FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly month and six period ended December 31, 2002
Commission file number 0-12751
DELAWARE 36-315014
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES X
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
YES X
Number of shares of Common Stock, $0.01 par value, outstanding at January 31, 2003: 69,944,447
Total number of pages: 63
DeVRY INC.
FORM 10-Q INDEX
For the Quarter and Six Months Ended December 31, 2002
PART I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets at
December 31, 2002, June 30, 2002,
and December 31, 2001 3-4
Consolidated Statements of Income
for the quarters and six months ended
December 31, 2002 and 2001 5
Consolidated Statements of Cash
Flows for the six months ended
December 31, 2002 and 2001 6
Notes to Consolidated Financial
Statements 7-16
Item 2. Management's Discussion and
Analysis of Results of Operations
and Financial Condition 17-21
Item 4. Controls and Procedures 22
Part II. Other Information
Item 1. Legal Proceedings 23
Item 4. Submission of Matters to a Vote
of Security Holders 24
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 25
SIGNATURES 26
CERTIFICATIONS 27-32
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EXHIBITS 33-63
PART I - Financial Information
Item 1 - Financial Statements
DEVRY INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
December 31, June 30, December 31,
2002 2002 2001
------------ ------------ ------------
(Unaudited) (Unaudited)
ASSETS
Current Assets
Cash and Cash Equivalents $ 134,575 $ 59,685 $ 76,108
Restricted Cash 41,173 19,264 28,934
Accounts Receivable, Net 46,845 26,054 65,416
Inventories 3,022 4,907 2,184
Prepaid Income Taxes 11,101 - 327
Deferred Income Taxes 5,448 5,448 5,221
Prepaid Expenses and Other 4,036 2,469 4,275
------- ------- -------
Total Current Assets 246,200 117,827 182,465
------- ------- -------
Land, Buildings and Equipment
Land 58,936 58,928 58,892
Buildings 175,564 174,344 171,067
Equipment 188,842 173,115 157,131
Construction In Progress 989 1,626 237
------- ------- -------
424,331 408,013 387,327
Accumulated Depreciation (165,391) (150,386) (136,094)
------- ------- -------
Land, Buildings and
Equipment, Net 258,940 257,627 251,233
------- ------- -------
Other Assets
Intangible Assets, Net 35,330 35,692 36,056
Goodwill 42,391 42,391 42,391
Deferred Income Taxes - 1,801 3,560
Perkins Program Fund, Net 10,617 10,180 9,958
Other Assets 2,007 2,110 2,225
------- ------- -------
Total Other Assets 90,345 92,174 94,190
------- ------- -------
TOTAL ASSETS $595,485 $467,628 $527,888
======= ======= =======
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The accompanying notes are an integral part of these consolidated financial statements.
DEVRY INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
December 31, June 30, December 31,
2002 2002 2001
------------ ------------ ------------
(Unaudited) (Unaudited)
LIABILITIES
Current Liabilities
Accounts Payable $ 31,285 $ 36,284 $ 34,476
Accrued Salaries, Wages &
Benefits 31,288 27,595 26,578
Accrued Expenses 11,945 11,643 7,431
Advance Tuition Payments 19,211 15,883 7,730
Deferred Tuition Revenue 97,355 12,287 99,509
------- ------- -------
Total Current Liabilities 191,084 103,692 175,724
------- ------- -------
Other Liabilities
Revolving Loan - - 25,000
Deferred Income Taxes 4,888 - -
Deferred Rent and Other 11,849 10,390 9,890
------- ------- -------
Total Other Liabilities 16,737 10,390 34,890
------- ------- -------
TOTAL LIABILITIES 207,821 114,082 210,614
------- ------- -------
SHAREHOLDERS' EQUITY
Common Stock, $0.01 par value,
200,000,000 Shares Authorized,
69,928,447, 69,898,540 and
69,807,822, Shares Issued and
Outstanding at December 31,
2002, June 30, 2002 and
December 31, 2001,
Respectively 700 700 698
Additional Paid-in Capital 66,481 66,345 64,924
Retained Earnings 319,934 285,827 251,269
Accumulated Other Comprehensive
Income 549 674 383
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY 387,664 353,546 317,274
------- ------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $595,485 $467,628 $527,888
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The accompanying notes are an integral part of these consolidated financial statements.
DEVRY INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except for Per Share Amounts)
(Unaudited)
For The Quarter For The Six Months
Ended December 31, Ended December 31,
-------------------- --------------------
2002 2001 2002 2001
-------------------- --------------------
REVENUES:
Tuition $159,159 $153,727 $310,314 $298,486
Other Educational 13,272 12,814 25,301 22,495
Interest 117 134 202 326
------- ------- ------- -------
Total Revenues 172,548 166,675 335,817 321,307
------- ------- ------- -------
COSTS AND EXPENSES:
Cost of Educational Services 93,480 90,135 185,651 173,262
Student Services and
Administrative Expense 55,271 45,854 107,728 93,970
Interest Expense 47 291 94 601
------- ------- ------- -------
Total Costs and Expenses 148,798 136,280 293,473 267,833
------- ------- ------- -------
Income Before Income Taxes 23,750 30,395 42,344 53,474
Income Tax Provision 8,949 11,976 16,387 20,977
Non-Recurring Tax Benefits (8,150) - (8,150) -
------- ------- ------- -------
NET INCOME $ 22,951 $ 18,419 $ 34,107 $ 32,497
======= ======= ======= =======
EARNINGS PER COMMON SHARE
Basic $0.33 $0.26 $0.49 $0.47
===== ===== ===== =====
Diluted $0.33 $0.26 $0.49 $0.46
===== ===== ===== =====
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The accompanying notes are an integral part of these consolidated financial statements.
DEVRY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
For The Six Months
Ended December 31,
-------------------
2002 2001
-------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 34,107 $32,497
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation 18,666 15,721
Amortization of Intangible Assets and Goodwill 362 405
Amortization of Other Assets 22 22
Provision for Refunds and
Uncollectible Accounts 17,931 17,267
Deferred Income Taxes 6,689 1,098
Loss on Disposals and Adjustments to
Land, Buildings and Equipment 128 201
Changes in Assets and Liabilities:
Restricted Cash (21,909) (8,450)
Accounts Receivable (38,606) (56,990)
Inventories 1,885 2,715
Prepaid Expenses And Other (11,681) (1,224)
Accounts Payable (4,999) (97)
Accrued Salaries, Wages,
Expenses and Benefits 3,995 (991)
Advance Tuition Payments 3,328 (6,449)
Deferred Tuition Revenue 85,068 88,552
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NET CASH PROVIDED BY OPERATING ACTIVITIES 94,986 84,277
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (20,107) (62,488)
------- ------
NET CASH USED IN INVESTING ACTIVITIES: (20,107) (62,488)
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds From Exercise of Stock Options 136 443
Proceeds From Revolving Credit Facility - 55,000
Repayments Under Revolving Credit Facility - (30,000)
------- ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 136 25,443
Effects of Exchange Rate Differences (125) (337)
------- ------
NET INCREASE IN CASH AND CASH EQUIVALENTS 74,890 46,895
Cash and Cash Equivalents at Beginning
of Period 59,685 29,213
------- ------
Cash and Cash Equivalents at End of Period $134,575 $76,108
======= ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest Paid During the Period $93 $591
Income Tax Payments During the Period, Net 14,552 24,481
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The accompanying notes are an integral part of these consolidated financial statements.
DEVRY INC.
Notes to Consolidated Financial Statements For the Quarter and Six Months Ended December 31, 2002
NOTE 1: INTERIM FINANCIAL STATEMENTS
The interim consolidated financial statements include the accounts of DeVry Inc. (the Company) and its wholly-owned subsidiaries. These financial statements are unaudited but, in the opinion of management, contain all adjustments, consisting only of normal, recurring adjustments, necessary to present fairly the financial condition and results of operations of the Company. The June 30, 2002 data, which is presented, is derived from audited financial statements.
The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2002 and in conjunction with the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2002, each as filed with the Securities and Exchange Commission.
The results of operations for the six months ended December 31, 2002, are not necessarily indicative of results to be expected for the entire fiscal year.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Goodwill and indefinite lived intangibles are reviewed annually for impairment, or more frequently if circumstances arise indicating impairment. For goodwill, if the carrying amount of the reporting unit containing the goodwill exceeds the fair value of that reporting unit, an impairment loss is recognized to the extent the "implied fair value" of the reporting unit goodwill is less than the carrying amount of the goodwill. For indefinite lived intangible assets, if the carrying amount exceeds the fair value, an impairment loss shall be recognized in an amount equal to that excess. Amortization of intangible assets with finite lives will continue over the expected economic lives of the intangible assets, generally six to 15 years.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
NOTE 3: INTANGIBLE ASSETS
Intangible assets consist of the following:
As of December 31, 2002
----------------------------------
Gross Carrying Accumulated
Amount Amortization
----------------------------------
Amortized Intangible Assets:
License and Non Compete
Agreements $2,600,000 $(1,477,000)
Class Materials 2,900,000 (400,000)
Other 600,000 (350,000)
--------- ---------
Total $6,100,000 $(2,227,000)
========= =========
Unamortized Intangible Assets:
Trademark $ 1,645,000
Trade Names 15,872,000
Intellectual Property 13,940,000
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Total $31,457,000
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NOTE 3: INTANGIBLE ASSETS, continued
As of June 30, 2002
----------------------------------
Gross Carrying Accumulated
Amount Amortization
----------------------------------
Amortized Intangible Assets:
License and Non Compete
Agreements $2,600,000 $(1,265,000)
Class Materials 2,900,000 (300,000)
Other 600,000 (300,000)
--------- ---------
Total $6,100,000 $(1,865,000)
========= =========
Unamortized Intangible Assets:
Trademark $ 1,645,000
Trade Names 15,872,000
Intellectual Property 13,940,000
----------
Total $31,457,000
==========
As of December 31, 2001
----------------------------------
Gross Carrying Accumulated
Amount Amortization
----------------------------------
Amortized Intangible Assets:
License and Non Compete
Agreements $2,600,000 $(1,051,000)
Class Materials 2,900,000 (200,000)
Other 600,000 (250,000)
--------- ---------
Total $6,100,000 $(1,501,000)
========= =========
Unamortized Intangible Assets:
Trademark $ 1,645,000
Trade Names 15,872,000
Intellectual Property 13,940,000
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Total $31,457,000
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NOTE 3: INTANGIBLE ASSETS, continued
Amortization expense for amortized intangible assets was $180,000 and $362,000 for the quarter and six months ended December 31, 2002, respectively, and $259,000 and $405,000 for the quarter and six months ended December 31, 2001, respectively. Estimated amortization expense for amortized intangible assets for the next five fiscal years ending June 30, is as follows:
Fiscal Year
2003 $730,000
2004 730,000
2005 730,000
2006 230,000
2007 210,000
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The original weighted-average amortization period for amortized intangible assets is six years for License and Non Compete Agreements, 14 years for Class Materials and six years for Other as of December 31, 2002.
Indefinite lived intangible assets related to Trademarks, Trade Names and Intellectual Property are not amortized as there are no legal, regulatory, contractual, economic or other factors that limit the useful life of these intangible assets by the Company. As of the end of fiscal 2002, there was no impairment loss associated with these indefinite lived intangible assets as fair value exceeded the carrying amount.
