders made in the ordinary course of business and not involving a commitment for a duration greater than one year or an aggregate amount in excess of $5,000; and (iii) any other Contract or other agreement made in the ordinary course of business and not providing for a duration in excess of six months or involving aggregate payments or potential liabilities in excess of $5,000 for such six (6) months.

        (b)   Except as disclosed in Section 3.12(c) of the Disclosure Schedule, as of the date hereof:

        (1)   To Seller's knowledge, each Contract is the valid and binding obligation of the other contracting party, enforceable in all material respects in accordance with its terms against the

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other contracting party and is in full force and effect; and all rights of the Seller thereunder are owned free and clear of any Encumbrance;

        (2)   no other contracting party to any Contract is now in material breach thereof or has breached the same in any material respect within the twelve-month period prior to the date hereof, there is no anticipated material breach thereof by any such party; and there are not now, nor have there been in the twelve (12) month period prior to the date hereof, any written disagreements or disputes between the Seller and any other party to any Contract relating to the validity or interpretation of such Contract or to the performance by any party thereunder that has been disclosed to Seller in writing;

        (3)   Seller has fulfilled all obligations required pursuant to each Contract to have been performed by it prior to the date hereof, and Seller has no reason to believe, as of the date of Closing, that Seller would not be able to fulfill, when due, all of its obligations under each Contract which remain to be performed between the date hereof and the Closing;

        (4)   Seller has not received any notice that any party to any Contract intends to cancel or terminate any such Contract or to exercise or not to exercise any option or extension right thereunder;

        (5)   Seller does no have any liability or obligation with respect to the return of inventory or products sold by the Business which are in the possession of distributors, wholesalers, retailers or customers; and

        (6)   the Contracts include all of the contracts and agreements necessary for the conduct of the Business as conducted during the twelve-month period prior to the date hereof, and as proposed to be conducted as of the date of Closing.

        3.13    Labor and Employment Matters; Consultants.

        (a)   Section 3.13(a) of the Disclosure Schedule contains a complete and accurate list of the following information for each employee of Seller: name; job title; date of hiring or engagement; date of commencement of employment or engagement; current compensation (including salary, commissions, bonuses, incentives and other amounts) paid or payable; sick days, personal days and vacation leave that is accrued but unused through the date of this Agreement; benefits to which he or she is entitled; last review date; last compensation adjustment date; and service credited for purposes of vesting and eligibility to participate under any Benefit Plan ("Employees' Accrued Liabilities"). None of Seller's employees has an employment agreement and all employees of Seller are employed at-will and may be terminated by Seller without the payment of severance. Seller has no retired employees, directors.

        (b)   Section 3.13(b) of the Disclosure Schedule contains a complete and accurate list of the following information for each consultant and independent contractor of Seller: name, services provided, compensation (including commissions), date of commencement and termination of contract.

        (c)   Seller's relationship with its employees and independent contractors is good. Seller is not a party to any collective bargaining or other agreement with labor unions, labor representatives or any other employee groups; Seller is not experiencing, and is not aware of any facts or circumstances which would result in any labor troubles or strife, work stoppages, slowdowns, or other labor matters; Seller has not received notice that it has committed any unfair labor practice and is not experiencing, and is not aware of any facts or circumstances which would result in, any current union organization efforts or negotiations or requests for negotiations, for any representation or any labor contract relating to its employees.

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        (d)   Except as disclosed in Section 3.13(c) of the Disclosure Schedule, as of the date hereof:

        (1)   no charge or complaint of employment discrimination against the Seller related to the Business is pending or threatened before the Equal Employment Opportunity Commission or any other federal, state, or local agency, court or tribunal;

        (2)   no charge of complaint against the Seller related to the Business is pending or threatened for payment of wages or other benefits under the Fair Labor Standards Act, as amended, or under any similar state or local employment standards law;

        (3)   no charge or complaint against the Seller related to the Business is pending or threatened before the Occupational Safety and Health Administration or any similar state or local agency;

        (4)   there is no complaint or action against the Seller related to the Business by any current or former employee of the Seller, including, but not limited to, a complaint or action alleging breach of an employment contract, wrongful discharge, or breach of a duty of good faith and fair dealing in the employment relationship is pending before any federal, state or local agency, court or tribunal;

        (5)   there no complaint or action against the Seller related to the Business by any current or former independent contractor of Seller;

        (6)   there are no pending claims against the Seller related to the Business for workers' compensation, unemployment insurance, or disability benefits under federal, state, or local law; or

        (7)   as of the Closing Date, Seller will have withheld all amounts required by currently applicable law or by written agreement to be withheld from the wages, salaries and other payments to its employees involved in the Business.

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        3.14    Pension and Benefit Plan.

        (a)   Section 3.14(a) of the Disclosure Schedule sets forth a correct and complete list of the pension plans and welfare plans that the Seller and its ERISA affiliates maintain, as of the date hereof.

        (b)   Except as disclosed in Section 3.14(b) of the Disclosure Schedule, as of the date hereof:

        (1)   Each ERISA plan conforms in all material respects to all applicable laws, including ERISA and the Internal Revenue Code of 1986, as amended (the "Code"). All material notices, reports, returns, applications and disclosures have been timely made which are required to be made to the Internal Revenue Service and the U.S. Department of Labor;

        (2)   the Seller and its ERISA affiliates have made or provided for (with fully-funded reserves) all contributions heretofore required to have been made under all ERISA plans, and will, by the Closing Date, have made or provided for (with fully-funded reserves) all contributions required to be made on or before the Closing Date under all such plans;

        (3)   No ERISA plan nor any trust created thereunder, nor any trustee or administrator thereof has engaged in a transaction which may subject any of such ERISA plans, any such trust, or any party dealing with such ERISA plans or any such trust, to the Tax or penalty on prohibited transactions imposed by Section 4975 of the Code or to a civil penalty imposed by Section 502 of ERISA;

        (4)   There are no actions, claims or lawsuits which have been asserted or instituted against the assets of any of the trusts under the ERISA plans, and no basis for such action, claim or lawsuit exists, and no such action, claim or lawsuit has been threatened; and

        (5)   True, correct and complete copies of the following documents, with respect to each of the ERISA plans, have been delivered to Buyer:

        (i)    Each ERISA plan document.

        (ii)   The most recent summary plan description of each ERISA plan for which a summary plan description is required under ERISA and summaries of material modifications thereto.

        (iii)  All instruments under which the assets of any ERISA plan are held or managed and benefits provided, including, but not limited to, insurance contracts, trust agreements, custodial contracts and investment management agreements.

        (iv)  The two most recent Forms 5500, 5500-C or 5500-R for each ERISA plan for which such filing is required, with all attachments and schedules thereto.

        (v)   The two most recent annual financial statements for each ERISA plan, if not included with such Form 5500 (5500-C or 5500-R); and

        (vi)  With respect to each ERISA plan that has received a determination letter under Section 401(a) of the Code, and any voluntary employee benefit association trust that has received a determination letter under Section 501(c) of the Code, the most recent Internal Revenue Service determination letter (including any letter concerning the tax-exempt status of any trust under Section 501 (a) of the Code).

        3.15    Insurance.    Section 3.15 of the Disclosure Schedule sets forth a true and correct list of all policies or binders of fire, liability, workers' compensation, vehicular or other insurance held by or on behalf of Seller specifying the insurer, the policy number or covering note number with respect to binders, and describing each pending claim thereunder of more than $5,000. Such policies and binders are in full force and effect. There are no outstanding unpaid claims under any such policy or binder.

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Seller has not received a notice of cancellation or non-renewal of any such policy or binder. There is no inaccuracy in any application for such policies or binders, any failure to pay premiums when due, or any similar state of facts which may form the basis for termination of any such insurance. In the last five years the Seller has never been refused any insurance with respect to its properties or operations, nor has its insurance coverage ever been limited. The Seller is unaware of any facts which, if known to any such insurer, may result in a cancellation or termination of any such policy or binder. The rating of the insurance companies insuring all of the policies is not less than BB+. The insurance owned by the Seller is appropriate for the Business operated by the Seller. All of the insurance policies set forth on the Disclosure Schedule will remain in full force and effect after the completion of the transaction contemplated by this Agreement.

        3.16    Compliance with the U.S. Department of Education and Other Applicable Governmental Rules.    The Seller has complied with the U.S. Department of Education Rules and regulations during the Seller's ownership of the Business, including, without limitation, those relating to the receipt of Title IV funds for its students, the timely return of students' stipends or excess funds, and, except as disclosed in Section 3.16 of the Disclosure Schedule, it has complied with all applicable rules and outcomes and compliance standards. None of the funds have knowingly been improperly spent by Seller as defined by the U.S. Department of Education Guidelines prior to the Closing.

        3.17    Tax Matters.

        (a)   The Seller has filed all Tax returns that it was required to file, such Tax returns were correct and complete in all material respects, and all Taxes owing have been paid (whether or not showing on such Tax returns);

        (b)   The Seller has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency;

        (c)   There are no outstanding liens for Taxes upon the Assets of the Seller;

        (d)   The Seller has not: (A) received any written notice of deficiency or assessment from any Taxing or other Governmental Authority with respect to income Taxes or any written notice of material deficiency or assessment from any Taxing or other Governmental Authority concerning any Taxes or any material audit by any Taxing or other Governmental Authority concerning any other Taxes of Seller or (B) executed any waiver of the state of limitations with respect to any taxable period;

        (e)   No claim has ever been made by an authority in a jurisdiction where any of the Seller does not file Tax returns that it is or any be subject to taxation by that jurisdiction;

        (f)    The Seller has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other Third Party;

        (g)   The Seller has not made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Code Section 280G;

        (h)   The Seller is not a party to any income Tax allocation or sharing agreement, Tax indemnification agreement or similar arrangement that will remain in effect subsequent to the Closing;

        (i)    Seller is exempt from federal income taxation under § 501(a) of the Code, as an organization described under § 501(c)(3) of the Code;

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        (j)    Seller's status as an exempt organization described in § 501(c)(3) of the Code has not been revoked or modified since it was first recognized by the Internal Revenue Service ("IRS") on March 11, 2003 (the "Determination Letter");

        (k)   Seller is not a private foundation within the meaning of § 509(a) of the Code;

        (l)    Seller's purposes, activities, and methods of operation have not changed materially since the date of Seller's organization and are not materially different from those described in Seller's Form 1023, Application for Recognition of Exemption, including any attachments and supplemental materials provided to the IRS in connection therewith (the "Application");

        (m)  Seller has operated consistently with, and there have been no changes materially affecting, the representations made in its Application, and the Determination Letter is still in effect. Seller is in compliance with the terms, conditions, and limitations of the Determination Letter;

        (n)   Seller has not received any indication or notice, written or oral, from representatives of the IRS that its exemption under § 501(c)(3) of the Code has been modified, limited, revoked, or superseded, or that the IRS is considering modifying, limiting, revoking, or superseding its exemption, and the exemption of the Seller under § 501(c)(3) of the Code is still in effect as of the date hereof. Seller has not been audited by the IRS or contacted by the IRS to schedule an audit;

        (o)   The information provided in Seller's annual information returns (Forms 990), including any accompanying schedules and statements, is true, correct, and complete;

        (p)   Seller has not undertaken any activities not disclosed in its Forms 990;

        (q)   No substantial part of Seller's activities has consisted of carrying on propaganda or otherwise attempting to influence legislation, and Seller has not participated in or intervened in any political campaign (including by publishing or distributing statements) on behalf of, or in opposition to, any candidate for public office;

        (r)   No part of Seller's net earnings inures, or has inured, to the benefit of any person having a personal and private interest in Seller's activities;

        (s)   Seller is not organized or operated for the benefit of private interests or persons controlled, directly or indirectly, by private interests and has never been so operated;

        (t)    Seller has not engaged in an unrelated trade or business within the meaning of § 513(a) of the Code;

        (u)   Compensation (including all forms of cash and noncash compensation, deferred compensation, premiums paid for liability or any other insurance coverage, and all other benefits, whether or not included in income for tax purposes, and any other economic benefit) paid to Seller's officers and employees, including those in a position to exercise substantial influence over Seller's affairs, is, and has always been, reasonable and comparable to such amounts as would ordinarily be paid for like services by like enterprises under like circumstances;

        (v)   Seller's directors are not compensated in their capacity as such;

        (w)  Compensation (including all forms of cash and non-cash compensation, whether or not included in income for tax purposes, and any other economic benefit) paid for goods or services to persons other than Seller's officers and employees is, and has always been, reasonable and comparable to such amounts as would ordinarily be paid for like goods or services by like enterprises under like circumstances;

        (x)   Seller is not a party to any suit, legal or administrative proceeding, inquiry or investigation, at law or in equity before or by any court, public board or body, pending or threatened against or affecting Seller, nor is there any basis therefore, wherein an unfavorable

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decision, ruling or finding would in any way question Seller's tax-exempt status or that would otherwise materially adversely affect the financial condition of Seller;

        (y)   Seller has not taken any action that would cause Seller to lose its status as an organization described in § 501(c)(3) of the Code or as an organization other than a private foundation within the meaning of § 509(a) of the Code.; and

        (z)   The Seller has reserved its reasonably anticipated Tax liability for the fiscal year in which the transaction will occur.

        3.18    Real Property.    Seller does not own any real property. Section 3.18 of the Disclosure Schedule lists all real property leased or subleased to the Seller or that the Seller has leased to any other Third Party including subsidiaries (individually, a "Leased Property" and collectively, the "Leased Properties "). Each lease and sublease listed in Section 3.18 of the Disclosure Schedule is legal, valid, binding, enforceable, and in full force and effect. No lessor under any of the leases set forth on Section 3.18 of the Disclosure Schedule has taken action in respect of any lease or threatened to terminate any lease before the expiration date specified in such lease. The Leased Property constitutes all real property used by the Seller and the subsidiaries in the conduct of the Business, and is adequate to conduct the operations of the Seller, there is no pending or threatened condemnation, eminent domain or similar proceeding with respect to any real property occupied by the Seller. Each Lease Property occupied by the Seller is in compliance in all material respects with all building, zoning, subdivision, health, safety and other applicable foreign, federal, state and local laws and regulations. None of the buildings, plant or structures on the Leased Properties is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material. All utility systems serving the Leased Properties are adequate for the Business, as currently conducted. To the knowledge of the Seller, sources of water are adequate in quantity and quality to support the operations of the Seller and the Leased Properties, as currently conducted. All of the fixtures located in the Leased Properties shall remain with said property when it is acquired by Buyer. The Leased Properties are and shall remain be free of any Encumbrances as of the Closing Date.

        3.19    No Broker.    No broker, finder, agent or similar intermediary has acted for or on behalf of Seller in connection with this Agreement or the transactions contemplated hereby, and no broker, finder, agent or similar intermediary is entitled to any broker's, finder's, or similar fee or other commission in connection therewith based on any agreement, arrangement or understanding with Seller or any action taken by Seller. Seller shall fully discharge all obligations to brokers or finders engaged by Seller to raise capital or to consummate the transactions which are the subject of his Agreement.

        3.20    Subsidiaries.    Seller has no subsidiaries.

        3.21    Capitalization.    Set forth in Section 3.21 of the Disclosure Schedule is the authorized capital of the Seller and an accurate statement of the outstanding ownership of Seller. Seller hereby represents and warrants that all former shareholders of the Colorado School of Professional Psychology, Inc., a Colorado corporation, which corporation merged with and into Switzer Counseling Center on February 1, 2001, ceased to be shareholders of the Colorado School of Professional Psychology, Inc. as of the effective date of the merger and all of their shares were surrendered and cancelled.

        3.22    Absence of Certain Developments.    Since December 31, 2006, there has been no (i) material adverse change in the condition, financial or otherwise, of the Seller or its assets, liabilities, properties, or business or prospectus, (ii) declaration, setting aside or payment of any dividend or other distribution with respect to the capital stock of the Seller, (iii) issuance of capital stock (other than pursuant to (A) the exercise of options, warrants, or convertible securities outstanding at such date or (B) the conversion of convertible debt or other interest-bearing debt outstanding at such date) or options, warrants or rights to acquire capital stock (other than the rights granted to the Investors hereunder), (iv) Material Loss, destruction or damage to any property of the Seller, whether or not

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insured, (v) acceleration or prepayment of any indebtedness for borrowed money or the refunding of any such indebtedness, (vi) labor trouble involving the Seller or any material change in its personnel or the terms and conditions of employment, (vii) waiver of any valuable right, whether by contract or otherwise, (viii) loan or extension of credit to any officer or employee of the Seller, (ix) change in accounting methods, principles or practices used in preparing the Seller's financial statements (x) acquisition or disposition of any material assets (or any contract or arrangement therefore), or any other material transaction by the Seller otherwise than for fair value in the ordinary course of business; (xi) increase on incurrence of a material liability; (xii) incurrence of liens or other encumbrances on the assets; (xiii) failure to satisfy an obligation or a default or breach under a material obligation; (xiv) increase in employee compensation; (xv) any increase in capital expenditures in excess of $5,000 individually or $15,000 in the aggregate; and (xvi) any agreement or commitment to do any of the foregoing.