Based upon the valuation analysis performed for the Company by independent professional valuation specialists, there was no impairment in the value of the Company's goodwill for any reporting units as of the end of fiscal 2002. The carrying amount of goodwill related to the DeVry University reportable segment at December 31, 2002 and 2001 was unchanged at $22,195,000. The carrying amount of goodwill related to Professional and Training reportable segment at December 31, 2002 and 2001 was unchanged at $20,196,000.
NOTE 4: IMPAIRMENT OF LONG-LIVED ASSETS
During the quarter ended December 31, 2002, the Company assessed the expected future results of its DeVry University Canadian operations. The Company recently consolidated campuses in the Toronto area and has proceeded further with other rationalization and cost cutting efforts in response to declining enrollment. However, there has been a further decline in enrollment producing further adverse effects on financial performance in Canada during the first half of fiscal 2003. The assessment included estimates of expected future cash flows associated with the Canadian operations, which indicated an impairment loss with respect to certain long-lived assets that are held and used by the Company. Upon completing this analysis, it was determined that recognition of an impairment loss related to Canadian leasehold improvements was appropriate. This resulted in a charge in the quarter ended December 31, 2002 of approximately $800,000 that is classified as Cost of Educational Services in the Consolidated Statements of Income and related to the DeVry University reportable segment.
NOTE 5: INCOME TAXES
As described in Note 4 above, during the quarter ended December 31, 2002, the Company assessed the expected future results of its DeVry University Canadian operations. The assessment also included an analysis of the previously recorded Canadian net deferred tax assets, which were primarily comprised of net operating loss carryforwards and property and equipment tax basis in excess of book basis. Based on these recent estimates of future cash flows and taxable income associated with the Canadian operations, it was determined that, with respect to the realization of the deferred tax asset, a valuation allowance for 100 percent of the Canadian deferred tax assets was appropriate at this time. This resulted in an additional income tax provision in the quarter ended December 31, 2002 of approximately $6.5 million.
The Company also determined that it would deduct the full amount of the tax basis of its investment in its Canadian subsidiary in this quarter. This reflects the negative value ascribed to the investment as determined by independent valuations of the business which were undertaken as a part of the assessment. This United States income tax deduction results in a tax benefit totaling approximately $14.6 million. Such a benefit has been recorded as it has been determined that the difference in the US tax basis of the investment, which exceeds the book value, will reverse in the foreseeable future.
The effect of the above actions is a net tax benefit of approximately $8.1 million, categorized as "Non-recurring Tax Benefits" in the Consolidated Statements of Income.
The Company is continuing to assess the operations in Canada and will take further actions to reduce the level of losses being incurred. However, such losses and the future obligations associated with leases and providing instruction in Canada are significant factors in the current assessment of expected future operating results.
Also, during the second quarter ended December 31, 2002, the Company completed a study that identified certain business incentive tax credits relating primarily to employment at its DeVry University operations in Long Beach, California. These credits contributed to a reduced ongoing effective tax rate of 38.7 percent for fiscal 2003. For the first half of fiscal 2003, tax expense was adjusted to this effective tax rate. The current effective tax rate does not include the effect of the previously described non-recurring tax benefit related to the Company's Canadian operations.
NOTE 6: SEGMENT INFORMATION
The Company's principal business is providing post-secondary education. The services provided by our operations are described in more detail under "Nature of Operations" in Note 1 to the consolidated financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2002. The Company presents two reportable segments: the DeVry University under-
NOTE 6: SEGMENT INFORMATION, continued
graduate and graduate operations (DeVry University) and the professional examination review and training operations including Becker Conviser Professional Review and Center for Corporate Education (Professional and Training).
These segments are based on the method by which management evaluates performance and allocates resources. Such decisions are based upon each segment's operating income, which is defined as income before interest expense, amortization and income taxes. Intersegment sales are accounted for at amounts comparable to sales to nonaffiliated customers, and are eliminated in consolidation. The accounting policies of the segments are the same as those described in Note 1 - Summary of Significant Accounting Policies to the consolidated financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2002.
The segments as described above have changed from those previously reported. In February 2002, the Higher Learning Commission of the North Central Association approved the merger of DeVry Institutes (undergraduate programs) and Keller Graduate School of Management (graduate programs) into a single educational institution with the name of DeVry University. The North Central Association is one of six regional bodies that make up the nation's system for accrediting colleges and universities. In support of the transition to DeVry University, the Company's resources and organization have been restructured to better serve the needs of its students, employers and shareholders and achieve the University's strategic goals. Accordingly, the reportable segments of the Company have been realigned to reflect this combination.
The consistent measure of segment profit excludes interest expense, amortization and certain corporate related depreciation. As such, these items are reconciling items in arriving at income before income taxes. The consistent measure of segment assets excludes deferred income tax assets and certain depreciable corporate assets. Additions to long-lived assets have been measured in this same manner. Reconciling items are included as corporate assets.
NOTE 6: SEGMENT INFORMATION, continued
Following is a tabulation of business segment information for the quarters and for the six months ended December 31, 2002 and 2001. Corporate information is included where it is needed to reconcile segment data to the consolidated financial statements.
For the Quarter For the Six Months
Ended December 31, Ended December 31,
------------------ ------------------
2002 2001 2002 2001
---- ---- ---- ----
Revenues:
DeVry University $159,103 $155,294 $313,561 $301,551
Professional and Training 13,445 11,381 22,256 19,756
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Total Consolidated Revenues $172,548 $166,675 $335,817 $321,307
------- ------- ------- -------
Operating Income:
DeVry University $18,170 $27,270 $35,256 $48,795
Professional and Training 6,014 3,880 7,941 6,068
Reconciling Items:
Amortization Expense (192) (270) (384) (427)
Interest Expense (47) (291) (94) (601)
Depreciation and Other (195) (194) (375) (361)
------ ------ ------ ------
Total Consolidated Income
before Income Taxes $23,750 $30,395 $42,344 $53,474
------ ------ ------ ------
Segment Assets:
DeVry University $497,311 $443,732 $497,311 $443,732
Professional and Training 69,714 62,360 69,714 62,360
Corporate 28,460 21,796 28,460 21,796
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Total Consolidated Assets $595,485 $527,888 $595,485 $527,888
------- ------- ------- -------
Additions to Long-lived Assets:
DeVry University $10,021 $7,133 $20,051 $62,102
Professional and Training 42 137 56 386
------ ----- ------ ------
Total Consolidated Additions
to Long-lived Assets $10,063 $7,270 $20,107 $62,488
------ ----- ------ ------
Depreciation Expense:
DeVry University $ 9,770 $7,875 $18,084 $15,071
Professional and Training 97 142 191 263
Corporate 196 194 391 387
------ ----- ------ ------
Total Consolidated Depreciation $10,063 $8,211 $18,666 $15,721
------ ----- ------ ------
Amortization Expense:
DeVry University $ 7 $ 7 $ 15 $ 15
Professional and Training 185 263 369 412
--- --- --- ---
Total Consolidated Amortization $192 $270 $384 $427
--- --- --- ---
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NOTE 6: SEGMENT INFORMATION, continued
The Company conducts its educational operations in the United States, Canada, Europe, the Middle East and the Pacific Rim. International revenues, which are derived principally from Canada, were less than 5% of total revenues for the quarters and for the six months ended December 31, 2002 and 2001. Revenues and long-lived assets by geographic area are as follows:
For the Quarter For the Six Months
Ended December 31, Ended December 31,
-------------------- --------------------
2002 2001 2002 2001
-------------------- --------------------
Revenues from Unaffiliated Customers:
Domestic Operations $167,072 $160,743 $325,353 $308,976
International Operations 5,476 5,932 10,464 12,331
------------------ ------------------
Consolidated $172,548 $166,675 $335,817 $321,307
================== ==================
Long-lived Assets:
Domestic Operations $346,931 $334,971 $346,931 $334,971
International Operations 2,354 10,452 2,354 10,452
------------------ ------------------
Consolidated $349,285 $345,423 $349,285 $345,423
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No one customer accounted for more than 10% of the Company's consolidated revenues.
NOTE 7: COMMITMENTS AND CONTINGENCIES
The Company is subject to occasional lawsuits, regulatory reviews associated with financial assistance programs and claims arising in the normal conduct of its business. These are described in "Item 6 - Other Information" later in this report. The Company has accrued amounts it believes are appropriate to vigorously pursue its defense in these matters. At this time, the Company does not believe that the outcome of current claims, regulatory reviews and lawsuits will have a material effect on its results of operations or financial position.
The following updates the status of litigation and claims previously disclosed:
In March 2002, the Company received notice of a class-action complaint filed under the Fair Labor Standards Act by several former field sales representatives seeking overtime compensation for services rendered during their period of employment.
NOTE 7: COMMITMENTS AND CONTINGENCIES, continued
In January 2002, the Company received notice of an antitrust complaint concerning the alleged monopoly by operations of its Becker CPA Review Corp. subsidiary in California. This complaint was filed in federal district court by the trustee in bankruptcy of a failed CPA review provider seeking a substantial amount of damages. On April 15, 2002, this complaint was voluntarily dismissed by the plaintiff without prejudice. The complaint was amended and has subsequently been refiled.
In January 2002, a graduate of one of DeVry University's Los Angeles-area campuses filed a class-action complaint on behalf of all students enrolled in the post-baccalaureate degree program in Information Technology. The suit alleges that the program offered by DeVry did not conform to the program as it was presented in the advertising and other marketing materials.
In November 2000, three 1999 graduates of one of DeVry University's Chicago- area campuses filed a class-action complaint that alleges DeVry graduates do not have appropriate skills for employability in the computer information systems field. The complaint was subsequently dismissed by the court, but was amended and refiled, this time including a student from a second Chicago- area campus.
The Company has recorded approximately $1 million associated with estimated loss contingencies at June 30, 2002. While the ultimate outcome of these contingencies is difficult to estimate at this time, the Company does intend to vigorously defend itself with respect to these claims.
In conjunction with the required annual review procedures for fiscal year 2001 related to its administration of financial aid programs under the Ontario Student Aid Program, the Toronto-area DeVry campuses engaged in discussions with the Ontario Ministry of Education relating to certain additional information requirements. These additional information requirements could be interpreted as the basis for a Ministry claim for the return of some amounts of financial aid disbursed to students attending these campuses. Discussions with the Ministry as to the extent and purpose of the information requirements resulted in the submission of additional data. Based upon its discussions to-date, the Company believes that its discussions with the Ministry with respect to these requests for fiscal 2001 have been successfully concluded and that there should be no monetary liability.
Certain information contained in this quarterly report may constitute forward- looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon the Company's current expectations and beliefs about future events. Such statements are inherently uncertain and may involve risks that could cause future results of differ materially from the forward-looking statements. Potential risks and uncertainties include, but are not limited to, undergraduate program concentration in selected areas of technology, dependence on student financial aid, dependence on state and provincial approvals and licensing requirements, dependence on continued accreditation for DeVry University and other factors detailed in the Company's Securities and Exchange Commission filings, including those discussed under the heading entitled "Risk Factors" in the Company's Registration Statement on Form S-3 (No. 333-22457).
The following discussion of the Company's results of operations and financial condition should be read in conjunction with the consolidated financial statements of the Company and the notes thereto as included in the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2002 and the Company's annual report on Form 10-K for the fiscal year ended June 30, 2002. The Company's annual report on Form 10-K includes a description of significant accounting policies and estimates and assumptions used in the preparation of the Company's financial statement including, but not limited to, revenue recognition, useful lives of equipment and facilities, useful lives of acquired finite-lived intangible assets, valuation of goodwill and indefinite-lived intangible assets, losses on the collection of student receivable balances, settlements of law suits and health care costs for incurred but not yet paid medical services.
Because of the somewhat seasonal pattern of the Company's enrollments and its educational program starting dates, which affect the results of operations and the timing of cash inflows, the Company's management believes that comparisons of its results of operations should be made to the corresponding period in the preceding year. Comparisons of financial position should be made to both the end of the previous fiscal year and to the end of the corresponding interim quarterly period in the preceding year.
Copies of the Company's annual and quarterly reports on Form 10-K and Form 10-Q as filed with the Securities and Exchange Commission may be obtained at the Company's website, www.devry.com.
Other Educational Revenues, which are composed primarily of the sale of books, supplies, fee charges and interest or payment deferral charges in the Company's educational programs, increased by $0.5 million and $2.8 million from the second quarter and first half, respectively. The larger rate of increase for the first half compared to the second quarter is caused by the Technology and Software Supplies charge billed each term to most DeVry University undergraduate students. This charge was first assessed in November 2001 and, therefore, there was no charge in the first quarter of last year compared to the charge in the first quarter of this year. During the second quarter, a total of 14 of the DeVry University undergraduate campus bookstores were outsourced to Follett Higher Education Group compared to 12 that were outsourced during the second quarter of last year. Sales of books and supplies remain under Company management at the other undergraduate and graduate teaching locations.
DeVry University segment revenues increased by $3.8 million, or 2.5%, for the second quarter compared to last year. For the first half, segment revenues increased by $12.0 million, or 4.0%. Contributing to the increased revenues were higher graduate program enrollments, the undergraduate program Technology and Software Supplies charge described above and approximately 6% tuition rate increases, all of which more than offset the lower enrollment in undergraduate programs. For the undergraduate academic term which began in November, total enrollment declined by 5.9% to 45,200 compared to 48,032 students enrolled last year. The Company believes that undergraduate program enrollments continue to be affected by the reductions in technology field employment that have lessened applicant interest in these fields. The number of coursetakers in the Keller graduate school programs for the term that began in November increased by 22.0% to 10,761 compared to 8,823 coursetakers last year as interest in graduate management programs remains high.
Professional and Training segment revenues increased by $2.1 million, or 18.1%, and $2.5 million, or 12.7%, for the second quarter and first half, respectively. The increased revenue results from higher course prices and an increased number of students enrolled in the Becker Conviser CPA Review course preparing for the November CPA exam.
The Company's Cost of Educational Services increased by $3.3 million or 3.7% from the second quarter of last year. For the first half, the Cost of Educational Services increased by $12.4 million, or 7.2% from last year. Cost increases were incurred throughout all of the Company's operations. At DeVry University, there were two new large undergraduate campuses and 14 additional University Center locations offering undergraduate programs. Graduate programs were offered in seven more teaching centers than last year. Expanded operations in the undergraduate and graduate online programs also contributed to the cost increases.
Depreciation expense, most of which is included in Cost of Educational Services, increased by $2.9 million for the first half of the year because of the investment in new facilities and associated equipment and because of improvements to existing facilities and the new equipment required to support continuous improvement to the Company's educational programs. Further contributing to the increased depreciation for the first six months was the recognition during the second quarter of an approximately $0.8 million impairment loss in accordance with SFAS 144 on the long-lived leasehold improvements in the Company's Canadian operations. The recognition of this impairment loss followed an assessment of the expected future results and cash flows of the Canadian operations where enrollment declines have adversely affected financial results.
Student Services and Administrative Expense increased by $9.4 million, or 20.5%, and $13.8 million, or 14.6%, from the second quarter and first half of last year, respectively. Spending for advertising was increased to try and offset the decline in undergraduate new student enrollments experienced in each of the last four terms. Also contributing to the increase in this expense category was the continued spending on a new student information system to provide better support for educational processes and related activities. Information system development costs related to this project, and to other system support and improvement initiatives, have increased from last year. In accordance with accounting principles for internal software development costs, certain wage and outside consulting service costs are being capitalized. During the first half, the Company capitalized $3.1 million and charged an additional $2.6 million directly to expense related to work on the new student information system. In addition, $0.2 million of previously capitalized costs were amortized to expense during the first half.
Included in the higher level of Student Services and Administrative Expense, was an approximately $1.1 million accrual to reflect the costs for the current period relating to new employment agreements with the Company's co-Chief Executive Officers. This accrual is based on recording, over the period of their future active service, the present value of the obligation using the sinking fund accrual method. Under this method of accrual, future quarters in the remaining 2 1/2 year accrual period will be less than the charge recorded in the current quarter.
The total Cost of Educational Services and Student Services and Administrative Expense for the second quarter increased from last year by 9.4%. This increase in spending, when compared to the prior year, is the smallest rate of spending increase in any of the eight previous quarters as the Company initiated staff and budget reductions to better match expenses to revenues. In the first quarter, the Company eliminated about 70 staffed and 100 unfilled positions and further reduced discretionary spending through the second quarter. These expense reductions have helped to offset a portion of the cost increases associated with the previously discussed increases in spending on advertising and spending at the new DeVry University undergraduate and graduate teaching locations opened during the past year.
In the DeVry University segment, operating income declined by $9.1 million and $13.5 million, respectively, for the second quarter and first half of the year. Contributing to the decline in income was a lesser rate of revenue growth than experienced in previous years as a result of declining undergraduate enrollments. Expenses, as described above, have increased at a faster rate. The increased expenses are associated with more teaching locations, higher levels of advertising directed at trying to offset the declining undergraduate enrollments, accrual of the current period cost related to the new employment agreements and the recognition of an impairment loss on leasehold improvements in the Canadian operations.
In the Professional and Training segment, operating income increased by $2.1 million for the second quarter and by $1.9 million for the first six months. Higher tuition rates and increased enrollments in the Becker Conviser CPA Review course for the November CPA examination produced the higher income.
Interest expense was lower than last year by $0.2 million in the second quarter and by $0.5 million for the first half. During the first half of this year there were no borrowings under the Company's revolving line of credit agreement. This compares to borrowings that were outstanding during both the first and second quarters of last year, principally to provide funds for the first quarter acquisition of two DeVry University undergraduate campuses.
Taxes on income for the first six months, excluding the non-recurring tax benefits during the second quarter, were at an effective rate of 38.7% compared to a rate of 39.2% for the first six months of last year. Contributing to the lower tax rate in the first half of this year were certain business incentive tax credits. During the second quarter the Company completed a study that identified and quantified the amount of these tax credits relating primarily to employment at the DeVry University campus in Long Beach, California. Additional credits in lesser amounts may also be available next year.
During the second quarter, the Company recorded approximately $8.1 million of net non-recurring tax benefits related to its Canadian operations. In this period, the Company assessed the expected future results of its DeVry University Canadian operations including future cash flows and taxable income. This assessment included an analysis of the previously recorded Canadian deferred tax assets. These deferred tax assets consisted primarily of net operating loss carryforwards and a tax basis higher than book basis for property and equipment. Based upon this assessment, it was determined that a valuation allowance of 100 percent was required for these deferred tax assets. This resulted in an additional income tax expense provision in the second quarter of approximately $6.5 million.
The Company also determined, based upon this same assessment, that it would deduct the full amount of the tax basis of its investment in its Canadian subsidiary. This reflects the negative value ascribed to the investment as determined by the independent valuations of the business which were undertaken as a part of the assessment. The U.S. income tax deduction results in a tax benefit totaling approximately $14.6 million. The net effect of these two actions is a benefit to net income of approximately $8.1 million, categorized as "Non-Recurring Tax Benefits" in the Statement of Income.
Net Income for the quarter, including these Non-Recurring Tax Benefits, was $23.0 million, or $0.33 per share fully diluted, compared to $18.4 million, or $0.26 per share, last year. For the first half, Net Income was $34.1 million, or $0.49 per share, compared to $32.5 million, or $0.46 per share, last year.
Capital spending for the first half was $20.1 million compared to $62.5 million in the first half of last year. Included in the capital spending during the first quarter of last year was the purchase of two DeVry University undergraduate campuses for $37.8 million. Previously these campuses had been occupied under lease. Both operating and capital expenditures remain under review to better match spending with revenues in the coming quarters. Capital spending for the balance of this fiscal year is expected to remain at a level approximately equal to that incurred during the first half of the year.
The Company did not make any borrowings under its revolving line of credit agreement during the first half. Cash balances at the end of last fiscal year and cash generated from operations during the first half of the year were sufficient to meet requirements for both operating and capital needs and produce additional unrestricted cash balances compared to last year. There were approximately $2.7 million in outstanding letters of credit under the revolving line during the quarter. These letters of credit were issued in conjunction with various insurance coverage policies, a rental agreement on a leased teaching facility and for DeVry University's participation in federal financial aid programs. Approximately $0.5 million of additional amounts of letters of credit are being issued in the third quarter in conjunction with these federal financial aid programs. The Company is seeking approval from its banks for an amendment to extend the revolving credit agreement until February 1, 2005.
The Company's long-term contractual obligations consist only of its revolving line of credit, operating leases on facilities and equipment and agreements for various services. The Company is not otherwise a part to any off-balance sheet financing or contingent payment arrangements. The Company has not entered into any synthetic leases and there are no residual purchase or value commitments related to any lease. The Company has not entered into any derivative, swap, futures contract, put, call, hedge or non-exchange traded contract.
The principal source of the Company's liquidity is its operating cash flow that is significantly dependent upon DeVry University's continued participation in and compliance with federal, state and provincial financial aid programs. The Company is highly dependent upon the timely receipt of these financial aid funds in both its U.S. and Canadian operations. The Company estimates that almost 70% of its undergraduate student and approximately 40% of its graduate student tuition, bookstore and fee revenues have been financed by government-provided financial aid to students. These financial aid and assistance programs are subject to political and governmental budgetary considerations. There is no assurance that such funding will be maintained.
Extensive and complex regulations in the United States and Canada govern all of the government financial assistance programs in which the Company's students participate. The Company's administration of these programs is periodically reviewed by various regulatory agencies. Any regulatory violation could be the basis for disciplinary action, including initiation of a suspension, limitation or termination proceeding against the Company.
The Company believes that current balances of unrestricted cash, cash generated from operations and, if needed, borrowings under its revolving credit agreement will be sufficient to fund its current operations and plans for the foreseeable future.
There were no significant changes in internal controls, procedures or other factors that could significantly affect these controls subsequent to the date of their evaluation that would indicate the existence of material weakness or the need for corrective action.
In March 2002, the Company received notice of a collective-action complaint filed under the Fair Labor Standards Act by several former field sales representatives seeking overtime compensation for services rendered during their period of employment.
In January 2002, the Company received notice of an antitrust complaint concerning the alleged monopoly by operations of its Becker CPA Review Corporation subsidiary in California. This complaint was filed in federal district court by the trustee in bankruptcy of a failed CPA review provider seeking a substantial amount of damages. In April 2002, this complaint was voluntarily dismissed by the plaintiff without prejudice. The complaint was amended and has subsequently been refiled.
In January 2002, a graduate of one of DeVry University's Los Angeles-area campuses filed a class-action complaint on behalf of all students enrolled in the post-baccalaureate degree program in Information Technology. The suit alleges that the program offered by DeVry did not conform to the program as it was presented in the advertising and other marketing materials.