        3.23    Condition of Properties.    All facilities, Assets and other properties owned, leased or used by the Seller in the Business are in good operating condition and repair, are reasonably fit and usable for the purposes for which they are being used and are presently contemplated to be used, are adequate and sufficient for the Seller's Business as now conducted and as presently contemplated to be conducted and conform in all material respects with all applicable ordinances, regulations and laws.

        3.24    Transactions with Related Parties.    Except as set forth in Schedule 3.24(a) of the Disclosure Schedule, Seller is not party to any Contract with any of the Seller's directors, officers or members or any Affiliate or family member of any of the foregoing under which it: (i) leases any real or personal property (either to or from such Person) (ii) licenses technology (either to or from such Person), (iii) is obligated to purchase an tangible or intangible asset from or sell such asset to such Person, (iv) purchases products or services from such Person or (v) has borrowed money from or lent money to such Person. Additionally, except as set forth in Schedule 3.24(a), Seller does not employ as an employee or engage as a consultant any family member, spouse or relative of any of the Seller's directors, officers or members. Schedule 3.24(b) sets forth a list of all of shareholders' loans, ("Shareholders' Loans") which Seller hereby represents and warrants to Buyer have been paid off and Seller has no further obligation in connection therewith.

        3.25    Interest in Competitors.    Neither the Seller, any of its officers or, to the best of its knowledge, directors, has any interest, either by way of contact or by way of investment (other than as holder of not more than 2% of the outstanding capital stock of a publicly traded Person) or otherwise, directly or indirectly, in any Person other than the Seller that (i) is engaged in an activity similar to or competitive with any activity currently proposed to be conducted by the Seller or any of its subsidiaries or (ii) has any direct or indirect interest in any asset or property, real or personal, tangible or intangible, of the Seller.

        3.26    Illegal or Unauthorized Payments; Political Contributions.    Neither the Seller nor, to the best of its knowledge (after reasonable inquiry of its officers and directors), any of its officers, directors, employees, agents or other representatives of the Seller or any other business entity or enterprise with which the Seller is or has been affiliated or associated, has, directly or indirectly, made or authorized any payment, contribution or gift of money, property, or services, whether or not in contravention of applicable law, (a) as a kickback or bribe to any Person or (b) to any political organization, or the holder of or any aspirant to any elective or appointive public office except for personal political contributions not involving the direct or indirect use of funds of the Seller.

        3.27    Internal Accounting Controls.    The Seller has established or is in the process of establishing a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's

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general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

        3.28    Suppliers.    Section 3.28 of the Disclosure Schedule lists the names of all suppliers of merchandise and/or services for the Seller within the last twenty-four (24) months in excess of Five Thousand Dollars ($5,000.00).

        3.29    Distributed Funds.    Except as set forth on Section 3.29 of the Disclosure Schedule, the Seller have not used any restricted funds to fund unrestricted operations of the Seller or for any other unauthorized or non-permitted use that is contrary to the restricted nature of such funds.

        3.30    Solvency.    Seller has not (i) made an assignment for the benefit of creditors; (ii) applied for or consented to the appointment of a receiver or trustee with respect to itself; (iii) admitted in writing its inability to pay its debts as they mature; or (iv) been the subject of a bankruptcy, insolvency, reorganization or liquidation proceeding. Seller is not insolvent and will not be rendered insolvent by the transactions contemplated hereby.

        3.31    Full Disclosure.    This Agreement, the schedules furnished contemporaneously herewith, and the other agreements, documents, certificates or written statements furnished or to be furnished to the Buyer or Buyer's Subsidiary, through the Closing Date by or on behalf of the Seller in connection with the transactions contemplated hereby taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein or herein, in light of the circumstances in which they were made, not misleading. There is no fact which is known to the Seller which has not been disclosed herein or otherwise by the Seller which would reasonably be expected to have a Material Adverse Effect upon the condition (financial or otherwise), assets, liabilities, business, operations, properties or prospects of the Seller, the value or utility of its Assets or the ability of the Seller to consummate the transaction contemplated herein.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER

        Buyer hereby represents and warrants to Seller that the statements contained in this Article 4 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date.

        4.1    Due Formation.    Buyer is a corporation duly organized, validly existing and in good standing under the laws of Delaware and the Subsidiary is a limited liability company duly organized, validly existing and in good standing under the laws of Colorado. Each of them has all requisite power and authority to own, lease and operate its assets, properties and business and to carry on its business as now conducted.

        4.2    Authority to Execute and Perform Agreements.    Each of Buyer and its Subsidiary, have all requisite power, authority and approval required to enter into, execute and deliver this Agreement and the other Transaction Documents and to perform fully their obligations hereunder and thereunder.

        4.3    Due Authorization.    Buyer has taken all actions necessary to authorize it to enter into and perform its obligations under this Agreement and all other Transaction Documents and to consummate the transactions contemplated herein and therein. This Agreement is, and as of the Closing Date, such other Transaction Documents will be, the legal, valid and binding obligations of Buyer, enforceable in accordance with their respective terms.

        4.4    No Violation.    Neither the execution and delivery of this Agreement nor any of the other Transaction Documents nor the consummation of the transactions contemplated herein and therein will (a) violate any provision of the Certificate of Incorporation and limited liability company agreement, with a resulting material adverse change or a Material Loss; (b) to Buyer's knowledge, violate, conflict

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with, or constitute a default under any Contract to which Buyer is a party or by which Buyer or its property is bound with a resulting material adverse change or a Material Loss; (c) require the consent of any party to any Contract or other agreement to which Buyer is a party or by which its property is bound; or (d) violate any laws or orders to which Buyer or its property is subject with a resulting material adverse change or a Material Loss.

        4.5    Regulatory Approvals.    All consents, approvals, authorizations and other requirements prescribed by any law or order which must be obtained or satisfied by Buyer and which are necessary for the execution and delivery by Buyer of this Agreement and all other Transaction Documents and the consummation of the transactions contemplated in this Agreement will be obtained and satisfied prior to the Closing (other than those consents being obtained by Seller as provided in this Agreement).

        4.6    No Broker.    No broker, finder, agent or similar intermediary has acted for or on behalf of Buyer in connection with this Agreement or the transactions contemplated hereby, and no broker, finder, agent or similar intermediary is entitled to any broker's, finder's, or similar fee or other commission in connection therewith based on any agreement, arrangement or understanding with Buyer or any action taken by Buyer. Buyer shall fully discharge all obligations to brokers or finders engaged by Buyer to raise capital to consummate the transactions which are the subject of his Agreement.

ARTICLE 5
COVENANTS AND AGREEMENTS OF SELLER

        5.1    Operation of the Business.    To the best of its ability, between the date of this Agreement and the Closing, Seller shall conduct its Business only in the ordinary course of business, use its reasonable efforts to preserve intact its current business organization, keep available the services of its officers, employees and agents and maintain its relations and good will with suppliers, students, landlords, creditors, employees, agents and others having business relationships with it and Seller shall not engage in any practice, take any action, or enter into any transaction which, if engaged in, taken or entered into would constitute a breach of Section 3.22. Seller shall also:

        (a)   pay Assumed Liabilities as they become due in the ordinary course of business;

        (b)   use commercially reasonable efforts to keep in full force and effect insurance comparable in amount and scope of coverage to insurance carried by it as of the date hereof;

        (c)   maintain its books of account and records in the ordinary course of business;

        (d)   maintain its Assets and facilities in as good working order and condition as at present, ordinary wear and tear excepted;

        (e)   cooperate with Buyer in making the application to the U.S. Department of Education and any other applicable regulatory bodies;

        (f)    file all Tax returns required to be filed; and

        (g)   to use its best efforts to obtain the Required Consents referred to in this Agreement.

        5.2    Notification.    Between the date of this Agreement and the Closing, Seller shall promptly notify Buyer in writing if Seller becomes aware of (a) any fact or condition that causes or constitutes a breach of any of Seller's representations and warranties made as of the date of this Agreement or (b) the occurrence after the date of this Agreement of any fact or condition that would or be reasonably likely to cause or constitute a breach of any such representation or warranty had that representation or warranty been made as of the time of the occurrence of, or Seller's discovery of, such fact or condition. Seller shall promptly deliver a notice of such disclosure to Buyer (such notice, a "Disclosure Schedule Update"), provided, however, that such Disclosure Schedule Update shall not be

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deemed to cure any breach of a representation, warranty, covenant or agreement or to satisfy any condition to Closing of Seller and if the contents of a Disclosure Schedule Update has resulted or is likely to result in a Material Adverse Effect on any of the Assets or the Business, Buyer will be entitled to terminate this Agreement, upon written notice to Seller prior to the Closing without any further liability to Buyer. For the avoidance of doubt, for purposes of determining whether Article 8 has been satisfied, any such written disclosures pursuant to this Section 5.2 shall not be taken into account.

        5.3    Reasonable Efforts.    Seller shall use its best efforts to cause the conditions in Article 8 to be satisfied.

        5.4    Employees.

        (a)   The Parties acknowledge and agree that it is the Parties' intention to orderly transition to Buyer's Subsidiary those employees of Seller who are active as of the Closing Date (with their respective Employees' Accrued Liabilities), so that seamlessly, such employees (upon acceptance of Seller's offer) become employees of Buyer's Subsidiary immediately after the Closing (the "Hired Employees"). To this end, as of the date of this Agreement, the Seller will give Buyer reasonable access to the facilities and the personnel records of Seller's employees so that Buyer can prepare for and conduct (at Buyer's discretion) pre-hiring interviews. The Hired Employees will be subject to Buyer's Subsidiary's customary employment practices and benefits. For the sake of clarity and notwithstanding anything to the contrary set forth in this Agreement, Buyer (or its Subsidiary) are not assuming any Liabilities arising in connection with Seller's breach or failure to comply with any applicable employment laws or regulations (the "Employees' Excluded Liabilities").

        (b)   Seller also acknowledges and agrees that on or before the Closing Date, Seller shall pay all payroll and payroll taxes.

        5.5    Seller's Expenses.    Seller shall bear all expenses incurred on behalf of Seller in connection with the preparation, negotiation, execution and performance of this Agreement, Schedules and Exhibits, including but not limited to: reasonable attorneys' fees and costs, appraisal fees and expenses in connection with the analysis of the consideration being paid for the Assets by Buyer and any other fees and expenses of Seller's agents, representatives, counsel, actuaries and accountants, even if the transaction contemplated by this Agreement does not close for any reason.

        5.6    Tax Returns.    The Seller shall promptly file all Tax returns for the fiscal year in which the transaction occurs and shall deliver a copy of the proposed Tax returns to Buyer at least fifteen (15) days prior to the due date (including extensions thereof) for the filing of such return(s).

        5.7    Pre-approval with U.S. Department of Education.    Seller shall submit and file, at Seller's cost and expense, with the U.S. Department of Education an application to consent to the transactions contemplated herein and shall exert its best efforts to obtain any other required Governmental Approvals, including that required for The Switzer Community Counseling Center ("Counseling Center") to maintain its status as an organization described in Section 501(c)(3) of the Code and for Seller to maintain its not-for-profit status.

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        5.8    Access.    The Seller shall provide Buyer with complete access to the Seller's facilities, Books and Records and those matters specified in Article 3 of this Agreement and shall cause the Representatives of the Seller to cooperate fully with Buyer and Buyer's Representatives in connection with Buyer's due diligence investigation of the Seller and its Assets, Contracts, Liabilities, operations, records and other aspects of the Business. Buyer shall be under no obligation to continue with its due diligence investigation or to consummate the transactions contemplated by this Agreement if, at any time, the results of its due diligence investigation are not satisfactory to Buyer for any reason in its sole discretion.

        5.9    Completion of Schedules and Exhibits.    Buyer and Seller acknowledge that all of the schedules to this Agreement, including, without limitation, the Disclosure Schedule (collectively, the "Schedules") and the Cowan Employment Agreement (collectively, the "Exhibits"), may not be completed prior to the execution and delivery of this Agreement; in the event that this is the case, Seller agrees that, following the execution and delivery of this Agreement, Seller shall complete and submit all of the Schedules and Exhibits to Buyer for its review at least three (3) days prior to the Closing Date (the "Delivery Date"). Upon Buyer's receipt and review of the Schedules, Buyer and the Seller shall negotiate in good faith so that the Schedules and Exhibits shall be in such form and substance as is mutually agreeable to Buyer and the Seller. If despite the Parties' good faith negotiations, Buyer has not approved the form and contents of the Schedules and the Exhibits (or any revisions thereof) at its sole discretion prior to or on the Closing Date, Buyer shall be entitled to immediately terminate this Agreement without any further liability to Seller.

ARTICLE 6
COVENANTS AND AGREEMENTS OF BUYER

        6.1    [Intentionally Deleted].

        6.2    Reasonable Efforts.    Buyer shall use its best efforts to cause the conditions in Article 7 to be satisfied.

ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF SELLER

        The obligation of Seller to enter into and complete the Closing is subject to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of which may be waived by it, to the extent permitted by law:

        7.1   Delivery of the consideration as provided in Section 1.4;

        7.2   The representations and warranties of Buyer contained in this Agreement shall be true and correct as of the Closing Date as though made on and as of the Closing Date, and Buyer shall have performed or complied with all covenants, terms and conditions to be performed by Buyer prior to Closing and delivered to Seller a certificate to this effect ("Buyer's Closing Certificate") duly signed by an authorized officer of Buyer;

        7.3   Receipt from Buyer of the documents required under Section 2.3 hereof; and

        7.4   Buyer shall cause its Subsidiary to execute and deliver the Cowan Employment Agreement and the Services Agreement required by Section 10.7(c) below.

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ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF BUYER TO CLOSE

        8.1   The obligation of Buyer to enter into and complete the Closing is subject to the fulfillment on or to the Closing Date of the following conditions, any one or more of which may be waived by it prior to the extent permitted by law:

        (a)   Seller shall not have suffered any loss of academic accreditation by the HLC or the U.S. Department of Education;

        (b)   All regulatory approvals with respect to the State of Colorado have been obtained by Seller at Seller's expense with respect to the transactions contemplated herein;

        (c)   Receipt of (i) pre-approval of the change of ownership to be effected pursuant to the Transaction from the U.S. Department of Education, and (ii) any other necessary regulatory, governmental or other Third Party consents or approvals;

        (d)   Approval of the change of ownership of the Business from the HLC;

        (e)   No loss of Title IV status;

        (f)    The representations and warranties of Seller contained in this Agreement shall be true and correct as of the Closing Date as though made on and as of the Closing Date, and Seller shall have performed or complied with all covenants, terms and conditions to be performed by Seller prior to Closing and delivered to Buyer a certificate to this effect ("Seller's Closing Certificate") duly signed by an authorized officer of Seller;

        (g)   The completion of a Bulk Sale Notice, if any;

        (h)   Receipt of all necessary Permits to own and operate the facilities comprising the Business;

        (i)    Buyer's satisfaction with respect to the Assumed Liabilities and proof of the payment or satisfaction in full by the Seller of the Excluded Liabilities;

        (j)    Satisfactory completion (as determined by Buyer in its sole discretion) of Buyer's due diligence review of Seller, the Assets and the Business;

        (k)   No violation of any material Contracts;

        (l)    No Material Adverse Change in the Seller's financial condition, Business or Assets (including, without limitation, the composition of the faculty as of the Closing);

        (m)  Final approval of the Transaction by the Board of Directors of the Seller;

        (n)   Any other approvals reasonably determined to be appropriate by the Buyer after completion of due diligence;

        (o)   Delivery by Seller of all of the items required under Section 2.2 hereof;

        (p)   Signed releases in the form and substance reasonably acceptable to Buyer's counsel, from each of the holders of Shareholders' Loans;

        (q)   The Schedules and Exhibits shall have been completed and delivered to Buyer in a form and substance satisfactory to Buyer. Furthermore, any Disclosure Schedule Update that may be required between the Delivery Date and the Closing Date, shall not disclose any Material Adverse Change in any of the information set forth therein; and

        (r)   The absence of any order issued by any Governmental Authority that prohibits the consummation of the proposed Transaction.

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ARTICLE 9
NOTICE OF EXCLUSIVITY

        9.1    Exclusivity.    Until such time as this Agreement shall be terminated pursuant to Section 9.1, or the Closing consummated, Buyer will have a period of exclusivity, during which neither the Seller not shall, directly or indirectly, through any Representative or affiliates or agents, solicit, initiate, encourage or entertain any inquiries or proposals from, discuss or negotiate with, provide any nonpublic information to or consider the merits of any inquiries or proposals from any Person (other than Buyer) relating to the Seller, the Assets or the Business, in whole or in part, whether through direct purchase, merger, consolidation or other business combination (an "Acquisition Proposal"). Seller shall notify Buyer of any such inquiry or proposal within twenty-four (24) hours of receipt or awareness of the same by any of the Seller.

ARTICLE 10
POST-CLOSING COVENANTS

        10.1    Further Assurances.    Promptly following the Closing Date, Seller shall stop using the trade names being transferred within the Assets hereunder, and shall take all actions necessary, as Buyer may reasonably request for the purpose of carrying out the intent of this Agreement and the transactions contemplated hereby.

        10.2    Mail.    Seller hereby irrevocably authorize Buyer and/or its Subsidiary after the Closing to receive and open all mail and other communications received by Buyer and relating to the Business or the Assets and addressed or directed to the Seller and to act with respect to such communications in such manner as Buyer may elect, and to endorse and cash any checks or instruments payable or endorsed to the Seller or its order which are received by Buyer and which relate to its Business or the Assets. The Seller will promptly deliver to Buyer the original of any mail or other communication received by Seller after the Closing that relates to the Business or the Assets. In addition, in the event that any payment on assets included in the Assets is received by Seller after the Closing Date, the Seller will remit such amounts to Buyer as soon as practicable (and in any event within two (2) Business Days following receipt thereof).

        10.3    Sales Tax.    Seller shall be solely responsible for the payment of any state or local sales, gross receipts, value added, use or similar transfer taxes that are applicable to or imposed on or as a result of the transfer of assets under this Agreement ("Transfer Taxes"), regardless of the party upon whom such Transfer Taxes are imposed under Laws.

        10.4    Students and other Business Relationships.    After the Closing, the Seller will cooperate with Buyer in its efforts to continue and maintain for the benefit of Buyer those business relationships of the Seller existing prior to the Closing and relating to the Business, including relationships with students, lessors, employees, regulatory authorities, licensors, customers, suppliers and others.

        10.5    Confidentiality.    Seller acknowledges and agrees that the protection of the Confidential Information is necessary to protect and preserve the value of the Business and the Assets. Therefore, Seller acknowledges and agrees from and after the Closing not to disclose or use for his, her or its own account or for the benefit of any Third Party any Confidential Information, whether or not such information is embodied in writing or other physical form or is retained in the memory of Seller, unless and to the extent that the Confidential Information is or becomes generally known to and available for use by the public other than as a result of the Seller's fault or the fault of any other Person bound by a duty of confidentiality to Buyer or the Seller.

        10.6    Tax Returns.    Seller shall pay any and all federal, state, local and other Taxes imposed or assessed at any time upon any of the Business or any of its Assets or with respect to any receipts, income, sales, transactions or other business activities of any of the Business with respect to the period

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through the close of the Closing and any period ended before that time. Any amount owed by Seller pursuant to the immediately preceding sentence shall be paid within the later of fifteen (15) days after Buyer's request for such payment and five (5) days prior to the date on which the Buyer is required to pay or cause to be paid any such Tax.

        10.7    U of R Foundation.

        (a)   At or immediately after the Closing, Seller's current tax identification number and qualification as a Section 501(c)(3) tax exempt organization under the IRC, shall be retained and Seller's name will be changed with the Secretary of State of Colorado to University of the Rockies Foundation (the "U of R Foundation"). The Switzer Community Counseling Center will continue to operate as a wholly-owned subsidiary of the U of R Foundation.

        (b)   As soon as practicable after the Closing, the Parties shall mutually agree upon an escalated schedule over a four-year period for funding the U of R Foundation. This escalated funding is based on the premise that such funding will be available from operating cash flow arising from the growth of University of the Rockies, LLC after the Closing. In the event that Seller and Buyer cannot reach an agreement on such escalated schedule, the Parties' only and exclusive remedy shall be to submit such dispute to a Qualified Accountant who will make a final determination on the escalated schedule. The fees, expenses and costs of the Qualified Accountant shall be borne by Seller and Buyer in inverse proportion as each of them may prevail on the matters resolved by the Qualified Accountant, which pro-rata allocation will also be determined by the Qualified Accountant and be included in its final decision.

        (c)   At Closing, the Parties shall execute an mutually acceptable services agreement between the Subsidiary and the Counseling Center (the "Services Agreement") providing for field education training for the Subsidiary's psychology students.

        (d)   After Closing, Seller shall (i) not engage in any activities or take any action that is inconsistent with or materially different from the activities described in Seller's Application; (ii) continue to operate in compliance with the terms, limitations and conditions of Seller's Determination Letter; and (iii) not take any action that would cause Seller to lose its status as an organization described in § 501(c)(3) of the Code or as an organization other than a private foundation within the meaning of § 509(a) of the Code.

        10.8    Transitional Activity.    Hired Employees as defined in Section 5.4(a) above, shall be allowed and expected to continue and complete the administrative duties of the Seller relating to the continuance of the tax exempt organization, the subsequent U of R Foundation and the operation of the Counseling Center until such time the Services Agreement referred to in Section 10.7(c) above is executed and delivered by the Parties hereto.

ARTICLE 11
INDEMNIFICATION

        11.1    Obligation to Indemnify

        (a)   Seller agrees to indemnify, defend and hold harmless Buyer its officers, directors and affiliates from and against all Losses resulting from or arising out of (i) the Excluded Assets and Excluded Liabilities, (ii) a breach of any of its representations, warranties, covenants and agreements contained herein, or in any Transaction Document; (iii) any action brought by any donors against the Seller or the Buyer for the failure of the Counseling Center to maintain an appropriate composition of Assets in amounts needed to comply with all donor restrictions and to maintain its 501(c)(3) status; (iv) any Liability imposed upon Buyer by reason of Buyer's status as transferee of Seller's Business or Assets or by reason of non-compliance with the bulk-transfer provisions of applicable law in connection with the transactions contemplated hereby; (vi) any

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Liability for any pre-Closing Tax liability of Seller or any Tax owed by Seller in connection with the consummation of the transactions contemplated herein; (vii) the Shareholders' Loans and any Liabilities relating thereto; or (viii) payments owed to the U.S. Department of Education or other applicable Governmental Agencies for any actions or inactions prior to and up to the Closing Date.

        (b)   Buyer agrees to indemnify, defend and hold harmless the Seller, its officers, directors and affiliates from and against all Losses resulting from or arising out of (i) obligations arising from the conduct of the Business subsequent to Closing and (ii) a breach of any of its representations and warranties, covenants and agreements, and (iii) failure to pay an Assumed Liability.

        (c)   The term "Losses" as used in this Article 11 is not limited to matters asserted by Third Parties against Seller or Buyer, but includes Losses incurred or sustained by any of them in the absence of Third Party claims and also include any fines, interest, or payments owed to the U.S. Department of Education or other applicable governmental agencies for improper use of funds. Payments by a party of amounts for which such party is indemnified hereunder shall not be a condition precedent to recovery.

        (d)   Seller hereby agrees that Buyer shall be entitled to offset against the Note the amount of any Losses (including, without limitation, the Shareholders' Loans) incurred by Buyer as set forth in Subsection (a) above; provided, however, that such offset right shall not limit any other remedies of Buyer hereunder.

        11.2    Notice of Asserted Liability.    Promptly after Buyer or Seller becomes aware of any fact, condition or event that may give rise to Losses for which indemnification may be sought under this Article 11 the party becoming aware of such facts, condition or event shall notify the other party in the manner provided in Section 13.1 of this Agreement (the "Claims Notice") to the other party. All Claims Notices must be delivered within the time periods set forth in Section 11.5. The party entitled to indemnification ("Indemnitee") shall deliver the Claims Notice to the other party ("Indemnitor"). The Claims Notice shall include a description in reasonable detail of any claim or the commencement (or threatened commencement) of any action, proceeding or investigation (an "Asserted Liability") against Indemnitee, and shall indicate the amount (estimated, if necessary) of the Losses that have been or may be suffered by Indemnitee. Failure of Indemnitee to promptly give notice hereunder shall not affect rights to indemnification hereunder, except to the extent that Indemnitor demonstrates actual damage caused by such failure. Upon Indemnitor's request, Indemnitee shall provide Indemnitor with such reasonable documentation as Indemnitor shall request pertaining to any claim(s) made by Indemnitee. Claims may only be brought by delivery of the Claims Notice during the periods set forth in Section 11.5 hereof.

        11.3    Opportunity to Defend.    Indemnitor may elect to compromise or defend, at its own expense and by its own counsel, any Asserted Liability; provided, however, that Indemnitor may not compromise or settle any Asserted Liability without the consent of Indemnitee, such consent not to be unreasonably withheld, unless such compromise or settlement requires no more than a monetary payment for which Indemnitee and any other indemnifiable Parties hereunder are fully indemnified or involves other matters not binding upon Indemnitee or such other indemnifiable Parties. If Indemnitor elects to compromise or defend such Asserted Liability, it shall within 15 days (or sooner, if the nature of the Asserted Liability so requires) notify Indemnitee of its intent to do so and Indemnitee shall cooperate in the compromise of, or defense against, such Asserted Liability. If Indemnitor elects not to compromise or defend any Asserted Liability, fails to notify Indemnitee of its election as herein provided or contests its obligation to indemnify, Indemnitee may pay, compromise or defend such Asserted Liability without prejudice to any right it may have hereunder. In any event, each of Buyer and Seller may participate, at its own expense, in the defense of any Asserted Liability in respect of which it may have an indemnification obligation under Section 11.1. If either Party chooses to defend or

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participate in the defense of any Asserted Liability, it shall have the right to receive from the other Party any books, records or other documents within such party's control that are reasonably necessary or appropriate for such defense.

        11.4    Exclusive Remedy.    The indemnification provided for in Article 11 hereof, (including without limitation, Buyer's offset rights set forth in Section 11.1(d)), shall be the exclusive remedy of all Parties to this Agreement except for acts of any Party that are alleged to be fraudulent.

        11.5    Statute of Limitations.    Except for Sections 3.1 (Organization), 3.2 (Authority to Execute and Perform Agreement), 3.3 (Enforceability) and 3.10 (Personal Property), the representations, warranties and covenants shall each survive for the later of the appropriate statute of limitations or four (4) years from the Closing. The representations and warranties in Sections 3.1, 3.2, 3.3 and 3.10 shall survive indefinitely. Covenants contained in this Agreement that by its own terms survive the Closing shall survive as provided for in each such corresponding section.

        11.6    Risk of Loss.    From the date hereof through the Closing Date, all risk of loss or damage to the Assets shall be borne by the Seller, and thereafter shall be borne by Buyer. If any portion of the Assets is destroyed or damaged by fire or any other cause on or prior to the Closing Date, other than use, wear or loss in the ordinary course of the Business, the Seller shall give written notice to Buyer as soon as practicable after, but in any event within five (5) calendar days of, discovery of such damage or destruction, the amount of insurance, if any, covering such Assets and the amount, if any, which the Seller is otherwise entitled to receive as a consequence. Prior to the Closing, Buyer shall have the option, which shall be exercised by written notice to the Sellers within ten (10) calendar days after receipt of Seller's notice or if there is not 10 calendar days prior to the Closing Date, as soon as practicable prior to the Closing Date, of (a) accepting such Assets in their destroyed or damaged condition in which event Buyer shall be entitled to the proceeds of any insurance or other proceeds payable with respect to such loss and to such indemnification for any uninsured portion of such loss pursuant to this Article 11, (b) excluding such Assets from this Agreement or (c) terminating this Agreement in accordance with Article 12.

ARTICLE 12
TERMINATION OF AGREEMENT

        12.1    Termination.    This Agreement may be terminated prior to the Closing as follows:

        (a)   at the election of Seller, if any one or more of the conditions to its obligation to close has not been fulfilled as of September 30, 2007, unless the delay in the Closing is due to Seller's material breach of this Agreement, and such breach has not been cured within five (5) days from receipt of Buyer's written notice of breach.

        (b)   at the election of Buyer, if any one or more of the conditions to its obligation to close has not been fulfilled as of September 30, 2007, unless Buyer is then in material breach of this Agreement, and such breach has not been cured within five (5) days from receipt of Seller's written notice of breach.

        (c)   at any time on or prior to the Closing Date, by mutual written consent of Seller and Buyer.

        In the event that Buyer or Seller, as the case may be, elects to terminate this Agreement pursuant to Section 12.1(a) and (b), hereof, the terminating party shall deliver a notice to the other Party or Parties to this Agreement declaring its election to so terminate this Agreement in accordance with the provisions of Section 12.l (a) and (b), as the case may be, and setting forth in detail therein the basis for such termination. If this Agreement so terminates, it shall become null and void and have no further force or effect, except as provided in Sections 5.5 and 13.14.

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ARTICLE 13
MISCELLANEOUS

        13.1    Notices.    All notices or other communications required or permitted hereunder shall be in writing and shall be deemed given or delivered (a) when delivered personally, against written receipt, (b) if sent by registered or certified mail, return receipt requested, postage prepaid, when received, (c) when received by facsimile transmission or electronic email transmission (with returned receipt), or (d) when delivered by a nationally recognized overnight courier service, prepaid, and shall be addressed as follows:

If to Buyer, to:

Bridgepoint Education, Inc.
13500 Evening Creek Drive North, Suite 600
San Diego, CA 92128
Fax: (858) 513-9239
Attention: Chief Executive Officer

with a copy (that shall not constitute notice) to:

Sheppard, Mullin, Richter & Hampton LLP
12275 El Camino Real, Suite 200,
San Diego, CA 92130-2006
Fax: (858) 509-3691
Attention: Richard L. Kintz

If to the Seller, to:

Colorado School of Professional Psychology
555 E. Pikes Peak Avenue, #108,
Colorado Springs, Colorado 80903-3612
Fax: (719) 389-0359
Attention: President and Chief Executive Officer

        Any party may by notice given in accordance with this Section 13.1 to the other Parties designate another address or person for receipt of notices hereunder.

        13.2    Entire Agreement.    This Agreement (including the Schedules hereto) contains the entire agreement of the Parties with respect to the purchase of the Assets and related transactions, and supersedes all prior agreements written or oral with respect thereto including without limitation that certain Term Sheet between the Parties dated August 1, 2007.

        13.3    Waivers and Amendments Non-Contractual Remedies.    This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by each of the Parties or, in the case of a waiver, by the Party waiving compliance. The failure of either Party to insist, in any one or more instances, upon performance of the terms or conditions of this Agreement shall not be construed as a waiver or relinquishment of any right granted hereunder or of the future performance of any such term, covenant or condition. No waiver on the part of any Party of any right, power or privilege, nor any single or partial exercise of any such right, power or privilege, shall preclude any further exercise thereof or the exercise of any other such right, power or privilege. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies that any Party may otherwise have at law or in equity. The rights and remedies of any Party based upon, arising out of or otherwise in respect of any inaccuracy in or breach of any representation, warranty, covenant or agreement contained in this Agreement shall in no way be limited by the fact that the act, omission, occurrence or other state of facts upon which any claim of any such inaccuracy or breach is based may also be the subject matter of any other representation,

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warranty, covenant or agreement contained in this Agreement (or in any other agreement between the Parties) as to which there is no inaccuracy or breach.

        13.4    Governing Law.    This Agreement shall be governed by and construed in accordance with the substantive and procedural laws of the State of Colorado applicable to agreements made and to be performed entirely within such State, without regard to conflicts-of-laws principles that would require the application of any other law.

        13.5    Jurisdiction; Service of Process.    Any Proceeding arising out of or relating to this Agreement or any Transaction shall be brought solely in federal courts in Colorado Springs, Colorado, and each of the Parties irrevocably submits to the exclusive jurisdiction of such court in any such Proceeding, waives any objection it may now or hereafter have to venue or to convenience of forum, agrees that all claims in respect of the Proceeding shall be heard and determined only in any such court and agrees not to bring any Proceeding arising out of or relating to this Agreement or any Transaction in any other court. The Parties agree that either or both of them may file a copy of this paragraph with any court as written evidence of the knowing, voluntary and bargained agreement between the Parties irrevocably to waive any objections to venue or to convenience of forum. Process in any Proceeding referred to herein may be served on any Party anywhere in the world.

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        13.6    Binding Effect, Assignment.    This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns and legal representatives. Neither this Agreement, nor any right hereunder, may be assigned by any Party without the written consent of the other Party hereto; provided, however, that Buyer, in its sole discretion, may assign this Agreement (and all of Buyer's rights and obligations hereunder), in whole or in part, to any wholly-owned subsidiary of Buyer without the prior consent or approval of Seller. Any assignment or attempted assignment in violation of this Section shall be void.

        13.7    No Third Party Beneficiaries.    Nothing in this Agreement is intended or shall be construed to give any person any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. Without limiting the generality of the foregoing, no provision in this Agreement shall create any Third Party beneficiary or other right in any employee or former employee of Seller (including any beneficiary or dependent thereof) in respect of continued employment (or resumed employment) with Buyer or Seller or in respect of any benefits that may be provided, directly or indirectly, under any Employee Benefit Plan.

        13.8    Counterparts.    This Agreement may be executed by the Parties in multiple counterparts and transmitted by facsimile or by electronic mail in "portable document format" ("PDF") form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a Party's signature. Each such counterpart and facsimile or .PDF signature shall constitute an original and all of which together shall constitute one and the same original.

        13.9    Schedules.    The Disclosure Schedules are a part of this Agreement as if fully set forth herein. All references herein to Articles, Sections, paragraphs and Schedules shall be deemed references to such parts of this Agreement unless otherwise specified.

        13.10    Headings.    The headings in this Agreement are for reference only, and shall not affect the interpretation of this Agreement.

        13.11    Severability.    Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement. This Agreement was negotiated by the Parties with the benefit of legal representation, and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any Party shall not apply to any construction or interpretation hereof.