In November 2000, three 1999 graduates of one of DeVry University's Chicago- area campuses filed a class-action complaint that alleges DeVry graduates do not have appropriate skills for employability in the computer information systems field. The complaint was subsequently dismissed by the court, but was amended and refiled, this time including a student from a second Chicago-area campus.
The Company has recorded approximately $1 million associated with estimated loss contingencies at December 31, 2002. While the ultimate outcome of these contingencies is difficult to estimate at this time, the Company does intend to vigorously defend itself with the respect to these claims.
At the meeting, three Directors of the Company were elected to serve as Class II Directors to hold office until 2005 or until their respective successors are elected and qualified. The results of the voting for Directors, whether in person or by proxy, were as follows:
Class II For Against Withheld
-------- --- ------- --------
David S. Brown 58,003,781 - 2,054,814
Dennis J. Keller 54,377,836 - 5,680,759
Frederick A. Krehbiel 59,292,182 - 766,413
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The terms of office of the following Directors continued after the meeting:
Charles A. Bowsher, Thurston E. Manning, Robert C. McCormack, Julie A. McGee,
Hugo J. Melvoin, Harold T. Shapiro and Ronald L. Taylor.
Also submitted to a vote of the stockholders at this meeting was a proposal for the ratification of the appointment of PricewaterhouseCoopers LLP as independent public accountants for the Company for the current fiscal year. The following table presents the results of the stockholders' vote on this matter:
For Against Withheld --- ------- -------- 56,975,702 3,040,435 42,457 |
In late January, the Illinois Student Aid Commission began a scheduled biennial audit for fiscal years 2001 and 2002 of state financial aid program administration at the Company's two suburban Chicago-area campuses. An audit at the Chicago campus is expected to begin in March or April.
In late January, the Higher Education Services Corporation began a scheduled triennial audit of the DeVry University New York undergraduate campus of state financial aid program administration.
A complete listing of exhibits is included on page 33 of this Form 10-Q
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Company during the quarter ended December 31, 2002.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: FEBRUARY 12, 2003 /s/Ronald L. Taylor
-------------------------------------
Ronald L. Taylor
Co-Chief Executive Officer, President
and Chief Operating Officer
Date: FEBRUARY 12, 2003 /s/Norman M. Levine
-------------------------------------
Norman M. Levine
Senior Vice President and
Chief Financial Officer
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I, Norman M. Levine, certify that:
1. I have reviewed this quarterly report on Form 10-Q of DeVry Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: February 12, 2003
/s/Norman M. Levine
-----------------------
Senior Vice President &
Chief Financial Officer
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I, Ronald L. Taylor, certify that:
1. I have reviewed this quarterly report on Form 10-Q of DeVry Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: February 12, 2003
/s/Ronald L. Taylor
--------------------------
Co-Chief Executive Officer
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CERTIFICATIONS
I, Dennis J. Keller, certify that:
1. I have reviewed this quarterly report on Form 10-Q of DeVry Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: February 12, 2003
/s/Dennis J. Keller
-------------------------------
Chairman and Co-Chief Executive
Officer
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INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
10(a) Employment Agreement between
the Registrant and each of
Ronald L. Taylor and
Dennis J. Keller 34-49
10(b) Senior Advisor Agreement between
the Registrant and each of
Ronald L. Taylor and
Dennis J. Keller 50-63
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WHEREAS, the Company and the School wish to obtain the future services of the Executive for the Company and the School; and
WHEREAS, the Company, the School and the Executive are also entering into a Senior Advisor Agreement dated as of July 1, 2002 (the "Senior Advisor Agreement"), pursuant to which the Company and the School wish to obtain the future services of the Executive for the Company and the School after the Executive ceases to be employed by the Company and the School in accordance with this Agreement; and
WHEREAS, the Executive is willing, upon the terms and conditions herein set forth, to provide services hereunder;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and intending to be legally bound hereby, the parties hereto agree as follows:
(b) During the Term of Employment, the Executive shall devote substantially all of his business time, energy and skill as may be reasonably necessary for the performance of his duties, responsibilities and obligations hereunder (except for vacation periods and reasonable periods of illness and during any period in which he has a physical or mental disability which renders him incapable, after reasonable accommodation, of performing his duties under this Agreement), consistent with past practices.
(c) Nothing contained in this Agreement shall require Executive to follow any directive or to perform any act which would violate any laws, ordinances, regulations or rules of any governmental, regulatory or administrative body, agent or authority, any court or judicial authority, or any public, private or industry regulatory authority.
(d) During the Term of Employment, while the Executive is employed by the Company and the School, and notwithstanding the foregoing provisions of this Section 2, the Executive may devote reasonable time to activities other than those required under this Agreement, including the supervision of his personal investments, and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, membership on the boards of directors of other organizations, any other business or similar types of activities, consistent with past practices to the extent that such other activities do not inhibit or prohibit the performance of the Executive's duties under this Agreement, or conflict in any material way with the business of the Company, the School, or any Subsidiary; provided, however, that, the Executive shall not serve on the board of any business or hold any other position with any business without notifying the Board.
(e) For purposes of this Agreement, the term "Subsidiary" shall mean any corporation, partnership, joint venture or other entity during any period in which at least a fifty percent interest in such entity is owned, directly or indirectly, by the Company or the School(or a successor to the Company or the School).
substantially all of the assets of the Company, or a successor to such entity or purchaser, the Executive shall not be treated as having terminated employment for purposes of this Agreement until such time as the Executive terminates employment with the successor (including, without limitation, the merged entity or purchaser), provided that the new employer agrees to assume this Agreement and be substituted for the Company under this Agreement.
(b) The Executive's employment under this Agreement may be
terminated at any time by the Company: (i) in the event that because of
physical or mental disability the Executive is unable to perform, and does
not perform, his duties hereunder after reasonable accommodation for a
continuous period of one hundred eighty (180) days ("Disability"), or
(ii) for Cause (as defined in Section 3(c)). The Executive's employment
under this Agreement will terminate upon his death. Except as expressly
provided in Section 3(a) and this Section 3(b), or upon the death of
Executive, the Company may not terminate the Executive's employment hereunder
during the Term of Employment.
(c) For the purposes of this Section 3, "Cause" shall mean any of the following: (i) Executive's conviction of any crime involving any felony, or (ii) Executive's conviction of fraud or embezzlement.
(d) The Executive's employment may be terminated at any time by
the Executive in the event: (i) Executive is not accorded the authority,
duties, obligations and prerogatives set forth in Section 1, or if Executive
is able and willing to serve as a director of the Company but is not
nominated or slated for reelection as a director at the 2003 annual meeting
of the Company or thereafter, (ii) the authority, duties, obligations and
prerogatives of Executive are materially or substantially reduced, (iii) the
Executive is not paid or reimbursed the amounts owed to Executive under this
Agreement after ten (10) days' notice thereof to the Company, (iv) the
Company otherwise does not observe its obligations under this Agreement, or
(v) a "Change of Control," as defined in Exhibit A to this Agreement, occurs
while the Executive is employed by the Company, and the Executive resigns for
any reason at any time during the 12-month period following the occurrence of
a Change in Control, after providing at least 30 days' advance written notice
of such resignation to the Company (collectively, a "Constructive
Dismissal").
(e) In the event that, during the Term of Employment (as it may
be extended pursuant to Section 3(a)), the Executive's employment under this
Agreement is terminated due to Disability, by the Company for any reason
other than Cause, or by the Executive in the event of Constructive Dismissal,
then the Company, effective immediately upon such termination, will pay
Executive an amount equal to the product of 1.5 times the sum of (x) an
amount equal to the rate of annual base compensation being paid to Executive
during the fiscal year of the Company in which such termination occurs, plus
(y) the annual bonus paid to Executive during the fiscal year of the Company
immediately preceding the fiscal year in which such termination occurs.
(f) In the event that, during the Term of Employment (as it may be extended pursuant to Section 3(a)), the Executive's employment under this Agreement is terminated due to death, Disability, by the Company for any reason other than Cause, or by the Executive in the event of Constructive Dismissal, or if the Executive's employment is terminated under this Agreement due to the end of the Term of Employment (as it may be extended
pursuant to Section 3(a)) or pursuant to a Qualified Resignation or Retirement (as defined in Section 4(b)), the Executive shall receive payment of the bonus for the performance period in which his termination occurs, based on actual performance for the entire period, and payable at the same time as it is payable for executives of the Company; provided, however, that it shall be subject to a pro-rata reduction for the portion of the performance period following termination.
(g) The Executive and any of his dependents shall be eligible for COBRA continuation coverage (as described in Section 4980B of the Internal Revenue Code of 1986, as amended) to the extent required by applicable law.
(h) In the event that Executive's employment under this
Agreement is terminated during the Term of Employment (as it may be extended
pursuant to Section 3(a)) for any reason, the Company shall also pay
Executive (and shall pay Executive's Designated Beneficiary (as defined in
Section 16) in the event of his death) his accrued and unpaid base salary at
the rate in effect at the time of such termination, any previous year's
earned but unpaid bonus and other earned and unpaid incentive cash
compensation, accrued and unused vacation, unpaid expense reimbursements and
other unpaid cash entitlements earned by Executive as of the date of such
termination pursuant to the terms of the applicable Company Plan or program
(collectively, "Accrued Obligations").
(b) In addition to termination of employment due to death, Disability or resignation incident to Constructive Dismissal, and without impairing his other rights and interests hereunder, the Executive shall have the right to resign or retire from employment under this Agreement for any reason and at any time and be employed pursuant to the Senior Advisor Agreement, but only upon one-year advance written notice to the Company, with such resignation or retirement referred to herein as a "Qualified Resignation or Retirement."
(a) As base compensation for his services hereunder, in monthly
installments, a base salary at a rate of $609,000 per annum. The Executive's
base compensation rate shall be reviewed by the Board on or about July 1 of
each year during the Term of Employment to determine whether an increase in
the amount of base compensation is appropriate; provided that, in all events,
the Executive shall be entitled to an annual increase in base compensation no
less than the budgeted annual average percentage increase for all employees
of the Company. In no event shall the base compensation of the Executive be
reduced to an amount that is less than the amount specified in this
Section 5(a), or to an amount that is less than the amount that he was
previously receiving.
(b) An annual bonus as determined and approved by the Board in its sole discretion.
(c) The Executive shall receive director's fees for the period he is serving as a member of the Board.
(d) At the request of the Executive, the Company shall obtain and maintain term life insurance coverage on the Executive's life providing $1,000,000 in death benefits payable to the beneficiary named by the Executive, and the Company shall pay the premiums with respect to such policy or, at Executive's option the Executive may obtain such coverage in lieu of the Company, and the Company shall reimburse Executive for the premium cost to maintain such coverage; provided, however, that if the cost for term life insurance coverage providing for $1,000,000 in death benefits exceeds $30,000 per year, the Company shall pay (or reimburse Executive for) premiums of $30,000 per year for life insurance coverage providing for a lesser death benefit; and further provided that the Company shall have no obligation to provide life insurance coverage under this Section 5(d) if the Executive shall fail to reasonably cooperate with obtaining such insurance, including submitting to medical examination and providing information necessary for such insurance or if the Company, after reasonable investigation, is unable to obtain such coverage from a life insurance company. The Executive agrees that, in addition to the foregoing obligation to provide life insurance coverage with the benefits payable to the beneficiary named by the Executive, the Board, in its sole discretion, may direct the Company to obtain life insurance on the life of the Executive in any amount the Board determines to be appropriate, with the benefits payable to the Company or such other beneficiary determined by the Board, and the Executive and his beneficiaries shall have no rights with respect to the coverage or benefits described in this sentence.