        13.12    Time of Essence.    Time is of the essence for each and every provision of this Agreement.

        13.13    Attorneys' Fees.    If any legal action or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which it may be entitled.

        13.14    Parties' Expenses.    Except as otherwise provided in this Agreement, each Party will bear its respective fees and expenses incurred in connection with the preparation, negotiation, execution and performance of this Agreement and the transactions contemplated hereby.

        13.15    Public Announcements.    Any public announcement, press release or similar publicity with respect to this Agreement or the transactions contemplated hereby will be issued, if at all, at such time and in such manner as Buyer and the Seller mutually determine (if prior to the Closing) and as Buyer shall determine (if following the Closing). Except with the prior written consent of Buyer or as

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permitted by this Agreement, no Party (if prior to the Closing) or Seller (if following the Closing) shall disclose to any Person any information about, or the terms of, the transactions contemplated hereby.

        13.16    Further Assurances.    Seller shall cooperate with Buyer in connection with any steps required to be taken as part of their respective obligations under this Agreement, and shall (i) furnish upon request to Buyer other such further information; (ii) execute and deliver to Buyer such other documents; and (iii) do such other acts and things, all as Buyer may reasonably request for the purpose of carrying out the intent of this Agreement.

        13.17    Bulk Sales Laws.    The Parties hereby waive compliance with the bulk sales laws of any state in which any Assets are located or in which any Seller's Business is conducted. This waiver does not affect the Seller's obligations under Section 11.1.

        13.18    Consultation with Counsel; Negotiated Agreement.    Each Party hereto has consulted or has had the opportunity to consult with counsel of its choice. This Agreement was prepared following the negotiation of the provisions contained herein, and constitutes the agreement of all Parties hereto. The Parties to this Agreement agree that any interpretation of the provisions and terms contained herein shall not be interpreted against the party responsible for the drafting of this Agreement.

ARTICLE 14
DEFINITIONS

        As used herein, the terms below shall have the following meanings. The use of Any of such terms, unless the context otherwise requires, may be used in the singular or plural, depending upon the reference.

        "Accounts Receivable" shall mean all accounts and notes receivable (whether current or non-current), refunds, work in process and unbilled time, deposits, prepayments or prepaid expenses excluding without limitation any prepaid insurance premiums of Seller which are related to the Business.

        "Agreement" is defined in the preamble hereof.

        "Ancillary Agreements" shall mean those agreements that are Exhibits to this Agreement.

        "Application" is defined in Section 3.17(l) hereof.

        "Asserted Liability" is defined in Section 11.2 hereof.

        "Assets" is defined in Section 1.1 hereof.

        "Assignment and Assumption Agreement" is defined in Section 2.2(c) hereof.

        "Assumed Liabilities" is defined in Section 1.3 hereof.

        "Bill of Sale " is defined in Section 2.2(a) hereof.

        "Books and Records" means originals or copies of all of Seller's books and records relating to the Business, including books of account, minute books, and accounting records, sales data, customer lists, information relating to customers, supplier lists, mailing lists, brochures, advertising materials, business and marketing plans, and operating records of every kind.

        "Bridgepoint" is defined in the preamble hereof.

        "Buyer" is defined in the preamble hereof.

        "Buyer's Closing Certificate" is defined in Section 7.2 hereof.

        "Cash Flow Determination" is defined in Section 1.6 hereof.

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        "Claims Notice" is defined in Section 11.2 hereof.

        "Closing" is defined in Section 2.1 hereof.

        "Closing Balance Sheet" is defined in Section 1.5(a) hereof.

        "Closing Date" is defined in Section 2.1 hereof.

        "Code" is defined in Section 3.14(b)(1) hereof.

        "Confidential Information" means any and all information disclosed hereunder related to a Party, any of its subsidiaries or any of its affiliates, including, but not limited to, agreements, documentation, financial information, administrative and business records, notes, memoranda, analysis, studies, governmental licenses, employee records, prices, discounts, customer lists, vendors, products, business plans and/or projections, knowledge, products, materials, financials, proprietary information, technical data, trade secrets, know-how, copyrights, patents, trademarks, intellectual property—any of which is not generally known—and all other proprietary information of a Party, whether in written, oral, magnetic or other machine-readable format, prepared by a Party or on its behalf by its directors, officers, shareholders, partners, members, trustees, managers, employees, agents and other representatives (including advisers, attorneys, accountants, financial advisers and potential financing sources) which contain or otherwise reflect such Confidential Information, together with any and all copies, extracts or other reproductions thereof.

        "Consideration" is defined in Section 1.4 hereof.

        "Contract" means any written agreement, contract (including, without limitation, all faculty employment contracts), note, loan, evidence of indebtedness, purchase order, letter of credit, franchise agreement, undertaking, covenant not to compete, employment agreement, license, lease, royalty agreement, confidentiality agreement, marketing agreement, distribution agreement, sales representative agreement, agency agreement, registration rights agreement, instrument, obligation or commitment to which the Seller is a party or is bound.

        "Counseling Center" is defined in Section 5.7 hereof.

        "Cowan Employment Agreement" is defined in Section 2.2(j) hereof.

        "Delivery Date" is defined in Section 5.9 hereof.

        "Determination Letter" is defined in Section 3.17(j) hereof.

        "Disclosure Schedule" is defined in the intro paragraph of Article 3 hereof.

        "Disclosure Schedule Update" is defined in Section 5.2 hereof.

        "Domain Name" is defined in Section 1.1(d) hereof.

        "Employees' Accrued Liabilities" is defined in Section 3.13(a).

        "Employees' Excluded Liabilities" is defined in Section 5.4(a).

        "Encumbrances" means any charge, claim, community or other marital property interest, condition, equitable interest, lien, option, pledge, security interest, mortgage, right of way, easement, encroachment, servitude, right of first option, right of first refusal or similar restriction, including any restriction on use, voting (in the case of any security or equity interest), transfer, receipt of income or exercise of any other attribute of ownership.

        "Environmental Law(s) or Order" or "Environmental Law" means all laws or orders which regulate or relate to the protection or clean-up of the environment or the disposal of Hazardous Materials, including orders, demand letters or claims under the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.), Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.) ("RCRA"), Safe

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Drinking Water Act (21 U.S.C. § 349, 42 U.S.C. § 300f-300j-26), Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), Clean Air Act (42 U.S.C. § 7401 et seq.), Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.) ("CERCLA"), or any other similar federal, state or local law of similar effect, each as amended).

        "ERISA" means the Employee Retirement Income Security Act of 1974.

        "Excluded Assets" is defined in Section 1.2 hereof.

        "Excluded Liabilities" is defined in Section 1.3 hereof.

        "Exhibits" is defined in Section 5.9 hereof.

        "Final Balance Sheet" is defined in Section 1.5(c) hereof.

        "Financial Statements" are defined in Section 3.6 hereof.

        "Fixtures and Equipment" means all of the furniture, fixtures, furnishings, machinery, spare parts, office supplies, equipment and other tangible personal property owned by Seller and used in connection with, and located at any office or other facility of, the Business.

        "GAAP" means generally accepted accounting principles in the United States of America.

        "Governmental Authority" means any: (a) nation, state, county, city, town, borough, village, district or other jurisdiction; (b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi-governmental body of any nature (including any agency, branch, department, board, commission, court, tribunal or other entity exercising governmental or quasi-governmental powers); (d) or official of any of the foregoing.

        "Hazardous Materials " are defined in Section 3.8 hereof.

        "Hired Employees" is defined in Section 5.4(b) hereof.

        "HLC" is defined in Recital A hereof.

        "Indemnitor" is defined in Section 11.2 hereof.

        "Indemnitee" is defined in Section 11.2 hereof.

        "Intellectual Property" is defined in Section 3.11 hereof.

        "Intellectual Property Assets" is defined in Section 3.11 hereof.

        "Interim Balance Sheet" are defined in Section 3.6 hereof.

        "Interim Balance Sheet Date" are defined in Section 3.6 hereof.

        "IRS " is defined in Section 3.17(j) hereof.

        "Liability" or "Liabilities" means, with respect to any Person, any liability or obligation of such Person of any kind, short or long term, character or description, whether known or unknown, absolute or contingent, unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise and whether or not the same is required to be accrued on the financial statements of such Person.

        "Leased Properties" is defined in Section 3.18 hereof.

        "Losses" means all losses, costs, claims, liabilities, damages, lawsuits, deficiencies, demands and expenses (whether or not arising out of third-party claims), including without limitation interest, penalties, costs of litigation, losses in connection with any Environmental Law (including without limitation any clean-up, remedial, corrective or responsive action), lost profits and other losses resulting from any shut down or curtailment of operations, damages to the environment, attorneys' fees, and all

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amounts paid in the investigation, defense or settlement of any of the foregoing that arises as a result of those matters described in Section 11.1 hereof.

        "Material Adverse Effect" or "Material Adverse Change" means any circumstance, change, event, development or effect (except to the extent arising from or relating to general business or economic conditions affecting the Business), that, individually or in the aggregate, is or would reasonably expected to result in a Material Loss or to be materially adverse to the Business or the Assets, financial condition or results of operations of the Seller, taken as a whole, or materially adversely affects the ability of Seller to consummate the transactions contemplated hereby, including the loss of any education accreditation or Permit or an investigation initiated by a Governmental Authority in connection therewith.

        "Material Loss" means a single loss in excess of $5,000 regardless of whether or not it is covered by insurance.

        "New Foundation" is defined in Section 10.7 hereof.

        "Note" is defined in Section 1.4(b) hereof.

        "Party" or "Parties" is defined in the preamble hereof.

        "Permits" means all licenses, permits, franchises, approvals, authorizations, consents or orders of, or filings with, any Governmental Authority, whether foreign, federal, state or local, or any other person, necessary or desirable for the past, present or anticipated conduct of, or relating to the operation of the Business.

        "Person" means an individual, corporation, partnership, association, trust, estate or other entity or organization, including a Governmental Authority.

        "Proceeding" is defined in Section 3.9 hereof.

        "Projected Cash Shortfall Amount" is defined in Section 1.6 hereof.

        "Qualified Accountant" is defined in Section 1.5(c) hereof.

        "Representative" means any officer, director, principal, attorney, agent, employee or representative.

        "Required Consents" is defined in Section 3.5 hereof.

        "Schedules" is defined in Section 5.9 hereof.

        "Seller" is defined in the preamble hereof.

        "Seller's Closing Certificate" is defined in Section 8.1(f) hereof.

        "Shareholders' Loans" is defined in Section 3.24(b) hereof.

        "Subsidiary" is defined in Recital C hereof.

        "Tax" means any income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental, windfall profit, customs, vehicle, or other title or registration, capital stock, franchise, employees' income withholding, foreign or domestic withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, value added, alternative, add-on minimum and other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever and any interest, penalty, addition or additional amount thereon imposed, assessed or collected by or under the authority of any Governmental Authority or payable under any tax-sharing agreement or any other Contract.

        "Third Parties" or "Third Party" means any party other than Seller or Buyer or its Subsidiary.

        "Transaction" means the sale of the Assets and the assumption of the Assumed Liabilities as described herein.

        "Transaction Document(s)" means the agreements, exhibits, certificates, documents or instruments to be delivered pursuant to this Agreement.

        "Transfer Taxes " is defined in Section 10.3 hereof.

        "U of R Foundation" is defined in Section 10.7(a) hereof.

[SIGNATURE PAGE FOLLOWS]

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        IN WITNESS WHEREOF, each of the Parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written.

"BUYER"
Bridgepoint Education, Inc., a Delaware corporation
By:	/s/ ANDREW S. CLARK Andrew S. Clark, Chief Executive Officer
University of the Rockies, LLC, a Colorado limited liability company
By:	Bridgepoint Education, Inc., a Delaware Corporation, its Sole Member
	By:	/s/ ANDREW S. CLARK Andrew S. Clark, Chief Executive Officer
The Colorado School of Professional Psychology, a Colorado non-profit corporation
By:	/s/ EMORY G. COWAN Emory G. Cowan, Jr. Ph.D., President and Chief Executive Officer

[Signature Page to Asset Purchase and Sale Agreement]

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Exhibit 2.2

ASSET PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
BRIDGEPOINT EDUCATION, INC.
AND
THE COLORADO SCHOOL OF PROFESSIONAL PSYCHOLOGY
SEPTEMBER 12, 2007
TABLE OF CONTENTS
LIST OF EXHIBITS
ASSET PURCHASE AND SALE AGREEMENT
RECITALS
AGREEMENT
ARTICLE 1 PURCHASE OF ASSETS
ARTICLE 2 CLOSING
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE SELLER
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER
ARTICLE 5 COVENANTS AND AGREEMENTS OF SELLER
ARTICLE 6 COVENANTS AND AGREEMENTS OF BUYER
ARTICLE 7 CONDITIONS TO THE OBLIGATIONS OF SELLER
ARTICLE 8 CONDITIONS TO THE OBLIGATIONS OF BUYER TO CLOSE
ARTICLE 9 NOTICE OF EXCLUSIVITY
ARTICLE 10 POST-CLOSING COVENANTS
ARTICLE 11 INDEMNIFICATION
ARTICLE 12 TERMINATION OF AGREEMENT
ARTICLE 13 MISCELLANEOUS
ARTICLE 14 DEFINITIONS

EX-10.2

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Exhibit 10.2

Stock Option No.            

BRIDGEPOINT EDUCATION, INC.,
2005 STOCK INCENTIVE PLAN
NOTICE OF STOCK OPTION GRANT

        You have been granted the following option to purchase common stock of Bridgepoint Education, Inc. (the "Company"):

Name of Optionee:
Total Number of Shares Granted:	("Optioned Stock")
Type of Option:	o  Incentive Stock Option
	o  Non-Statutory Stock Option
Exercise Price Per Share:	$
Date of Grant:
Date Exercisable:	This option may be exercised with respect to the first 25% of the Optioned Stock when the Optionee completes 12 months of continuous Service after the Vesting Commencement Date. This option may be exercised with respect to an additional 2% of the Optioned Stock when the Optionee completes each of the next 33 consecutive months of continuous Service thereafter. This option may be exercised with respect to an additional 3% of the Optioned Stock when the Optionee completes each of the 46th through 48th month of continuous Service after the Vesting Commencement Date.
Vesting Commencement Date:
Expiration Date:

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By your signature and the signature of the Company's representative below, you and the Company agree that this option is granted under and governed by the terms and conditions of this Notice of Stock Option Grant, the Stock Option Agreement, and the Bridgepoint Education, Inc. 2005 Stock Incentive Plan, both of which are attached to and made a part of this document.

OPTIONEE	BRIDGEPOINT EDUCATION, INC.
	By:
Print Name	Title:
Social Security Number

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BRIDGEPOINT EDUCATION, INC.
2005 STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT

        1.    Definitions.    Unless otherwise defined herein, the terms defined in the Bridgepoint Education, Inc. 2005 Stock Incentive Plan (the "Plan") shall have the same defined meanings in this Stock Option Agreement.

        2.    Grant of Option.    Pursuant to the terms and conditions set forth in the Notice of Stock Option Grant attached hereto, this Agreement, and the Plan, Bridgepoint Education, Inc. (the "Company") grants to the optionee named in the Notice of Stock Option Grant ("Optionee") on the date of grant set forth in the Notice of Stock Option Grant ("Date of Grant") the option to purchase, at the exercise price set forth in the Notice of Stock Option Grant ("Exercise Price"), the number of Shares set forth in the Notice of Stock Option Grant. This option is intended to be an Incentive Stock Option or a Non-Statutory Stock Option, as provided in the Notice of Stock Option Grant.

        3.    Exercise of Option.    Subject to the other conditions set forth in this Agreement, all or part of this option may be exercised prior to its expiration at the time or times set forth in the Notice of Stock Option Grant; provided, however, the Optionee shall cease vesting in this option on the Optionee's Termination Date. This option may also become exercisable in accordance with Section 21 below. Notwithstanding anything herein to the contrary, this option may not be exercised until the stockholders of the Company have approved the Plan in accordance with Section 18 of the Plan. If the stockholders of the Company do not approve the Plan within the 12 months provided for in Section 18 of the Plan, then this option shall terminate as of the end of such 12 month period.

        4.    Expiration of Option.    Subject to the provisions of Section 5 hereof, this option shall expire and all rights to purchase Shares hereunder shall cease on the date set forth in the Notice of Stock Option Grant ("Expiration Date").

        5.    Termination of Option.    In the event that the Optionee's Service terminates for any reason other than due to a Disability, death, or Cause, this option shall expire on the date that is three months following the Optionee's Termination Date, unless this option would expire pursuant to Section 4 at an earlier date in which case this option will expire on the earlier Expiration Date. In the event that the Optionee's Service terminates due to a Disability, this option shall expire on the date that is 12 months following the Optionee's Termination Date, unless this option would expire pursuant to Section 4 at an earlier date in which case this option will expire on the earlier Expiration Date. In the event that the Optionee should die while in Service, this option shall expire on the date that is 12 months after the Optionee's death, unless this option would expire pursuant to Section 4 at an earlier date in which case this option will expire on the earlier Expiration Date. In the event that the Optionee's Service terminates for Cause, this option shall terminate on the Termination Date.

        6.    Non-transferability of Option.    This option shall be non-transferable by the Optionee other than by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the Optionee only by the Optionee, or as to Non-Statutory Stock Options also, by the Optionee's guardian or legal representative. After the death of the Optionee, this option may be exercised prior to its termination by the Optionee's legal representative, heir or legatee, to the extent permitted in the Plan. Upon any attempt to sell, transfer, assign, pledge, hypothecate or otherwise dispose of this option (a "Transfer"), or of any right or privilege conferred hereby, contrary to the provisions hereof, or upon any attempted sale under any execution, attachment or similar process upon the rights and privileges conferred hereby, this option and the rights and privileges conferred hereby shall immediately become null and void. Until written notice of any permitted passage of rights under this option shall have been given to and received by the Secretary of the Company, the Company may, for all purposes, regard the Optionee as the holder of this option.

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        7.    Method of Exercise.    The rights granted under this Agreement may be exercised by the Optionee, or by the person or persons to whom the Optionee's rights under this Agreement shall have passed under the provisions of Section 6 hereof, by delivering to the Company in care of its Secretary at the Company's principal office, written notice of the number of Shares with respect to which the rights are being exercised, accompanied by this Agreement for appropriate endorsement by the Company, such investment letter as may be required by Section 14 hereof, executed Stockholders Agreement described in Section 8 below, payment of the exercise price, and such other representations and agreements as may be required by the Administrator. The exercise price may be paid in cash, check, or consideration received by the Company under a broker assisted sale and remittance program acceptable to the Administrator.

        8.    Stockholders Agreement.    Notwithstanding any other provision of this Agreement to the contrary, the initial exercise of this option shall be further conditioned upon the execution and delivery by the Optionee and, if applicable, his/her spouse, of the Stockholders Agreement (in the form attached hereto as Exhibit A), to the extent not already a party thereto. This provision shall terminate in the event of a Qualified Public Offering.

        9.    Regulatory Compliance.    The issue and sale of Common Stock pursuant to this Agreement shall be subject to full compliance with all then applicable requirements of law and the requirements of any stock exchange or interdealer quotation system upon which the Common Stock may be listed or traded.

        10.    Legends.    The certificates evidencing the Common Stock issued upon exercise of this option, if any, shall bear the following legend, if applicable, at the time of exercise:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF SUCH ACT OR SUCH LAWS OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

In addition, each certificate evidencing the Common Stock issued upon exercise of this option, if any, shall be endorsed with the following legend:

THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS AGREEMENT BETWEEN BRIDGEPOINT EDUCATION, INC., A DELAWARE CORPORATION (THE "COMPANY"), THE HOLDER OF THE SHARES REPRESENTED BY THIS CERTIFICATE, AND CERTAIN OTHER INVESTORS. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL BUSINESS OFFICE OF THE COMPANY.

        11.    Modification and Termination.    The rights of the Optionee are subject to modification and termination in certain events, as provided in the Plan.

        12.    Withholding Tax.    As a condition to the exercise of this option, the Optionee shall make such arrangements as the Administrator may require for the satisfaction of any federal, state and local income, and employment tax withholding requirements that may arise in connection with such exercise. The Optionee shall also make such arrangements as the Administrator may require for the satisfaction of any federal, state and local income, and employment tax withholding requirements that may arise in connection with the disposition of Shares purchased by exercising this option. The Optionee shall pay to the Company an amount equal to the withholding amount (or the Company may withhold such amount from the Optionee's salary) in cash or check. At the Administrator's election, the Optionee may pay the withholding amount with Shares (including previously vested Optioned Stock); provided, however, that payment in Stock shall be limited to the withholding amount calculated using the

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minimum statutory withholding rates interpreted in accordance with applicable accounting requirements, or consideration received by the Company under a broker assisted sale and remittance program acceptable to the Administrator.

        13.    Holder of Shares.    Neither the Optionee nor the Optionee's legal representative, legatee or distributee shall be, or be deemed to be, a holder of any Shares subject to this option unless and until such person has been issued a certificate or certificates therefor. No adjustment will be made for dividends or other rights for which the record date is prior to the date such stock certificate or certificates are so issued.

        14.    Investment Covenant.    The Optionee represents and agrees that if the Optionee exercises this option in whole or in part at a time when there is not in effect under the Act, a registration statement relating to the Shares issuable upon exercise hereof and there is not available for delivery a prospectus meeting the requirements of Section 10(a)(3) of such Act, (i) the Optionee will acquire the Shares upon such exercise for the purpose of investment and not with a view to the distribution thereof, (ii) if requested by the Company, upon such exercise of this option, the Optionee will furnish to the Company an investment letter in form acceptable to it, (iii) if requested by the Company, prior to selling or offering for sale any such Shares, the Optionee will furnish the Company with an opinion of counsel satisfactory to it to the effect that such sale may lawfully be made and will furnish it with such certificates as to factual matters as it may reasonably request, and (iv) certificates representing such shares may be marked with an appropriate legend describing such conditions precedent to sale or transfer. Any person or persons entitled to exercise this option under the provision of Section 6 hereof shall furnish to the Company letters, opinions, and certificates to the same effect as would otherwise be required of the Optionee.

        15.    Nondisclosure.    Optionee acknowledges that the grant and terms of this option are confidential and may not be disclosed by Optionee to any other person, including other employees of the Company and other participants in the Plan, without the express written consent of the Company's President. Notwithstanding the foregoing, the Optionee may disclose the grant and terms of this option to the Optionee's family member, financial advisor, and attorney. Any breach of this provision will be deemed to be a material breach of this Agreement.

        16.    Governing Law.    This Agreement shall be governed by and interpreted in accordance with the internal laws of the State of Delaware.

        17.    Successors.    This Agreement shall inure to the benefit of and be binding upon the parties hereto and their legal representatives, heirs, and permitted successors and assigns.

        18.    Plan.    This Agreement is subject to all of the terms and provisions of the Plan, receipt of a copy of which is hereby acknowledged by the Optionee. The Optionee further acknowledges receipt of a copy of the Stockholders Agreement. The Optionee hereby agrees to accept as binding, conclusive, and final all decisions and interpretations of the Administrator upon any questions arising under the Plan, this Agreement, and Notice of Stock Option Grant.

        19.    Rights to Future Employment.    This option does not confer upon the Optionee any right to continue in the Service of the Company or any Affiliate, nor does it limit the right of the Company to terminate the Service of the Optionee at any time.

        20.    Market Stand-Off.    In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Act, including the Company's initial public offering, the Optionee shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Shares acquired under this Agreement without the prior written consent of the Company or its underwriters. Such restriction (the "Market

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Stand-Off") shall be in effect for such period of time following the date of the final prospectus for the offering as may be requested by the Company or such underwriters. In no event, however, shall such period exceed 180 days. In the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company's outstanding securities without receipt of consideration, any new, substituted or additional securities which are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares acquired under this Agreement until the end of the applicable stand-off period. The Company's underwriters shall be beneficiaries of the agreement set forth in this Section. This Section shall not apply to Shares registered in the public offering under the Act, and the Optionee shall be subject to this Section only if the directors and officers of the Company are subject to similar arrangements.

        21.    Change in Control.    In the event of a Change in Control prior to the Optionee's Termination Date, the provisions of Section 6(h) of the Plan shall apply.

        22.    Entire Agreement.    The Notice of Stock Option Grant, this Agreement, and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof. They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof.

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Exhibit 10.3

Stock Option No.            

BRIDGEPOINT EDUCATION, INC.,
2005 STOCK INCENTIVE PLAN
NOTICE OF STOCK OPTION GRANT

        You have been granted the following options to purchase common stock of Bridgepoint Education, Inc. (the "Company"):

Name of Optionee:
Number of Shares Granted:	Under Time Vested Options
	Under Performance Vested Options
	Under Exit Options
Type of Option:	o    Incentive Stock Options
	o    Non-Statutory Stock Options
Exercise Price Per Share:	$
Date of Grant:
Vesting Commencement Date:
Expiration Date:

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Vesting Schedule:

Time Vested Options

Subject to Optionee's continued Service, as defined in Section 5 herein, Optionee's Time Vested Options shall vest as to (i) 25% of the Shares underlying such Time Vested Options on the one-year anniversary of the vesting commencement date, (ii) as to an additional 2% of the Shares underlying such Time Vested Options on each monthly anniversary of the vesting commencement date over the subsequent 33-month period following such one-year anniversary of the vesting commencement date, and (iii) an additional 3% of the Shares underlying such Time Vested Options on each of the 46th, 47th and 48th monthly anniversary of the vesting commencement date; provided, however, in the event that Optionee's Service is terminated by the Company without Cause or as a result of his or her death or Disability, on the date of such termination, an additional number of Time Vested Options shall vest equal to the number of Time Vested Options that would otherwise have vested (solely as a result of the passage of time) within the 12-month period immediately following the date of such termination.

Performance Vested Options

Except as provided in Section 21 herein, for each fiscal year of the Company beginning with fiscal year 2005 and ending with fiscal year 2008, 25% of the Shares underlying the Performance Vested Options granted to Optionee shall be eligible to become vested and exercisable, to the extent that the Company's actual performance for any fiscal year results in achievement of the Annual Performance Targets for such fiscal year. If in any fiscal year that either the Annual EBITDA Target or the Annual Revenue Target is not achieved (a "Missed Fiscal Year"), but in any subsequent fiscal year the Company's cumulative EBITDA and revenue performance from and including fiscal year 2005 results in achievement of the Cumulative Performance Targets, Performance Vested Options otherwise eligible to vest during the Missed Fiscal Year(s) shall vest. All Performance Vested Options which have not vested in accordance with this paragraph shall expire as of Optionee's termination of Service, as defined in Section 5 herein; provided, however, if Optionee's termination of Service is as a result of his or her death or Disability, notwithstanding Section 5 herein, the Performance Vested Options eligible to vest in the fiscal year in which such termination occurs shall remain outstanding until such time that achievement of the Annual Performance Targets is determined, and to the extent achieved, such Performance Vested Options shall vest as if Optionee had remained in Service through the date of such determination, and for purposes of Section 5 herein, with respect to such Performance Vested Options only, the date of termination of Service shall be deemed to be the applicable vesting date.

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Definitions for Performance Vested Options	"Annual EBITDA Target" means:     (a) for fiscal year 2005, ($7,430,000) or greater;     (b) for fiscal year 2006, ($238,000) or greater;     (c) for fiscal year 2007, $3,920,000; and     (d) for fiscal year 2008, $5,880,000; provided, however, that the Annual EBITDA Target shall be subject to adjustment if the Company is required to secure equity funding in excess of $2.2 million following the first quarter of 2006.
	"Annual Performance Targets" means, collectively, the Annual EBITDA Target and the Annual Revenue Target.
	"Annual Revenue Target" means:     (a) for fiscal year 2005, $7,871,000;     (b) for fiscal year 2006, $21,808,000;     (c) for fiscal year 2007, $39,879,000; and     (d) for fiscal year 2008, $49,000,000; provided, however, that the Annual Revenue Target shall be subject to adjustment if the Company is required to secure equity funding in excess of $2.2 million following the first quarter of 2006.
	"Cumulative EBITDA Target" means:     (a) for fiscal year 2005, ($7,430,000) or greater;     (b) for fiscal year 2006, ($7,668,000) or greater;     (c) for fiscal year 2007, ($3,748,000); and     (d) for fiscal year 2008, $2,132,000; provided, however, that the Cumulative EBITDA Target shall be subject to adjustment if the Company is required to secure equity funding in excess of $2.2 million following the first quarter of 2006.
	"Cumulative Performance Targets" means, collectively, the Cumulative EBITDA Target and the Cumulative Revenue Target.
	"Cumulative Revenue Target" means:     (a) for fiscal year 2005, $7,871,000;     (b) for fiscal year 2006, $29,679,000;     (c) for fiscal year 2007, $69,558,000; and     (d) for fiscal year 2008, $118,558,000; provided, however, that the Cumulative Revenue Target shall be subject to adjustment if the Company is required to secure equity funding in excess of $2.2 million following the first quarter of 2006.

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	"EBITDA" means, net income plus, without duplication and to the extent deducted in determining such consolidated net income, the sum of (i) consolidated interest expense (net of any interest income), (ii) consolidated provisions for taxes based on income, profits or capital and commercial activity (or similar taxes) for such period, (iii) all amounts attributable to depreciation and amortization for such period, in each case, determined in accordance with Generally Accepted Accounting Principles.
	"Revenue" means, the sum of all net student tuition (excluding non-cash scholarships awards), matriculation fees, room and board and other charges recognized in accordance with Generally Accepted Accounting Principles.
Exit Options	Subject to Optionee's continued Service, as defined in Section 5 herein, through the date of an Exit Event, and provided that the Exit Factor is equal to or in excess of four, a number of Optionee's Exit Options shall vest on such Exit Event equal to the aggregate number of Shares underlying such Exit Options multiplied by the Warburg Exit Percentage. All Exit Options which have not otherwise vested in connection with a Change of Control due to the fact that the Exit Factor is not equal to or in excess of four (or have previously vested upon a prior Exit Event) shall expire as of the date of such Change in Control. All Exit Options which have not vested in accordance with this paragraph shall expire as of the date of Optionee's termination of Service.
Definitions for Exit Options	"Change in Control" means: (i) a change in ownership or control of the Company effected through a transaction or series of related transactions (other than an offering of Company's securities to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any "person" or related "group" of "persons" (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act), other than an Affiliate of the Company or the Warburg Investors, directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than fifty percent (50%) of the total combined voting power of the Company's securities outstanding immediately after such acquisition; or (ii) the sale or conveyance of all or substantially all of the assets of the Company to a person who is not an Affiliate of the Company or the Warburg Investors.
	"Exit Event" means a Change in Control or a Liquidity Event, as applicable.

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"Exit Factor" means, with respect to any Exit Event, a fraction, the numerator of which is equal to the aggregate proceeds received by the Warburg Investors in connection with such Exit Event, excluding any amounts received as a result of the liquidation preference associated with such equity securities, if any, and the denominator of which is equal to the Warburg Exit Percentage multiplied by the aggregate purchase price paid by the Warburg Investors in connection with their purchase of equity in the Company.

"Liquidity Event" means the sale by the Warburg Investors of any portion of their equity securities of the Company to another person or group (other than any Warburg Investor or any Affiliate thereof) in which the Warburg Investors receive cash or marketable securities, and which does not otherwise constitute a Change in Control.

"Warburg Exit Percentage" means:

(a) in the case of a Liquidity Event, a percentage equal to 100 multiplied by the quotient of

(i) the aggregate amount of equity securities of the Company that the Warburg Investors sell in connection with such Liquidity Event (determined on a fully diluted basis), divided by

(ii) the aggregate amount of equity securities of the Company acquired by the Warburg Investors in connection with their purchase of equity in the Company, in each case, as adjusted for changes in capitalization; and

(b) in the case of a Change in Control, 100% less the sum of each Warburg Exit Percentage applicable to any Liquidity Event occurring prior to such Change in Control.

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        By your signature and the signature of the Company's representative below, you and the Company agree that these options are granted under and governed by the terms and conditions of this Notice of Stock Option Grant, the Stock Option Agreement, and the Bridgepoint Education, Inc. 2005 Stock Incentive Plan, both of which are attached to and made a part of this document.

OPTIONEE	BRIDGEPOINT EDUCATION, INC.
	By:
Print Name	Title:
Social Security Number

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BRIDGEPOINT EDUCATION, INC.
2005 STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT

        1.    Definitions.    Unless otherwise defined herein, the terms defined in the Bridgepoint Education, Inc. 2005 Stock Incentive Plan (the "Plan") shall have the same defined meanings in this Stock Option Agreement.

        2.    Grant of Options.    Pursuant to the terms and conditions set forth in the Notice of Stock Option Grant attached hereto, this Agreement, and the Plan, Bridgepoint Education, Inc. (the "Company") grants to the optionee named in the Notice of Stock Option Grant ("Optionee") on the date of grant set forth in the Notice of Stock Option Grant ("Date of Grant") the options to purchase, at the exercise price set forth in the Notice of Stock Option Grant ("Exercise Price"), the number of Shares set forth in the Notice of Stock Option Grant. These options are intended to be Incentive Stock Options or Non-Statutory Stock Options, as provided in the Notice of Stock Option Grant.

        3.    Exercise of Options.    Subject to the other conditions set forth in this Agreement, all or part of these options may be exercised prior to their expiration at the time or times set forth in the Notice of Stock Option Grant; provided, however, the Optionee shall cease vesting in these options on the Optionee's Termination Date. These options may also become exercisable in accordance with Section 21 below. Notwithstanding anything herein to the contrary, these options may not be exercised until the stockholders of the Company have approved the Plan in accordance with Section 18 of the Plan. If the stockholders of the Company do not approve the Plan within the 12 months provided for in Section 18 of the Plan, then these options shall terminate as of the end of such 12 month period.

        4.    Expiration of Options.    Subject to the provisions of Section 5 hereof, these option shall expire and all rights to purchase Shares hereunder shall cease on the date set forth in the Notice of Stock Option Grant ("Expiration Date").