(e) Consistent with past practices, the Company will reimburse the Executive for periodic dues associated with the Executive's membership in one professional, country, social or other club as may be selected by the Executive.
(f) Consistent with past practices, the Company shall reimburse the Executive for the costs of his financial and tax planning expenses, provided that such reimbursement shall not exceed $15,000 per year.
(g) Except as otherwise specifically provided to the contrary in this Agreement, and consistent with past practices, the Executive shall participate in (i) the Company's annual incentive compensation and long term incentive compensation programs; (ii) deferred compensation plans (including, without limitation, pension, profit sharing, savings and other retirement plans or programs); and (iii) welfare benefits and other fringe benefits, in all cases to the extent and on terms no less favorable than those benefits are provided by the Company from time to time to the Company's other senior management employees; provided, however, that if any such benefits are adjusted to reflect an executive's position, the Executive's benefits shall be adjusted in a manner commensurate with his position, consistent with past practices. However, the Company shall not be required to provide a benefit under this Section 5(g) if such benefit would duplicate (or otherwise be of the same type as) a benefit specifically required to be provided under another provision of this Agreement. Nothing in this Section 5(g) shall be construed to prevent the Company from revising the benefits or perquisites generally provided to executives from time to time.
(h) Without limiting the generality of the provisions of
Section 5(g), the Executive shall be entitled to use of an automobile on
terms consistent with past practices and no less favorable than those in
existence on the date of this Agreement (and, at the termination of the
Executive's employment under this Agreement, the Executive shall be permitted
to purchase from the Company the automobile then provided to him by the
Company, at a cost of 75% of the then book value of the automobile as shown
on the books of the Company) and to health, disability and pension benefits
consistent with past practice, or as increased from time to time, and the
Executive shall be entitled to the perquisites customarily provided by the
Company to the individual holding Executive's position.
(i) Except as may be required by the lawful order of a court or agency of competent jurisdiction, except as necessary to carry out his duties to the Company, the School and the Subsidiaries, or except to the extent that the Executive has express authorization from the Company, the Executive agrees to take all reasonable steps and actions to keep secret and confidential indefinitely, all Confidential Information, and not to disclose the same, either directly or indirectly, to any other person, firm, or business entity. The Executive shall, during the continuance of the Executive's employment, use the Executive's
best endeavors to prevent the unauthorized publication or misuse of any Confidential Information.
(ii) To the extent that any court or agency seeks to have the Executive disclose Confidential Information, he shall promptly inform the Company, and he shall take reasonable steps to prevent disclosure of Confidential Information until the Company has been informed of such requested disclosure, and the Company has an opportunity to respond to such court or agency. To the extent that the Executive obtains information on behalf of the Company, the School, or any of the Subsidiaries that may be subject to attorney-client privilege as to the Company's attorneys, the Executive shall take reasonable steps to maintain the confidentiality of such information and to preserve such privilege.
(iii) Nothing in the foregoing provisions of this Section 6(a) shall be construed so as to prevent the Executive from using, in connection with his employment for himself or an employer other than the Company, the School, or any of the Subsidiaries, knowledge which was acquired by him during the course of his employment with the Company, the School and the Subsidiaries, and which is generally known to persons of his experience in other companies in the same industry.
(v) This Section 6(a) shall not be construed to unreasonably restrict the Executive's ability to disclose Confidential Information in an arbitration proceeding or a court proceeding in connection with the assertion of, or defense against any claim of breach of this Agreement. If there is a dispute between the Company and the Executive as to whether information may be disclosed in accordance with this Section 6(a), the matter shall be submitted to the arbitrators or the court (whichever is applicable) for decision.
(b) The Executive agrees that, while he is employed by the Company, and thereafter, he shall not make any false, defamatory or disparaging statements about the Company, the School, any of the Subsidiaries, or the officers or directors of the Company, the School, or the Subsidiaries that are reasonably likely to cause material damage to the Company, the School or any of the Subsidiaries, or the officers or directors of the Company, the School or any of the Subsidiaries. While the Executive is employed by the Company, and after the termination of the Term of Employment, the Company agrees, on behalf of itself, the School and the
Subsidiaries, that neither the respective officers nor the respective directors of the Company, the School or any of the Subsidiaries shall make any false, defamatory or disparaging statements about the Executive that are reasonably likely to cause material damage to the Executive.
(c) While he is employed by the Company, and for a period of 24 months after the termination of the Executive's employment under this Agreement for any reason (and which period shall be extended for an additional period equal in duration to the period during which the breach or breaches of the following covenants occurred, including the period of any litigation or arbitration regarding such breach (but only if a final nonappealable ruling holds that such a breach occurred)):
(i) The Executive shall not, without the prior written consent of the Board (or duly authorized committee thereof) which consent shall not be unreasonably withheld, be employed by, serve as a consultant to, or otherwise assist or directly or indirectly provide services to a Competitor (defined below) if: (i) the services are to be provided with respect to any location in which the Company, the School or a Subsidiary had material operations during the 24-month period prior to the termination of the Executive's employment under this Agreement, or with respect to any location in which the Company, the School or a Subsidiary had devoted material resources to establishing operations during the 24-month period prior to the termination of the Executive's termination of employment under this Agreement; or (ii) the trade secrets, confidential information, or proprietary information (including, without limitation, confidential or proprietary methods) of the Company, the School and any of the Subsidiaries to which the Executive had access could reasonably be expected to benefit the Competitor if the Competitor were to obtain access to such secrets or information. For purposes of this Section 6(c), services provided by others shall be deemed to have been provided by the Executive if the Executive had material supervisory responsibilities with respect to the provision of such services. The foregoing provisions of this Section 6(c)(i) to the contrary notwithstanding, the Executive may from time to time serve, without compensation, as a member of the board of directors (and any committee thereof) of one or more not-for-profit institutions that are Competitors, to the extent that such service does not inhibit or prohibit the performance of the Executive's duties under this Agreement.
(ii) The Executive shall not solicit or attempt to solicit any party who is then or, during the 24-month period prior to such solicitation or attempt by the Executive was (or was solicited to become), a customer or supplier of the Company, the School or a Subsidiary, provided that the restriction in this Section 6(c) shall not apply to any activity on behalf of a business that is not a Competitor; and further provided that this Section 6(c) shall not apply to the solicitation of a supplier of the Company, the School or a Subsidiary if such solicitation would not reasonably be expected to result in furthering material competition with the Company, the School or a Subsidiary.
(iii) The Executive shall not solicit, entice, persuade or induce any individual who is employed by the Company, the School or any
of the Subsidiaries (or was so employed within 90 days prior to the Executive's action) to terminate or refrain from renewing or extending such employment or to become employed by or enter into contractual relations with any other individual or entity other than the Company, the School or any of the Subsidiaries, and the Executive shall not approach any such employee for any such purpose or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity.
(iv) The Executive shall not directly or indirectly own an equity interest in any Competitor (other than ownership of 1% or less of the outstanding stock of any corporation listed on a national stock exchange or included in the NASDAQ System).
The term "Competitor" means any enterprise (including a person, firm or business, whether or not incorporated, and whether for profit or not for profit) during any period in which a material portion of its business is (and during any period in which it intends to enter into business activities that would be) materially competitive in any way with any business in which the Company, the School or any of the Subsidiaries was engaged during the 24- month period prior to the termination of the Executive's employment under this Agreement (including, without limitation, any business if the Company, the School or any Subsidiary devoted material resources to entering into such business during such 24-month period). Nothing in this Section 6(c) shall be construed as limiting the Executive's duty of loyalty to the Company, the School and the Subsidiaries or any other duty he may otherwise have to the Company, the School and the Subsidiaries while he is employed by the Company.
(d) The Executive agrees that, during the Term of Employment, and continuing for a reasonable period after the termination of the Executive's employment under this Agreement, the Executive will assist the Company, the School and the Subsidiaries in the defense of any claims that may be made against any of the Company, the School and the Subsidiaries, and will assist the Company, the School and the Subsidiaries in the prosecution of any claims that may be made by the Company, the School or any of the Subsidiaries, to the extent that such claims may relate to services performed by the Executive for the Company, the School and the Subsidiaries. The Executive agrees to promptly inform the Company if he becomes aware of any lawsuits involving such claims that may be filed against the Company, the School or any Subsidiary. The Company agrees to provide legal counsel to the Executive in connection with such assistance (to the extent legally permitted), and to reimburse the Executive for all of the Executive's reasonable out-of-pocket expenses associated with such assistance, including travel expenses. For periods after the Executive's employment with the Company, the School and all Subsidiaries terminates, the Company agrees to provide reasonable compensation to the Executive for such assistance. The Executive also agrees to promptly inform the Company if he is asked to assist in any investigation of the Company, the School or any of the Subsidiaries (or their actions) that may relate to services performed by the Executive for the Company, the School or any of the Subsidiaries, regardless of whether a lawsuit has then been filed against the Company, the School or any of the Subsidiaries with respect to such investigation.
(e) The Executive acknowledges that the Company, the School and the Subsidiaries would, for purposes of establishing the basis of equitable remedies hereunder, be irreparably injured by a violation of Section 6, and he agrees that the Company, the School and the Subsidiaries, in addition to
any other remedies available to them for such breach or threatened breach, shall be entitled to a preliminary injunction, temporary restraining order, or other equivalent relief, restraining the Executive from any actual or threatened breach of Section 6. The Company acknowledges that the Executive would, for purposes of establishing the basis of equitable remedies hereunder, be irreparably injured by a violation of this Section 6, and agrees that the Executive, in addition to any other remedies available to him for such breach or threatened breach, shall be entitled to a preliminary injunction, temporary restraining order, or other equivalent relief, restraining the Company, the School and Subsidiaries from any actual or threatened breach of this Section 6. If a bond is required to be posted in order for the Company or Executive to secure an injunction or other equitable remedy, the parties agree that said bond need not be more than a nominal sum.
(f) The foregoing provisions of this Section 6 shall be applicable for periods after the Executive's termination of employment under this Agreement only if the Executive's employment under this Agreement is terminated by the Company for Cause or by the Executive due to a resignation or retirement that is neither a Qualified Resignation or Retirement nor a Constructive Dismissal. In all other cases, the rights and obligations of the Executive, the Company, and the School for periods after termination of employment under this Agreement shall be governed by the terms of the Senior Advisor Agreement rather than this Agreement.
If to Company: DeVry Inc.
Attn: Legal Department
One Tower Lane, Suite 1000
Oakbrook Terrace, IL 60181
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Any such notices shall be deemed to be given on the date personally delivered or such return receipt is issued.
hereunder, or (ii) any dispute with regard to his rights and interests hereunder; provided, however, that to the extent that the court or arbitrator shall determine that under the circumstances recovery by the Executive of all or a part of any such fees and costs and expenses would be unjust or inappropriate, the Executive shall not be entitled to such recovery and to the extent that such amounts have been recovered by the Executive previously, the Executive shall repay such amounts to the Company.