        5.    Termination of Options.    In the event that the Optionee's Service terminates for any reason other than due to a Disability, death, or Cause, these options shall expire on the date that is three months following the Optionee's Termination Date, unless these options would expire pursuant to Section 4 at an earlier date in which case these options will expire on the earlier Expiration Date. In the event that the Optionee's Service terminates due to a Disability, these options shall expire on the date that is 12 months following the Optionee's Termination Date, unless these options would expire pursuant to Section 4 at an earlier date in which case these options will expire on the earlier Expiration Date. In the event that the Optionee should die while in Service, these options shall expire on the date that is 12 months after the Optionee's death, unless these options would expire pursuant to Section 4 at an earlier date in which case these options will expire on the earlier Expiration Date. In the event that the Optionee's Service terminates for Cause, these options shall terminate on the Termination Date.

        6.    Non-transferability of Options.    These options shall be non-transferable by the Optionee other than by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the Optionee only by the Optionee, or as to Non-Statutory Stock Options also, by the Optionee's guardian or legal representative. After the death of the Optionee, these options may be exercised prior to their termination by the Optionee's legal representative, heir or legatee, to the extent permitted in the Plan. Upon any attempt to sell, transfer, assign, pledge, hypothecate or otherwise dispose of this option (a "Transfer"), or of any right or privilege conferred hereby, contrary to the provisions hereof, or upon any attempted sale under any execution, attachment or similar process upon the rights and privileges conferred hereby, these options and the rights and privileges conferred hereby shall immediately become null and void. Until written notice of any permitted passage of rights under these options shall have been given to and received by the Secretary of the Company, the Company may, for all purposes, regard the Optionee as the holder of these options.

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        7.    Method of Exercise.    The rights granted under this Agreement may be exercised by the Optionee, or by the person or persons to whom the Optionee's rights under this Agreement shall have passed under the provisions of Section 6 hereof, by delivering to the Company in care of its Secretary at the Company's principal office, written notice of the number of Shares with respect to which the rights are being exercised, accompanied by this Agreement for appropriate endorsement by the Company, such investment letter as may be required by Section 14 hereof, executed Stockholders Agreement described in Section 8 below, payment of the exercise price, and such other representations and agreements as may be required by the Administrator. The exercise price may be paid in cash, check, or consideration received by the Company under a broker assisted sale and remittance program acceptable to the Administrator.

        8.    Stockholders Agreement.    Notwithstanding any other provision of this Agreement to the contrary, the initial exercise of these options shall be further conditioned upon the execution and delivery by the Optionee and, if applicable, his/her spouse, of the Stockholders Agreement (in the form attached hereto as Exhibit A), to the extent not already a party thereto. This provision shall terminate in the event of a Qualified Public Offering.

        9.    Regulatory Compliance.    The issue and sale of Common Stock pursuant to this Agreement shall be subject to full compliance with all then applicable requirements of law and the requirements of any stock exchange or interdealer quotation system upon which the Common Stock may be listed or traded.

        10.    Legends.    The certificates evidencing the Common Stock issued upon exercise of these options, if any, shall bear the following legend, if applicable, at the time of exercise:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF SUCH ACT OR SUCH LAWS OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

In addition, each certificate evidencing the Common Stock issued upon exercise of these options, if any, shall be endorsed with the following legend:

THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS AGREEMENT BETWEEN BRIDGEPOINT EDUCATION, INC., A DELAWARE CORPORATION (THE "COMPANY"), THE HOLDER OF THE SHARES REPRESENTED BY THIS CERTIFICATE, AND CERTAIN OTHER INVESTORS. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL BUSINESS OFFICE OF THE COMPANY.

        11.    Modification and Termination.    The rights of the Optionee are subject to modification and termination in certain events, as provided in the Plan.

        12.    Withholding Tax.    As a condition to the exercise of these options, the Optionee shall make such arrangements as the Administrator may require for the satisfaction of any federal, state and local income, and employment tax withholding requirements that may arise in connection with such exercise. The Optionee shall also make such arrangements as the Administrator may require for the satisfaction of any federal, state and local income, and employment tax withholding requirements that may arise in connection with the disposition of Shares purchased by exercising these options. The Optionee shall pay to the Company an amount equal to the withholding amount (or the Company may withhold such amount from the Optionee's salary) in cash or check. At the Administrator's election, the Optionee may pay the withholding amount with Shares (including previously vested Optioned Stock); provided, however, that payment in Stock shall be limited to the withholding amount calculated using the

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minimum statutory withholding rates interpreted in accordance with applicable accounting requirements, or consideration received by the Company under a broker assisted sale and remittance program acceptable to the Administrator.

        13.    Holder of Shares.    Neither the Optionee nor the Optionee's legal representative, legatee or distributee shall be, or be deemed to be, a holder of any Shares subject to these options unless and until such person has been issued a certificate or certificates therefor. No adjustment will be made for dividends or other rights for which the record date is prior to the date such stock certificate or certificates are so issued.

        14.    Investment Covenant.    The Optionee represents and agrees that if the Optionee exercises these options in whole or in part at a time when there is not in effect under the Act, a registration statement relating to the Shares issuable upon exercise hereof and there is not available for delivery a prospectus meeting the requirements of Section 10(a)(3) of such Act, (i) the Optionee will acquire the Shares upon such exercise for the purpose of investment and not with a view to the distribution thereof, (ii) if requested by the Company, upon such exercise of these options, the Optionee will furnish to the Company an investment letter in form acceptable to it, (iii) if requested by the Company, prior to selling or offering for sale any such Shares, the Optionee will furnish the Company with an opinion of counsel satisfactory to it to the effect that such sale may lawfully be made and will furnish it with such certificates as to factual matters as it may reasonably request, and (iv) certificates representing such shares may be marked with an appropriate legend describing such conditions precedent to sale or transfer. Any person or persons entitled to exercise these options under the provision of Section 6 hereof shall furnish to the Company letters, opinions, and certificates to the same effect as would otherwise be required of the Optionee.

        15.    Nondisclosure.    Optionee acknowledges that the grant and terms of these options are confidential and may not be disclosed by Optionee to any other person, including other employees of the Company and other participants in the Plan, without the express written consent of the Company's President. Notwithstanding the foregoing, the Optionee may disclose the grant and terms of these options to the Optionee's family member, financial advisor, and attorney. Any breach of this provision will be deemed to be a material breach of this Agreement.

        16.    Governing Law.    This Agreement shall be governed by and interpreted in accordance with the internal laws of the State of Delaware.

        17.    Successors.    This Agreement shall inure to the benefit of and be binding upon the parties hereto and their legal representatives, heirs, and permitted successors and assigns.

        18.    Plan.    This Agreement is subject to all of the terms and provisions of the Plan, receipt of a copy of which is hereby acknowledged by the Optionee. The Optionee further acknowledges receipt of a copy of the Stockholders Agreement. The Optionee hereby agrees to accept as binding, conclusive, and final all decisions and interpretations of the Administrator upon any questions arising under the Plan, this Agreement, and Notice of Stock Option Grant.

        19.    Rights to Future Employment.    These options do not confer upon the Optionee any right to continue in the Service of the Company or any Affiliate, nor does it limit the right of the Company to terminate the Service of the Optionee at any time.

        20.    Market Stand-Off.    In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Act, including the Company's initial public offering, the Optionee shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Shares acquired under this Agreement without the prior written consent of the Company or its underwriters. Such restriction (the "Market

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Stand-Off") shall be in effect for such period of time following the date of the final prospectus for the offering as may be requested by the Company or such underwriters. In no event, however, shall such period exceed 180 days. In the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company's outstanding securities without receipt of consideration, any new, substituted or additional securities which are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares acquired under this Agreement until the end of the applicable stand-off period. The Company's underwriters shall be beneficiaries of the agreement set forth in this Section. This Section shall not apply to Shares registered in the public offering under the Act, and the Optionee shall be subject to this Section only if the directors and officers of the Company are subject to similar arrangements.

        21.    Merger, Consolidation, Reorganization, Liquidation, Etc.    If the Company shall become a party to any corporate reorganization, merger, liquidation, spinoff, or agreement for the sale of substantially all of its assets and property, the Board shall attempt to make appropriate arrangements, which shall be binding upon the Optionee, for the substitution of new options for any unexpired options then outstanding under this Agreement, or for the assumption of any such unexpired options, to the end that the Optionee's proportionate interest shall be maintained as before the occurrence of such event. If the options granted hereunder are not substituted or assumed, then (i) the Time Vested Options shall expire on the effective date of such event and the Optionee shall have 21 days prior to the expiration date to exercise these options, and the Board shall notify the Optionee of the expiration date at least 21 days prior to such date; (ii) the Exit Options shall vest to the extent provided for under the Vesting Schedule under Section 2 herein, and all Exit Options that have not otherwise vested shall expire in accordance with the Vesting Schedule; and (iii) the Performance Vested Options shall vest to the extent the applicable transaction is an Exit Event and the Exit Factor is equal to or greater than four, but otherwise shall only vest to the extent that applicable performance targets, as described in the Vesting Schedule under Section 2 herein, have been achieved, and all Performance Vested Options that have not otherwise vested shall expire on the effective date of the applicable transaction. Notwithstanding the foregoing, the Company may cancel all outstanding options effective as of the date of the applicable transaction and deliver to Optionee in lieu thereof the difference between the Fair Market Value of a Share on the date of the applicable transaction and the Exercise Price, multiplied by the number of vested Shares that Optionee would have received had Optionee exercised the Option. For purposes of the preceding sentence, Optionee shall be deemed to be vested in a Share if such Share is not subject to the Company's right to repurchase at its Exercise Price. Notwithstanding anything in this Agreement to the contrary, unless Section 280G Approval, as defined below, has been obtained, no acceleration of vesting or payment shall occur under this Section 14.2 to the extent that such acceleration or payment would, after taking into account any other payments in the nature of compensation to which the Optionee would have a right to receive from the Company and any other Person contingent upon the occurrence of such Change in Control, result in a "parachute payment" as defined in Section 280G(b)(2) of the Code. "Section 280G Approval" shall mean the stockholder approval obtained in compliance with the requirements of Code Section 280G(b)(5)(B), as amended, and any successor thereof, and the regulations or proposed regulations promulgated thereunder, as determined by the Board in its sole discretion.

        22.    Entire Agreement.    The Notice of Stock Option Grant, this Agreement, and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof. They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof.

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Exhibit 10.3

BRIDGEPOINT EDUCATION, INC., 2005 STOCK INCENTIVE PLAN NOTICE OF STOCK OPTION GRANT

EX-10.4

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Exhibit 10.4

Stock Option No.  

BRIDGEPOINT EDUCATION, INC.,
2005 STOCK INCENTIVE PLAN
NOTICE OF STOCK OPTION GRANT

        You have been granted the following options to purchase common stock of Bridgepoint Education, Inc. (the "Company"):

Name of Optionee:
Number of Shares Granted:	Under Time Vested Options
	Under Performance Vested Options
	Under Exit Options
Type of Option:	o    Incentive Stock Options
	o    Non-Statutory Stock Options
Exercise Price Per Share:	$
Date of Grant:
Vesting Commencement Date:
Expiration Date:

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Vesting Schedule:

Time Vested Options

Subject to Optionee's continued Service, as defined in Section 5 herein, Optionee's Time Vested Options shall vest as to (i) 25% of the Shares underlying such Time Vested Options on the one-year anniversary of the vesting commencement date, (ii) as to an additional 2% of the Shares underlying such Time Vested Options on each monthly anniversary of the vesting commencement date over the subsequent 33-month period following such one-year anniversary of the vesting commencement date, and (iii) an additional 3% of the Shares underlying such Time Vested Options on each of the 46th, 47th and 48th monthly anniversary of the vesting commencement date; provided, however, in the event that Optionee's Service is terminated by the Company without Cause or as a result of his or her death or Disability, on the date of such termination, an additional number of Time Vested Options shall vest equal to the number of Time Vested Options that would otherwise have vested (solely as a result of the passage of time) within the 12-month period immediately following the date of such termination.

Performance Vested Options

Except as provided in Section 21 herein, for each fiscal year of the Company beginning with fiscal year 2005 and ending with fiscal year 2008, 25% of the Shares underlying the Performance Vested Options granted to Optionee shall be eligible to become vested and exercisable, to the extent that the Company's actual performance for any fiscal year results in achievement of the Annual Performance Targets for such fiscal year. If in any fiscal year that either the Annual EBITDA Target or the Annual Revenue Target is not achieved (a "Missed Fiscal Year"), but in any subsequent fiscal year the Company's cumulative EBITDA and revenue performance from and including fiscal year 2005 results in achievement of the Cumulative Performance Targets, Performance Vested Options otherwise eligible to vest during the Missed Fiscal Year(s) shall vest. All Performance Vested Options which have not vested in accordance with this paragraph shall expire as of Optionee's termination of Service, as defined in Section 5 herein; provided, however, if Optionee's termination of Service is as a result of his or her death or Disability, notwithstanding Section 5 herein, the Performance Vested Options eligible to vest in the fiscal year in which such termination occurs shall remain outstanding until such time that achievement of the Annual Performance Targets is determined, and to the extent achieved, such Performance Vested Options shall vest as if Optionee had remained in Service through the date of such determination, and for purposes of Section 5 herein, with respect to such Performance Vested Options only, the date of termination of Service shall be deemed to be the applicable vesting date.

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Definitions for Performance Vested Options	"Annual EBITDA Target" means:     (a) for fiscal year 2005, ($7,430,000) or greater;     (b) for fiscal year 2006, ($238,000) or greater;     (c) for fiscal year 2007, $3,920,000; and     (d) for fiscal year 2008, $5,880,000; provided, however, that the Annual EBITDA Target shall be subject to adjustment if the Company is required to secure equity funding in excess of $2.2 million following the first quarter of 2006.
	"Annual Performance Targets" means, collectively, the Annual EBITDA Target and the Annual Revenue Target.
	"Annual Revenue Target" means:     (a) for fiscal year 2005, $7,871,000;     (b) for fiscal year 2006, $21,808,000;     (c) for fiscal year 2007, $39,879,000; and     (d) for fiscal year 2008, $49,000,000; provided, however, that the Annual Revenue Target shall be subject to adjustment if the Company is required to secure equity funding in excess of $2.2 million following the first quarter of 2006.
	"Cumulative EBITDA Target" means:     (a) for fiscal year 2005, ($7,430,000) or greater;     (b) for fiscal year 2006, ($7,668,000) or greater;     (c) for fiscal year 2007, ($3,748,000); and     (d) for fiscal year 2008, $2,132,000; provided, however, that the Cumulative EBITDA Target shall be subject to adjustment if the Company is required to secure equity funding in excess of $2.2 million following the first quarter of 2006.
	"Cumulative Performance Targets" means, collectively, the Cumulative EBITDA Target and the Cumulative Revenue Target.
	"Cumulative Revenue Target" means:     (a) for fiscal year 2005, $7,871,000;     (b) for fiscal year 2006, $29,679,000;     (c) for fiscal year 2007, $69,558,000; and     (d) for fiscal year 2008, $118,558,000; provided, however, that the Cumulative Revenue Target shall be subject to adjustment if the Company is required to secure equity funding in excess of $2.2 million following the first quarter of 2006.

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	"EBITDA" means, net income plus, without duplication and to the extent deducted in determining such consolidated net income, the sum of (i) consolidated interest expense (net of any interest income), (ii) consolidated provisions for taxes based on income, profits or capital and commercial activity (or similar taxes) for such period, (iii) all amounts attributable to depreciation and amortization for such period, in each case, determined in accordance with Generally Accepted Accounting Principles.
	"Revenue" means, the sum of all net student tuition (excluding non-cash scholarships awards), matriculation fees, room and board and other charges recognized in accordance with Generally Accepted Accounting Principles.
Exit Options	Subject to Optionee's continued Service, as defined in Section 5 herein, through the date of an Exit Event, and provided that the Exit Factor is equal to or in excess of four, a number of Optionee's Exit Options shall vest on such Exit Event equal to the aggregate number of Shares underlying such Exit Options multiplied by the Warburg Exit Percentage. All Exit Options which have not otherwise vested in connection with a Change of Control due to the fact that the Exit Factor is not equal to or in excess of four (or have previously vested upon a prior Exit Event) shall expire as of the date of such Change in Control. All Exit Options which have not vested in accordance with this paragraph shall expire as of the date of Optionee's termination of Service.
Definitions for Exit Options	"Change in Control" means: (i) a change in ownership or control of the Company effected through a transaction or series of related transactions (other than an offering of Company's securities to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any "person" or related "group" of "persons" (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act), other than an Affiliate of the Company or the Warburg Investors, directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than fifty percent (50%) of the total combined voting power of the Company's securities outstanding immediately after such acquisition; or (ii) the sale or conveyance of all or substantially all of the assets of the Company to a person who is not an Affiliate of the Company or the Warburg Investors.
	"Exit Event" means a Change in Control or a Liquidity Event, as applicable.