(b) Unless Executive's employment under this Agreement is terminated for Cause, and irrespective of when Executive's employment under this Agreement terminates, any payments or benefits to be provided to the Executive by the Company or the School or a Subsidiary pursuant to any employee benefit plans or arrangements established or adopted by the Company or the School or a Subsidiary (including, without limitation except as provided in Section 13(c), any rights to indemnification from the Company or from a third-party insurer for directors and officers liability coverage with respect to any costs, losses, claims, suits, proceedings, damages or liabilities to which the Executive may become subject which arise out of, are based upon or relate to the Executive's employment by the Company or the School or a Subsidiary, the Executive's service as an officer or member of the Board, the Board of Directors of the School, or the Board of Directors of any Subsidiary), shall be paid to Executive to the extent such amounts are due from the Company or the School or Subsidiary in accordance with the terms of such plans or arrangements.
(c) The Company shall indemnify Executive, during and after his employment under this Agreement, to the fullest amount provided by the Certificates of Incorporation and Bylaws of the Company and any Director Indemnity Agreements of the Company, and nothing herein will be construed as modifying those separate Agreements.
with the provisions of this Agreement. The "Designated Beneficiary" shall be the beneficiary or beneficiaries designated by the Executive in a writing filed with the Company in accordance with Section 9 in such form and at such time as the Company shall require. If the Executive fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Executive, any benefits distributable to the Executive shall be distributed to the legal representative of the estate of the Executive. If the Executive designates a beneficiary and the Designated Beneficiary survives the Executive but dies before the complete distribution of benefits to the Designated Beneficiary under this Agreement, then any benefits distributable to the Designated Beneficiary shall be distributed to the legal representative of the estate of the Designated Beneficiary.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the day and year first above written.
EXECUTIVE: COMPANY:
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By:
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Its:
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SCHOOL:
By:
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Its:
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Exhibit A
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Change in Control Definition
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A-1. Purpose. This Exhibit A is attached to and forms a part of an employment transition agreement (the "Agreement") among __________ (the "Executive"), DeVry Inc., a Delaware corporation (the "Company"), and DeVry University, Inc., an Illinois corporation dated July 1, 2002. The purpose of this Exhibit A is to set forth the definition of the term "Change in Control" as used in Section 3(d) of the Agreement.
A-2. Change in Control. "Change in Control" means the occurrence of the events described in any of Sections (a), (b), (c) or (d) below:
(a) Acquisition of Securities. The acquisition (disregarding any Excluded Acquisitions) by any Person of ownership of any Voting Securities if, immediately after such acquisition, such Person has ownership of more than twenty-five percent (25%) of either the Outstanding Company Common Stock, or the combined voting power of the Outstanding Company Voting Securities.
(b) Change in Board. Individuals who constitute the Incumbent Board cease for any reason to represent greater than 50% of the voting power of members of the Board.
(c) Corporate Transaction. Consummation of (A) a Corporate Transaction or (B) the sale or other disposition of more than fifty percent (50%) of the operating assets of the Company (determined on a consolidated basis), but not including an Internal Reorganization.
(d) Liquidation. Approval by the shareholders of the Company of a plan of complete liquidation or dissolution of the Company.
A-3. Definitions. The terms used in the definition of "Change in Control" shall have the following meanings:
(a) The term "Company Plan" means an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company.
(b) The term "Corporate Transaction" means any reorganization, merger, consolidation, or other business combination involving the Company.
(c) The following shall constitute "Excluded Acquisitions" of Stock or Voting Securities (whichever is applicable):
(I) Any acquisition of Stock or Voting Securities (whichever is applicable) by a Company Plan.
(II) Any acquisition of Stock or Voting Securities (whichever is applicable) by an underwriter temporarily holding securities pursuant to an offering of such securities.
(III) Any acquisition of Stock or Voting Securities (whichever is applicable) by any Person pursuant to an Internal Reorganization.
(IV) Any acquisition of Stock or Voting Securities (whichever is applicable) directly from the Company (excluding any acquisition resulting from the exercise of an exercise, conversion or exchange privilege unless the security being so exercised, converted or exchanged was acquired directly from the Company).
(V) Any acquisition of Stock or Voting Securities (whichever is applicable) by the Company.
(d) The members of the "Incumbent Board" shall mean the members of the Board of Directors as of the Effective Date of the Agreement and shall also mean any individual becoming a director after that date whose election, or nomination for election by the Company shareholders, was approved by a vote of a least a majority of the directors then comprising the Incumbent Board; provided, however, that there shall be excluded for this purpose any such individual whose initial assumption of office occurs as a result of an actual or publicly threatened election contest (as such terms are used in Rule 14a-11 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act")) or other actual or publicly threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.
(e) The term "Internal Reorganization" means a sale-leaseback or other arrangement resulting in the continued utilization of the assets being sold or otherwise transferred (or the operating products of such assets) by the Company. The term "Internal Reorganization" also means a Corporate Transaction to which all of Sections (I), (II), and (III) below are applicable:
(I) All or substantially all of the individuals and entities who have ownership, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction have ownership of more than fifty percent (50%) of, respectively, the then outstanding shares of common equity securities and the combined voting power of the then outstanding Voting Securities entitled to vote generally in the election of directors, as the case may be, of the ultimate parent entity resulting from such Corporate Transaction (including, without limitation, an entity which, as a result of such transaction, has ownership of the Company or all or substantially all of the assets of the Company either directly or through one or more subsidiaries) in substantially the same relative proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be.
(II) No Person (other than the Company, any Company Plan or related trust, the corporation resulting from such Corporate Transaction, and any Person having ownership, immediately prior to such Corporate Transaction, directly or indirectly, of more than twenty-five percent (25%) of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, as the case may be)
will have ownership of more than twenty-five percent (25%) of, respectively, the then outstanding common stock of the ultimate parent entity resulting from such Corporate Transaction or the combined voting power of the then outstanding Voting Securities of such entity.
(III) Individuals who were members of the Incumbent Board immediately prior to the Corporate Transaction will constitute at least a majority of the members of the board of directors of the ultimate parent entity resulting from such Corporate Transaction.
(f) The term "Outstanding Company Common Stock" as of any date means the then outstanding shares of common stock, of whatever class, of the Company.
(g) The term "Outstanding Company Voting Securities" as of any date means the then outstanding Voting Securities (which shall be counted based on the number of votes that may be cast per share).
(h) The term "ownership" means beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(i) The term "Person" means an individual, entity or group as that term is used in Section 13(d)(3) or 14(d)(2) of the Exchange Act.
(j) The term "Voting Securities" as of any date means any of the outstanding securities of the Company entitled to vote generally in the election of the Company's Board of Directors.
This Senior Advisor Agreement (the "Agreement"), dated as of July 1, 2002 (the "Effective Date"), is entered into by and among _____________ (the "Executive"), DeVry Inc., a Delaware corporation (the "Company"), and DeVry University, Inc., an Illinois corporation (the "School");
WHEREAS, the employment of the Executive by the Company and the School is currently subject to an Employment Agreement, dated June 1, 1991 (the "Prior Employment Agreement"); and
WHEREAS, the Company, the School and the Executive are entering into an Employment Agreement, dated as of July 1, 2002 (the "2002 Employment Agreement"), and the Company and the School wish to obtain the future services of the Executive for the Company and the School after the Executive ceases to be employed during the "Term of Employment" in accordance with the 2002 Employment Agreement; and
WHEREAS, the Executive has made significant contributions to the success of the Company and the School through his many years of service to each organization, and such service was provided without full adequate compensation; and
WHEREAS, the Company and the School wish to provide for an orderly transition to successor management; and
WHEREAS, the Executive is willing, upon the terms and conditions herein set forth and under the 2002 Employment Agreement, to provide services hereunder and thereunder.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and intending to be legally bound hereby, the parties hereto agree as follows:
1.2 Location. During the Senior Advisor Period, and consistent with past practices, the Executive shall be provided, at Company expense, with a suitable office at a mutually agreeable location within 20 miles of the Company's headquarters (as of the Effective Date) and with appropriate secretarial support.
1.3 Responsibilities and Reporting. The Executive's employment shall be subject to the following:
(a) During the Senior Advisor Period, while the Executive is employed by the Company and the School pursuant to this Agreement, the Executive agrees that he shall perform his duties faithfully and to the best of his ability, subject to the directions of the Board of Directors of the Company (the "Board"), consistent with past practices.
(b) During the Senior Advisor Period, the Executive's responsibilities and duties shall include focusing on the strategy of and investor relations for the Company and serving as a senior advisor to the Board.
(c) Nothing contained in this Agreement shall require the Executive to follow any directive or to perform any act which would violate any laws, ordinances, regulations or rules of any governmental, regulatory or administrative body, agent or authority, any court or judicial authority, or any public, private or industry regulatory authority.
(d) The foregoing provisions of this section 1.3 to the contrary notwithstanding, if at any time Executive is not paid or reimbursed the amounts owed to Executive when due, or is not provided with other fringe benefits due him, pursuant to Section 2 of this Agreement, then after ten (10) days notice thereof to the Company in which the Company may cure such deficiency and which deficiency is not so cured, the Executive shall not be required to perform any services for the Company.
(b) The Executive shall be considered "Disabled" during any period in which he has a physical or mental disability which renders him incapable, after reasonable accommodation, of performing his duties under this Agreement.
(c) The Executive shall be considered "Permanently Disabled" if he is then Disabled and, for a continuous period of 180 days, the Executive, as a result of a physical or mental disability, has been incapable, after reasonable accommodation, of performing the Executive's responsibilities and duties under this Agreement.
1.5 Agreement Periods and Senior Advisor Period. This Agreement shall commence and apply to the Executive's employment as of the first day following the termination of the Term of Employment of Executive as determined in accordance with the 2002 Employment Agreement, provided that the Executive shall become employed in accordance with this Agreement only to the extent provided in Section 4 of the 2002 Employment Agreement. The date,
if any, on which the Executive becomes employed in accordance with this Agreement, as described in the preceding two sentences, shall be the "Senior Advisor Employment Date" under this Agreement. The "Senior Advisor Period" shall be the period beginning on the Senior Advisor Employment Date and ending on the 15 year anniversary of the Senior Advisor Employment Date. The "Senior Advisor Period" shall consist of the "Initial Senior Advisor Period", which begins on the Senior Advisor Employment Date and ends on the five-year anniversary of the Senior Advisor Employment Date, and the "Final Ten Years" of the Senior Advisor Period, which begins immediately after the end of the Initial Senior Advisor Period, and ends on the fifteen year anniversary of the Senior Advisor Employment Date. If the Executive becomes employed by an entity into which the Company is merged, or the purchaser of substantially all of the assets of the Company, or a successor to such entity or purchaser, the Executive shall not be treated as having terminated employment for purposes of this Agreement until such time as the Executive terminates employment with the successor (including, without limitation, the merged entity or purchaser), provided that the new employer agrees to assume this Agreement and be substituted for the Company under this Agreement.
Subject to the terms of this Agreement, during the Senior Advisor Period, while the Executive is employed by the Company, the Company shall compensate him for his services as follows:
(ii) Final Ten Years. The Executive shall receive during the Final Ten Years of the Senior Advisor Period, in substantially equal monthly or more frequent installments, a "Salary" at an annual rate of $50,000, increased annually at a rate equal to the budgeted annual average percentage increase for all employees of the Company from the Effective Date to the beginning of the fiscal year for which such Salary is to be paid.
(b) Bonus. The Salary under paragraph (a) above shall be in lieu of any form of annual incentive or performance bonus or other salary payments for the Senior Advisor Period.
(c) Other Fringe Benefits. Except as otherwise specifically provided to the contrary in this Agreement, during the Senior Advisor Period the Executive shall be provided with the health, welfare, and pension (pursuant to the Company's qualified pension plan or plans) benefits consistent with past practice, or as increased from time to time, and other fringe benefits to the same extent and on the same terms as those benefits are provided by the Company from time to time to the Company's senior management employees. For purposes of this paragraph (c), the health, welfare and other fringe benefits shall not include deferred compensation (except for deferred compensation provided under deferred
compensation plans that are qualified under section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code")), shall not include club fees and dues, shall not include financial and tax planning reimbursement, and shall not include any bonuses, stock options, or other incentive compensation. Nothing in this paragraph (c) shall be construed to prevent the Company from revising the welfare benefits or fringe benefits or perquisites generally provided to executives from time to time. The Company shall not be required to provide an automobile to the Executive during the Senior Advisor Period.
(d) Director's Fees. The Executive shall receive director's fees for the period he is serving as a member of the Board.
(e) Life Insurance. At the request of the Executive, during the Initial Senior Advisor Period, the Company shall obtain and maintain term life insurance coverage on the Executive's life providing $1,000,000 in death benefits payable to the beneficiary named by the Executive, and the Company shall pay the premiums with respect to such policy or, at Executive's option the Executive may obtain such coverage in lieu of the Company, and the Company shall reimburse Executive for the premium cost to maintain such coverage; provided, however, that if the cost for term life insurance coverage providing for $1,000,000 in death benefits exceeds $30,000 per year, the Company shall pay (or reimburse Executive for) premiums of $30,000 per year for life insurance coverage providing for a lesser death benefit; and further provided that the Company shall have no obligation to provide life insurance coverage under this paragraph (e) if the Company, after reasonable investigation, is unable to obtain such coverage from a life insurance company or if the Executive fails to submit to a medical examination or provide information reasonably necessary for obtaining and maintaining such insurance. The Executive agrees that, in addition to the foregoing obligation to provide life insurance coverage with the benefits payable to the beneficiary named by the Executive, the Board, in its sole discretion, may direct the Company to obtain life insurance on the life of the Executive in any amount the Board determines to be appropriate, with the benefits payable to the Company or such other beneficiary determined by the Board, and the Executive and his beneficiaries shall have no rights with respect to the coverage or benefits described in this sentence.
(f) Expenses. During the Senior Advisor Period and consistent with past practices, the Company shall reimburse Executive for documented travel, entertainment and other expenses reasonably incurred by Executive in connection with the performance of his duties hereunder and in accordance with the past practices of the Company with regard to Executive during the Term of Employment under the Employment Agreement, and the rules, customs and usages of the Company from time to time in effect.
The Executive's employment hereunder will terminate upon his death. The Executive's employment with the Company during the Senior Advisor Period
may be terminated by the Company or the Executive without any breach of this Agreement only under the circumstances described in paragraph 3(a) through 3(b):
(a) The Company may terminate the Executive's employment hereunder at any time during any period in which he is Permanently Disabled. The Company may terminate the Executive's employment hereunder at any time for Cause. For purposes of this Agreement, the term "Cause" shall mean any of the following: (i) the Executive's conviction of any crime or criminal offense involving any felony, or (ii) the Executive's conviction of fraud or embezzlement. Except as expressly provided in this Section 3(a) the Company shall not terminate the Executive's employment under this Agreement.
(b) The Executive may terminate his employment hereunder at any time for any reason by giving the Company prior written Notice of Termination (as defined in paragraph (c) below), which Notice of Termination, however, shall be effective no earlier than ninety (90) days following such notice, provided that nothing in this Agreement shall require the Executive to specify a reason for such termination. Failure by the Executive to give a ninety (90) day prior written notice of his termination of employment shall be a material breach of this section 3(b) for purposes of section 4.1(f).
(c) Any permitted termination of the Executive's employment by the Company
or the Executive (other than a termination pursuant to Executive's
death) must be communicated by a written "Notice of Termination" to the
other party hereto. For purposes of this Agreement, a "Notice of
Termination" means a dated notice which indicates the date of
termination of employment (not earlier than the date on which the
notice is provided, or if termination of employment occurs under
Section 3(b) not earlier than ninety (90) days after the date on which
the notice is provided). For purposes of this Agreement, the "Date of
Termination" means the last day the Executive is employed by the
Company, subject to such notice. If the Executive becomes employed by
an entity into which the Company is merged, or the purchaser of
substantially all of the assets of the Company, or a successor to such
entity or purchaser, the Executive shall not be treated as having
terminated employment for purposes of this Agreement until such time as
the Executive terminates employment with the successor (including,
without limitation, the merged entity or purchaser), provided that the
new employer agrees to assume this Agreement and be substituted for the
Company under this Agreement.
The Executive's right to payment and benefits under this Agreement for periods after his Date of Termination shall be determined in accordance with the following provisions of this section 4.
4.1 General. If the Executive's Date of Termination occurs during the Senior Advisor Period for any reason except Cause, the Company shall pay to the Executive:
(a) If the Date of Termination occurs during the Initial Senior Advisor Period, the Company shall make payments through the end of the Initial
Senior Advisor Period at the Salary rate in effect on such Date of Termination in accordance with paragraph 2.1(a)(i), and the Company shall make payments for the Final Ten Years of the Senior Advisor Period at the Salary rate determined in accordance with paragraph 2.1(a)(ii). If the Date of Termination occurs during the Final Ten Years of the Senior Advisor Period, the Company shall make payments for the remainder of the Final Ten Years of the Senior Advisor Period at the Salary rate determined in accordance with paragraph 2.1(a)(ii).
(b) Irrespective of when the Date of Termination occurs, the Executive and any of his dependents shall be eligible for COBRA continuation coverage (as described in section 4980B of the Code) to the extent required by applicable law.
(c) Subject to the right to receive continuing payments or benefits in accordance with the provisions of sections 4.1 and 4.2, or as may otherwise be expressly provided to the contrary in this Agreement, nothing in this Agreement shall be construed as requiring the Executive to be treated as employed by the Company for purposes of any employee benefit plan or arrangement following the Executive's Date of Termination.
(d) In the event payments are made under this section 4.1 due to Executive's death, such payments shall be made to the beneficiary determined in accordance with section 6.8.
(e) In the event the Company alleges a material breach by the Executive of the provisions of any of sections 3(b), 5.1, 5.2, or 5.3, and there is a final and unappealable determination by a court or mutually agreed arbitrator that such material breach occurred, then all benefits and payments pursuant to section 4.1 shall thereupon cease and the Company may seek in addition to obtain appropriate and provable damages and other recoveries and relief from the appropriate court or arbitrator as a result of such material breach (including, without limitation, recovery or cessation of payments or benefits under sections 4.1(a) and 4.1(b) of this Agreement), subject to the determination by such court or arbitrator, after taking into account all appropriate precedent, considerations and circumstances; provided, that the Company shall continue to provide payments under section 4.1(a) and benefits pursuant to section 4.1(b) pending such final determination of material breach, recoveries and relief.
4.2 Continuation of Medical Coverage. Anything in section 4.1(e) to the contrary notwithstanding, the Company shall provide the benefits described in this section 4.2 for the period following the Date of Termination (regardless of whether such Date of Termination occurs during the Senior Advisor Period or after the end of the Senior Advisor Period); provided, that the Company shall not be required to provide the benefits under this section 4.2 after the Executive's Date of Termination if such Date of Termination occurs due to a termination by the Company for Cause. The Company shall continue health insurance benefits ("Health Benefits") for the Executive and, if she survives the Executive, the Executive's wife which are concurrently being provided to senior executives then employed by the Company during that period; provided, that the Executive shall not be required to make contributions toward premiums for such coverage that are required of executives of the Company for such coverage from time to time. Such coverage with respect to the Executive shall continue for the remainder of the Executive's life, and such coverage with respect to the Executive's wife shall continue for the remainder of the life of the Executive's wife.
However, during any period after the Executive's Date of Termination during which he is eligible to obtain medical benefit coverage (with respect to the Executive or his wife) from his employer, or other person to whom he provides service, or from Medicare or other similar government sponsored program, he will file such an application, and take such other steps as may be necessary to obtain such coverage (including the payment of premiums), and to the extent permitted by applicable law, coverage obtained in accordance with this sentence shall be primary. For the period beginning on the Date of Termination, to the extent that the value of the Health Benefits provided to the Executive under this section 4.2 are determined to be includible in his income for income tax (and employment tax) purposes, and such benefits would not have been includible in his income for income tax (and employment tax) purposes if he continued in the employ of the Company, the Company will make a Tax Gross-Up Payment (as described below) to the Executive with respect to such coverage. For purposes of this section 4.2, the term "Tax Gross-Up Payment" with respect to any benefit shall mean an amount which shall be equal to the aggregate amount of additional Federal, state and local income and employment taxes payable by the Executive from time to time as a result of the receipt of such benefit and the receipt of such additional payment.
(b) For purposes of this Agreement, the term "Subsidiary" shall mean any corporation, partnership, joint venture or other entity during any period in which at least a fifty percent interest in such entity is owned, directly or indirectly, by the Company or the School (or a successor to the Company or the School).
5.1 Confidential Information. The Executive agrees that during the Senior Advisor Period while he is employed by the Company and all times thereafter:
(a) Except as may be required by the lawful order of a court or agency of competent jurisdiction, except as necessary to carry out his duties to the Company, the School and the Subsidiaries, or except to the extent that the Executive has express authorization from the Company, the Executive agrees to take all reasonable steps and actions to keep secret and confidential indefinitely, all Confidential Information, and not to disclose the same, either directly or indirectly, to any other person, firm, or business entity. The Executive shall, during the continuance of the Executive's employment, use the Executive's best endeavors to prevent the unauthorized publication or misuse of any Confidential Information.
(b) To the extent that any court or agency seeks to have the Executive disclose Confidential Information, he shall promptly inform the Company, and he shall take reasonable steps to prevent disclosure of Confidential Information until the Company has been informed of such requested disclosure, and the Company has an opportunity to respond to such court or agency. To the extent that the Executive obtains information on behalf of the Company, the School, or any of the Subsidiaries that may be subject to attorney-client privilege as to the Company's attorneys, the Executive shall take reasonable steps to maintain the confidentiality of such information and to preserve such privilege.
(c) Nothing in the foregoing provisions of this section 5.1 shall be construed so as to prevent the Executive from using, in connection with his employment for himself or an employer other than the Company, the School, or any of the Subsidiaries, knowledge which was acquired by him during the course of his employment with the Company, the School and the Subsidiaries, and which is generally known to persons of his experiene in other companies in the same industry.
(d) For purposes of this Agreement, the term "Confidential Information" shall include all non-public information (including, without limitation, information regarding litigation and pending litigation) concerning the Company, the School and the Subsidiaries which was acquired by or disclosed to the Executive during the course of his employment with the Company under this Agreement. For purposes of this Agreement, the term "Confidential Information" shall also include all non-public information concerning any other company that was shared with the Company or the School or a Subsidiary subject to an agreement to maintain the confidentiality of such information.
(e) This section 5.1 shall not be construed to unreasonably restrict the Executive's ability to disclose Confidential Information in an arbitration proceeding or a court proceeding in connection with the assertion of, or defense against any claim of breach of this Agreement. If there is a dispute between the Company and the Executive as to whether information may be disclosed in accordance with this paragraph (e), the matter shall be submitted to the arbitrators or the court (whichever is applicable) for decision.