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"Exit Factor" means, with respect to any Exit Event, a fraction, the numerator of which is equal to the aggregate proceeds received by the Warburg Investors in connection with such Exit Event, excluding any amounts received as a result of the liquidation preference associated with such equity securities, if any, and the denominator of which is equal to the Warburg Exit Percentage multiplied by the aggregate purchase price paid by the Warburg Investors in connection with their purchase of equity in the Company.

"Liquidity Event" means the sale by the Warburg Investors of any portion of their equity securities of the Company to another person or group (other than any Warburg Investor or any Affiliate thereof) in which the Warburg Investors receive cash or marketable securities, and which does not otherwise constitute a Change in Control.

"Warburg Exit Percentage" means:

(a) in the case of a Liquidity Event, a percentage equal to 100 multiplied by the quotient of

(i) the aggregate amount of equity securities of the Company that the Warburg Investors sell in connection with such Liquidity Event (determined on a fully diluted basis), divided by

(ii) the aggregate amount of equity securities of the Company acquired by the Warburg Investors in connection with their purchase of equity in the Company, in each case, as adjusted for changes in capitalization; and

(b) in the case of a Change in Control, 100% less the sum of each Warburg Exit Percentage applicable to any Liquidity Event occurring prior to such Change in Control.

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        By your signature and the signature of the Company's representative below, you and the Company agree that these options are granted under and governed by the terms and conditions of this Notice of Stock Option Grant, the Stock Option Agreement, and the Bridgepoint Education, Inc. 2005 Stock Incentive Plan, both of which are attached to and made a part of this document.

OPTIONEE	BRIDGEPOINT EDUCATION, INC.
	By:
Print Name	Title:
Social Security Number

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BRIDGEPOINT EDUCATION, INC.
2005 STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT

        1.    Definitions.    Unless otherwise defined herein, the terms defined in the Bridgepoint Education, Inc. 2005 Stock Incentive Plan (the "Plan") shall have the same defined meanings in this Stock Option Agreement.

        2.    Grant of Options.    Pursuant to the terms and conditions set forth in the Notice of Stock Option Grant attached hereto, this Agreement, and the Plan, Bridgepoint Education, Inc. (the "Company") grants to the optionee named in the Notice of Stock Option Grant ("Optionee") on the date of grant set forth in the Notice of Stock Option Grant ("Date of Grant") the options to purchase, at the exercise price set forth in the Notice of Stock Option Grant ("Exercise Price"), the number of Shares set forth in the Notice of Stock Option Grant. These options are intended to be Incentive Stock Options or Non-Statutory Stock Options, as provided in the Notice of Stock Option Grant.

        3.    Exercise of Options.    Subject to the other conditions set forth in this Agreement, all or part of these options may be exercised prior to their expiration at the time or times set forth in the Notice of Stock Option Grant; provided, however, that subject to the following sentence, the Optionee shall cease vesting in these options on the Optionee's Termination Date. In the event that the Optionee is subject to an Involuntary Termination (defined below) within the 12 month period immediately following a Change in Control, all Time Vested Options that have not previously become vested or exercisable shall vest and become exercisable as of the date of such Involuntary Termination. These options may also become exercisable in accordance with Section 21 below. Notwithstanding anything herein to the contrary, these options may not be exercised until the stockholders of the Company have approved the Plan in accordance with Section 18 of the Plan. If the stockholders of the Company do not approve the Plan within the 12 months provided for in Section 18 of the Plan, then these options shall terminate as of the end of such 12 month period.

        The term "Involuntary Termination" shall mean the Optionee's termination of Service by reason of: (i) the involuntary discharge of the Optionee by the Company (or the Related Corporation employing him or her) for reasons other than Cause (excluding any termination as a result of the Optionee's death or Disability); or (ii) the voluntary resignation of the Optionee following (A) a material adverse change in his or her title, stature, authority or responsibilities with the Company (or the Related Corporation employing him or her), (B) a material reduction in his or her base salary or annual bonus opportunity, or (C) receipt of notice that his or her principal workplace will be relocated by more than 50 miles.

        4.    Expiration of Options.    Subject to the provisions of Section 5 hereof, these option shall expire and all rights to purchase Shares hereunder shall cease on the date set forth in the Notice of Stock Option Grant ("Expiration Date").

        5.    Termination of Options.    In the event that the Optionee's Service terminates for any reason other than due to a Disability, death, or Cause, these options shall expire on the date that is three months following the Optionee's Termination Date, unless these options would expire pursuant to Section 4 at an earlier date in which case these options will expire on the earlier Expiration Date. In the event that the Optionee's Service terminates due to a Disability, these options shall expire on the date that is 12 months following the Optionee's Termination Date, unless these options would expire pursuant to Section 4 at an earlier date in which case these options will expire on the earlier Expiration Date. In the event that the Optionee should die while in Service, these options shall expire on the date that is 12 months after the Optionee's death, unless these options would expire pursuant to Section 4 at an earlier date in which case these options will expire on the earlier Expiration Date. In the event that the Optionee's Service terminates for Cause, these options shall terminate on the Termination Date.

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        6.    Non-transferability of Options.    These options shall be non-transferable by the Optionee other than by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the Optionee only by the Optionee, or as to Non-Statutory Stock Options also, by the Optionee's guardian or legal representative. After the death of the Optionee, these options may be exercised prior to their termination by the Optionee's legal representative, heir or legatee, to the extent permitted in the Plan. Upon any attempt to sell, transfer, assign, pledge, hypothecate or otherwise dispose of this option (a "Transfer"), or of any right or privilege conferred hereby, contrary to the provisions hereof, or upon any attempted sale under any execution, attachment or similar process upon the rights and privileges conferred hereby, these options and the rights and privileges conferred hereby shall immediately become null and void. Until written notice of any permitted passage of rights under these options shall have been given to and received by the Secretary of the Company, the Company may, for all purposes, regard the Optionee as the holder of these options.

        7.    Method of Exercise.    The rights granted under this Agreement may be exercised by the Optionee, or by the person or persons to whom the Optionee's rights under this Agreement shall have passed under the provisions of Section 6 hereof, by delivering to the Company in care of its Secretary at the Company's principal office, written notice of the number of Shares with respect to which the rights are being exercised, accompanied by this Agreement for appropriate endorsement by the Company, such investment letter as may be required by Section 14 hereof, executed Stockholders Agreement described in Section 8 below, payment of the exercise price, and such other representations and agreements as may be required by the Administrator. The exercise price may be paid in cash, check, or consideration received by the Company under a broker assisted sale and remittance program acceptable to the Administrator.

        8.    Stockholders Agreement.    Notwithstanding any other provision of this Agreement to the contrary, the initial exercise of these options shall be further conditioned upon the execution and delivery by the Optionee and, if applicable, his/her spouse, of the Stockholders Agreement (in the form attached hereto as Exhibit A), to the extent not already a party thereto. This provision shall terminate in the event of a Qualified Public Offering.

        9.    Regulatory Compliance.    The issue and sale of Common Stock pursuant to this Agreement shall be subject to full compliance with all then applicable requirements of law and the requirements of any stock exchange or interdealer quotation system upon which the Common Stock may be listed or traded.

        10.    Legends.    The certificates evidencing the Common Stock issued upon exercise of these options, if any, shall bear the following legend, if applicable, at the time of exercise:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF SUCH ACT OR SUCH LAWS OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

In addition, each certificate evidencing the Common Stock issued upon exercise of these options, if any, shall be endorsed with the following legend:

THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS AGREEMENT BETWEEN BRIDGEPOINT EDUCATION, INC., A DELAWARE CORPORATION (THE "COMPANY"), THE HOLDER OF THE SHARES REPRESENTED BY THIS CERTIFICATE, AND CERTAIN OTHER INVESTORS. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL BUSINESS OFFICE OF THE COMPANY.

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        11.    Modification and Termination.    The rights of the Optionee are subject to modification and termination in certain events, as provided in the Plan.

        12.    Withholding Tax.    As a condition to the exercise of these options, the Optionee shall make such arrangements as the Administrator may require for the satisfaction of any federal, state and local income, and employment tax withholding requirements that may arise in connection with such exercise. The Optionee shall also make such arrangements as the Administrator may require for the satisfaction of any federal, state and local income, and employment tax withholding requirements that may arise in connection with the disposition of Shares purchased by exercising these options. The Optionee shall pay to the Company an amount equal to the withholding amount (or the Company may withhold such amount from the Optionee's salary) in cash or check. At the Administrator's election, the Optionee may pay the withholding amount with Shares (including previously vested Optioned Stock); provided, however, that payment in Stock shall be limited to the withholding amount calculated using the minimum statutory withholding rates interpreted in accordance with applicable accounting requirements, or consideration received by the Company under a broker assisted sale and remittance program acceptable to the Administrator.

        13.    Holder of Shares.    Neither the Optionee nor the Optionee's legal representative, legatee or distributee shall be, or be deemed to be, a holder of any Shares subject to these options unless and until such person has been issued a certificate or certificates therefor. No adjustment will be made for dividends or other rights for which the record date is prior to the date such stock certificate or certificates are so issued.

        14.    Investment Covenant.    The Optionee represents and agrees that if the Optionee exercises these options in whole or in part at a time when there is not in effect under the Act, a registration statement relating to the Shares issuable upon exercise hereof and there is not available for delivery a prospectus meeting the requirements of Section 10(a)(3) of such Act, (i) the Optionee will acquire the Shares upon such exercise for the purpose of investment and not with a view to the distribution thereof, (ii) if requested by the Company, upon such exercise of these options, the Optionee will furnish to the Company an investment letter in form acceptable to it, (iii) if requested by the Company, prior to selling or offering for sale any such Shares, the Optionee will furnish the Company with an opinion of counsel satisfactory to it to the effect that such sale may lawfully be made and will furnish it with such certificates as to factual matters as it may reasonably request, and (iv) certificates representing such shares may be marked with an appropriate legend describing such conditions precedent to sale or transfer. Any person or persons entitled to exercise these options under the provision of Section 6 hereof shall furnish to the Company letters, opinions, and certificates to the same effect as would otherwise be required of the Optionee.

        15.    Nondisclosure.    Optionee acknowledges that the grant and terms of these options are confidential and may not be disclosed by Optionee to any other person, including other employees of the Company and other participants in the Plan, without the express written consent of the Company's President. Notwithstanding the foregoing, the Optionee may disclose the grant and terms of these options to the Optionee's family member, financial advisor, and attorney. Any breach of this provision will be deemed to be a material breach of this Agreement.

        16.    Governing Law.    This Agreement shall be governed by and interpreted in accordance with the internal laws of the State of Delaware.

        17.    Successors.    This Agreement shall inure to the benefit of and be binding upon the parties hereto and their legal representatives, heirs, and permitted successors and assigns.

        18.    Plan.    This Agreement is subject to all of the terms and provisions of the Plan, receipt of a copy of which is hereby acknowledged by the Optionee. The Optionee further acknowledges receipt of a copy of the Stockholders Agreement. The Optionee hereby agrees to accept as binding, conclusive,

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and final all decisions and interpretations of the Administrator upon any questions arising under the Plan, this Agreement, and Notice of Stock Option Grant.

        19.    Rights to Future Employment.    These options do not confer upon the Optionee any right to continue in the Service of the Company or any Affiliate, nor does it limit the right of the Company to terminate the Service of the Optionee at any time.

        20.    Market Stand-Off.    In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Act, including the Company's initial public offering, the Optionee shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Shares acquired under this Agreement without the prior written consent of the Company or its underwriters. Such restriction (the "Market Stand-Off") shall be in effect for such period of time following the date of the final prospectus for the offering as may be requested by the Company or such underwriters. In no event, however, shall such period exceed 180 days. In the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company's outstanding securities without receipt of consideration, any new, substituted or additional securities which are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares acquired under this Agreement until the end of the applicable stand-off period. The Company's underwriters shall be beneficiaries of the agreement set forth in this Section. This Section shall not apply to Shares registered in the public offering under the Act, and the Optionee shall be subject to this Section only if the directors and officers of the Company are subject to similar arrangements.

        21.    Merger, Consolidation, Reorganization, Liquidation, Etc.    If the Company shall become a party to any corporate reorganization, merger, liquidation, spinoff, or agreement for the sale of substantially all of its assets and property, the Board shall attempt to make appropriate arrangements, which shall be binding upon the Optionee, for the substitution of new options for any unexpired options then outstanding under this Agreement, or for the assumption of any such unexpired options, to the end that the Optionee's proportionate interest shall be maintained as before the occurrence of such event. If the options granted hereunder are not substituted or assumed, then (i) the Time Vested Options shall fully vest and become exercisable on the date that immediately proceeds the effective date of such event, and the Administrator shall notify the Optionee of their Options' exercisability at least 21 days prior to the effective date of such event so that the Optionee can decide whether to exercise the Time Vested Options on the date that immediately precedes the effective date of the event. Effective on the effective date of such event all unexercised Time Vested Options shall terminate; (ii) the Exit Options shall vest to the extent provided for under the Vesting Schedule under Section 2 herein, and all Exit Options that have not otherwise vested shall expire in accordance with the Vesting Schedule; and (iii) the Performance Vested Options shall vest to the extent the applicable transaction is an Exit Event and the Exit Factor is equal to or greater than four, but otherwise shall only vest to the extent that applicable performance targets, as described in the Vesting Schedule under Section 2 herein, have been achieved, and all Performance Vested Options that have not otherwise vested shall expire on the effective date of the applicable transaction. Notwithstanding the foregoing, the Company may cancel all outstanding options effective as of the date of the applicable transaction and deliver to Optionee in lieu thereof the difference between the Fair Market Value of a Share on the date of the applicable transaction and the Exercise Price, multiplied by the number of vested Shares that Optionee would have received had Optionee exercised the Option. For purposes of the preceding sentence, Optionee shall be deemed to be vested in a Share if such Share is not subject to the Company's right to

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repurchase at its Exercise Price. Notwithstanding anything in this Agreement to the contrary, unless Section 280G Approval, as defined below, has been obtained, no acceleration of vesting or payment shall occur under this Section 14.2 to the extent that such acceleration or payment would, after taking into account any other payments in the nature of compensation to which the Optionee would have a right to receive from the Company and any other Person contingent upon the occurrence of such Change in Control, result in a "parachute payment" as defined in Section 280G(b)(2) of the Code. "Section 280G Approval" shall mean the stockholder approval obtained in compliance with the requirements of Code Section 280G(b)(5)(B), as amended, and any successor thereof, and the regulations or proposed regulations promulgated thereunder, as determined by the Board in its sole discretion.

        22.    Entire Agreement.    The Notice of Stock Option Grant, this Agreement, and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof. They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof.

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Exhibit 10.4

BRIDGEPOINT EDUCATION, INC., 2005 STOCK INCENTIVE PLAN NOTICE OF STOCK OPTION GRANT

EX-10.11

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Exhibit 10.11

NOMINATING AGREEMENT

        THIS NOMINATING AGREEMENT (this "Agreement"), of Bridgepoint Education, Inc., a Delaware corporation (the "Company") is made as of February 17, 2009, by and between the Company and Warburg Pincus Private Equity VIII, L.P. ("Warburg Pincus") to be effective as of the time of the Company's initial public offering.

RECITALS

        WHEREAS, immediately prior to the consummation of the Company's initial public offering of its common stock, par value $0.01 per share (the "Common Stock"), the Series A Convertible Preferred Stock held by Warburg Pincus will automatically convert into an aggregate of 197,084,670 shares of Common Stock; and

        WHEREAS, the parties hereto wish to make certain agreements with respect to the nomination of candidates for election to the board of directors of the Company as a means of maintaining a longer continuity of ownership by Warburg Pincus in the Company, upon the terms and conditions set forth in this Agreement.

        NOW, THEREFORE, in consideration of the mutual covenants herein contained and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

AGREEMENT

        SECTION 1.    Election of Directors.    Subject to the provisions of Section 2 hereof, Warburg Pincus shall have the right to designate individuals for nomination for election to the board of directors (the "Board") as set forth below and the Company shall, acting through its Nominating and Governance Committee, cause such individuals to be nominated for election to the Company's Board as set forth below; provided that the Nominating and Governance Committee's obligations under this Agreement are subject to the requirements of their fiduciary duties as directors and the Delaware General Corporation Law.

        1.1.  For as long as Warburg Pincus beneficially owns at least fifteen percent (15%) of the outstanding shares of Common Stock, Warburg Pincus shall be entitled to designate two (2) individuals for election to the Board; or

        1.2.  For as long as Warburg Pincus beneficially owns, less than fifteen percent (15%), but at least five percent (5%) of the outstanding shares of Common Stock, Warburg Pincus shall be entitled to designate one (1) individual for election to the Board.

        SECTION 2.    Mechanics of Designation.    In order to nominate an individual for election to the Board, Warburg Pincus must adhere to the Company's advance notice requirements and procedures for director nominations in accordance with the Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws (the "Bylaws") of the Company. The Company agrees that it shall provide Warburg Pincus with written notice, at least 120 days prior to the date of such annual meeting of the Company's stockholders, of the expected date of such meeting in accordance with the notice provisions set forth in Section 4.3 hereof. At each meeting of the Company's stockholders at which the directors of the Company are to be elected, the Company agrees to recommend that the stockholders elect to the Board each designee of Warburg Pincus nominated for election at such meeting in accordance with the provisions of Section 1 above.