5.2 Non-Disparagement. The Executive agrees that, while he is employed by the Company, and thereafter, he shall not make any false, defamatory or disparaging statements about the Company, the School, any of the Subsidiaries, or the officers or directors of the Company, the School, or the Subsidiaries that are reasonably likely to cause material damage to the Company, the School or any of the Subsidiaries, or the officers or directors of the Company, the School or any of the Subsidiaries. While the Executive is employed by the Company, and after his Date of Termination, the Company agrees, on behalf of itself, the School and the Subsidiaries, that neither the respective officers nor the respective directors of the Company, the School or any of the Subsidiaries shall make any false, defamatory or disparaging statements about the Executive that are reasonably likely to cause material damage to the Executive.
5.3 Noncompetition. The Executive agrees that (i) during the Senior Advisor Period while he is employed by the Company; and (ii) for a period of 24 months after the termination of Executive's employment under this Agreement for any reason (and which period shall be extended for an additional period equal in duration to the period during which the breach or
breaches of the following covenants occurred including the period of any litigation or arbitration regarding such breach (but only if a final nonappealable ruling holds that such a breach occurred)):
(a) The Executive shall not, without the prior written consent of the Board (or duly authorized committee thereof) which consent shall not be unreasonably withheld, be employed by, serve as a consultant to, or otherwise assist or directly or indirectly provide services to a Competitor (defined below) if: (i) the services are to be provided with respect to any location in which the Company, the School or a Subsidiary had material operations during the 24-month period prior to the Date of Termination, or with respect to any location in which the Company, the School or a Subsidiary had devoted material resources to establishing operations during the 24-month period prior to the Date of Termination; or (ii) the trade secrets, Confidential Information, or proprietary information (including, without limitation, confidential or proprietary methods) of the Company, the School and any of the Subsidiaries to which the Executive had access could reasonably be expected to benefit the Competitor if the Competitor were to obtain access to such secrets or information. For purposes of this paragraph (a), services provided by others shall be deemed to have been provided by the Executive if the Executive had material supervisory responsibilities with respect to the provision of such services. The foregoing provisions of this paragraph (a) to the contrary notwithstanding, the Executive may from time to time serve, without compensation, as a member of the board of directors (and any committee thereof) of one or more not-for-profit institutions that are Competitors.
(b) The Executive shall not solicit or attempt to solicit any party who is then or, during the 24-month period prior to such solicitation or attempt by the Executive was (or was solicited to become), a customer or supplier of the Company, the School or a subsidiary of the Company, provided that the restriction in this paragraph (b) shall not apply to any activity on behalf of a business that is not a Competitor; and further provided that this paragraph (b) shall not apply to the solicitation of a supplier of the Company, the School or a subsidiary of the Company if such solicitation would not reasonably be expected to result in furthering material competition with the Company, the School or a subsidiary of the Company.
(c) The Executive shall not solicit, entice, persuade or induce any individual who is employed by the Company, the School or any of the Subsidiaries (or was so employed within 90 days prior to the Executive's action) to terminate or refrain from renewing or extending such employment or to become employed by or enter into contractual relations with any other individual or entity other than the Company, the School or any of the Subsidiaries, and the Executive shall not approach any such employee for any such purpose or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity.
(d) The Executive shall not directly or indirectly own an equity interest in any Competitor (other than ownership of 1% or less of the outstanding stock of any corporation listed on a national stock exchange or included in the NASDAQ System).
The term "Competitor" means any enterprise (including a person, firm or business, whether or not incorporated, and whether for profit or not for profit) during any period in which a material portion of its business is (and during any period in which it intends to enter into business activities that would be) materially competitive in any way with any business in which the Company, the School or any of the Subsidiaries was engaged during the 24-month period prior to the Executive's Date of Termination (including, without limitation, any business if the Company, the School or any Subsidiary devoted material resources to entering into such business during such 24-month period). Nothing in this subsection 5.3 or subsections 5.1 or 5.2 shall be construed as limiting the Executive's duty of loyalty to the Company, the School and the Subsidiaries or any other duty he may otherwise have to the Company, the School and the Subsidiaries while he is employed by the Company.
5.4 Assistance with Claims. The Executive agrees that, for the period beginning on the Effective Date, and continuing for a reasonable period after the Executive's Date of Termination, the Executive will assist the Company, the School and the Subsidiaries in the defense of any claims that may be made against any of the Company, the School and the Subsidiaries, and will assist the Company, the School and the Subsidiaries in the prosecution of any claims that may be made by the Company, the School or any of the Subsidiaries, to the extent that such claims may relate to services performed by the Executive for the Company, the School and the Subsidiaries. The Executive agrees to promptly inform the Company if he becomes aware of any lawsuits involving such claims that may be filed against the Company, the School or any subsidiary of the Company. The Company agrees to provide legal counsel to the Executive in connection with such assistance (to the extent legally permitted), and to reimburse the Executive for all of the Executive's reasonable out-of-pocket expenses associated with such assistance, including travel expenses. For periods after the Executive's employment with the Company terminates, the Company agrees to provide reasonable compensation to the Executive for such assistance. The Executive also agrees to promptly inform the Company if he is asked to assist in any investigation of the Company, the School or any of the Subsidiaries (or their actions) that may relate to services performed by the Executive for the Company, the School or any of the Subsidiaries, regardless of whether a lawsuit has then been filed against the Company, the School or any of the Subsidiaries with respect to such investigation.
5.5 Equitable Remedies. The Executive acknowledges that the Company, the School and the Subsidiaries would, for purposes of establishing the basis of equitable remedies hereunder, be irreparably injured by a violation of subsections 5.1, 5.2, or 5.3, and he agrees that the Company, the School and the Subsidiaries, in addition to any other remedies available to them for such breach or threatened breach, shall be entitled to a preliminary injunction, temporary restraining order, or other equivalent relief, restraining the Executive from any actual or threatened breach of subsections 5.1, 5.2, or 5.3. The Company acknowledges that the Executive would, for purposes of establishing the basis of equitable remedies hereunder, be irreparably injured by a violation of subsections 5.2, and agrees that the Executive, in addition to any other remedies available to him for such breach or threatened breach, shall be entitled to a preliminary injunction, temporary restraining order, or other equivalent relief, restraining the Company, the School and Subsidiaries from any actual or threatened breach of subsections 5.2. If a bond is required to be posted in order for the Company or Executive to secure an injunction or other equitable remedy, the parties agree that said bond need not be more than a nominal sum.
6.1 Notice. Any notice, request, demand or other communication required or permitted to be given under this Agreement shall be given in writing and delivered personally, or sent by certified or registered mail, return receipt requested, as follows (or to such other addressee or address as shall be set forth in a notice given in the same manner):
If to Company: DeVry Inc.
One Tower Lane
Oakbrook Terrace, Illinois 60181-4624
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Any such notices shall be deemed to be given on the date personally delivered or such return receipt is issued.
6.2 Company Representations. The Company hereby represents and warrants to Executive that it has the authorization, power and right to deliver, execute and fully perform its obligations under this Agreement in accordance with its terms.
6.3 Validity. If, for any reason, any provision hereof shall be determined to be invalid or unenforceable, the validity and effect of the other provisions hereof shall not be affected thereby.
6.4 Severability. Whenever possible, each provision of this Agreement will 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 invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. If any court determines that any provision hereof is unenforceable because of the power to reduce the scope or duration of such provision, as the case may be and, in its reduced form, such provision shall then be enforceable.
6.5 Waiver of Breach; Specific Performance. The waiver by the Company or the Executive of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other breach of such other party. Each of the parties (and third party beneficiaries) to this Agreement will be entitled to enforce its rights under this breach of any provision of this Agreement and to exercise all other rights existing in its favor.
(b) Unless Executive's employment under this Agreement is terminated for Cause, and irrespective of when Executive's employment under this Agreement terminates, any payments or benefits to be provided to the Executive by the Company or the School or a Subsidiary pursuant to any employee benefit plans or arrangements established or adopted by the Company or the School or a Subsidiary (including, without limitation except as provided in subsection 6.6(c), any rights to indemnification from the Company or from a third-party insurer for directors and officers liability coverage with respect to any costs, losses, claims, suits, proceedings, damages or liabilities to which the Executive may become subject which arise out of, are based upon or relate to the Executive's employment by the Company or the School or a Subsidiary, the Executive's service as an officer or member of the Board, the Board of Directors of the School, or the Board of Directors of any Subsidiary), shall be paid to Executive to the extent such amounts are due from the Company or the School or Subsidiary in accordance with the terms of such plans or arrangements.
(c) The Company shall also indemnify Executive, during and after his employment under this Agreement, to the fullest amount provided by the Certificates of Incorporation and Bylaws of the Company and any Director Indemnity Agreements of the Company, and nothing herein will be construed as modifying those separate Agreements.
6.7 Mitigation and Set-Off. Unless the Executive's employment under this Agreement is terminated for Cause, (a) the Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking employment or otherwise, and (b) neither the Company, nor the School, nor any Subsidiary shall be entitled to any set-off against the amounts payable by Company, the School or any Subsidiary to Executive any amounts owed to the Company, School or any Subsidiary by the Executive.
6.8 Assignment. This Agreement shall be binding upon, and inure to the benefit of, the Company and its successors and assigns and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company's assets and business, and the successor shall be substituted for the Company under this Agreement. The Executive may dispose of his rights under this Agreement by will or limit the power or rights of any executor or any administrator. If any benefits deliverable to the Executive under this Agreement have not been delivered at the time of the Executive's death, such benefits shall be delivered to the Designated Beneficiary, in accordance with the provisions of this Agreement. The "Designated Beneficiary" shall be the beneficiary or beneficiaries
designated by the Executive in a writing filed with the Company in accordance with subsection 6.1 in such form and at such time as the Company shall require. If the Executive fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Executive, any benefits distributable to the Executive shall be distributed to the legal representative of the estate of the Executive. If the Executive designates a beneficiary and the Designated Beneficiary survives the Executive but dies before the complete distribution of benefits to the Designated Beneficiary under this Agreement, then any benefits distributable to the Designated Beneficiary shall be distributed to the legal representative of the estate of the Designated Beneficiary. Except as otherwise provided in the foregoing provisions of this subsection 6.7, neither the Executive nor the Company (or the School) may assign, transfer, pledge, encumber or otherwise dispose of this Agreement or any of his or its respective rights or obligations hereunder, without the prior written consent of the other.
6.9 Amendment; Entire Agreement. This Agreement may not be changed orally, but only by an agreement in writing agreed to by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. This Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter of the agreements, and supersede and replace all prior agreements (including, without limitation, the Prior Employment Agreement), understandings and commitments with respect to such subject matter.
6.10 Litigation. This Agreement shall be governed by, construed, applied and enforced in accordance with the laws of the State of Illinois, except that no doctrine of choice of law shall be used to apply any law other than that of Illinois, and no defense, counterclaim or right of set-off given or allowed by the laws of any other state or jurisdiction, or arising out of the enactment, modification or repeal of any law, regulation, ordinance or decree of any foreign jurisdiction, be interposed in any action hereon. Executive and the Company agree that any action or proceeding to enforce or arising out of this Agreement may be commenced in the state courts, or in the United States District courts in Chicago, Illinois. Executive and the Company consent to such jurisdiction, agree that venue will be proper in such courts and waive any objections based upon forum non conveniens. The choice of forum set forth in this section 6.10 shall not be deemed to preclude the enforcement of any judgment obtained in such forum or the taking of any action under this Agreement to enforce same in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the Effective Date.
EXECUTIVE
DEVRY INC.
DEVRY UNIVERSITY, INC.