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        SECTION 3.    Vacancies.    At any time at which a vacancy shall be created on the Board as a result of the death, disability, retirement, resignation, removal or otherwise of a designee of Warburg Pincus and Warburg Pincus still maintains the right to designate a person for nomination for election to the Board, as specified in Section 1 above, Warburg Pincus shall have the right to designate for appointment by the remaining directors under the Bylaws of the Company an individual to fill such vacancy and to serve as a director. In connection with the foregoing, Warburg Pincus agrees to provide information to the Nominating and Governance Committee as is necessary to determine that such individual will qualify to serve as a director of the Company under any applicable law, rule or regulation.

        SECTION 4.    Miscellaneous.    

        4.1.  Successors and Assigns.

        This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto.

        4.2.  Entire Agreement; Amendment and Waiver.

        This Agreement constitutes the entire understandings of the parties hereto and supersedes all prior agreements or understandings with respect to the subject matter hereof among such parties, including without limitation that certain Stockholders Agreement, as amended, dated as of November 26, 2003. This Agreement may be amended, and the observance of any term of this Agreement may be waived, with (and only with) the written consent of the parties hereto

        4.3.  Notices

        All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be given under this Agreement shall be in writing and shall be deemed to have been duly given if (i) delivered personally, (ii) mailed, certified or registered mail with postage prepaid, (iii) sent by next-day or overnight mail or delivery or (iv) sent by fax, as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):

If to the Company:	Bridgepoint Education, Inc. 13500 Evening Creek Drive North, Suite 600 San Diego, California 92128 Attention: Facsimile:
with copy to:	Sheppard, Mullin, Richter & Hampton LLP 12275 El Camino Real, Suite 200 San Diego, CA 92130 Attention: Facsimile: 858.509.3691
If to Warburg Pincus:	Warburg Pincus Private Equity VIII, L.P. 466 Lexington Avenue New York, NY 10017 Attention: General Counsel Facsimile:

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        4.4.  Severability

        In the event that any part or parts of this Agreement shall be held illegal or unenforceable by any court or administrative body of competent jurisdiction, such determination shall not affect the remaining provisions of this Agreement, which shall remain in full force and effect.

        4.5.  Term

        The term of this Agreement shall terminate upon the earlier to occur of: (i) the mutual consent in writing of the parties hereto or (ii) the date on which Warburg Pincus beneficially owns less than five percent (5%) of the outstanding shares of Common Stock.

        4.6.  Counterparts

        This Agreement may be executed in two or more counterparts (including by facsimile), each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

        4.7.  Governing Law

        This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed entirely within such State.

[Remainder of Page Left Intentionally Blank]

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        IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above.

BRIDGEPOINT EDUCATION, INC.
By:	/s/ Daniel J. Devine Name:  Daniel J. Devine Title:  Chief Financial Officer
WARBURG PINCUS PRIVATE EQUITY VIII, L.P.
By:	Warburg Pincus Partners LLC, General Partner
By:	WARBURG PINCUS & CO., Managing Member
By:	/s/ BARRY TAYLOR Name: Barry Taylor Title: Managing Director

[Signature Page to Nominating Agreement]

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Exhibit 10.11

NOMINATING AGREEMENT
RECITALS
AGREEMENT

EX-10.12

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Exhibit 10.12

Stock Option No.            

BRIDGEPOINT EDUCATION, INC.,
2005 STOCK INCENTIVE PLAN
NOTICE OF STOCK OPTION GRANT

        You have been granted the following option to purchase common stock of Bridgepoint Education, Inc. (the "Company"):

Name of Optionee:
Total Number of Shares Granted:	("Optioned Stock")
Type of Option:	o  Incentive Stock Option
	o  Non-Statutory Stock Option
Exercise Price Per Share:
Date of Grant:
Date Exercisable:	Subject to Optionee's continued Service, as defined in Section 5 herein, Optionee's options shall vest as to (i) 25% of the Shares underlying such options on the one-year anniversary of the vesting commencement date, (ii) as to an additional 2% of the Shares underlying such options on each monthly anniversary of the vesting commencement date over the subsequent 33-month period following such one-year anniversary of the vesting commencement date, and (iii) an additional 3% of the Shares underlying such options on each of the 46th, 47th and 48th monthly anniversary of the vesting commencement date; provided, however, in the event that Optionee's Service is terminated by the Company without Cause or as a result of his or her death or Disability, on the date of such termination, an additional number of options shall vest equal to the number of options that would otherwise have vested (solely as a result of the passage of time) within the 12-month period immediately following the date of such termination.
Vesting Commencement Date:
Expiration Date:

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By your signature and the signature of the Company's representative below, you and the Company agree that this option is granted under and governed by the terms and conditions of this Notice of Stock Option Grant, the Stock Option Agreement, and the Bridgepoint Education, Inc. 2005 Stock Incentive Plan, both of which are attached to and made a part of this document.

OPTIONEE	BRIDGEPOINT EDUCATION, INC.
By:	By:
Name:	Name: Title:
Social Security Number

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BRIDGEPOINT EDUCATION, INC.
2005 STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT

        1.    Definitions.    Unless otherwise defined herein, the terms defined in the Bridgepoint Education, Inc. 2005 Stock Incentive Plan (the "Plan") shall have the same defined meanings in this Stock Option Agreement.

        2.    Grant of Options.    Pursuant to the terms and conditions set forth in the Notice of Stock Option Grant attached hereto, this Agreement, and the Plan, Bridgepoint Education, Inc. (the "Company") grants to the optionee named in the Notice of Stock Option Grant ("Optionee") on the date of grant set forth in the Notice of Stock Option Grant ("Date of Grant") the options to purchase, at the exercise price set forth in the Notice of Stock Option Grant ("Exercise Price"), the number of Shares set forth in the Notice of Stock Option Grant. These options are intended to be Incentive Stock Options or Non-Statutory Stock Options, as provided in the Notice of Stock Option Grant.

        3.    Exercise of Options.    Subject to the other conditions set forth in this Agreement, all or part of these options may be exercised prior to their expiration at the time or times set forth in the Notice of Stock Option Grant; provided, however, the Optionee shall cease vesting in these options on the Optionee's Termination Date. These options may also become exercisable in accordance with Section 21 below. Notwithstanding anything herein to the contrary, these options may not be exercised until the stockholders of the Company have approved the Plan in accordance with Section 18 of the Plan. If the stockholders of the Company do not approve the Plan within the 12 months provided for in Section 18 of the Plan, then these options shall terminate as of the end of such 12 month period.

        4.    Expiration of Options.    Subject to the provisions of Section 5 hereof, these option shall expire and all rights to purchase Shares hereunder shall cease on the date set forth in the Notice of Stock Option Grant ("Expiration Date").

        5.    Termination of Options.    In the event that the Optionee's Service terminates for any reason other than due to a Disability, death, or Cause, these options shall expire on the date that is three months following the Optionee's Termination Date, unless these options would expire pursuant to Section 4 at an earlier date in which case these options will expire on the earlier Expiration Date. In the event that the Optionee's Service terminates due to a Disability, these options shall expire on the date that is 12 months following the Optionee's Termination Date, unless these options would expire pursuant to Section 4 at an earlier date in which case these options will expire on the earlier Expiration Date. In the event that the Optionee should die while in Service, these options shall expire on the date that is 12 months after the Optionee's death, unless these options would expire pursuant to Section 4 at an earlier date in which case these options will expire on the earlier Expiration Date. In the event that the Optionee's Service terminates for Cause, these options shall terminate on the Termination Date.

        6.    Non-transferability of Options.    These options shall be non-transferable by the Optionee other than by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the Optionee only by the Optionee, or as to Non-Statutory Stock Options also, by the Optionee's guardian or legal representative. After the death of the Optionee, these options may be exercised prior to their termination by the Optionee's legal representative, heir or legatee, to the extent permitted in the Plan. Upon any attempt to sell, transfer, assign, pledge, hypothecate or otherwise dispose of this option (a "Transfer"), or of any right or privilege conferred hereby, contrary to the provisions hereof, or upon any attempted sale under any execution, attachment or similar process upon the rights and privileges conferred hereby, these options and the rights and privileges conferred hereby shall immediately become null and void. Until written notice of any permitted passage of rights under these options shall have been given to and received by the Secretary of the Company, the Company may, for all purposes, regard the Optionee as the holder of these options.

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        7.    Method of Exercise.    The rights granted under this Agreement may be exercised by the Optionee, or by the person or persons to whom the Optionee's rights under this Agreement shall have passed under the provisions of Section 6 hereof, by delivering to the Company in care of its Secretary at the Company's principal office, written notice of the number of Shares with respect to which the rights are being exercised, accompanied by this Agreement for appropriate endorsement by the Company, such investment letter as may be required by Section 14 hereof, executed Stockholders Agreement described in Section 8 below, payment of the exercise price, and such other representations and agreements as may be required by the Administrator. The exercise price may be paid in cash, check, or consideration received by the Company under a broker assisted sale and remittance program acceptable to the Administrator.

        8.    Stockholders Agreement.    Notwithstanding any other provision of this Agreement to the contrary, the initial exercise of these options shall be further conditioned upon the execution and delivery by the Optionee and, if applicable, his/her spouse, of the Stockholders Agreement (in the form attached hereto as Exhibit A), to the extent not already a party thereto. This provision shall terminate in the event of a Qualified Public Offering.

        9.    Regulatory Compliance.    The issue and sale of Common Stock pursuant to this Agreement shall be subject to full compliance with all then applicable requirements of law and the requirements of any stock exchange or interdealer quotation system upon which the Common Stock may be listed or traded.

        10.    Legends.    The certificates evidencing the Common Stock issued upon exercise of these options, if any, shall bear the following legend, if applicable, at the time of exercise:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF SUCH ACT OR SUCH LAWS OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

In addition, each certificate evidencing the Common Stock issued upon exercise of these options, if any, shall be endorsed with the following legend:

THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS AGREEMENT BETWEEN BRIDGEPOINT EDUCATION, INC., A DELAWARE CORPORATION (THE "COMPANY"), THE HOLDER OF THE SHARES REPRESENTED BY THIS CERTIFICATE, AND CERTAIN OTHER INVESTORS. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL BUSINESS OFFICE OF THE COMPANY.

        11.    Modification and Termination.    The rights of the Optionee are subject to modification and termination in certain events, as provided in the Plan.

        12.    Withholding Tax.    As a condition to the exercise of these options, the Optionee shall make such arrangements as the Administrator may require for the satisfaction of any federal, state and local income, and employment tax withholding requirements that may arise in connection with such exercise. The Optionee shall also make such arrangements as the Administrator may require for the satisfaction of any federal, state and local income, and employment tax withholding requirements that may arise in connection with the disposition of Shares purchased by exercising these options. The Optionee shall pay to the Company an amount equal to the withholding amount (or the Company may withhold such amount from the Optionee's salary) in cash or check. At the Administrator's election, the Optionee may pay the withholding amount with Shares (including previously vested Optioned Stock); provided, however, that payment in Stock shall be limited to the withholding amount calculated using the

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minimum statutory withholding rates interpreted in accordance with applicable accounting requirements, or consideration received by the Company under a broker assisted sale and remittance program acceptable to the Administrator.

        13.    Holder of Shares.    Neither the Optionee nor the Optionee's legal representative, legatee or distributee shall be, or be deemed to be, a holder of any Shares subject to these options unless and until such person has been issued a certificate or certificates therefor. No adjustment will be made for dividends or other rights for which the record date is prior to the date such stock certificate or certificates are so issued.

        14.    Investment Covenant.    The Optionee represents and agrees that if the Optionee exercises these options in whole or in part at a time when there is not in effect under the Act, a registration statement relating to the Shares issuable upon exercise hereof and there is not available for delivery a prospectus meeting the requirements of Section 10(a)(3) of such Act, (i) the Optionee will acquire the Shares upon such exercise for the purpose of investment and not with a view to the distribution thereof, (ii) if requested by the Company, upon such exercise of these options, the Optionee will furnish to the Company an investment letter in form acceptable to it, (iii) if requested by the Company, prior to selling or offering for sale any such Shares, the Optionee will furnish the Company with an opinion of counsel satisfactory to it to the effect that such sale may lawfully be made and will furnish it with such certificates as to factual matters as it may reasonably request, and (iv) certificates representing such shares may be marked with an appropriate legend describing such conditions precedent to sale or transfer. Any person or persons entitled to exercise these options under the provision of Section 6 hereof shall furnish to the Company letters, opinions, and certificates to the same effect as would otherwise be required of the Optionee.

        15.    Nondisclosure.    Optionee acknowledges that the grant and terms of these options are confidential and may not be disclosed by Optionee to any other person, including other employees of the Company and other participants in the Plan, without the express written consent of the Company's President. Notwithstanding the foregoing, the Optionee may disclose the grant and terms of these options to the Optionee's family member, financial advisor, and attorney. Any breach of this provision will be deemed to be a material breach of this Agreement.

        16.    Governing Law.    This Agreement shall be governed by and interpreted in accordance with the internal laws of the State of Delaware.

        17.    Successors.    This Agreement shall inure to the benefit of and be binding upon the parties hereto and their legal representatives, heirs, and permitted successors and assigns.

        18.    Plan.    This Agreement is subject to all of the terms and provisions of the Plan, receipt of a copy of which is hereby acknowledged by the Optionee. The Optionee further acknowledges receipt of a copy of the Stockholders Agreement. The Optionee hereby agrees to accept as binding, conclusive, and final all decisions and interpretations of the Administrator upon any questions arising under the Plan, this Agreement, and Notice of Stock Option Grant.

        19.    Rights to Future Employment.    These options do not confer upon the Optionee any right to continue in the Service of the Company or any Affiliate, nor does it limit the right of the Company to terminate the Service of the Optionee at any time.

        20.    Market Stand-Off.    In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Act, including the Company's initial public offering, the Optionee shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Shares acquired under this Agreement without the prior written consent of the Company or its underwriters. Such restriction (the "Market

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Stand-Off") shall be in effect for such period of time following the date of the final prospectus for the offering as may be requested by the Company or such underwriters. In no event, however, shall such period exceed 180 days. In the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company's outstanding securities without receipt of consideration, any new, substituted or additional securities which are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares acquired under this Agreement until the end of the applicable stand-off period. The Company's underwriters shall be beneficiaries of the agreement set forth in this Section. This Section shall not apply to Shares registered in the public offering under the Act, and the Optionee shall be subject to this Section only if the directors and officers of the Company are subject to similar arrangements.

        21.    Merger, Consolidation, Reorganization, Liquidation, Etc.    If the Company shall become a party to any corporate reorganization, merger, liquidation, spinoff, or agreement for the sale of substantially all of its assets and property, the Board shall attempt to make appropriate arrangements, which shall be binding upon the Optionee, for the substitution of new options for any unexpired options then outstanding under this Agreement, or for the assumption of any such unexpired options, to the end that the Optionee's proportionate interest shall be maintained as before the occurrence of such event. If the options granted hereunder are not substituted or assumed, then the options shall fully vest and become exercisable on the date that immediately precedes the effective date of such event, and the Administrator shall notify the Optionee of their options' exercisability at least 21 days prior to the effective date of such event so that the Optionee can decide whether to exercise the options on the date that immediately precedes the effective date of the event. Effective on the effective date of such event all unexercised options shall terminate. Notwithstanding the foregoing, the Company may cancel all outstanding options effective as of the date of the applicable transaction and deliver to Optionee in lieu thereof the difference between the Fair Market Value of a Share on the date of the applicable transaction and the Exercise Price, multiplied by the number of vested Shares that Optionee would have received had Optionee exercised the Option. For purposes of the preceding sentence, Optionee shall be deemed to be vested in a Share if such Share is not subject to the Company's right to repurchase at its Exercise Price. Notwithstanding anything in this Agreement to the contrary, unless Section 280G Approval, as defined below, has been obtained, no acceleration of vesting or payment shall occur under this Section 21 to the extent that such acceleration or payment would, after taking into account any other payments in the nature of compensation to which the Optionee would have a right to receive from the Company and any other Person contingent upon the occurrence of such Change in Control, result in a "parachute payment" as defined in Section 280G(b)(2) of the Code. "Section 280G Approval" shall mean the stockholder approval obtained in compliance with the requirements of Code Section 280G(b)(5)(B), as amended, and any successor thereof, and the regulations or proposed regulations promulgated thereunder, as determined by the Board in its sole discretion.

        22.    Entire Agreement.    The Notice of Stock Option Grant, this Agreement, and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof. They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof.

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Exhibit 10.12

EX-23.2

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EXHIBIT 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        We hereby consent to the use in this Registration Statement on Amendment No. 1 to Form S-1 of our reports dated December 21, 2008, except for Note 3, "Restatement of Consolidated Financial Statements: Restatement of Redeemable Convertible Preferred Stock and Earnings Per Share," and Note 20 "Subsequent Events," which are as of February 16, 2009, relating to the consolidated financial statements and financial statement schedule of Bridgepoint Education, Inc. and its subsidiaries, which appear in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
San Diego, California
February 16, 2009

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EXHIBIT 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM