-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SDHbpM8TnetHehj5CbS562nuX4FBCpoQGGutxRBSvEnKQ2javcUQwXWLo0jMy5lW 2Te1sZiWWsChGm34hV3AbQ== 0000730464-96-000012.txt : 19960925 0000730464-96-000012.hdr.sgml : 19960925 ACCESSION NUMBER: 0000730464-96-000012 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960924 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEVRY INC CENTRAL INDEX KEY: 0000730464 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 363150143 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13988 FILM NUMBER: 96633859 BUSINESS ADDRESS: STREET 1: ONE TOWER LN STREET 2: SUITE 1000 CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 BUSINESS PHONE: 7085717700 MAIL ADDRESS: STREET 1: ONE TOWER LANE CITY: OAKBROOK STATE: IL ZIP: 60181 10-K 1 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended: JUNE 30, 1996 ------------- Commission file number: 0-12751 ------- DeVRY INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 36-3150143 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) ONE TOWER LANE, SUITE 1000, OAKBROOK TERRACE, ILLINOIS 60181 ------------------------------------------------------- --------- (Address of principal executive offices) (Zip Code) Registrant's telephone number; including area code: (630) 571-7700 -------------- Securities registered pursuant to section 12(b) of the Act: Title of each class: Name of each exchange on which registered: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $0.01 PAR VALUE ----------------------------- (Title of class) 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]. No [ ]. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] SEPTEMBER 1, 1996 - $567,103,500 - ------------------------------------------------------------------------------- State the aggregate market value of the voting stock held by non-affiliates of the registrant. The market value was computed using the closing sale price of the common stock on the date indicated. Shares of common stock held directly or controlled by each director and executive officer have been excluded in that such persons may be deemed to be affiliates. SEPTEMBER 1, 1996 - 16,623,212 shares of common stock, $0.01 par value - ------------------------------------------------------------------------------- Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. DOCUMENTS INCORPORATED BY REFERENCE List hereunder the documents incorporated by reference and the Part of the Form 10-K (e.g. Part I, Part II, etc.) into which the document is incorporated: Certain portions of the Registrant's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on November 19, 1996, are incorporated into Part III of this Form 10-K to the extent stated herein. Exhibit Index located on Pages 71-72 Total number of pages, 241 2 DeVRY INC. ANNUAL REPORT ON FORM 10-K YEAR ENDED JUNE 30, 1996 TABLE OF CONTENTS PAGE # PART I ------ - ------ Item 1 - Business 3 Item 2 - Properties 29 Item 3 - Legal Proceedings 32 Item 4 - Submission of Matters to a Vote of Security Holders 33 - Executive Officers 34 PART II - ------- Item 5 - Market for Common Equity and Related Stockholder Matters 37 Item 6 - Selected Financial Data 38 Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations 38 Item 8 - Financial Statements and Supplementary Data 47 Item 9 - Changes in and Disagreements with Accountants 64 PART III - -------- Item 10 - Directors and Executive Officers 65 Item 11 - Executive Compensation 65 Item 12 - Security Ownership of Beneficial Owners and Management 65 Item 13 - Certain Relationships and Transactions 65 PART IV - ------- Item 14 - Exhibits, Financial Statements and Reports on Form 8-K 66 - Financial Statements 66 - Financial Statement Schedules 66 - Exhibits 66 - Reports on Form 8-K 66 - Signatures 68-69 3 PART I ------ ITEM 1 - BUSINESS - ----------------- DeVry Inc. (the "Company") is incorporated under the laws of the State of Delaware. Founded in 1973, the Company acquired the DeVry Institutes ("Old DeVry") in August 1987, which were then operating as an 85% owned subsidiary of Bell & Howell Co. with the remaining 15% being held by public stockholders. The Company, through its wholly-owned subsidiary, Keller Graduate School of Management, Inc. (the "Operating Subsidiary"), owns and operates the DeVry Institutes of Technology (the "DeVry Institutes") and the Keller Graduate School of Management ("KGSM") which collectively form one of the largest private, degree-granting, regionally accredited higher education systems in North America, and Corporate Educational Services ("CES"), a provider of customized, on-site technical education and training services to corporations and government agencies. The Company also owns and operates the Becker CPA Review which prepares candidates to pass the Certified Public Accountant ("CPA") and Certified Management Accountant ("CMA") professional certification examinations. The DeVry Institutes were founded in 1931 by Dr. Herman DeVry and have provided career-oriented technical education to high school graduates in the United States and Canada for more than 60 years. The first DeVry Institute was opened in Chicago in 1931 as an electronics school. By 1967, the DeVry Institutes consisted of one school in Chicago and one in Toronto. Today, the DeVry Institutes are located on ten campuses in the United States and four campuses in Canada. Originally offering only programs in electronics, DeVry introduced the computer information systems curriculum in 1979. As the number of high school graduates in the U.S. declined during the 1980s, the DeVry Institutes expanded their program offerings and delivery schedule into the evening hours to serve larger numbers of working adults. In the summer of 1986, a bachelor's degree program in business operations was introduced. That fall, the DeVry Institutes introduced the telecommunications management program, followed by the introduction of an accounting program in the spring of 1988. 4 In 1991, the DeVry Institutes initiated a facility improvement and expansion program to attract and retain an increased student enrollment. The Atlanta DeVry Institute completed a renovation and expansion for the fall 1992 term. In October 1992, the Lombard DeVry Institute was relocated to a larger facility in Addison, Illinois. In October 1993, the Dallas DeVry Institute was relocated to a larger facility in North Irving, Texas, and the City of Industry DeVry Institute was relocated to a larger facility in Pomona, California. The North York (Toronto), Ontario, Canada, DeVry Institute expanded its capacity in the fall of 1992 and again in the fall of 1993 by renovating and leasing additional space at its current location. The Calgary, Alberta, Canada, DeVry Institute also expanded in the fall of 1993 by leasing additional space. In July 1994, a school was opened in Scarborough (Toronto), Ontario, Canada, as a satellite branch of the school in North York and in November 1994 a school was opened in Long Beach, California. The Scarborough (Toronto), Canada, DeVry Institute was expanded by the lease of additional space for the fall 1994 term and expanded again by the lease of additional space for the summer 1995 term. In June 1996, the Woodbridge, New Jersey, Institute was relocated to a new and larger company-owned facility in North Brunswick, New Jersey, in preparation for the summer term. In July 1996, a school was opened in Mississagua (Toronto), Ontario, Canada, as a second satellite branch of the school in North York (Toronto). At the beginning of the spring 1996 semester, which is the final semester in the Company's 1996 fiscal year, approximately 28,150 full and part-time students were enrolled in the DeVry Institutes' diploma, associate and bachelor's degree day and evening programs in electronics, electronics engineering technology, computer information systems, accounting, business operations, technical management and telecommunications management. Cumulatively, total student enrollment for the three semesters of fiscal 1996 increased by 8.6% compared with fiscal 1995. In response to the expansions and improvements initiated in the past several years, fiscal 1996 marks the fifth consecutive year that total cumulative enrollment has increased from the prior year. The DeVry Institutes' operations accounted for approximately 93% of the Company's revenues in 1996. 5 Classes began on July 15th for the summer 1996 semester. At the Atlanta Institute, however, the class start was postponed until August 12th to avoid interference with the summer Olympics activity. In this first semester in the Company's 1997 fiscal year, a total of 27,600 students were enrolled in the DeVry Institutes' programs, a 4.6% increase from the number of students enrolled in the summer term last year. This was the seventeenth consecutive term in which total enrollments exceeded the prior year level. Historically, the summer semester has been the period of lowest enrollment during the year. After declining through much of the 1980's and stabilizing in the early 1990's, the number of high school graduates, which represents a substantial portion of the DeVry Institutes' new student enrollment each year, is projected by the U.S. Department of Education to increase without interruption by more than 20% from a low of 2,482,000 in 1992 to over 3,000,000 by the year 2004. In addition, the Department of Education's National Center for Education Statistics found that in 1994, 62% of high school graduates (ages 16-24) went directly to college, up from 51% in 1975. Recent data from the U.S. Department of Education also indicates that more than one third of U.S. undergraduate students are 25 years of age or older and that these older students will continue to be a significant portion of college enrollments in the coming years. The Company estimates that approximately 40% of the students enrolled at its DeVry Institutes are 25 years of age or older. To attract the growing number of adults returning to college, the DeVry Institutes introduced a bachelor of science degree completion program in technical management which focuses on business and management skills vital to career advancement for students who already have an associate degree. Over 20% of recent new students enrolled at the DeVry Institutes had some prior college experience. Programs are also being offered on weekends in some locations to serve the working adult. To better serve the working adult student, DeVry is currently developing a weekend Computer Information Systems curriculum with a shorter term length and time to completion. While this program will be an intensive and demanding experience for students, it will enable them to fulfill their other responsibilities during the normal work week while still completing this program in a relatively short period of time on weekends. 6 Each of the DeVry Institute programs is designed to integrate general education and technology or business. DeVry's general education courses develop skills and competencies that help graduates enhance both their professional and personal capabilities. Laboratory courses throughout each curriculum provide the opportunity to translate classroom learning into a practical, hands-on experience that better prepares the student for the workplace. More than 80% of DeVry's U.S. Institute regular faculty hold advanced academic degrees. The annual U.S. average DeVry faculty compensation is practically identical to the $48,500 average salary of faculty members at state-supported four year institutions, as reported in a recent study by the College and University Personnel Association. To facilitate student success, DeVry devotes significant amounts of resources in the form of learning resource centers and academic support services which can assist students in any phase of their educational program. In addition, the DeVry Institutes encourage students to participate in campus activities and offer a student success strategies course aimed at preparing students to assume responsibility for their learning and growth through practical strategies and methods for realizing success. KGSM was founded in 1973 to offer a practitioner-based graduate management program leading to the Master of Business Administration ("MBA") degree. In 1991 and 1993, respectively, KGSM introduced a Master of Project Management ("MPM") and a Master of Human Resource Management ("MHRM") degree program. In September 1995, KGSM began offering a Health Services Management ("HSM") concentration within its MBA program. The HSM concentration includes five health services management courses within the 16 course MBA curriculum. This program is being offered in response to the growing demands of the health services industry professionals or professionals in related fields such as the insurance or pharmaceutical industries. KGSM emphasizes a practitioner orientation, excellence in teaching and service to working adults, offering classes in the evenings and on weekends. From a base of six sites in Illinois and Wisconsin in 1987, 7 classes are now offered at nineteen locations nationwide. KGSM operates five of its teaching sites on DeVry Institute campuses in Arizona, California, Georgia and Missouri. KGSM faculty members are practicing professionals who bring their expertise to the classroom, emphasizing theory and practices that will best serve students in their work as managers. Critical competencies in areas such as business communications, technology, quality and international issues are woven throughout the curricula. KGSM's curricula are regularly reviewed for relevance to both students and employers through advisory councils composed of representatives of distinction and achievement in business and community affairs. At the start of the June term, which falls primarily in the Company's 1997 fiscal year, enrollment at KGSM was 2,601, an increase of 462 students or 21.6% from the previous June. Historically, the summer term has been the period of lowest enrollment during the year. At the start of the summer 1996 semester, which is the first semester in the Company's 1997 fiscal year, a combined total of approximately 30,201 full and part-time students were enrolled in the Company's DeVry and KGSM educational programs, up 5.9% from a total of 28,513 full and part-time students in the summer 1995 semester. To serve what the Company believes is a large and growing need for employee training, the Corporate Educational Services division was created in 1991. This division offers customized professional services and training in business, project management, electronics and telecommunications. Conducted at customers' sites, CES programs emphasize the direct, practical application of business concepts, techniques and skills. The operations of CES have been aligned with KGSM, allowing CES to utilize the academic and operational infrastructure of KGSM's national system and to better link its clients to one of the largest applications-based education and training organizations in North America. Corporate Educational Services draws on the faculty, staff and curriculum resources of the DeVry and KGSM systems as needed. 8 In June 1996, the Company acquired the Becker CPA Review (Becker). Becker is a leading international training firm preparing students to take the national Certified Public Accountant (CPA) exam and Certified Management Accountant (CMA) exam. Becker, which is headquartered in Los Angeles, offers classes at approximately 135 locations in the United States and at eight locations in the Middle East, Pacific Rim and Canada. Becker's proprietary course materials and teaching methods result in pass rates on the CPA exam for Becker students that are approximately double the national average pass rate. More than one-third of all students passing the CPA exam are Becker CPA Review alumni which now number over 200,000 since the course was founded in 1957. The amounts of revenue, earnings before interest and taxes and identifiable assets of the Company's U.S. and foreign operations are included in Note 9 to the Consolidated Financial Statements, Operations by Geographic Area. Competition - ----------- The postsecondary education market, composed of approximately 7,000 universities, colleges and schools, is highly fragmented and competitive with no single institution having a significant market share. The Company believes that it is one of the largest private, degree-granting, regionally accredited, higher education school systems in North America. The DeVry Institutes compete with traditional publicly supported and independent two- year and four-year colleges, other for-profit schools and alternatives to higher education, such as employment and military service. Publicly supported colleges may offer programs similar to those of the DeVry Institutes at a lower tuition level due to government subsidies, government and foundation grants, tax-deductible contributions and other financial sources not available to for-profit schools. Tuition at independent not- for-profit institutions is, on average, higher than the tuition at the DeVry Institutes. Other for-profit schools offer programs that compete, to a limited extent, with those of the DeVry Institutes. According to Company surveys of prospective students, the most common alternative to attending a DeVry Institute is attending a four-year college. Other frequently cited alternatives are keeping or seeking a full-time job, attending another career-oriented school or joining the military. 9 The DeVry Institutes believe their competitive strengths include career- oriented curricula developed with regular structured employer input, faculty with related industry experience, the demonstrated effectiveness of their career services activities, their national brand name, market presence and student recruitment organization, the accreditations granted to the DeVry Institutes, authorization by various states to grant degrees, modern facilities, well-equipped laboratories and a trimester schedule that allows attendance year-round, thereby permitting earlier graduation. Only a limited number of traditional colleges offer a bachelor's degree program which can be completed in three years. At the DeVry Institutes, classes are generally offered in morning, afternoon or evening sessions which help students maintain a part-time job. This availability of part-time employment and government-provided financial aid partially offsets the competitive advantage of those schools with lower tuition levels. Each curriculum is generally the same at all of the DeVry Institutes, permitting students to transfer, if necessary, to another DeVry Institute at a different location without interrupting their studies. Institutions that participate in Title IV financial aid programs must now, upon request, begin to disclose information about student completion rates to current and prospective students. Completion rates at each of the U.S. DeVry Institutes fall within the range of completion rates for selected urban public colleges in the areas in which that DeVry Institute operates as published by U.S. News and World Report, 1996 America's Best Colleges. KGSM competes with other MBA programs offered in all markets in which it has operations. In the Chicago area, there are over 20 MBA programs today. Nationwide there are more than 700 graduate business programs. Competition with KGSM's MHRM program varies by the market area in which it is offered but is generally more moderate than competition for the MBA program. KGSM is one of only a few schools in the country offering a master's degree in project management but increasing interest in this field is beginning to attract similar offerings. KGSM differentiates itself in the marketplace by stressing a practitioner approach to education, excellence in teaching by a faculty of practicing professionals and a high level of service to the adult student. To help 10 its students master the skills they need to succeed on the job, KGSM introduced an innovative teaching technique called System Supported Teaching and Learning (SSTL)TM that incorporates frequent feedback and mastery learning. KGSM offers five 10-week terms each year. Courses meet once a week, either in the evening or on Saturday. This schedule allows students with heavy travel or other demands on their time to fit courses into their schedules. In addition, in most markets KGSM is able to offer greater flexibility in course scheduling, a greater choice of elective courses and a more convenient location than its competitors. As the market for adult education programs has expanded in recent years, other schools have implemented multi-location evening programs. However, enrollments at KGSM continue to increase, demonstrating the recognition it has earned as an innovator in providing quality practical education. With educational centers in seven states, KGSM also offers distributed access points throughout the country to adults who may be transferred from one part of the country to another by their employer or who capitalize upon personal career opportunities in other locations. Corporate Educational Services competes with individual consultants, colleges, industry associations, other training companies and the internal training departments of many large potential corporate customers and government agencies. CES, utilizing KGSM's national system, and drawing on the DeVry Institutes, differentiates itself in the marketplace through the applied curriculum expertise of both KGSM and DeVry, particularly in the areas of project management, electronics and telecommunications. Materials are derived from the proven instructional success in these topics at the DeVry Institutes and KGSM, modified as necessary using the academic resources of both. Becker competes with CPA exam preparation through self-study, with courses offered by colleges and universities and with other training companies, most of which operate on a local or regional basis, although at least one training company competitor operates nationally. Courses offered by competitors generally have a lower total course cost to help attract 11 students. Becker differentiates itself from its competitors by providing more classroom hours of instruction, extensive and constantly updated review and practice test materials and experienced, qualified instructors for each area of specialty included in the exam. The high success rate of students who take the Becker review course and the numbers of students enrolling after taking other review courses but not passing the CPA exam is testimony to the quality and value of the Becker methodology. Student Recruiting - ------------------ Students at the DeVry Institutes are recruited by admissions representatives at on-campus admissions offices and by field student recruiters. Field student recruiters are an important nationwide element of the recruiting process because a significant portion of the DeVry Institutes' students come from outside the immediate area in which the DeVry Institute campus they attend is located. The percentage of enrollment coming from these two recruiting sources varies campus by campus, but is predicated largely on each school's location. Overall, admissions representatives currently generate over 2/3 of the DeVry Institutes' total enrollments. The DeVry Institutes employ approximately 350 admissions and field representatives throughout the United States and Canada. In order to recruit students in certain states and Canadian provinces, representatives must be licensed or authorized by the appropriate regulatory agency. Regulations governing student participation in federal financial assistance programs prohibit an institution from paying a commission, bonus or incentive to the Company's student recruiters based upon their success in securing enrollments. The Company believes that its method of recruiter compensation complies with the regulations. The admissions representatives are salaried, full-time company employees. They are located at each DeVry campus and work with students who respond to the Company's advertising or otherwise learn of the school. Admissions representatives generally work with older students, many of them working adults wanting to attend class in the evening, recently unemployed adults seeking to improve their job skills as a way to re-enter the workforce and 12 students transferring to DeVry from nearby junior colleges. Each DeVry Institute has entered into articulation agreements with nearby community colleges to facilitate the enrollment of their students seeking to transfer course credits into a DeVry program. Field student recruiters meet individually with prospective students who are contacted primarily through high school, club and youth group presentations. These student recruiters visited over 10,000 high schools in North America last year, making presentations on career choices and the importance of a college education. Field recruiters also receive student inquiries generated by direct mail and television advertising in the particular recruiter's territory. Follow-up interview sessions with prospective students are generally held in the student's home with the student and his or her parents. The continued downsizing of the U.S. military and recent base closings also presents recruiting opportunities. Veterans with military-specific technical training are attracted to DeVry's practical career-oriented education. Although a veteran may be recruited at his mustering-out base, DeVry's locations across the U.S. are often near the home area to which the veteran will relocate. Numerous new students with V.A. benefits have enrolled at the DeVry Institutes over the past several years. Field student recruiters are salaried, full-time company employees who are trained by both field managers and headquarters-based staff. In support of its recruiting force, the DeVry Institutes advertise on television and radio, in magazines and newspapers, and utilize telemarketing and direct mail to reach prospective students. Prospective students are also frequently referred by their employers, alumni or currently enrolled students. In addition to the more traditional recruiting methods, DeVry's new Internet site provides another avenue for students to receive information and apply for admission. To be admitted to a DeVry program, an applicant must be a high school graduate, have a General Education Development (GED) certificate or hold a degree from an accredited postsecondary institution. Applicants must also meet minimum entrance examination scores which vary depending on the program to which they are applying. In 1996, the DeVry Institutes implemented a Computerized Placement Test designed in collaboration with 13 The College Board and Educational Testing Service. This exam helps DeVry better serve the needs of its students by allowing DeVry to assess students' achievement levels and developmental needs during the admission process. KGSM recruits students through direct mail, radio advertising, telemarketing, print advertising and referrals from employers, alumni or current students. KGSM employs on-campus admissions representatives at each teaching center who meet with, counsel and evaluate admission qualifications of prospective students. To be admitted to a KGSM program, applicants must hold a baccalaureate degree from a regionally accredited institution. Applicants must also achieve acceptable scores on either the Graduate Management Admission Test (GMAT), the Graduate Record Examination (GRE) or KGSM's alternative admission test. Becker CPA Review markets its courses directly to potential students and to some of their employers, e.g. Big Six accounting firms. Alumni referrals, direct mail, print advertising and a network of on-campus recruiters at colleges and universities across the country all generate the new students who take the CPA or CMA review courses, which are offered twice each year. Becker also enrolls many students who have previously completed a competitor's course or a self-study program but were unable to pass the exam. Accreditation and Approvals - --------------------------- Accreditation is a process for recognizing educational institutions and the professional programs offered by those institutions for a level of quality that entitles them to the confidence of the educational community and the public they serve. In the United States, this recognition is extended primarily through nongovernmental, voluntary, regional or specialized accrediting associations. Accredited institutions are subject to periodic review by accrediting bodies to ensure that these institutions maintain the level of performance, evidence institutional and program improvement, demonstrate integrity and fulfill requirements established by the accrediting body. 14 Although regional accreditation in the United States is a voluntary process designed to promote educational quality and improvement, it is an important strength of the DeVry Institutes, providing significant advantages over most other for-profit colleges. College and university administrators depend on the accredited status of an institution in evaluating transfers of credit and applications to graduate schools. Employers rely on the accredited status of an institution when evaluating a candidate's credentials, and parents and high school counselors look to accreditation for assurance that an institution meets quality educational standards. Moreover, accreditation is necessary for students to qualify for eligibility for federal financial assistance. Also, most scholarship commissions restrict their awards to students attending accredited institutions. DeVry Institutes and KGSM are accredited by the Commission on Institutions of Higher Education of the North Central Association of Colleges and Schools, the same accrediting agency that accredits other four-year publicly supported and independent colleges and universities in the North Central region. The DeVry Institutes and KGSM accreditations were last reaffirmed by the North Central Commission in 1992 for the maximum ten year period. An interim progress monitoring visit is scheduled for the DeVry Institutes in May of 1997. Accreditations of the DeVry Institutes and KGSM in the United States and of the DeVry Institutes in Canada are as follows: UNITED STATES CANADA - ----------------------------------- ---------------------------------- Commission on Institutions of Ontario Association of Certified Higher Education of the North Engineering Technicians and Central Association of Colleges and Technologists (DeVry/Toronto area Schools campuses' Electronics Engineering Technology and Electronics Technology Accreditation Commission Engineering Technician programs) of the Accreditation Board for Engineering and Technology (DeVry's Alberta Society of Engineering Electronics Engineering Technology Technologists (DeVry/Calgary's Bachelor of Science Degree program Electronics Engineering Technology and, at the New Jersey campus, the and Electronics Engineering Electronics Engineering Technology Technician programs) Associate in Applied Science Degree program.) - ----------------------------------- ---------------------------------- 15 In the United States, each DeVry Institute is approved to grant associate and bachelor's degrees by the respective state where it is located. In New Jersey, however, authorization is only at the associate degree level for three programs - electronics engineering technology, computer information systems and telecommunications management. Students at the DeVry Institute, North Brunswick, are encouraged, upon completion of their associate's degree, to transfer to other DeVry Institutes to complete bachelor's degree requirements. In June 1996, the New York Board of Regents Commission on Higher and Professional Education voted to grant permission to establish a DeVry Institute of Technology campus in the New York City area with authority to grant certain bachelor and associate degrees. The Company has begun a search for an appropriate facility for this campus. Under current Canadian law, the Canadian DeVry Institutes are not permitted to grant degrees. However, students at the Canadian Institutes are allowed to transfer to DeVry Institutes in the U.S. to complete their degree requirements. In 1995, the Alberta Department of Advanced Education, the State of Arizona and the Commission on Institutions of Higher Education of the North Central Association of Colleges and Schools approved the DeVry Institute in Phoenix to offer its bachelor of science degree-completion program on the Calgary campus. This allows students attending classes at the Calgary campus to complete their degree studies without relocating to a campus in the United States. KGSM is authorized to operate and award degrees under authority of the Illinois Board of Higher Education, Georgia Nonpublic Postsecondary Education Commission, Wisconsin Educational Approval Board, Arizona State Board for Private Postsecondary Education, Missouri Coordinating Board for Higher Education and the California Council for Private Postsecondary and Vocational Education. The Virginia Council of Higher Education has granted conditional approval to KGSM to offer two of its master's degree programs. 16 State and Provincial Approval and Licensing - ------------------------------------------- Authorizations from state or provincial licensing agencies or ministries are required to recruit students, operate the Company's schools and grant degrees. Many states and provinces require for-profit postsecondary education institutions to post surety bonds for licensure. The Company has posted approximately $4 million of surety bonds with state and local regulatory authorities and approximately $1 million (CDN) of surety bonds with regulatory agencies in Canada and believes it is currently in compliance with all state and provincial regulations. Certain states have set standards of financial responsibility beyond those prescribed by federal regulation. For example, fiscal tests adopted by the California legislature (as discussed more fully below) and similar regulations adopted or proposed by other state regulators may place the Company in future non- compliance under certain state regulations. If the Company were unable to meet these tests and could not otherwise demonstrate that it was financially responsible, it could be required to cease operations in that state. To date, the Company has successfully demonstrated its financial responsibility where required. In January 1991, the state of the California adopted legislation that requires private, postsecondary education institutions to meet certain fiscal tests in order to continue operating in the state. These fiscal tests include three requirements; not having an operating loss in each of an institution's two most recent fiscal years; having positive net worth in its latest fiscal year; and maintaining a ratio of current assets to current liabilities of 1.25:1 or greater. The Company has achieved two of the required fiscal tests but has not maintained the ratio of current assets to liabilities of 1.25:1 which the Company believes is an inefficient use of its assets. At June 30, 1996, the Company had a ratio of current assets to current liabilities of 1.17:1. The California Council for Private Postsecondary and Vocational Education also has discretion under this statute to allow an educational institution to continue operating, even if it does not satisfy the financial tests, if the institution can demonstrate that it has maintained sufficient financial resources to sustain all of its promised educational services. At June 30, 1996, the Company believes that it has satisfactorily demonstrated its financial strength and ability to continue to operate. California law also requires an on-site visit to all postsecondary institutions having 17 accreditation from a regional accrediting association other than the Western Association of Colleges and Schools. The California Council for Private Postsecondary and Vocational Education conducted a visit of the California campuses in August. Their report has not yet been issued. Tuition and Fees - ---------------- Effective with the spring 1996 term, the DeVry Institutes' tuition in the United States for two semesters (one academic year) ranged from $6,580 to $6,665, an increase of approximately 5.1% from last spring. Variations in tuition depend on term of enrollment. Students enrolled on less than a full time basis are charged somewhat lower tuition. For a student enrolled in the DeVry Institute's 5 term electronics technician program, total tuition cost would be $16,550. For a student enrolled in the 8 term accounting program, total tuition cost would be $26,420. A national survey of tuition released in the fall of 1995 by the College Board reported that annual tuition and fee increases adopted by publicly supported and independent four-year institutions averaged 6% for the 1995-96 academic year. Tuition in Canada was increased to $6,020 (CDN) for the two semester period, an increase of approximately 5.1% from last spring. Effective with the September 1996 term, KGSM tuition per course (four quarter credit hours) ranges from $905 to $1,110, depending on the state in which the student is enrolled. This compares to tuition rates from $855 to $1,050 last year. In addition to the tuition amounts described above, students at the DeVry Institutes and KGSM must purchase textbooks and supplies as part of their educational program. If a student leaves school prior to completing a term, federal, state and provincial regulations and accreditation criteria permit the Company to retain only a set percentage of the total tuition received from such student, which varies with, but generally equals or exceeds, the percentage of the term completed by such student. Amounts received by the Company in excess of such set percentage of tuition are refunded to the student or the appropriate funding source. 18 Financial Aid and Financing Student Education - --------------------------------------------- Students attending the DeVry Institutes finance their education through a combination of family contributions, individual resources (including earnings from full or part-time employment), financial aid (including Company-provided financial aid) and tuition reimbursement from their employers. The recent restoration of tax exemption for undergraduate education employer tuition reimbursement will be of benefit to DeVry students, mainly those working adults attending its part-time evening programs, who receive partial or full tuition reimbursement. The Company believes that approximately 79% of the U.S. DeVry Institutes' students receive some government-sponsored financial aid and that a similar percentage of the students attending the Canadian DeVry Institutes receive some government-sponsored financial assistance. The Company believes that between 10% and 15% of KGSM's students receive government-sponsored financial aid. In addition, a substantial number of KGSM students receive tuition reimbursement from their employers. Students attending the Becker CPA or CMA review courses are not eligible for financial aid but many of them receive part or full tuition reimbursement from their employers. The DeVry Institutes assist their undergraduate students in locating part- time employment. Data from the National Center for Education Statistics indicates that in 1993, almost half of all full-time college students between the ages of 16 and 24 were employed. The Company believes that a substantially greater percentage of its full-time students are employed to help finance their costs of education. On the basis of a financial aid application completed by the student and the student's family, the DeVry Institutes develop an assistance package for students who require financial aid. Government-sponsored financial aid is of great importance to the Company because approximately 68% of the DeVry Institutes' U.S. tuition, book and fee revenues collected in 1996 were dependent on some form of such financial aid received by its students. In 1995, approximately 69% of revenues collected were dependent on financial aid. The government-provided financial aid and assistance programs in which many of the Company's students participate are subject to political and budgetary considerations. There is no assurance that government funding 19 for the financial aid programs in which the Company's students participate will be maintained at current levels. A reduction in funding levels to financial aid programs could result in lower enrollments or an increased amount of Company-provided financial aid to its students. Budgetary proposals currently circulating in this election year include President Clinton's tax deduction of up to $10,000 per year for the cost of college or vocational training, a $1,500 tax credit for full-time students and increasing the maximum amount of the Pell Grant to $2,700 from its current level of $2,470. Dole's tax cut proposals include a $500 per child per year tax credit for funds deposited into an "IRA-like" account which can be used for college or other post-secondary education costs. Extensive and complex regulations in the U.S. and Canada govern all of the government grant, loan and work programs in which the Company and its students participate. Regulations and standards that an institution must satisfy in order for its students to participate in federal financial assistance programs include, among others, maximum student loan default rates; limits on the proportion of an institution's revenue that can be derived from federal aid programs; financial responsibility and administrative capability requirements; and prohibition of certain types of incentive payments to student recruiters. At June 30, 1996, the Company achieved an operating profit, positive net worth, a "quick ratio" (cash plus accounts receivable to all current liabilities) of more than 1:1 and maintained the required cash reserve for the payment of refunds. This fully satisfied the standards of financial responsibility established by the U.S. Department of Education for participation in federal financial assistance programs. Similarly, the Company fully satisfied the standards of financial responsibility at June 30, 1995 and 1994. Failure to achieve these standards or otherwise demonstrate, within the regulations, its ability to continue to provide the educational services it offers could result in the Company being required to post a surety bond to permit its students to continue to participate in federal financial assistance programs. The Company maintains a staff at its Oakbrook Terrace headquarters to review, interpret and establish procedures for compliance with these regulations. Because financial assistance programs are required to be administered in accordance with the standard of care and diligence of a 20 fiduciary, any regulatory violation could be the basis for the initiation of a suspension, limitation or termination proceeding against the Company. Changes in or new interpretations of applicable laws, rules or regulations could have an adverse effect on the Company in the future. In the United States, the Company has completed and submitted its required audits of compliance with federal financial assistance programs for all previous years and its independent accountants are currently conducting the required audits of the one year period ending June 1996. In August, the Department of Education undertook a site visit, as a part of its program of periodic review of the administration of student financial assistance programs, at the DeVry North Brunswick, New Jersey, campus. Although the Company has no reason to believe that any proceeding against the Company is presently contemplated, if such a proceeding were initiated against the Company and resulted in a substantial curtailment of the Company's participation in government grant or loan programs, the Company could be adversely affected. In Canada, DeVry's two Toronto-area schools were notified at the beginning of September 1995 that the Ontario Ministry of Education and Training had temporarily suspended the processing of new financial aid applications from DeVry students pending review of inaccuracies found in applications filed by some students. The Ministry believed that some of DeVry's Toronto-area students applied for and collected what may be excessive government-sponsored financial aid by inappropriately reporting that they had zero income. A Ministry audit of these applications, with DeVry's full cooperation, began in September 1995. In order to restore financial aid eligibility, the Company refunded to the Ministry approximately CDN $1.6 million which the Company believes is substantially all of the previous inappropriately disbursed financial aid. In addition, the Company posted a letter of credit at the Ministry's request against possible additional amounts that may have been inappropriately disbursed. Effective with the spring term, which began in March, the Ministry conditionally reinstated approval for the processing of financial aid applications. Full unconditional reinstatement is subject to the Ministry's completion of certain procedures regarding verification of the Company's compliance with financial aid processing regulations. 21 The following is a description of the U.S. and Canadian financial aid programs in which the Company's students participate. United States Government Financial Aid Programs The following U.S. Department of Education financial aid programs under Title IV of the Higher Education Act are utilized by the Company's students in the United States: (1) Federal Pell Grant ("Pell"), (2) Federal Supplemental Educational Opportunity Grant ("SEOG"), (3) Federal Family Education Loan Program ("FFELP"), (4) Federal Perkins Direct Student Loan program ("Perkins"), (5) Federal Work Study ("FWS") and (6) William D. Ford Federal Direct Student Loan Program ("FDSL"). Grants are funds made available by the government to eligible students who demonstrate financial need. Grants do not have to be repaid. The Company's students are eligible to participate in the Pell and SEOG Grant programs, which are programs for undergraduate students. Eligible students receive a Pell grant ranging in amount from $400 to $2,470 per year. SEOG is a supplement to the Pell grant, available to only the neediest students because SEOG funds are limited in amount at each institution based upon a federally determined formula. In addition to these federal assistance funds, DeVry is required to make a 25% institutional matching contribution of all SEOG funds disbursed. The institutional matching contribution may be satisfied, in whole or in part, by the DeVry scholarship funds, discussed separately in this section, or by externally provided scholarship grants. Loans Students at the DeVry Institutes participate in the Stafford and PLUS programs within the FFELP and in the Perkins loan program. Stafford loans may include an interest subsidy depending upon the financial need of the student and loan repayment is scheduled to begin six months after a student no longer attends school on at least a half-time basis. In 1996, over 80% of the financial aid received by students attending the Company's U.S. DeVry Institutes was provided by federal student loans. Students at KGSM participate in the FDSL. In 1993, Congress passed legislation creating the new Direct Student Loan Program. Under this program, students may complete all loan application and processing steps at their educational institution. Besides the 22 benefit of one-stop processing, which can be done at the institution in conjunction with the application for aid under other programs, this loan program offers other benefits to student borrowers such as income-based repayments, lower loan fees and lower loan interest rates. For the 1994- 95 school year, the DeVry DuPage Institute was one of only 104 institutions in the nation chosen by the Department of Education to pilot the implementation. For the 1995-96 school year, four additional DeVry Institutes and KGSM were chosen for participation. The U.S. Congress has considered various proposals to eliminate this program or to cap loans made under this program at some percentage of all federal student loans until there is more experience with its success and realized cost savings. Work Study Work Study wages are 75% paid from federal funds and 25% from qualified employer funds. Work opportunities, both on or off-campus, under FWS are offered on a part-time basis by the U.S. DeVry Institutes to undergraduate students who demonstrate financial need. State Financial Aid Programs State grant assistance may be received by eligible students attending DeVry Institutes in Arizona, California, Georgia, Ohio and New Jersey. Canadian Government Financial Aid Programs Canadian students, other than students from Quebec, are eligible for loans under the Canada Student Loan Plan, which is financed by the Canadian government but administered at the provincial level. Canadian Student Loans are available to students who are Canadian citizens or a permanent resident of Canada enrolled at approved postsecondary institutions. Students from Quebec are eligible for loans under the Quebec Student Loan Plan. The loans are interest-free while the student is in school and repayment begins six months after the student leaves school. All other forms of government financial aid in Canada, both loans and grants, are financed and administered by the provinces. "85/15 Rule" This U.S. Department of Education regulation affects only for- profit postsecondary institutions, such as the Company. Under this rule, students attending a for-profit institution that derives more than 85% of its revenues from federal financial assistance programs in any year will not be able to participate in these programs for the following year. This 23 rule, which was reported on for the first time for the Company's fiscal 1995, is commonly referred to as the "85/15 rule." In 1995, the U.S. Institutes derived approximately 69% of their revenues from these defined federal assistance programs. In 1996, the U.S. Institutes derived approximately 68% of their revenues from these programs and no institute within the DeVry system derived more than 78% of its revenues from these programs. Each of the DeVry Institutes (except for the Long Beach, California, Institute which currently operates as an additional location of the Pomona, California, Institute) and KGSM are established as separate institutions under the HEA provisions and must separately meet the criteria for the "85/15 rule" and for loan default rates. Company-Provided Financial Assistance The Company's EDUCARD Plan is available to students attending the U.S. DeVry Institutes. The EDUCARD Plan is an installment loan program designed to assist students unable to completely cover educational costs with student and family contributions, federal and state grants and loans. The installment loan feature of the EDUCARD Plan is available to a student only after other student financial assistance has been applied toward the payment of tuition, books and fees and is available only for those purposes. Repayment of EDUCARD Plan balances is worked out in accordance with the financial circumstances of the particular student, but is typically on a monthly basis with all balances required to be paid within 12 months following a students's graduation or termination of study. The receivable balance related to Company-provided financial aid at the U.S. DeVry Institutes at June 30, 1996, was approximately $10.8 million. Improved timeliness in financial aid processing and the collection of student-owed balances, maintained this receivable at approximately the same amount owed by students last year under the EDUCARD Plan, although the number of enrolled students and tuition revenues increased from last year. Amounts owed by students under the EDUCARD Plan are subject to a monthly interest charge of 1% of the average outstanding balance. In addition to the student financial assistance provided by the EDUCARD Plan, the DeVry Scholarship Competition annually offers merit-based scholarships. The U.S. DeVry Institutes offered 30 full-tuition and 90 half-tuition scholarships to 1995/96 high school graduates. Each scholarship covers the application fee and tuition for one of DeVry's 24 degree programs. The total value of these scholarships was over $2 million. Similar scholarship offers have been made to high school graduates in previous years and are expected to be offered in the future. To attract students who attend community or junior colleges, the U.S. DeVry Institutes offered 36 half-tuition scholarships, valued at more than $500,000, to students who graduated from an accredited community/junior college in 1994 or later. In Canada, the DeVry Institutes offered 7 full- tuition and 14 half-tuition scholarships valued at more than CDN $300,000 to high school graduates. The DeVry Institutes have also provided funds in the form of institutional grants which help students most in need of financial assistance. Student Loan Defaults - --------------------- The Company believes that in 1996, federal student loans represented more than 80% of the federal aid received by students at the U.S. DeVry Institutes and 100% of the federal aid received by students at KGSM. For a variety of reasons, high student loan default rates on federal student loans are most often found in proprietary and minority institutions and community colleges, all of which tend to have a higher percentage of low income students enrolled than do four-year publicly supported and independent colleges and universities. In 1989, the U.S. Department of Education instituted strict regulations that penalize educational institutions with high student loan default rates. These regulations were further tightened by the 1992 Higher Education Reauthorization Act. Any individual institution with a FFELP or FDSL cohort default rate exceeding 20% for the year is required to develop a default management plan in order to reduce defaults, although the institution's operations and its students' ability to utilize student loans are not restricted. Any individual institution with a FFELP or FDSL cohort default rate of 25% or more for three consecutive years is ineligible for participation in these loan programs and cannot offer student loans administered by the U.S. Department of Education for the fiscal year in which the ineligibility determination is made and for the two succeeding fiscal years. In addition, effective this fall is the added provision that students attending an institution whose cohort default rate has exceeded 25% for three consecutive years will be ineligible for Pell grants. Any institution with a FFELP or FDSL cohort default rate of 40% or more in any year is subject to immediate limitation, suspension or termination proceedings from all federal aid programs. No 25 DeVry Institute has ever had a FFELP or FDSL cohort default rate of 25% or more for three consecutive years nor a cohort default rate of 40% or more in any one year. The Company carefully monitors its students' loan default rate. To help reduce student loan default rates, the Department of Education requires that all educational institutions wait 30 days before disbursing funds to first-time, first-year undergraduates to prevent potential early-term dropouts from defaulting on their loans. Students who leave school in the early part of their educational program typically default on their loans at a higher rate than those students who remain and complete the course. Another significant factor in controlling student loan default rates is the servicing and collection efforts by lenders and guaranty agencies. The Company assists the efforts of these lenders and agencies by contacting its students who are delinquent in their loan repayments and advising them of their responsibilities and rights to deferments or collection forbearance if they are eligible. According to preliminary reports by the U.S. Department of Education, the Company's schools had FFELP student loan default rates for 1994 (the latest year for which statistics are available) ranging from 1.5% to 26.8%. The Company's preliminary system-wide FFELP student loan default rate was reported at approximately 17.7%. The reported rates for 1994 reflect the proportion of former students who were due to begin repaying their loans during that year but who were in default by the end of 1995. For 1993, the Company's system-wide FFELP cohort default rate was 18.6%. Upon review of the calculations of these rates for each Institute, the Company discovered numerous errors and exceptions. The Company has filed an appeal with the Department of Education for the recalculation of rates for both 1993 and 1994. Only one DeVry Institute had a FFELP student loan default rate greater then 20% for 1994. That Institute, whose preliminary default rate was reported at 26.8%, has initiated a default management plan and submitted it for approval to the Department of Education. The Company believes that its appeals should result in lower reported default rates and that the Institutes can lower their default rates for future periods. Default rate reduction initiatives are underway at each Institute. No DeVry Institute is subject to any restrictions or termination under the student loan program. 26 Students who attend the U.S. DeVry Institutes also participate in the Federal Perkins loan program. This program provides low interest educational loans to students who demonstrate exceptional need. Funding for this program is provided, in part, by the Department of Education and, in part, by the participating institution. As loans are repaid, the principal and interest from these repayments is returned to the pool of funds available for future loans to students at that institution. The program, including the responsibility for collection of outstanding loans, is administered by the institution. Any institution with a Perkins loan cohort default rate exceeding 15% must establish a default reduction plan. Any institution with a Perkins loan cohort default rate between 20% and 30% will receive a reduced annual federal contribution to the program. If the cohort default rate exceeds 30%, the institution will not receive any new federal contribution to the program. However, new loans to eligible students may continue to be made from the pool of funds created by monthly repayments on previous loans. The DeVry Institutes reported Perkins loan default rates for 1995 (the latest year for which statistics are available) ranging from 15.6% to 34.0%. The U.S. DeVry Institutes system-wide Perkins loan default rate was 25.9%. For 1994, the Perkins loan default rates ranged from 10.8% to 27.0% and the U.S. DeVry Institutes system-wide Perkins loan default rate was approximately 20.5%. A portion of the increase in the 1995 default rates results from regulatory changes in the default rate calculation which now includes as defaults some loans previously considered to be not in default. For 1996, it is expected that some of these calculation revisions will be rescinded. Student counseling and additional collection efforts are being implemented to reduce these default rates. Career Services - --------------- The Company believes that the employment of its graduating students is essential to its ability to attract new students. There were more than 45,600 graduates over the ten year period ending October 1995 who were eligible for career services assistance (i.e. excluding graduates who continued their education, students from foreign countries not legally eligible to work in the U.S., etc.). Of the more than 43,000 graduates who actively pursued employment or were already employed, 91.5% held positions in their chosen fields within six months of graduation. Each Institute has career services staff working with students in the areas of career choice 27 activity, resume preparation and job interviewing. The staff also maintains contact with local and national employers to determine job opportunities and arrange interviews. The Company attempts to gather accurate data on the number of its graduates employed in education related positions within six months following graduation. To a large extent, the reliability of such data is dependent on the information that graduates report to the Company. Full and part-time U.S. degree and diploma program graduates for the three classes which ended in calendar year 1995, and for the three classes which ended in calendar year 1994, were employed in their chosen field within six months of graduation, based on data reported to the DeVry Institutes, as follows: THE U.S. DEVRY INSTITUTES' GRADUATE EMPLOYMENT STATISTICS ---------------------------------------------------------
Percent of Graduates Who Number of Actively Graduates Pursued Who Number of and Actively Graduates Obtained Pursued Employed Employment Employment in and Those Percent Number or Were Education Who were Of Net of Net Already Related Already Graduates Graduates(1) Employed(2) Positions Employed(2) Employed(1) ---------- --------- --------- --------- --------- Calendar Year 1995 Graduating Classes (2/95, 6/95, 10/95) 4,166 4,070 3,882 95.4% 93.2% Calendar Year 1994 Graduating Classes (2/94, 6/94, 10/94) 4,207 4,064 3,848 94.7% 91.5%
- ---------------------------- (1)Net graduates exclude students continuing their education, students from foreign countries who are legally ineligible to work in the United States and students ineligible for employment because of extreme circumstances. (2)Does not include students who actively pursued employment for less than 6 months and did not obtain employment. 28 The majority of employers of the DeVry Institutes' graduates are in the electronics or information processing industries. Management believes that no single employer has hired more than 5% of the DeVry Institutes' graduates in recent years. Major employers of the DeVry Institutes' graduates include the following companies: Andersen Consulting Group, Applied Materials, AT&T, Cellular One, Eastman Kodak Co., EDS, General Electric Company, IBM, INTEL, Motorola Inc. and Sprint. KGSM maintains a career services office to assist current and past graduates. This office offers a full range of services designed to enhance each individual's career development skills and is available to graduates, at no charge, on a lifetime basis. Seasonality - ----------- The Company's business is somewhat seasonal. Highest enrollment and revenues at the DeVry Institutes and KGSM typically occur during the fall back-to-school period which corresponds to the second and third quarters of the Company's fiscal year. Slightly lower enrollment is experienced in the spring and the lowest enrollment occurs during the summer months. Becker experiences higher enrollments for its courses beginning in June and July leading to the fall CPA exam. Results of operations reflect this seasonal enrollment pattern and the pattern of student recruiting activity costs that precede the start of every term. Revenues, income before interest and taxes and net income by quarter for each of the past two fiscal years are included in Note 10 to the Company's consolidated financial statements. Employees - --------- As of August 1996, the Company had approximately 2,900 full and part-time employees. In addition, the DeVry Institutes employed over 1,000 students as faculty assistants and in other part-time positions and used over 200 visiting instructors who teach on an as-needed, course-by- course basis, primarily for evening courses. The majority of KGSM faculty members are practicing business professionals who are engaged to teach on a course-by- course basis. KGSM used over 300 such faculty members during the year. None of the Company's employees is represented by a union. The Company believes that relations with its employees are satisfactory. 29 Trademarks and Service Marks - ---------------------------- The Company uses a number of trademarks including "DeVry Institute of Technology", "Becker CPA Review" and variants thereof. All trademarks, service marks and copyright registrations associated with the business are registered in the name of the Company or one of its subsidiaries and expire over various periods of time. The Company vigorously defends against infringements of its trademarks, service marks and copyrights. ITEM 2 - PROPERTIES - -------------------- DeVry Institutes - ---------------- The DeVry Institute campuses are located in both suburban communities and urban neighborhoods. They are all easily accessible to major thoroughfares. Each Institute campus includes teaching facilities, admissions and administrative offices. Teaching facilities are housed in modern, air-conditioned buildings that include classrooms, laboratories, libraries, bookstores and student lounges. Electronics laboratories include PC based instrumentation and microprocessor development/circuit simulation systems along with traditional oscilloscopes, digital multimeters, power supplies, signal generators and other equipment. Computer laboratories include both stand alone and networked PC compatible workstations that support all curricula areas. Resources available to students include access to a central mainframe owned and operated by a third party, UNIX and numerous software packages supporting a variety of business, engineering and scientific applications. Connections to the Internet and World Wide Web are included through the computer laboratories as a part of the program curriculum. Telecommunications laboratories provide central office simulation, PBX administration, inter-networking and teaching LAN environments. None of the five DeVry Institute campuses owned by the Company is subject to a mortgage or other indebtedness. In June 1996, the DeVry Technical Institute in Woodbridge, N.J., moved to a new, 98,000 square foot company owned facility in North Brunswick, N.J., in advance of the summer term class start. 30 In July 1996, the Company began operation of a satellite campus in Mississauga (Toronto), Ontario, Canada. Opened in 42,000 square feet of space, this is the second satellite to the main campus operation in North York (Toronto) and the fourth DeVry Institute in Canada. The table below sets forth certain information regarding each of the properties at which the DeVry Institutes conduct educational operations: DeVRY INSTITUTE CAMPUSES ---------------------------
Full and Part-Time Area Students (Approximate Attending Square Feet) Spring 1996 Ownership ------------ ----------- --------- Decatur (Atlanta), Georgia 107,500 2,766 Owned Chicago, Illinois 104,850 2,924 Owned Addison (Chicago), Illinois 91,600 3,137 Leased Columbus, Ohio 106,480(1) 2,473 Owned North Irving (Dallas), Texas 95,250 2,294 Leased Kansas City, Missouri 74,500 1,902 Owned Phoenix, Arizona 120,200 2,559 Owned Pomona (Los Angeles), California 100,500 2,938 Leased Long Beach (Los Angeles), California 98,240 1,056 Leased Woodbridge, New Jersey 97,470 2,423 Leased Calgary, Alberta, Canada 42,900 1,389 Leased North York (Toronto), Ontario, Canada 51,690 1,499 Leased Scarborough (Toronto), Ontario, Canada 35,400 790 Leased ------ 28,150 ======
- ------------------------------- (1) Includes 14,400 square feet of modular buildings. The Company placed a deposit in escrow on a parcel of land in the San Fernando Valley, California, for the construction of a third campus in the Los Angeles area. Completion of the purchase is dependent upon, among other things, obtaining zoning of the property for campus use. In Alpharetta (Atlanta), Georgia, the Company is finalizing contracts with a developer for the construction of a build to suit, leased campus in that suburb. The facility, planned at 65,000 square feet, is expected to open for classes in fiscal 1998. 31 The Company has begun a search for land in the San Francisco area for construction of a campus to serve the Northern California area. In New York, a search is underway for an existing building that can be renovated to the Company's specifications for operation in the New York City area. KGSM - ---- KGSM centers include teaching facilities, admissions and administrative offices. The centers are housed in modern, air conditioned buildings whose locations were chosen for their convenience to students. Keller centers range in size from approximately 3,600 to 9,000 square feet. In the spring of 1996, Keller Graduate School of Management opened one new center in Tysons Corner, Virginia (Washington, D.C. area). The table below sets forth certain information regarding each of the properties at which KGSM conducts educational operations: KGSM CENTERS ------------
Part-Time Students April 1996 Ownership ---------- --------- Chicago, Illinois 310 Leased Schaumburg, Illinois 372 Leased Downers Grove, Illinois 390 Leased Lincolnshire, Illinois 358 Leased Orland Park, Illinois 162 Leased Elgin, Illinois 147 Leased Milwaukee, Wisconsin 220 Leased Waukesha, Wisconsin 164 Leased St. Louis, Missouri 85 Leased Kansas City, Missouri (downtown) 161 Leased Kansas City, Missouri 147 (1) Phoenix, Arizona 140 (1) Mesa, Arizona 169 Leased Decatur, Georgia 190 (1) Atlanta, Georgia 168 Leased Pomona, California 128 (1) Long Beach, California 91 (1) Tysons Corner, Virginia 41 Leased ----- 3,443 =====
- ------------------------ (1)Operates on a DeVry Institute campus. 32 In the fall of 1996, Keller opened a center at the Company's corporate headquarters location in Oakbrook Terrace, Illinois. This is the seventh center in the Chicagoland area and the nineteenth center in the system. The downtown Chicago center will relocate to a new and larger facility in the downtown Chicago area this fall to permit increased enrollment at this location. Becker - ------ Becker CPA is headquartered in leased offices in Encino, California. Classes are conducted in leased facilities, less than twenty of which are leased on a full-time basis. The remainder of the classes are conducted in facilities which are leased on an as used basis, allowing classes to be expanded or relocated as enrollments require. Corporate - --------- The Company's administrative offices are located in approximately 60,000 square feet of a leased facility in Oakbrook Terrace, Illinois. In addition, the Company leases approximately 17,900 square feet of storage and other miscellaneous use space at this facility. Corporate Educational Services maintains its headquarters at the Company's administrative offices in Oakbrook Terrace, Illinois. The Company's leased facilities are occupied under leases whose remaining terms range from one to 13 years. A majority of these leases can be renewed for additional periods. ITEM 3 -LEGAL PROCEEDINGS - ------------------------- The Company is subject to occasional lawsuits, investigations and claims arising out of the normal conduct of its business. Neither the Company nor any of its subsidiaries is currently a party to any material legal action except those described below. In July 1996, the Company entered into an out-of-court settlement agreement with the Internal Revenue Service (IRS) relative to the Statutory Notice of Deficiency issued by the IRS against the Company for tax years 1988 through 1991. The claimed deficiencies related to the amortization of intangible 33 assets purchased during the acquisition of the DeVry Institutes in 1987 (Notes 1 and 3). All of these issues have been resolved as a result of the settlement. The settlement amount is immaterial to the Company's financial position, results of operations and liquidity. During 1996, the Ontario Ministry of Education and Training temporarily suspended and later conditionally reinstated the processing of financial aid applications for students attending the Company's two Toronto-area schools. Full unconditional reinstatement is subject to the Ministry's completion of certain procedures regarding verification of the Company's compliance with financial aid processing regulations. In July 1996, the Company was served with a class action lawsuit in Canada alleging misrepresentation about the quality of the DeVry Institutes' educational programs. The Company believes that the claims in the lawsuit are frivolous and without merit. In response to the lawsuit, the Company has filed a Statement of Defense and intends vigorously to contest the allegations. Although the outcomes cannot be predicted with certainty, the Company believes the resolution of these matters will not have a material effect on the Company's financial position, results of operations or liquidity. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ There were no matters submitted to a vote of the Company's security holders during the fourth quarter of the fiscal year. 34 EXECUTIVE OFFICERS OF THE REGISTRANT ------------------------------------ The name, age and current position of each executive officer of the Company are: Name, Age and Office Business Experience - -------------------- ------------------- Dennis J. Keller.............55 Mr. Keller co-founded KGSM in 1973. From the inception of the company, Chairman of the Board and Mr. Keller has been Chairman of the Chief Executive Officer Board and Chief Executive Officer. Mr. Keller is a graduate of Princeton University and holds a Master of Business Administration degree from the University of Chicago. Ronald L. Taylor.............52 Mr. Taylor co-founded KGSM in 1973 and has been a director since its Director, President and inception. In 1981, Mr. Taylor became Chief Operating Officer President and Chief Operating Officer. Mr. Taylor is a graduate of Harvard University and holds a Master of Business Administration degree from Stanford University. David C. MacFarlane..........52 Mr. MacFarlane joined KGSM in 1974. During the past 20 years, he has Senior Vice President served in a variety of positions including Director of Admissions, Dean of Admissions and Dean of KGSM. Currently Mr. MacFarlane has responsibility for DeVry Institute regional student recruiting and various administrative functions. Norman C. Metz...............48 Mr. Metz joined the Company in April 1983 as a Vice President. In 1986, Senior Vice President Mr. Metz assumed responsibility for operations of the DeVry Institutes. In addition, Mr. Metz is responsible for student recruiting in the admission offices at the Institute locations. 35 Name, Age and Office Business Experience - -------------------- ------------------- O. John Skubiak..............46 Mr. Skubiak has been with KGSM for more than 18 years, progressing from Senior Vice President admissions representative to Dean of KGSM. In his current position as a Senior Vice President of the Company, Mr. Skubiak has responsibility for the Company's marketing, other than sales, and the operations of KGSM, Corporate Educational Services and Becker CPA Review. Norman M. Levine...........53 Mr. Levine has been Controller of the Company since 1987 and has been the Vice President, Controller Chief Financial Officer since March 1989. and Chief Financial Officer. From November 1982 to 1987, Mr. Levine was Controller of the DeVry Institutes. Marilynn J. Cason..........53 Ms. Cason joined the Company in January 1989 with responsibility for Vice President, General the Company's legal affairs and human Counsel and Corporate resources. From 1976 to 1988, Ms.Cason Secretary served in various legal roles as Vice President of Johnson Products Company, a manufacturer of cosmetics and toiletries. George W. Fisher...........44 Mr. Fisher joined the Company as Vice President Canadian Operations in Vice President, February 1985. His responsibilities Regional Operations currently include operations of several of the U.S. and Canadian DeVry Institutes. Patrick L. Mayers..........56 Dr. Mayers joined KGSM in 1978 as Dean of Academic Affairs. Dr. Mayers, who Vice President, Academic obtained his B.A., M.A., M.B.A. and Affairs, KGSM Ph.D. Degrees from the University of Chicago, was elected an officer of the Company in 1987. Gerald Murphy..............49 Mr. Murphy joined the Company in late 1995 as a Vice President with Vice President, responsibility for the operation of Regional Operations several of the U.S. and Canadian DeVry Institutes. Prior to joining DeVry, Mr. Murphy served as a Vice President of Education Management Corp. and of the Universal Technical Institute. 36 Name, Age and Office Business Experience - -------------------- ------------------- James Otten................47 Dr. Otten joined the Company in late 1995 as a Vice President with Vice President, responsibility for the operation of Regional Operations several of the U.S. DeVry Institutes. Prior to joining DeVry, Dr. Otten served as President of the Katherine Gibbs School in Boston and of the Brown Institute in Minneapolis. Sharon Thomas-Parrott......45 Ms. Thomas-Parrott joined the Company in January 1982 after several years as Vice President, Government an officer in the U.S. Department of Relations Education's Office of Student Financial Assistance. She served the Company in several student finance positions before being elected to her current position which includes responsibility for both student finance and government relations. Robert R. Roehrich.........49 Dr. Roehrich joined the Company in June 1981 as Dean of Computer Science Vice President, Academic at the Columbus DeVry Institute. In Affairs March 1983, he became Vice President, Accreditation, following which he was elected Vice President, Academic Affairs. Kenneth Rutkowski..........49 Mr. Rutkowski joined the Company in 1985 as Director of Operations Vice President, Operations and Administrative Services and was Services and Administration promoted to his current position in May 1991. His current responsibilities include managing the Company's real estate and various administrative functions. Vijay Shah.................45 Mr. Shah joined the Company in 1977 progressing from a representative in Vice President, Admissions an admissions office to director of admissions at a DeVry Institute. He has been National Director of Admissions since 1989 and was promoted to his current position in August 1994. Edward J. Steffes..........46 Mr. Steffes joined the Company in September 1984 as director of Vice President, Marketing marketing and was promoted to his current position in December 1986. 37 PART II ITEM 5 - MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - ---------------------------------------------------------- (a) Market Information ------------------ The Company's common stock has been traded on the New York Stock Exchange since November 14, 1995, under the symbol DV. Prior to that date, the Company's common stock traded on The NASDAQ Stock Market. The following table states the high and low quotation and sales price information by quarter for the past two years as reported by NASDAQ and the New York Stock Exchange. All quotation and sales price information has been adjusted for the two-for-one stock split in the form of a 100% stock dividend paid June 21, 1995, to shareholders of record on June 1, 1995.
FISCAL 1996 FISCAL 1995 ----------------- -------------------- HIGH LOW HIGH LOW ------------------------------------------------------------------ First Quarter $25 3/4 $20 $14 1/2 $12 17/32 Second Quarter 28 1/8 22 15 1/2 12 7/8 Third Quarter 35 1/2 25 3/4 19 5/16 15 1/4 Fourth Quarter 45 7/8 33 21 1/2 18 1/4 ------------------------------------------------------------------
(b) Approximate Number of Security Holders -------------------------------------- There were 337 holders of record of the Company's common stock as of August 8, 1996. The number of holders of record does not include beneficial owners of its securities whose shares are held by various brokerage firms and other financial institutions. The Company believes that there are over 8,000 beneficial holders of its common stock. 38 (c) Dividends --------- The Company is a holding company and, as such, is dependent on the earnings of the Operating Subsidiary and Becker for funds to pay cash dividends. Cash flow from the Operating Subsidiary and Becker may be restricted by law and is subject to some restrictions by covenants in the Operating Subsidiary's debt agreement. The Company has not paid any dividends on its common stock and expects for the foreseeable future to retain all of its earnings from operations for use in the Company's business. From time to time, the board of directors will review the Company's dividend policy. Any payment of dividends will be at the discretion of the board of directors and will be dependent on the earnings and financial requirements of the Company and other factors as the board of directors deems relevant. ITEM 6 - SELECTED FINANCIAL DATA - -------------------------------- Selected financial data for the Company for the last five years is included in the exhibit, Five-Year Summary - Operating, Financial and Other Data, on page 67 of this report. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ------------------------------------------------------------------------ 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 appearing elsewhere in this report. All references in the financial statements to the number of shares outstanding and per share amounts have been restated to reflect the two-for-one stock split effective June 21, 1995. RESULTS OF OPERATIONS - --------------------- 1996 vs. 1995 - ------------- Tuition revenues in 1996 increased by $29,077,000 or 14.0% from 1995. This was the largest tuition revenue increase in the history of the Company and is attributable to both higher student enrollment at the DeVry Institutes and KGSM and to tuition increases implemented during the year. 39 Cumulatively, total student enrollment at the DeVry Institutes in the three semesters of fiscal 1996 increased by 8.6% compared with fiscal 1995. This was partly due to higher enrollments at the Long Beach, California, and Scarborough (Toronto), Ontario, Canada, campuses, both of which opened in the previous year, and partly due to increased enrollments at the previously existing Institutes. This is the fifth consecutive year that total cumulative enrollment at the DeVry Institutes has increased from the previous year and the largest rise in any of those years. At KGSM, cumulative total student enrollment for the five terms of fiscal 1996 grew by 16.7% from 1995. The increase in enrollments was due to elevated enrollments at the Pomona and Long Beach, California, centers, both of which opened last year, the 1996 opening of a center in Tysons Corner, Virginia (Washington, D.C. area), and continued growth in enrollments at the previously existing centers. Tuition increases have historically been implemented by the DeVry Institutes effective with the spring term and effective with the fall term at KGSM. Tuition rates rose approximately 5% at DeVry, which is just slightly below the rate of last year's increase and below the average rate of tuition increases at other colleges and universities. Tuition rates rose similarly at KGSM. Other revenues are attributable primarily to sales of books and supplies to students attending the Company's educational programs. Interest income on short-term investments of cash balances in excess of those needed for daily operations declined slightly from last year, as the higher level of payments for taxes on income, payments and receivable increases associated with financial aid processing at the Toronto-area campuses and completion of the new DeVry Institute campus in North Brunswick, New Jersey, reduced average investible balances during the year. Cost of educational services include the cost of faculty and related staff, which composed approximately 60% of this expense category. Also included in this expense category are the costs of facilities, supplies, bookstore sales, other student education-related support activities and the cost of tuition refunds and uncollectible accounts. The cost of educational services rose by 13.6% from last year. Costs associated with the new DeVry 40 Institutes and KGSM centers contributed to this increase along with higher educational costs resulting from higher student enrollments at the existing locations. Depreciation expense on the Company's continued investment in facilities and equipment for its students increased by over $1 million from last year. Tuition refund and uncollectible account expense increased in the year partly because of higher enrollments and a larger tuition base at DeVry and KGSM and partly because of the higher proportion of new DeVry students this year as a result of growing new student enrollments. For the year, new student enrollment at the DeVry Institutes increased by 10.5% from last year. New students historically withdraw at higher rates than do students in later terms. Student services and administrative expense includes the costs of new student recruiting, curriculum development and general administrative costs. These expenses increased by 12.6% from last year. Marketing costs have grown to support the new DeVry Institutes and KGSM locations and to support the higher number of new students recruited at the existing locations. General administrative expenses increased from last year partly due to normal inflationary changes and partly because of efforts associated with the Ontario Ministry of Education's suspension and subsequent conditional reinstatement of financial aid eligibility for students attending the Company's Toronto area campuses. The Company's earnings from operations, before interest expense and taxes on income, reached a record $33,761,000 for the year. This represents an operating margin of 13.0%, up from 12.6% and 12.1% in each of the last two years, respectively. Higher revenues and cost-containment measures contributed to the improved margins. Interest expense was reduced by $2,007,000 to $1,063,000 for the year. The lower interest expense resulted from lower outstanding levels of debt throughout most of the year and the absence of the non-recurring make-whole premium payment made in 1995 when the Company voluntarily prepaid all of its senior subordinated notes. 41 The effective tax rate represents the combination of U.S. federal and state and Canadian federal and provincial income taxes on the Company's operations in these jurisdictions. 1995 vs. 1994 - ------------- Tuition revenues in 1995 increased by $16,325,000 or 8.5% from 1994. The rise is attributable to both higher student enrollment at DeVry and KGSM and to tuition increases implemented during the year. Cumulatively, total student enrollment at the DeVry Institutes in the three semesters of fiscal 1995 increased by 3.3% compared with fiscal 1994. This is the fourth consecutive year that total cumulative enrollment has grown from the previous year. At KGSM, cumulative total student enrollment for the five terms of fiscal 1995 grew by 17.7% from 1994. Tuition increases have historically been implemented by the DeVry Institutes in the spring term and at KGSM in the fall. Tuition rates grew by more than 5% at DeVry, a slightly lower percentage increase than was implemented in 1994. Tuition rates were increased similarly at KGSM. Historically, the Company has been able to pass along inflationary cost increases through higher tuition. Other revenues are attributable primarily to sales of books and supplies to students attending the Company's educational programs. Interest income on short-term investments increased because of higher cash balances available for investment throughout most of the year and because of higher prevailing interest rates. Costs of educational services include the cost of faculty and related staff, which composed approximately 60% of this expense category. Also included in this expense category are the costs of facilities, supplies, bookstore sales, other student education-related support activities and tuition refunds. The cost of educational services increased by 7.1% from 1994. Costs associated with rising student enrollment, such as additional faculty and higher wages and benefits, were largely responsible for the increase. The Company also continued its investment in growth with the 42 opening of new DeVry Institutes in Long Beach, California, and Scarborough (Toronto), Ontario, Canada. During the year, KGSM opened two new centers in California, operating in the DeVry Institute campuses in these locations. Partially offsetting these cost increases was a reduction in depreciation expense on certain assets whose depreciable lives expired in the first quarter. Tuition refund and bad debt expenses also declined, reflecting educational program and student service quality initiatives that have favorably affected the pattern of student retention, reducing refund expense and uncollected account balances compared to prior periods. Student services and administrative expense includes the costs of new student recruiting, curriculum development and general administrative costs. These expenses increased by 8.4% from last year. Marketing costs grew at a somewhat faster rate than tuition revenue in support of the two new DeVry campuses and two KGSM centers that opened during 1994. For the year, new student enrollment at the DeVry Institutes increased by 7.6% from 1994. The Company's earnings from operations, before interest expense and taxes on income, reached a record $28,829,000 for the year. This represents an operating margin of 12.6%, up from 12.1% last year and 11.7% the year before. Higher revenues; improved educational program success, producing greater student retention; and cost-containment measures contributed to the improved margins even as expansion continued. Interest expense was reduced by $1,545,000 to $3,070,000 for the year. The lower interest expense resulted from scheduled principal payments and voluntary prepayments of the Company's funded debt. In June, the Company voluntarily prepaid all $7,870,000 of its 13% senior subordinated notes, with a make-whole premium payment of $573,000 included in interest expense in the Consolidated Statement of Income. In 1995, total funded debt was reduced by $10,195,000. 43 Taxes on income were computed in accordance with Statement of Financial Accounting Standards No. 109 (FAS 109), which the Company adopted in 1992. The effective tax rate of 42.2% represents the combination of U.S. federal and state and Canadian income taxes on the Company's operations. Liquidity and Capital Resources - ------------------------------- The Company's primary source of liquidity is the cash received from student payments for tuition, fees and books. These payments include cash from student and family resources, student and family educational loans and other financial aid under various federal, state and provincial programs. The pattern of cash receipts is somewhat seasonal throughout the year. The level of accounts receivable from which cash payments are collected reaches a peak immediately after the billing of tuition, fees and books at the beginning of each DeVry Institute semester in July, November and March. Collections of these receivables are heaviest at the start of each semester. In the first two months of each semester, collections typically exceed payments for operating expenses applicable to that period. Accounts receivable reach their lowest level just prior to the start of the next semester, dropping to their lowest point in the year at the end of June. The end of June corresponds to both the end of the spring semester and to the end of a financial aid year, at which time all financial aid for the previous 12 months should have been disbursed to students' accounts. At June 30, 1996, net accounts receivable were $9,684,000. The increase in accounts receivable from last year results from the inclusion of a $1,472,000 receivable of refundable income tax and from higher revenues and number of students at the DeVry Institutes and KGSM during the year. The increase in receivables is also attributable, in part, to the tuition financing offered by DeVry Canada to those students at the Toronto area campuses who were affected by the temporary suspension of financial aid. In conjunction with the conditional reinstatement of financial aid processing effective with the spring term, the Company returned to the Ontario Ministry of Education and Training payments believed to have been 44 inappropriately disbursed to students. In addition, the Company posted a letter of credit with the Ministry as security against possible additional amounts that may have been inappropriately disbursed to students who incorrectly completed their financial aid applications. The Company estimates that historically nearly 70% of the DeVry Institutes' tuition, bookstore and fee revenues are derived from some form of government-provided financial aid to its students. These financial aid and assistance programs, in which most of the Company's students participate, are subject to political and budgetary considerations. There is no assurance that such funding will be maintained at current levels. Extensive and complex regulations in the U.S. 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 the initiation of a suspension, limitation or termination proceeding against the Company. Under the terms of the Company's participation in governmental financial aid programs, certain cash received from the U.S. Department of Education is maintained in restricted bank accounts. This cash becomes available for general use by the Company only after student loans and grants have been credited to the accounts of students and the cash is transferred to an unrestricted operating cash account. The introduction of electronic fund transfers for student loans and the direct loan program from the Department of Education have generally accelerated the receipt and processing of these payments by the DeVry Institutes and KGSM, contributing to the Company's liquidity. Cash payments for income taxes no longer benefit from the net operating loss carryovers, which were fully utilized by the end of the first quarter of fiscal 1996. While the increased payment of income taxes will affect the Company's liquidity, the Company believes that its present cash resources and cash flow from operations will be sufficient to meet its cash requirements. 45 In July 1996, the Company entered into an out-of-court settlement agreement with the Internal Revenue Service (IRS) relative to the Statutory Notice of Deficiency issued by the IRS against the Company for tax years 1988 through 1991. The claimed deficiencies related to the amortization of intangible assets purchased during the acquisition of the DeVry Institutes in 1987. All of these issues have been resolved as a result of the settlement. The settlement amount, which is expected to be paid in the first quarter of fiscal 1997, is immaterial to the Company's financial position, results of operations and liquidity. Cash generated from operations in 1996 was $28,368,000, approximately the same as in each of the last two years. The generation and use of cash during the year reflects the seasonal operating patterns discussed above. During some periods just prior to the start of a semester, cash balances may be supplemented by temporary borrowings under the Company's revolving line of credit. Cash generated from operations each year has been sufficient to meet all of the Company's operating needs and capital investment needs while reducing debt on a regular basis. Capital expenditures were primarily for expansion and facility improvement, replacement and upgrading of school laboratories and for teaching and administrative equipment. Capital expenditures in 1996 were a record $18,352,000. This spending reflects the Company's continued investment in improved quality of educational offerings, facilities and programs and in additional expenditures connected with the opening of new DeVry Institutes in Scarborough, Ontario, Canada, and Long Beach, California, last year, and the completion of construction of a DeVry Institute campus in North Brunswick, New Jersey, to replace the present leased facility in Woodbridge, New Jersey. For 1997, total capital spending for existing operations is planned at somewhat lower levels than during the past two years. Cash generated from operations and existing cash resources have been sufficient to meet capital requirements in the past and are anticipated to be sufficient to cover expansion plans in the future. 46 In June 1996, the Company and its banks completed a renegotiation of its 1994 term loan agreement. The $85,000,000 bank facility remains an unsecured revolving line of credit with a higher borrowing limit, longer term and lower interest rates effective upon the achievement of certain financial ratios. The revolving loan facility allows the Company to take maximum advantage of its seasonally heavy cash flows to reduce debt while also providing flexibility in providing funds for expansion as needed. At June 30, 1996, approximately $63,000,000 of the revolving line had been utilized in the form of borrowings and letters of credit. The terms of this loan agreement reflect the Company's strong financial position. In June 1996, the Company acquired certain tangible assets and tradenames of the Becker CPA review for $18,458,000 in cash and acquired copyrights, other intellectual property and publicity rights of the Becker CPA Review for $17,935,000. Funds for the acquisition were provided by borrowings under the Company's newly renegotiated revolving line of credit. The Company's bank borrowings are at a floating interest rate subject to adjustment at varying intervals at the Company's option. At the present time, the Company does not have an interest rate swap or other forms of protection against increases in the floating rate but has fixed the interval of interest rate adjustment on approximately one-third of its year- end borrowings for a one-year period. The Company periodically evaluates its need for additional protection in light of projected interest expense and borrowing levels. The Company believes that current balances of unrestricted cash, cash generated from operations and, if needed, the revolving loan facility will be sufficient to fund its operations for the foreseeable future. 47 ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following financial statements of the Company and its subsidiaries are included below on pages 48 through 63 of this report: 10K Report Page ----------- Consolidated Balance Sheets at June 30, 1996 and 1995 48-49 Consolidated Statements of Income for the years ended June 30, 1996, 1995 and 1994 50 Consolidated Statements of Cash Flows for the years ended June 30, 1996, 1995 and 1994 51 Consolidated Statements of Shareholders' Equity for the years ended June 30, 1996, 1995 and 1994 52 Notes to Consolidated Financial Statements 53-62 Report of Independent Accountants 63 48 DEVRY INC. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
June 30, 1996 1995 ---- ---- ASSETS Current Assets Cash and Cash Equivalents $ 29,948 $ 26,252 Restricted Cash 16,590 20,179 Accounts Receivable, Net 9,684 6,189 Inventories 3,290 3,553 Prepaid Expenses and Other 2,055 1,846 -------- -------- Total Current Assets 61,567 58,019 -------- -------- Land, Buildings and Equipment Land 18,956 18,952 Buildings 50,570 39,399 Equipment 51,198 43,390 Construction In Progress - 1,337 -------- -------- 120,724 103,078 Accumulated Depreciation (49,283) (42,820) -------- -------- Land, Buildings and Equipment, Net 71,441 60,258 -------- -------- Other Assets Intangible Assets, Net 37,709 2,022 Perkins Program Fund, Net 5,483 4,522 Other Assets 1,889 1,850 -------- -------- Total Other Assets 45,081 8,394 -------- -------- TOTAL ASSETS $178,089 $126,671 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 49 DEVRY INC. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
June 30, 1996 1995 ---- ---- LIABILITIES Current Liabilities Accounts Payable $ 18,859 $ 14,957 Accrued Salaries, Wages & Benefits 14,735 12,369 Accrued Expenses 7,640 3,671 Advance Tuition Payments 7,617 13,982 Deferred Tuition Revenue 3,609 3,768 -------- -------- Total Current Liabilities 52,460 48,747 -------- -------- Other Liabilities Revolving Loan 61,500 33,029 Deferred Income Tax Liability 2,207 2,318 Deferred Rent and Other 4,635 4,609 -------- -------- Total Other Liabilities 68,342 39,956 -------- -------- TOTAL LIABILITIES 120,802 88,703 -------- -------- COMMITMENTS AND CONTINGENCIES (Note 8) SHAREHOLDERS' EQUITY Common Stock, $0.01 par value, 20,000,000 Shares Authorized;16,621,852 and 16,613,492 Shares Issued and Outstanding at June 30, 1996 and 1995, Respectively 166 166 Additional Paid-in Capital 36,694 36,610 Retained Earnings 19,987 742 Foreign Currency Translation Adjustment 440 450 -------- -------- TOTAL SHAREHOLDERS' EQUITY 57,287 37,968 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $178,089 $126,671 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 50 DEVRY INC. CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands Except for Per Share Amounts)
For The Year Ended June 30, 1996 1995 1994 ---- ---- ---- REVENUES: Tuition $236,607 $207,530 $191,205 Other Educational 22,341 19,887 19,681 Interest 1,059 1,176 551 -------- -------- -------- Total Revenues 260,007 228,593 211,437 -------- -------- -------- COSTS AND EXPENSES: Cost of Educational Services 155,254 136,721 127,673 Student Services and Administrative Expense 70,992 63,043 58,146 Interest Expense 1,063 3,070 4,615 -------- -------- -------- Total Costs and Expenses 227,309 202,834 190,434 -------- -------- -------- Income Before Income Taxes 32,698 25,759 21,003 Income Tax Provision 13,453 10,863 8,778 -------- -------- -------- NET INCOME $ 19,245 $ 14,896 $ 12,225 ======== ======== ======== EARNINGS PER COMMON SHARE $1.14 $0.89 $0.73 ===== ===== =====
The accompanying notes are an integral part of these consolidated financial statements. 51 DEVRY INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
For The Year Ended June 30, 1996 1995 1994 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $19,245 $14,896 $12,225 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 7,516 6,157 6,981 Amortization 63 63 346 Provision for Refunds and Uncollectible Accounts 16,130 12,810 14,101 Deferred Income Tax (Provision) Benefit (456) 5,480 2,419 Loss (Gain)on Disposals of Land, Buildings and Equipment 19 (7) 338 Changes in Assets and Liabilities: Restricted Cash 3,589 (9,130) (1,447) Accounts Receivable (18,645) (11,746) (14,125) Inventories 263 (629) 34 Prepaid Expenses And Other (118) (128) 266 Perkins Program Fund Contribution and Other (1,188) (1,649) 1,717 Accounts Payable 3,210 3,136 1,380 Accrued Salaries, Wages, Expenses and Benefits 6,239 667 3,601 Advance Tuition Payments (7,340) 7,943 1,010 Deferred Tuition Revenue (159) 337 (441) ------- ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 28,368 28,200 28,405 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Capital Expenditures (18,352) (14,551) (6,288) Acquisition of Net Assets (Note 2): Payment for Purchase of Operating Assets, Net of Cash Acquired (16,930) - - Payment for Purchase of Intellectual Property (17,935) - - ------- ------- ------- NET CASH USED IN INVESTING ACTIVITIES (53,217) (14,551) (6,288) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds From Exercise of Stock Options 84 47 6 Proceeds From Revolving Credit Facility 46,500 22,000 35,029 Repayments Under Revolving Credit Facility (18,029) (20,000) (4,000) Repayments of Debt - (12,195) (43,517) ------- ------- ------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 28,555 (10,148) (12,482) ------- ------- ------- Effects of Exchange Rate Differences (10) 47 (275) ------- ------- ------- NET INCREASE IN CASH AND CASH EQUIVALENTS 3,696 3,548 9,360 Cash and Cash Equivalents at Beginning of Year 26,252 22,704 13,344 ------- ------- ------- Cash and Cash Equivalents at End of Year $29,948 $26,252 $22,704 ======= ======= ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest Paid During the Year $ 1,429 $3,367 $4,606 Income Taxes Paid During the Year 13,902 7,080 4,607
The accompanying notes are an integral part of these consolidated financial statements. 52 DEVRY INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Dollars in Thousands)
For The Year Ended June 30, 1996 1995 1994 ---- ---- ---- Common Stock Beginning of year $ 166 $ 83 $ 83 Two-for-one stock split in the form of a stock dividend - 83 - ------- ------- ------- End of year 166 83 83 ======= ======= ======= Additional Paid-In Capital Beginning of year 36,610 36,563 36,557 Shares issued for exercise of stock options 84 47 6 ------- ------- ------- End of year 36,694 36,610 36,563 ======= ======= ======= Retained Earnings (Accumulated Deficit) Beginning of year 742 (14,071) (26,296) Net income per accompanying statement 19,245 14,896 12,225 Two-for-one stock split in the form of a stock dividend - (83) - ------- ------- ------- End of year 19,987 742 (14,071) ======= ======= ======= Foreign Currency Translation Adjustment Beginning of year 450 403 678 Translation Adjustment (10) 47 (275) ------- ------- ------- End of year 440 450 403 ======= ======= ======= TOTAL SHAREHOLDERS' EQUITY, END OF YEAR $57,287 $37,885 $22,978 ======= ======= =======
The accompanying notes are an integral part of these consolidated financial statements. 53 DEVRY INC. Notes to Consolidated Financial Statements June 30, 1996 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations DeVry Inc. (the Company) is a holding company which, through its wholly owned subsidiaries, operates a national system of degree- granting, career-oriented higher-education schools and a leading international training firm. Keller Graduate School of Management, Inc. (KGSM), is one of the largest regionally accredited higher- education systems in North America. Its DeVry Institutes award associate and bachelor's degrees in electronics, computer information systems, business operations, accounting, technical management and telecommunications management. The DeVry Institutes are located on 10 campuses in the United States and four campuses in Canada. Keller Graduate School (Keller) awards master's degrees in business administration, human resource management and project management. Keller classes are offered at 18 locations in Illinois, Wisconsin, Missouri, Georgia, Arizona, California and Virginia. The Corporate Educational Services division offers on-site management and technical training programs for larger employers and government agencies. Becker CPA Review (Becker CPA), acquired June 19, 1996 (Note 2), is the leading international training firm preparing students to pass the Certified Public Accountant (CPA) examination . Currently, the CPA exam review course is offered at approximately 135 locations in the United States and at eight international locations. Becker CPA also offers a Certified Management Accountant (CMA) examination review course in the United States. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Becker CPA accounts are consolidated based upon an April 30 fiscal year end, which is its natural year end based on its business cycle. There were no events ocurring during the intervening period before June 30, that materially effected the financial position or results of operations of the Company. Unless indicated, or the context requires otherwise, references to years refer to the Company's fiscal years then ended. Cash and Cash Equivalents Cash and cash equivalents include time deposits, commercial paper, municipal bonds and bankers acceptances with maturities of three months or less or that are highly liquid and readily convertible to a known amount of cash. These investments are stated at cost, which approximates market, due to their short duration or liquid nature. The Company limits the amount of credit exposure with any one investment instrument or with any one financial institution. The Company evaluates the creditworthiness of the security issuers and financial institutions with which it invests. Financial Aid and Restricted Cash The financial aid and assistance programs, in which most of the Company's students participate, are subject to political and budgetary considerations. There is no assurance that such funding will be maintained at current levels. Extensive and complex regulations in the U.S. 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 the initiation of a suspension, limitation or termination proceeding against the Company. A significant portion of revenues is provided by students who participate in government financial aid and assistance programs. Restricted cash represents amounts received from the U.S. government under various student aid grant and loan programs. The cash is held in separate bank accounts and does not become available for general use by the Company until the financial aid is credited to the accounts of students and the cash is transferred to an operating cash account. 54 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Revenue Recognition Tuition revenue and provisions for refunds and uncollectible accounts are recognized ratably over each of the academic terms in a fiscal year. The provisions for refunds and uncollectible accounts are included in the cost of educational services in the Consolidated Statements of Income. Related reserves are $6,603,000 and $5,368,000 at June 30, 1996 and 1995, respectively. Textbook sales and other educational revenues are recognized when they occur. Revenue from training services is recognized when the training is provided. Inventories Inventories consist mainly of textbooks, electronics kits and supplies held for sale to students enrolled in KGSM's educational programs. Inventories are valued at the lower of cost (first-in, first-out) or market. Land, Buildings and Equipment Land, buildings and equipment are recorded at cost. Cost includes additions and those improvements that increase the capacity or lengthen the useful lives of the assets. Repairs and maintenance costs are expensed as incurred. Interest is capitalized as a component of cost on major projects during the construction period. The amount of interest capitalized for the years ended June 30, 1996 and 1995, was $314,000 and $101,000, respectively. Assets under construction are reflected in construction in progress until they are ready for their intended use. Depreciation is computed using the straight line method over estimated service lives ranging from three to 31 years. Intangible Assets Intangible assets relate to the acquired business operations of the DeVry Institutes and Becker CPA (Note 2). These assets consist of the purchase prices allocated to the estimated fair value of certain assets acquired (Note 3). Accumulated amortization is computed using the straight line method over the assets' estimated useful lives of 25 to 40 years. The Company expenses all marketing and new school opening costs as incurred. Perkins Program Fund The Company makes contributions to the Perkins Student Loan Fund at a rate equal to 33% of that contributed by the federal government. As previous borrowers repay their Perkins loans, their payments are used to fund new loans thus creating a permanent revolving loan fund. The Company carries its investment in such contributions at original values net of allowances for losses on loan collections of $1,547,000 and $1,275,000 at June 30, 1996 and 1995, respectively. Fair Value of Financial Instruments The carrying amount reported in the Consolidated Balance Sheets for cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued expenses and advanced and deferred tuition payments approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying amount reported for borrowings under the revolving loan agreement approximates fair value because the underlying instruments are variable-rate notes. 55 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Foreign Currency Translation The financial position and results of operations of KGSM's Canadian subsidiary are measured using the local currency as the functional currency. Assets and liabilities of the foreign subsidiary are translated to U.S. dollars using exchange rates in effect at the balance sheet dates. Income and expense items are translated at monthly average rates of exchange prevailing during the year. The resultant translation adjustments are included in the component of shareholders' equity designated as Foreign Currency Translation Adjustment. Transaction gains or losses during the years ended June 30, 1996, 1995 and 1994, were insignificant. Income Taxes Income taxes are provided by applying statutory rates to income recognized for financial statement purposes. Deferred income taxes are provided for revenue and expense items that are recognized in different accounting periods for financial reporting purposes than for income tax purposes. Effects of statutory rate changes are recognized for financial reporting purposes in the year in which enacted by law. Stock Split On May 17, 1995, the Company's board of directors authorized a two-for-one stock split in the form of a 100% stock dividend payable on June 21, 1995, to shareholders of record on June 1, 1995. The par value of the additional shares arising from the split has been reclassified from retained earnings to common stock. In addition, all references in the financial statements to the number of shares outstanding, per share amounts, stock option data and market prices of the Company's common stock have been restated to reflect the stock split. Earnings Per Common Share Earnings per common share are determined by dividing net earnings by the weighted average number of common and common share equivalents outstanding during the year after giving retroactive effect to the stock split. Incentive stock options are included as common stock equivalents using the treasury stock method. The number of shares used in computing the net earnings per share was 16,830,000, 16,727,000 and 16,694,000 in 1996, 1995 and 1994, respectively. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. 56 NOTE 2: ACQUISITION On June 19, 1996, a newly formed, wholly owned subsidiary of the Company acquired substantially all of the tangible operating assets and trademarks and assumed certain liabilities of Becker CPA for $18,458,000 in cash. On this same date, another newly formed, wholly owned subsidiary of the Company acquired certain copyrights, other intellectual property and publicity rights of Becker CPA for $17,935,000 in cash. Becker CPA is the leading international training firm preparing students to pass the nationally administered and centrally graded CPA exam, and it also offers a CMA exam review course. Funding for the acquisitions was obtained through borrowings under the Company's revolving credit facility (Note 5). The acquisitions have been accounted for under the purchase method of accounting. Accordingly, the purchase prices were allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The intangible assets are being amortized using the straight line method over a 25-year period for financial reporting purposes and are being deducted for tax reporting purposes over shorter statutory lives. The following unaudited pro forma financial information presents the results of operations of the Company and the acquired Becker CPA business as if the acquisitions had ocurred at the beginning of each fiscal year. The pro forma information is based on historical results of operations and does not necessarily reflect the actual results that would have ocurred, nor is it necessarily indicitive of future results of operations of the combined enterprises (dollars in thousands except for per share amounts): 1996 1995 (Unaudited) (Unaudited) ----------- ----------- Net Sales $279,938 $248,386 Net Income 19,375 15,035 Earnings Per Common Share $1.15 $0.90 NOTE 3: INTANGIBLE ASSETS Intangible assets that were not fully amortized at June 30 consist of the following:
1996 1995 ----------- ---------- Trademarks $ 2,521,000 $2,521,000 Tradenames 17,465,000 - Intellectual Property 17,425,000 - Other 860,000 - ----------- ---------- 38,271,000 2,521,000 Accumulated Amortization (562,000) (499,000) ----------- ---------- $37,709,000 $2,022,000 =========== ==========
57 NOTE 4: INCOME TAXES The components of income (loss) before income taxes are as follows:
For the Year Ended June 30, 1996 1995 1994 ----------- ----------- ----------- U.S. $35,645,000 $23,323,000 $18,220,000 Foreign (2,947,000) 2,436,000 2,783,000 ----------- ----------- ----------- Total $32,698,000 $25,759,000 $21,003,000 =========== =========== ===========
The net income tax provisions (benefits) related to the above results are as follows:
For the Year Ended June 30, 1996 1995 1994 ----------- ------------ ---------- Current Tax Provision: U.S. Federal $11,373,000 $ 3,141,000 $4,237,000 State and Local 2,400,000 897,000 596,000 Foreign (776,000) 1,345,000 1,526,000 ----------- ----------- ---------- Total Current 12,997,000 5,383,000 6,359,000 Deferred Tax Provision: U.S. Federal 381,000 4,578,000 2,039,000 State and Local 273,000 838,000 268,000 Foreign (198,000) 64,000 112,000 ----------- ----------- ---------- Total Deferred 456,000 5,480,000 2,419,000 ----------- ----------- ---------- Net Income Tax Provision $13,453,000 $10,863,000 $8,778,000 =========== =========== ==========
The income tax provisions differ from those computed using the statutory rate as a result of the following items:
For the Year Ended June 30, 1996 1995 1994 ----------------- ----------------- ---------------- Expected Provision $11,444,000 35.0% $ 9,016,000 35.0% $7,351,000 35.0% Higher Rates on (312,000)(1.0%) 323,000 1.3% 308,000 1.5% Foreign Operations State Income Taxes 1,767,000 5.4% 1,123,000 4.4% 875,000 4.1% Other 554,000 1.7% 401,000 1.5% 244,000 1.2% ----------- ----------- ---------- Income Tax Provision $13,453,000 41.1% $10,863,000 42.2% $8,778,000 41.8% =========== =========== ==========
58 NOTE 4: INCOME TAXES (continued) Deferred income tax assets (liabilities) result primarily from the recognition of the tax benefits of net operating loss carryforwards and from temporary differences in the recognition of various expenses for tax and financial statement purposes. These assets and liabilities are composed of the following:
For the Year Ended June 30, 1996 1995 1994 ---------- ---------- ---------- Loss Carryforwards $ - $ 829,000 $5,038,000 Employee Benefits 1,207,000 1,187,000 1,027,000 Tax Credits - 47,000 92,000 Rental and Occupancy 762,000 787,000 609,000 Receivable Reserves and Other 2,953,000 1,608,000 1,943,000 ---------- ---------- ---------- Gross Deferred Tax Assets 4,922,000 4,458,000 8,709,000 Depreciation and Other (4,837,000) (5,014,000) (3,970,000) Amortization (1,176,000) (991,000) (806,000) ---------- ---------- ---------- Gross Deferred Tax Liabilities (6,013,000) (6,005,000) (4,776,000) ---------- ---------- ---------- Net Deferred Taxes ($1,091,000) ($1,547,000) $3,933,000 ========== ========== ==========
Based on the Company's history of operating earnings and its expectations for the future, management believes that operating income will more than likely be sufficient to recognize fully all deferred tax assets. Deferred income tax provisions (benefits) result primarily from temporary differences in the recognition of various expenses for tax and financial statement purposes. The sources and tax effects of these differences are as follows:
For the Year Ended June 30, 1996 1995 1994 -------- ---------- ---------- Realization of Operating Loss Carryforwards $829,000 $4,220,000 $4,497,000 Excess (Tax) Book Depreciation and Amortization (266,000) 87,000 (339,000) Excess of Amounts Expensed for (Book) Tax Purposes Over Amounts Deductible for Book (Tax) Purposes (159,000) 973,000 (1,739,000) Other, Net 52,000 200,000 - -------- ---------- ---------- Deferred Tax Provision $456,000 $5,480,000 $2,419,000 ======== ========== ==========
59 NOTE 5: REVOLVING LOAN AGREEMENT All of the Company's borrowings and letters of credit under its revolving loan agreement are through its operating subsidiary, KGSM. This agreement consists of a revolving credit and letter of credit facility, which is available to KGSM in an aggregate amount not to exceed $85,000,000. This agreement was amended in June 1996 to permit the acquisition of Becker CPA (Note 2), increase the borrowing limits, extend its term and provide for reduced interest rates upon the achievement of certain financial ratios. All borrowings and letters of credit under the revolving loan agreement now mature in August 1999, and there are no required installment payments. Outstanding borrowings under the revolving loan agreeement are $61,500,000 and $33,029,000 at June 30, 1996 and 1995, respectively. There is also a $1,460,000 letter of credit outstanding under this agreement at June 30, 1996. Outstanding borrowings under the revolving loan agreement bear interest, payable quarterly, at either the prime rate or a Eurodollar rate plus 0.75%, at the option of KGSM. Upon achieving certain financial ratios included in the June 1996 amendment, the interest rate can be reduced to a Eurodollar rate plus 0.35%. The effective interest rate on outstanding borrowings at June 30, 1996, was 6.84%. Outstanding letters of credit under the revolving loan agreement are charged an annual fee equal to 0.75% of the undrawn face amount of the letter of credit , payable quarterly. The bank financing agreement contains certain covenants that, among other things, limit capital expenditure to $25,000,000 annually and require maintenance of certain financial ratios as defined in the agreement. None of these covenants negatively impacts the Company's liquidity or capital resources. In June 1995, the Company voluntarily prepaid the entire $7,870,000 remaining balance of its senior subordinated notes. On December 1, 1994 , in conjuntion with the scheduled principal payment on this date, the Company made a voluntary prepayment of $775,000 These senior subordinated notes bore interest at a rate of 13% per annum and were subordinate to the revolving credit facility. NOTE 6: EMPLOYEE BENEFIT PLANS Profit Sharing Retirement Plan All employees who meet certain eligibility requirements can participate in KGSM's 401(k) Profit Sharing Retirement Plan. KGSM contributes to the plan an amount equal to 1.5% of the total eligible compensation of employees who make contributions under the plan. KGSM's matching contributions under the plan were approximately $765,000, $636,000 and $608,000 in 1996, 1995 and 1994, respectively. In addition, the Company's board of directors may also make discretionary contributions for the benefit of all eligible employees. Provisions for discretionary contributions under the plan were approximately $1,924,000, $1,566,000 and $1,413,000 in 1996, 1995 and 1994, respectively. Employee Stock Purchase Plan Effective August 1, 1993, the Company established the DeVry Inc. Employee Stock Purchase Plan. The Plan stipulates that any eligible employee may authorize the Company to withhold up to $25,000 of annual earnings to purchase common stock of the Company on the open market at 100% of the prevailing market price. The Company pays all brokerage commissions and administrative fees associated with the Plan. These expenses were insignificant for the years ended June 30, 1996, 1995 and 1994. 60 NOTE 7: STOCK OPTION PLANS The Company maintains three stock option plans: the Amended and Restated Stock Incentive Plan, established in 1988, the 1991 Stock Incentive Plan and the 1994 Stock Incentive Plan. Under these Plans, directors, key executives and managerial employees are eligible to receive incentive stock or nonqualified options to purchase shares of the Company's common stock. The Amended and Restated Stock Incentive Plan and the 1994 Stock Incentive Plan are administered by a Plan Committee of the board of directors. Plan Committee members will be granted automatic, nondiscretionary annual options. The 1991 Stock Incentive Plan is administered by the board of directors. Options under all three Plans are granted for terms of up to ten years and vest over periods of one to five years. The option price under the Plans is the fair market value of the shares on the date of the grant. Share status of each of these plans at June 30, 1996, was as follows:
Reserved for Available for Authorized Issuance Future Grant ---------- ---------- ----------- Stock Incentive Plan 200,000 184,600 3,400 1991 Stock Incentive Plan 200,000 199,040 61,100 1994 Stock Incentive Plan 400,000 398,000 358,000
Activity during the three years ended June 30, 1996, with respect to options under these plans, was as follows:
Shares Option Prices ------- ------------- Under Option at June 30, 1993 122,000 $1.57 - 10.18 Options Exercised (1,800) 3.50 Options Canceled (2,000) 13.13 Options Granted 65,400 13.13 - 13.88 ------- ------------- Under Option at June 30, 1994 183,600 1.57 - 13.88 Options Exercised (7,000) 3.50 - 13.13 Options Canceled (7,600) 3.50 - 13.13 Options Granted 142,500 12.94 - 14.75 ------- ------------- Under Option at June 30, 1995 311,500 1.57 - 14.75 Options Exercised (8,360) 3.50 - 14.75 Options Canceled (10,550) 12.94 - 21.75 Options Granted 66,550 21.75 - 25.13 ------- ------------- Under Option at June 30, 1996 359,140 1.57 - 25.13 ------- ------------- Exercisable at June 30, 1996 151,040 $1.57 - 14.75 ------- -------------
61 NOTE 8: COMMITTMENTS AND CONTINGENCIES KGSM and Becker CPA lease certain equipment and facilities under non-cancelable operating leases, some of which contain renewal options, escalation clauses and requirements to pay taxes, insurance and maintenance costs. Future minimum rental commitments for all non-cancelable operating leases having a remaining term in excess of one year at June 30, 1996, are as follows: Year Ended June 30, Amount ------------------ ----------- 1997 $12,410,000 1998 11,740,000 1999 10,580,000 2000 9,480,000 2001 9,360,000 Thereafter $56,170,000 The Company recognizes rent expense on a straight-line basis over the term of the lease, although the lease may include escalation clauses that provide for lower rent payments at the start of the lease term and higher lease payments at the end of the lease term. Rent expenses for the years ended June 30, 1996, 1995 and 1994, were $13,879,000, $12,553,000 and $9,611,000, respectively. The Company is subject to occasional lawsuits, investigations and claims arising out of the normal conduct of its business. Neither the Company nor any of its subsidiaries is currently a party to any material legal action except those described below. In July 1996, the Company entered into an out-of-court settlement agreement with the Internal Revenue Service (IRS) relative to the Statutory Notice of Deficiency issued by the IRS against the Company for tax years 1988 through 1991. The claimed deficiencies related to the amortization of intangible assets purchased during the acquisition of the DeVry Institutes in 1987 (Notes 1 and 3). All of these issues have been resolved as a result of the settlement. The settlement amount is immaterial to the Company's financial position, results of operations and liquidity. During 1996, the Ontario Ministry of Education and Training temporarily suspended and conditionally reinstated the processing of financial aid applications for students attending the Company's Toronto-area schools. Full unconditional reinstatement is subject to the Ministry's completion of certain procedures regarding verification of the Company's compliance with financial aid processing regulations. In July 1996, the Company was served with a class action lawsuit in Canada alleging misrepresentation about the quality of the DeVry Institutes' educational programs. The Company believes that the claims in the lawsuit are frivolous and without merit. In response to the lawsuit, the Company has filed a Statement of Defense and intends to vigorously contest the allegations. Although the outcome cannot be predicted with certainty, the Company believes the resolution of this matter will not have material effect on the Company's financial position, results of operations or liquidity. 62 NOTE 9: OPERATIONS BY GEOGRAPHIC AREA The Company operates in a single industry segment as a provider of educational services. The Company conducts its educational operations in the United States and Canada. Revenues, income before interest and taxes, and identifiable assets by geographic area are as follows:
For the Year Ended June 30, 1996 1995 1994 ------------ ------------ ------------ Revenues: U.S. $234,180,000 $205,424,000 $192,842,000 Foreign 25,827,000 23,169,000 18,595,000 Income Before Interest and Taxes: U.S. 36,708,000 26,393,000 22,835,000 Foreign (2,947,000) 2,436,000 2,783,000 Identifiable Assets: U.S. 170,828,000 119,160,000 100,080,000 Foreign 7,261,000 7,511,000 6,718,000
NOTE 10: QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized unaudited quarterly data for the years ended June 30, 1996 and 1995, are as follows (dollars in thousands, except for per share amounts):
1996 Quarter -------------------------------------------------------- Total First Second Third Fourth Year -------------------------------------------- Revenues $59,839 $66,940 $68,412 $64,816 $260,007 Income Before Interest and Taxes 7,382 9,336 8,822 8,221 33,761 Net Income 4,031 5,385 5,062 4,767 19,245 Earnings Per Common Share 0.24 0.32 0.30 0.28 1.14
1995 Quarter ------------------------------------------------------- Total First Second Third Fourth Year -------------------------------------------- Revenues $51,955 $59,299 $59,739 $57,600 $228,593 Income Before Interest and Taxes 5,770 8,198 7,652 7,209 28,829 Net Income 2,932 4,343 4,098 3,523 14,896 Earnings Per Common Share 0.18 0.26 0.24 0.21 0.89
63 Report of Independent Accountants --------------------------------- To the Board of Directors and Shareholders of DeVry Inc. In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) and (2) on page 66 present fairly, in all material respects, the financial position of DeVry Inc. and its subsidiaries at June 30, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Chicago, Illinois August 6, 1996 64 ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE - ------------------------------------------------------------------------ There were no changes in or disagreements with accountants on accounting and financial disclosure. 65 PART III ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS - ---------------------------------------------------------------------- Information regarding directors and nominees for directors of the Company is included in the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on November 19, 1996, and is incorporated herein by reference. Information regarding executive officers is included on pages 34 through 36 in Part I of this Form 10-K. Information regarding compliance with Section 16(a) filings, if required, will be included in the Proxy Statement for the Annual Meeting of Stockholders to be held November 19, 1996, and is incorporated herein by reference. ITEM 11 - EXECUTIVE COMPENSATION - -------------------------------- Information regarding compensation of executive officers of the Company is included in the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on November 19, 1996, and is incorporated herein by reference. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - ------------------------------------------------------------------------ Information regarding security ownership of certain beneficial owners and management is included in the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on November 19, 1996, and is incorporated herein by reference. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - --------------------------------------------------------- Information regarding certain relationships and related transactions is included in the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on November 19, 1996, and is incorporated herein by reference. 66 PART IV -------- ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - ------------------------------------------------------------------------- (a) The following documents are filed as part of this report: (1) Financial Statements The following financial statements of the Company and its subsidiaries are included in Part II, Item 8, on pages 48 through 63 of this Form 10-K. 10K Report Page ----------- Consolidated Balance Sheets at June 30, 1996 and 1995 48-49 Consolidated Statements of Income for the years ended June 30, 1996, 1995 and 1994 50 Consolidated Statements of Cash Flows for the years ended June 30, 1996, 1995 and 1994 51 Consolidated Statements of Shareholders' Equity for the years ended June 30, 1996, 1995 and 1994 52 Notes to Consolidated Financial Statements 53-62 Report of Independent Accountants 63 (2) Supplemental Financial Statement Schedules The following supplemental schedule of the Company and its subsidiaries is included on page 70 of this Form 10-K. 10K Report Page II. - Valuation and Qualifying Accounts 70 Schedules other than the one listed above are omitted for the reason that they are not required or are not applicable, or the required information is shown on the financial statements or notes thereto. (3) Exhibits A complete listing of exhibits is included on pages 71 through 72 of this Form 10-K. (b) Reports on Form 8-K There were no reports on Form 8-K filed by the Company during the fourth quarter of its fiscal year ending June 30, 1996. 67 FIVE-YEAR SUMMARY - OPERATING, FINANCIAL AND OTHER DATA (Dollars in Thousands Except for Per Share Amounts)
YEAR ENDED JUNE 30, 1996 1995 1994 1993 1992 - ----------------------------------------------------------------------------------------------------------------- OPERATING: Revenues $260,007 $228,593 $211,437 $191,915 $179,196 Depreciation 7,516 6,157 6,981 6,609 6,782 Amortization of Intangible Assets 63 63 346 190 410 Earnings Before Interest and Taxes (EBIT) 33,761 28,829 25,618 22,438 19,534 EBIT as a Percent of Revenues 13.0% 12.6% 12.1% 11.7% 10.9% Interest Expense 1,063 3,070 4,615 6,849 9,661 Income before Cumulative Effect of Change in Accounting Principle 19,245 14,896 12,225 9,431 5,889 Change from Prior Year in Income before Cumulative Effect of Change in Accounting Principle 29.2% 21.8% 29.6% 60.1% NM Net Income 19,245 14,896 12,225 9,431 21,687 Per Share: Income before Cumulative Effect of Change in Accounting Principle 1.14 0.89 0.73 0.57 0.36 Net Income 1.14 0.89 0.73 0.57 1.31 Shares Used in Calculating Per Share Amounts (In Thousands) 16,830 16,727 16,694 16,631 16,668 FINANCIAL POSITION: Cash and Cash Equivalents 29,948 26,252 22,704 13,344 16,015 Total Assets 178,089 126,671 106,798 99,210 110,769 Total Funded Debt 61,500 33,029 43,224 55,712 77,563 Total Shareholders' Equity 57,287 37,968 22,978 11,022 1,322 OTHER SELECTED DATA: Cash Provided by Operating Activities 28,368 28,200 28,405 24,058 15,282 Capital Expenditures 18,352 14,551 6,288 5,147 3,892 Total Fall Term Student Enrollment 32,612 29,884 28,815 27,336 26,941 Shares Outstanding at Year-end (in Thousands) 16,622 16,613 16,606 16,604 16,338 Closing Price of Common Stock at Year-end 45 20 14 1/2 12 9/16 9 Price Earnings Ratio on Common Stock (1) 39 22 20 22 25 Number of Shareholders of Record 339 252 211 192 139 (1) Computed on trailing four quarters of fully diluted earnings before cumulative effect of accounting change.
68 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DeVRY INC. Date: September 23, 1996 By /s/Dennis J. Keller Dennis J. Keller Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and dates indicated below. Signature Title Date - --------- ----- ---- /s/Dennis J. Keller Dennis J. Keller Chairman, Chief Executive Officer and Director 09/23/96 /S/Ronald L. Taylor Ronald L. Taylor President, Chief Operating Officer and Director 09/23/96 /s/Norman M. Levine Norman M. Levine Vice President, Chief Financial Officer, Controller and Principal Accounting Officer 09/24/96 /s/David S. Brown David S. Brown Director 09/17/96 /s/Ann I. Gannon Ann I. Gannon Director 09/17/96 ______________________ Robert E. King Director /s/Thurston E. Manning Thurston E. Manning Director 09/17/96 69 SIGNATURES (CONTINUED) ---------------------- Signature Title Date - --------- ----- ---- /s/Robert C. McCormack Robert C. McCormack Director 09/18/96 /s/Julie A. McGee Julie A. McGee Director 09/17/96 /s/Hugo J. Melvoin Hugo J. Melvoin Director 09/18/96 70 DeVRY INC. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES For the Years Ended June 30, 1996, 1995 and 1994 (Dollars in Thousands)
Balance at Charged to Charged to Balance at Beginning Costs and Other Deductions End of Description of Allowances and Reserves of Period Expenses Accounts (a) Period - -------------------------------------- ---------- ---------- ---------- ---------- ---------- 1996 Deducted from accounts receivable for refunds and uncollectible accounts $5,368 $15,867 $ - $14,632 $6,603 Deducted from notes receivable for uncollectible notes 24 - - 9 15 For loss on disposition of inventory 61 22 - 22 61 For loss on DeVry capital contributions to Perkins loan program 1,275 272 - - 1,547 1995 Deducted from accounts receivable for refunds and uncollectible accounts $6,121 $12,634 $ - $13,387 $5,368 Deducted from notes receivable for uncollectible notes 29 5 - 10 24 For loss on disposition of inventory 62 15 - 16 61 For loss on DeVry capital contributions to Perkins loan program 1,099 176 - - 1,275 1994 Deducted from accounts receivable for refunds and uncollectible accounts $6,018 $14,252 $ - $14,149 $6,121 Deducted from notes receivable for uncollectible notes 60 (15) - 16 29 For loss on disposition of inventory 41 40 - 19 62 For loss on DeVry capital contributions to Perkins loan program 1,079 20 - - 1,099
71 INDEX TO EXHIBITS ----------------- Sequentially Exhibit Numbered Incorporated by Number Exhibit Page Reference to - ------ ------- ------------ --------------- 2(a) Agreement regarding purchase of Exhibit 2 to the Becker CPA assets dated as of Company's Form 8-K June 19, 1996. filed July 3, 1996 3(a) Certificate of Amendment Exhibit 3(a) to the of Restated Certificate of Company's Form 10-K Incorporation of the Registrant for the year ended June 30, 1995 3(b) Amended and Restated By-Laws Exhibit 3(d) to of the Registrant Amendment #1 of the Company's Form S- 1, #33-40151 dated May 21, 1991 4(a) Amended and Restated Financing Exhibit 4(a) to the Agreement, dated as of January 14, Company's Form 10-K 1994, between Keller Graduate for the year ended School of Management, Inc., certain June 30, 1994 financial institutions and Continental Bank N.A. 4(b) First Amendment, dated as of Exhibit 4(b) to the July 18, 1995, to Amended and Company's Form 10-K Restated Financing Agreement for the year ended between Keller Graduate School of June 30, 1995 Management, Inc., certain financial institutions and Bank of America Illinois 4(c) Amended and Restated Financing Agreement, dated as of June 12, 1996, between Keller Graduate School of Management, Inc., certain financial institutions and Bank of America Illinois. 73-175 4(d) Note Agreement, dated as of November 15, Exhibit 4(l) to the 1987, by and among Keller Graduate School Company's Form S-1, of Management, Inc., the Registrant and #33-40151 dated certain financial institutions regarding April 24, 1991 the 13% Senior Subordinated Notes and the 13% Convertible Senior Subordinated Notes 4(e) First Amendment and Exchange Agreement, Exhibit 4(m) to the dated as of August 1, 1990, by and among Company's Form S- 1, Keller Graduate School of Management, #33-40151 dated Inc., the Registrant and certain financial April 24, 1991 institutions regarding the Note Agreement dated as of November 15, 1987 4(f) Second Amendment to Note Agreement, dated Exhibit 4(m) to the as of May 30, 1991, by and among Keller Company's Form 10-K Graduate School of Management, Inc., the for the year ended Registrant and certain financial June 30, 1991 institutions regarding the Note Agreement dated as of November 15, 1987 72 Sequentially Exhibit Numbered Incorporated by Number Exhibit Page Reference to - ------ ------- ------------ --------------- 4(g) Instrument of Waiver and Consent dated Exhibit 4(r) to the as of August 31, 1992, by and among Company's Form S-3 Keller Graduate School of Management, Inc., #33-58636, dated the Registrant and certain financial February 22, 1993 institutions regarding the Note Agreement dated as of November 15, 1987 10(a) Registrant's Amended and Restated Stock Exhibit 10(a) to the Incentive Plan Company's Form S-3, #33-58636 dated February 22, 1993 10(b) Registrant's 1991 Stock Incentive Exhibit 10(b) to the Plan Company's Form S- 1, #33-40151 dated April 24, 1991 10(c) Registrant's 1994 Stock Incentive Exhibit 10(c) to the Plan Company's Form 10-K for the year ended June 30, 1994 10(d) DeVry Inc. Amended and Restated Profit Sharing Retirement Plan dated effective as of July 1, 1992 176-237 10(e) First Amendment to the DeVry Inc. Amended and Restated Profit Sharing Retirement Plan 238 10(f) Employee Stock Purchase Plan Exhibit 10(f) to the Company's Form S-3, #33-58636 dated February 22, 1993 10(g) First Amendment to Employee Stock Exhibit 10(h) to the Purchase Plan Company's Form 10-K for the year ended June 30, 1994 10(h) Form of Indemnification Agreement Exhibit 10(d) to the between the Registrant and its Company's Form S- 1, directors #33-40151 dated April 24, 1991 10(i) Employment Agreement between the Exhibit 10(f) to the Registrant and each of Dennis J. Company's Form 10-K Keller and Ronald L. Taylor for the year ended June 30, 1991 21 Subsidiaries of the Registrant 239 23 Consent of Price Waterhouse LLP, 240 independent accountants 27 Financial Data Schedule 241 EX-4 2 73 EXHIBIT 4(c) ------------ AMENDED AND RESTATED FINANCING AGREEMENT Dated as of June 12, 1996 between KELLER GRADUATE SCHOOL OF MANAGEMENT, INC. as Borrower CERTAIN FINANCIAL INSTITUTIONS as Lenders and BANK OF AMERICA ILLINOIS, as Agent 74 TABLE OF CONTENTS ----------------- PARAGRAPH PAGE - --------- ---- 1. DEFINITIONS AND INTERPRETATION 1 2. LOANS AND LETTERS OF CREDIT. 13 (A) Revolving Loan 13 (B) Notice of Borrowing 14 (C) Loan Account 15 (D) Prepayments 15 (E) Voluntary Reduction or Termination of the Revolving Maximum Loan Commitment 16 (F) Letters of Credit; Reimbursement Obligations 16 (G) Allocation 17 3. INTEREST ON THE LOANS. 17 (A) Rate of Interest 17 (B) Interest Payments and Computation 18 (C) Default Interest 19 (D) Conversion or Continuation 19 (E) Increased Costs; Legal Restrictions 20 (F) Amount of Eurodollar Rate Loans 22 (G) Determination of Eurodollar Interest Period 22 (H) Substituted Rate of Borrowing 22 (I) Required Termination and Prepayment 23 (J) Option of Borrower 24 (K) Compensation; Breakage Fees 24 (L) Eurodollar Rate Taxes; Indemnification 25 (M) Certain Indemnification 26 (N) Eurodollar Rate Loans After Default 26 (O) Affiliates Not Obligated 26 (P) Increased Capital 26 4. FEES AND CHARGES 27 (A) Non-Use Fees 27 (B) Agent's Fees 27 (C) Letter of Credit Fees 27 (D) Unpaid Charges 28 5. QUARTERLY ACCOUNTINGS BY AGENT. 28 6. RESERVED 28 7. RESERVED 28 75 8. PROCEEDS, PAYMENTS AND APPLICATION 28 (A) Application and Posting Time 28 (B) Order of Application; Invalidated Payments 29 (C) Sharing of Payments 29 9. AGENT AS BORROWER'S ATTORNEY 29 10. INSURANCE 30 11. REPORTING 30 (A) Quarterly Reports. 30 (B) Annual Reports 31 (C) Communication with Accountants; Other Financial Information 32 (D) Reports to SEC 32 (E) Reports of Changes in Subsidiaries 32 (F) Notices Relating to Default 32 (G) Notice of Material Adverse Events 33 (H) Other Reports 33 12. WARRANTIES AND REPRESENTATIONS 33 (A) Corporate Existence 33 (B) Corporate Authority 33 (C) Binding Effect 34 (D) Financial Data 34 (E) Material Adverse Change 35 (F) Tax Liabilities 35 (G) Loans; Guaranties 35 (H) Margin Security 35 (I) Subsidiaries 36 (J) Litigation and Proceedings 36 (K) Other Agreements 36 (L) Employee Controversies 36 (M) Compliance with Laws and Regulations 36 (N) Patents, Trademarks and Licenses 37 (O) ERISA 38 (P) Use of Proceeds 38 (Q) Fiscal Year 38 (R) Compliance with Environmental and Safety Laws 38 (S) Survival of Warranties 39 13. GENERAL AFFIRMATIVE COVENANTS. 39 (A) Reimbursement of Loan Operating Costs 39 (B) Notice of Claims 40 (C) Conduct of Business 40 (D) Claims and Taxes 41 (E) ERISA 42 (F) Environmental and Safety Laws 42 (G) Books, Records and Inspections 43 14. GENERAL NEGATIVE COVENANTS 44 (A) Consolidations, Mergers and Asset Acquisitions 44 (B) Investments 45 (C) Distributions and Loans 46 (D) Transactions With Affiliates 47 (E) Asset Disposition, etc. 47 (F) Conditional Sales 48 (G) Encumbrances 48 76 (H) Indebtedness 48 (I) Guarantees 49 (J) Amendment of Certificate of Incorporation or By-Laws. 49 (K) ERISA 49 (L) Transfer of DeVry Canada Stock 50 15. RESERVED 50 16. FINANCIAL COVENANTS 50 17. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT. 51 18. TERMINATION, ACCELERATION AND DEMAND 52 (A) Term 52 (B) Repayment and Acceleration of Loans 53 (C) Repayment and Acceleration of Interest and Fees 53 (D) Certain Obligations Payable on Demand; Waivers 53 19. EVENTS OF DEFAULT 53 20. LENDER'S RIGHTS AND REMEDIES 56 (A) Equitable Relief 56 (B) Cash Collateral for Letters of Credit 56 21. AGENT 57 (A) Actions; Indemnification 57 (B) Funding Reliance, etc. 58 (C) Exculpation 58 (D) Successor 58 (E) Loans by Agent 59 (F) Credit Decisions 59 (G) Copies, etc 59 22. MISCELLANEOUS 59 (A) Waivers, Amendments, etc 59 (B) Notices 60 (C) Costs and Expenses 61 (D) Indemnification 61 (E) Survival 63 (F) Severability 63 77 (G) Headings 63 (H) Counterparts, Effectiveness, etc 63 (I) Governing Law; Entire Agreement 63 (J) Successors and Assigns 63 (K) Assignments and Participations 64 (L) Other Transactions 68 (M) Waiver of Jury Trial 68 (N) Submission to Jurisdiction 68 (O) Restatement 69 78 References to Exhibits Exhibit Paragraph - ------- --------- A Form of Revolving Note 2(A) B Form of Notice of Borrowing 2(B) C Form of Compliance Certificate 11(A) D Form of Guaranty 1(A) E Existing L/Cs 2(A) F Other Indebtedness, Guaranties, 12(G) G Subsidiaries 12(I) H Litigation; Other Agreements 12(J); 12(K) I ERISA 12(O) J Investments 14(B) K Liens, Claims, Security Interests, 14(G) Encumbrances L Form of Opinion of Special Counsel 17(A) for Borrower M Form of Assignment 22(K) 79 AMENDED AND RESTATED FINANCING AGREEMENT This Amended and Restated Financing Agreement (this "Agreement"), made as of June 12, 1996 (the "Restatement Date"), by and between Keller Graduate School of Management, Inc., a Delaware corporation ("Borrower"), various financial institutions which are, or may become, parties hereto ("Lenders"), and Bank of America Illinois, a banking association having its principal office at 231 South LaSalle Street, Chicago, Illinois, as agent for Lenders (in such capacity, "Agent"). W I T N E S S E T H: WHEREAS, Borrower has entered into an Amended and Restated Financing Agreement made as of April 14, 1994 (as amended or modified and in effect on the Restatement Date, the "Existing Agreement") with the Lenders and the Agent; WHEREAS, Borrower, the Agent and the Lenders desire to amend and restate the Existing Agreement in its entirety in order to, without limitation, (i) increase the aggregate amount of Revolving Loans and Letters of Credit which may be outstanding hereunder at any one time, (ii) to extend the Termination Date and (iii) provide for the modification of certain of the representations and warranties, covenants and other provisions contained in the Existing Agreement; NOW, THEREFORE, in consideration of the terms and conditions contained herein, and of any loans or extensions of credit now or hereafter made to or for the benefit of Borrower by Lenders, the parties hereto agree to amend and restate the Existing Agreement as follows: 1. DEFINITIONS AND INTERPRETATION. (A) In this Agreement and the other Loan Documents, the following terms have the respective meanings indicated, unless a clear contrary intention appears: "Affiliate," as applied to any Person, shall mean any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by", and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to vote ten percent (10%) or more of the securities or other interests having voting power for the election of directors of such Person or otherwise to direct or cause the direction of the management policies of that Person, 80 whether through the ownership of voting securities, by contract or otherwise. Without limiting the generality of the foregoing, all of Borrower's officers, directors, Subsidiaries, joint ventures and partnerships shall be deemed to be Borrower's Affiliates for purposes of this Agreement. "Agent" shall have the meaning set forth in the preamble hereto. "Agreement" shall have the meaning set forth in the preamble hereto. "Applicable L/C Fee" and "Applicable Non-Use Fee" shall mean, and "Applicable Margin", as applied to Eurodollar Rate Loans or Base Rate Loans, as the case may be, shall mean, the percentage indicated in the table below opposite the then applicable range of Debt Coverage Ratio values:
Applicable Margin Debt Coverage Applicable --------------------- Applicable Ratio L/C Fee Eurodollar Base Rate Non-Use Fee - ------------- ---------- ---------- --------- ----------- less than 0.5:1 0.35 0.35 % 0.00% 0.15 % 0.5:1 up to but 0.50 0.50 % 0.00% 0.20 % not including 1.0:1 1.0:1 up to but 0.625 0.625% 0.00% 0.25 % not including 1.5:1 1.5:1 up to but 0.75 0.75 % 0.00% 0.25 % not including 2.0:1 2.0:1 up to but 1.25 1.25 % 0.00% 0.30 % not including 3.0:1 equal to or 1.75 1.75 % 0.50% 0.375% greater than 3.0:1
provided, that any change in the Applicable Non-Use Fee, the Applicable Margin and the Applicable L/C Fee because of a change in the Debt Coverage Ratio as measured at the end of a Fiscal Quarter shall become effective as of the first day of the second succeeding Fiscal Quarter; provided, further, that with respect to the Fiscal Quarters ending December 31, 1995, March 31, 1996 and June 30, 1996, the Debt Coverage Ratio shall be deemed to be between 1.5:1 and 2.0:1. "Assignable Commitments" shall have the meaning ascribed to such term in Paragraph 22(K). "Assignable Loans" shall have the meaning ascribed to such term in Paragraph 22(K). 81 "Assignment" shall have the meaning ascribed to such term in Paragraph 22(K)(b)(vi). "Attorneys' Fees" shall mean the reasonable fees (and costs and expenses related thereto) of the attorneys (and all paralegals and other staff employed by such attorneys whose services are regularly billed to such attorneys' clients) employed by Agent or any Lender from time to time to (i) file a petition, complaint, answer, motion or other pleading, or to take any other action in or with respect to any suit or proceeding (bankruptcy or otherwise) relating to the Obligations or any security for the Obligations or relating to this Agreement or any of the other Loan Documents; (ii) enforce any of Agent's or any Lender's rights to collect any of the Obligations; or (iii) give any advice with respect to any of the foregoing; provided that documentation supporting such services in reasonable detail as reasonably requested by Borrower shall be furnished to Borrower. "BAI" shall mean Bank of America Illinois and any successor thereto. "Bankruptcy Code" shall mean Title 11 of the United States Code (11 U.S.C., 101 et seq.). "Base Rate" shall mean, for any day, a fluctuating rate per annum (rounded upward to the next highest 1/8 of 1% if not already an integral multiple of 1/8 of 1%) equal to the greater of (i) the Reference Rate in effect on such day or (ii) the Federal Funds Effective Rate in effect on such day. For purposes of this Agreement, any change in the Base Rate due to a change in the Reference Rate shall be effective on the date such change in the Reference Rate is announced, and any change in the Base Rate due to a change in the Federal Funds Effective Rate shall be effective on the effective date of such change in the Federal Funds Effective Rate. If for any reason BAI shall have determined (which determination shall be conclusive in the absence of manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of BAI to obtain sufficient bids or publication in accordance with the terms hereof, the Base Rate shall be a fluctuating rate per annum equal to the Reference Rate in effect from time to time until the circumstances giving rise to such inability no longer exist. "Base Rate Loans" shall mean those Loans outstanding which bear interest at a rate based upon the Base Rate, as provided in Paragraph 3(A). "Becker Subsidiaries" shall mean, collectively, (i) DeVry CPA Review Course, Inc., a Delaware corporation, to be renamed 82 "Becker CPA Review Corporation" following consummation of the Becker Transaction, and (ii) DeVry Educational Development Corporation, a Delaware corporation, to be renamed "Becker/DeVry Educational Development Corporation" following consummation of the Becker Transaction. "Becker Transaction" shall mean, collectively, (i) the acquisition by DeVry Educational Development Corporation of all the trademarks, copyrights and certain other related intellectual property relating to the Becker Subsidiaries, (ii) the acquisition by DeVry CPA Review Course, Inc. of all the issued and outstanding capital stock of The Becker CPA Review, Inc., a Delaware corporation and (iii) the acquisition by DeVry of all the issued and outstanding partnership interests of Becker CPA Review Course Ltd., a California limited partnership, all as contemplated by the Agreement Regarding Purchase of Partnership Interests, among DeVry, the Becker Subsidiaries and other parties thereto. "Benefit Plan" shall mean any employee benefit plan which is subject to the provisions of Title IV of ERISA and which is, or was at any time, during the five preceding years, maintained for employees of Borrower, any Subsidiary or any ERISA Affiliate, other than a Multiemployer Plan. "Borrower" shall have the meaning set forth in the preamble hereto. "Business Day" shall mean any day excluding (i) Saturday, (ii) Sunday and (iii) any day which is a holiday under the laws of the State of Illinois; and with respect to Eurodollar Rate Loans, means such a day on which dealings are carried on in the London Interbank Market. "Canadian Letters of Credit" shall mean Letters of Credit issued by the Agent for the account or benefit of DeVry Canada. "Capital Expenditures" shall mean, for any period, (i) the aggregate of all expenditures (when paid in cash or, if earlier, accrued as liabilities), other than with respect to capitalized leases, made by DeVry and its Subsidiaries during such period that, in conformity with GAAP, are required to be included in the property, plant, equipment or similar fixed facilities accounts on the consolidated balance sheet of DeVry minus (ii) any such expenditures referred to in clause (i) of this definition which were made in connection with the maintenance, preservation, replacement or restoration of assets to the extent such expenditures were financed from insurance or other proceeds paid on account of the loss of or damage to the assets being replaced or restored or from awards of compensation arising from the 83 taking by condemnation or eminent domain of such assets being replaced. "CERCLA" shall mean the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended. "Conditions Precedent" shall have the meaning ascribed to such term in Paragraph 17. "Consolidated Net Income" shall mean, for any period, the consolidated net income of DeVry and the Subsidiaries for such period; provided, however, that any write-off or other charge against income relating to (i) an intangible or other asset excluded from the calculation of Consolidated Tangible Net Worth, (ii) deferred financing costs in connection with indebtedness hereunder and (iii) repurchase of interest rate protection agreements, currency exchange agreements or similar agreements, shall not be charged against consolidated net income for such period. "Consolidated Subsidiary" means, at any date, any Subsidiary or other entity (including, if applicable, the Exempt Entities) the accounts of which, in accordance with GAAP consistently applied, would be consolidated with those of DeVry in its consolidated financial statements as of such date. "Consolidated Tangible Net Worth" shall mean, with respect to DeVry and the Subsidiaries on a consolidated basis at any date, stockholders' equity minus, without duplication, all items which would properly be classified as intangible assets of DeVry and its Subsidiaries under GAAP, including deferred charges such as unamortized debt discount and expenses, organization costs and research and development costs. "Debt Coverage Ratio" shall mean the ratio, calculated as of the last day of each Fiscal Quarter, of (i) the average daily aggregate Indebtedness (excluding all Indebtedness to the extent consisting of items described in clause (iii) of the definition of "Indebtedness") of DeVry and its Subsidiaries for the then ending Fiscal Quarter to (ii) the difference of (a) EBITDA for the then ending and three immediately preceding Fiscal Quarters less (b) $3,500,000. "Default" shall mean any event which through the passage of time or the giving of notice or both would mature into an Event of Default. "DeVry" shall mean DEVRY INC., a Delaware corporation. 84 "DeVry Canada" shall mean DeVry Canada Inc., a Canadian corporation. "EBIT" shall mean DeVry's Consolidated Net Income before deducting interest expense (including, without limitation, any imputed interest attributable to capitalized leases), Fee Expenses and taxes. "EBITDA" shall mean DeVry's Consolidated Net Income before deducting interest expense (including, without limitation, any imputed interest attributable to capitalized leases), Fee Expenses, taxes, depreciation and amortization and other non-cash charges. "Eligible Assignee" shall mean any commercial bank. "ERISA" shall mean the Employee Retirement Income Security Act of 1974. "ERISA Affiliate" shall mean (i) a corporation which is a member of the same controlled group of corporations (within the meaning of section 414(b) of the Internal Revenue Code) as Borrower, DeVry or any Subsidiary; (ii) a trade or business which is under common control (within the meaning of section 414(c) of the Internal Revenue Code) with Borrower, DeVry or any Subsidiary; and (iii) an organization which is a member of the same affiliated service group (within the meaning of section 414(m) of the Internal Revenue Code) as Borrower, DeVry or any Subsidiary, or corporation or trade or business described in clause (i) or (ii) hereof. "Eurodollar Interest Period" shall mean any interest period applicable to a Eurodollar Rate Loan, as determined pursuant to Paragraph 3(G). "Eurodollar Interest Rate Determination Date" shall mean each date on which the Eurodollar Rate is calculated for purposes of determining the interest rate with respect to a Eurodollar Interest Period, which date shall be the second Business Day prior to the first day of the related Eurodollar Interest Period for a Eurodollar Rate Loan. "Eurodollar Rate" shall mean, for any Eurodollar Interest Period, a per annum rate of interest obtained by dividing (i) the rate of interest determined by the per annum rate at which deposits in U.S. Dollars are offered by the principal office of BAI in London to major banks in the London interbank market at 11:00 A.M. (London time) on the Eurodollar Interest Rate Determination Date for a period equal to such Eurodollar Interest Period and in an amount substantially equal to the amount of the 85 Eurodollar Rate Loan requested by Borrower, by (ii) a percentage equal to 100% minus the Eurodollar Reserve Percentage for such Eurodollar Interest Period. "Eurodollar Rate Loans" shall mean those Loans outstanding which bear interest at a rate based upon the Eurodollar Rate as provided in Paragraph 3(A). "Eurodollar Reserve Percentage" shall mean, for any Eurodollar Interest Period, that percentage (expressed as a decimal) which is in effect during such Eurodollar Interest Period (or, if more than one such percentage shall be in effect during such period, the daily average of such percentages for those days during such period on which any such percentage shall be in effect), as prescribed by the Board of Governors of the Federal Reserve System for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in Chicago, Illinois of that class of member banks of which Agent is a member in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Eurodollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of Agent to United States residents). The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage. "Event of Default" shall mean any of the events listed in Paragraph 19. "Exempt Entities" shall mean, collectively: (i) Becker C.P.A. Review (Isreal) Limited, an Israeli corporation; (ii) Newton Becker Limited, a Hong Kong corporation; (iii) DeVry Institute of Technology, Inc., a Delaware corporation; (iv) Missouri Institute of Technology, Inc., a Missouri corporation; and (v) Provost & Associates, Inc., an Illinois corporation. "Existing Agreement" shall have the meaning set forth in the recitals hereto. "Existing L/Cs" shall have the meaning ascribed to such term in Paragraph 2(A). "Federal Funds Effective Rate" shall mean, for any day, an interest rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day by the Federal Reserve Bank of New York, 86 or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by BAI from three federal funds brokers of recognized standing selected by it. In the case of a day which is not a Business Day, the Federal Funds Effective Rate for such day shall be the Federal Funds Effective Rate for the next preceding Business Day. "Fee Expenses" shall mean all commitment fees, Agent's fees and letter of credit fees paid or owed by Borrower pursuant to Paragraph 4. "Financials" shall have the meaning ascribed to such term in Paragraph 11(B). "Fiscal Quarter" shall mean a calendar quarter. "Fixed Charge Coverage Ratio" shall mean, for any period, the ratio of DeVry's (i) EBIT, plus lease expense included in determining net earnings (excluding, however, lease expenses for student housing leases for terms of less than 18 months), plus the aggregate cash proceeds of sales and other dispositions of DeVry's or Subsidiaries' assets, plus federal income tax refunds received by DeVry arising from losses of DeVry and its Affiliates from prior periods to (ii) interest expense and Fee Expenses plus lease expense included in determining net earnings (excluding, however, lease expenses for student housing leases for terms of less than 18 months). "GAAP" shall have the meaning ascribed to such term in Paragraph l(D). "Governmental Authority" shall mean any nation or government, any state, province or other political subdivision thereto and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to such government, nation, state, province or political subdivision thereof. "Guaranty" shall mean a guaranty in substantially the form of Exhibit D hereto. "Indebtedness" shall mean all of Borrower's obligations and liabilities to any Person, including all debts, claims and indebtedness, contingent, fixed or otherwise, heretofore, now and/or from time to time hereafter owing, due or payable, however evidenced, created, incurred, acquired or owing and however arising, whether under written or oral agreement, operation of law, or otherwise. Indebtedness includes, without limitation, (i) the Obligations; (ii) obligations and liabilities of any 87 Person secured by a lien, claim, encumbrance, or security interest upon property owned by Borrower, even though Borrower has not assumed or become liable for the payment therefor; and (iii) obligations or liabilities created or arising under any lease of real or personal property, or conditional sales contract or other title retention agreement with respect to property used and/or acquired by Borrower, even though the rights and remedies of the lessor, seller and/or lender thereunder are limited to repossession of such property. "Indemnified Liabilities" shall have the meaning ascribed to such term in Paragraph 22(D). "Indemnified Parties" shall have the meaning ascribed to such term in Paragraph 22(D). "Internal Revenue Code" shall mean the Internal Revenue Code of 1986. "Investment" shall mean, with respect to any Person, (i) any loan or advance made by such Person to another Person, (ii) any purchase or other acquisition of any capital stock, obligations or other securities of, or equity interest in, another Person (including the acquisition of capital stock or other equity interest in connection with the foundation of such Person), or (iii) any capital contribution to or other investment in or acquisition of any interest in another Person. "L/C Documents" shall mean all Letters of Credit and all applications, reimbursement agreements, security agreements, certificates, written draws, agreements, documents, correspondences and instruments in any way related to such Letters of Credit. "Lenders" shall have the meaning set forth in the preamble hereto. "Letter of Credit" shall mean the Existing L/C's and each other letter of credit issued by Agent for the account of Borrower or DeVry Canada hereunder. "Loan Documents" shall mean all agreements, instruments and documents, including security agreements, loan agreements (including this Agreement and the L/C Documents) notes, guarantees (including any Guaranty), mortgages, deeds of trust, subordination agreements, pledges, powers of attorney, consents, assignments, contracts, notices, leasehold mortgages, financing statements and all other written matter whether heretofore, now or hereafter executed by or on behalf of Borrower or any other Person and delivered to Agent or any Lender pursuant to this 88 Agreement or in connection with the transactions related hereto or contemplated hereby, together with all agreements and documents executed and delivered in connection therewith. "Loans" shall mean the Revolving Loan and each advance or component thereof consisting of a Base Rate or a Eurodollar Rate Loan. "Multiemployer Plan" shall mean a "multiemployer plan" as defined in section 4001(a)(3) of ERISA which is, or was at any time during the five preceding years, maintained for employees of Borrower, DeVry, any Subsidiary or any ERISA Affiliate. "Notice of Borrowing" shall have the meaning ascribed to such term in Paragraph 2(B). "Notice of Conversion or Continuation" shall have the meaning ascribed to such term in Paragraph 3(D). "Notice of Issuance" shall have the meaning ascribed to such term in Paragraph 2(F). "Obligations" shall mean and include all loans, advances, debts, liabilities, obligations, covenants and duties owing by Borrower to Agent or any Lender of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, whether arising under or with respect to this Agreement, any of the other Loan Documents or under any other agreement, instrument or document, whether or not for the payment of money, whether arising by reason of an extension of credit, opening of a Letter of Credit, loan, guaranty, interest rate protection agreement, currency exchange agreement, indemnification or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, arising before or after the filing of a petition in bankruptcy by or on behalf of Borrower, now existing or hereafter arising and however acquired any reimbursement obligations, and any other liabilities hereafter arising and owing to Agent in connection with the issuance of Letters of Credit. The Obligations include all interest, charges, expenses, fees, Attorneys' Fees and any other sums chargeable to Borrower under this Agreement, any of the Loan Documents or any other agreement with Agent or any Lender. "Percentage" shall mean, as to any Lender, such Lender's percentage set forth against its name on the signature pages hereof or, if such Lender has executed an Assignment, its percentage set forth therein or, if such Lender has executed more than one Assignment, the most recent thereof. 89 "Person" shall mean and include any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, entity, party or government (whether national, federal, state, provincial county, city, municipal, or otherwise, including any instrumentality, division, agency, body or department thereof). "Plan" shall mean any employee benefit plan defined in section 3(3) of ERISA other than a Multiemployer Plan or any employee welfare benefit plan which is maintained pursuant to a collective bargaining agreement to which two or more unrelated employers contribute and in respect of which Borrower, DeVry or and Subsidiary or any ERISA Affiliate is an "employer" as defined in section 3(5) of ERISA. "Quarterly Payment Date" shall mean each February 1, May 1, August 1 and November 1, commencing August 1, 1996. "Reference Rate" shall mean, at any time and from time to time, the rate per annum then most recently announced by BAI at its head office as its reference rate. The Reference Rate is not necessarily intended to be the lowest rate of interest determined by BAI in connection with extensions of credit. "Register" shall have the meaning ascribed to such term in Paragraph 22(K)(c). "Required Lenders" shall mean Lenders whose aggregate Percentages are at least sixty-six and two-thirds percent (66-2/3%). "Restatement Date" shall have the meaning set forth in the preamble hereto. "Revolving Loan" shall have the meaning ascribed to such term in Paragraph 2(A). "Revolving Loan Maximum Commitment" shall mean Eighty-Five Million Dollars ($85,000,000). "Semester" shall mean an academic period, consisting of approximately seventeen (17) weeks, including any associated administrative periods and holidays, as to which Borrower shall have given Agent written notice reasonably promptly following Borrower's announcement of the academic calendar which includes such academic period. A Semester shall be deemed to begin on the first day of classes in an academic period and end on the day prior to the commencement of classes in the subsequent academic period. 90 "Special Purpose Subsidiary" means any Subsidiary: (1) of which Borrower owns, directly all of the issued and outstanding voting stock, general partner's interests or other equity interests having ordinary voting power to elect the board of directors or other managers of such; (2) which has executed and delivered to the Agent for the benefit of the Lenders a Guaranty; and (3) which has been designated in writing by the Borrower to the Agent and the Lenders as a "Special Purpose Subsidiary". "Subsidiary" shall mean any corporation or other entity of which more than fifty percent (50%) of the outstanding capital stock or ownership interest having ordinary voting power to elect a majority of the board of directors or other management body of such corporation or other entity (irrespective of whether at the time stock of any other class or classes of such corporation or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned by DeVry, including, without limitation, Borrower; provided, that in no event shall "Subsidiary" include the Exempt Entities. "Termination Date" shall have the meaning ascribed to such term in Paragraph 18(A). (B) Use of Defined Terms. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in the other Loan Documents including each Notice of Borrowing, Notice of Continuation or Conversion and any other notice or communication delivered from time to time in connection with this Agreement or any other Loan Document. (C) Interpretation. In this Agreement and each other Loan Document, unless a clear contrary intention appears: (a) the singular number includes the plural number and vice versa; (b) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; (c) reference to any gender includes each other gender; (d) reference to any agreement (including this Agreement and the Schedules and Exhibits hereto), document or instrument means such agreement, document or instrument as amended or 91 modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof and reference to any promissory note includes any promissory note which is an extension or renewal thereof or a substitute or replacement therefor; (e) reference to any applicable law means such applicable law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder; (f) unless the context indicates otherwise, reference to any Paragraph, Schedule or Exhibit means such Paragraph hereof or Schedule or Exhibit hereto; (g) "hereunder", "hereof", "hereto" and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Paragraph or other provision hereof; (h) "including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term; and (i) relative to the determination of any period of time, "from" means "from and including" and "to" means "to but excluding". (D) Accounting Terms. For purposes of this Agreement and the other Loan Documents, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with generally accepted accounting principles ("GAAP"), from time to time in effect, unless a clear contrary intention appears and, where appropriate, reference to DeVry shall be deemed a reference to DeVry and its Subsidiaries on a consolidated basis. 2. LOANS AND LETTERS OF CREDIT. (A) Revolving Loan. Borrower acknowledges that set forth on Exhibit E is a true and complete listing of all "Letters of Credit" (as defined in the Existing Agreement); such Letters of Credit being referred to herein as the "Existing L/C's." From time to time before the Termination Date, each Lender severally and for itself alone shall make advances (such advances of all Lenders, in the aggregate, being hereinafter referred to as the "Revolving Loan") to or for the benefit of Borrower on a revolving credit basis in such Lender's Percentage of such aggregate amounts as Borrower may from time to time request. The aggregate outstanding principal amount of the Revolving Loan, 92 when added to the aggregate undrawn face amount of any outstanding Letters of Credit (together with any reimbursement obligations of Borrower with respect to such Letters of Credit), may aggregate, but shall not exceed at any one time outstanding the Revolving Loan Maximum Commitment then in effect. The Revolving Loan shall be evidenced by a promissory note executed by Borrower and made payable to the order of Agent in the form of Exhibit A (the "Revolving Note") and, subject to the terms and provisions of the Revolving Note and this Agreement, shall be due and payable on the Termination Date, unless no principal balance of the Revolving Loan is then outstanding. (B) Notice of Borrowing. Whenever Borrower desires to borrow under Paragraph 2(A), it shall deliver to Agent (who will promptly inform Lenders of the substance thereof) a written notice containing the original signature of an authorized officer or employee of Borrower ("Notice of Borrowing") substantially in the form of Exhibit B (i) no later than 10:00 a.m. (Chicago time) on the proposed date of disbursement of such borrowing, in the case of a borrowing of Base Rate Loans and (ii) no later than 10:00 a.m. (Chicago time) at least three (3) Business Days in advance of the proposed date of disbursement of such borrowing, in the case of a borrowing of Eurodollar Rate Loans. The Notice of Borrowing shall specify (a) that such proposed borrowing is an advance of the Revolving Loan, (b) the proposed date of disbursement of such proposed borrowing, (c) the amount of such proposed borrowing, (d) whether the proposed borrowing will be a Base Rate Loan or Eurodollar Rate Loan and (e) in the case of a Eurodollar Rate Loan, the requested Eurodollar Interest Period. In lieu of delivering the above described Notice of Borrowing, Borrower may give Agent (who will promptly inform Lenders of the substance thereof) telephonic notice of the request within the required time of any proposed borrowing under this Paragraph 2(B) provided that such notice is confirmed in writing by delivery to Agent promptly (but in no event later than the proposed date of disbursement of such borrowing) of a Notice of Borrowing. In the event such written confirmation is not delivered to Agent on or before the proposed date of disbursement, no Lender shall have any obligation to disburse such requested Loan. Subject to the terms of this Agreement, each proposed borrowing shall be made on the proposed date of disbursement of such borrowing. On such date of disbursement, each Lender shall deposit with Agent same day funds, at or before 12:00 noon (Chicago time), in an amount equal to such Lender's Percentage of such borrowing, such deposit to be made to such account as Agent shall specify from time to time to Lenders. After timely receipt of such funds, Agent shall, at or before 2:00 p.m. (Chicago time), make such funds available to Borrower by depositing such funds in an account maintained by Borrower with Agent for such purpose. No Lender's obligation to make any Loan shall be affected by any other Lender's failure to 93 make any Loan. Prior to the initial advance of the Revolving Loan after the Restatement Date, Borrower shall notify Agent in writing of the names of the officers and employees authorized to request borrowings on behalf of Borrower and shall provide Agent with a specimen signature of each such officer. Agent and each Lender shall be entitled to rely conclusively on such officers' and employees' authority to request borrowings on behalf of Borrower until Agent receives written notice to the contrary. Neither Agent nor any Lender shall have any duty to verify the authenticity of the signature appearing on any written Notice of Borrowing and, with respect to an oral request for a borrowing, shall have no duty to verify the identity of any Person representing himself or herself as one of the officers or employees authorized to make such request on behalf of Borrower. Neither Agent nor any Lender shall incur any liability to Borrower in acting upon any notice referred to above which Agent or such Lender believes in good faith to have been given by a duly authorized officer or employee authorized to act on behalf of Borrower or for otherwise acting in good faith under this Paragraph 2(B) and, upon disbursement of Loans in accordance with this Agreement pursuant to any such notice, Borrower shall have effected a borrowing of loans hereunder. Any Notice of Borrowing pursuant to this Paragraph 2(B) shall be irrevocable and Borrower shall be bound to make a borrowing in accordance therewith. (C) Loan Account. Agent shall maintain a loan account on its books in which shall be recorded (i) all Loans made to Borrower by Lenders pursuant to this Agreement, (ii) all payments made by Borrower on all such Loans and (iii) all other appropriate debits and credits as provided in this Agreement, including those for all fees, charges, expenses and interest. All entries in such loan account shall be made in accordance with Agent's customary accounting practices as in effect from time to time. Subject to the terms of Paragraph 5, Borrower promises to pay the amount reflected as owing by it under such loan account and all of its Obligations as such amounts become due or are declared due pursuant to the terms of this Agreement or the other Loan Documents. (D) Prepayments. Borrower may, at any time, prepay any or all of the outstanding principal portion of the Obligations in increments of $500,000, without penalty or premium, other than the payment of any amounts owing pursuant to Paragraph 3(E) or 3(K); provided, that any prepayment of all of the outstanding principal portion of the Obligations need not be in an increment of $500,000; provided, further, that on the Restatement Date the Borrower may make a one-time prepayment of the Outstanding Revolving Loans in any amount of up to $50,000. Each such voluntary prepayment shall be applied as specified by Borrower to Agent at the time of such prepayment or, if Borrower fails to so 94 specify the application thereof, as specified by the Agent to the outstanding principal balance of the Revolving Loan. (E) Voluntary Reduction or Termination of the Revolving Maximum Loan Commitment. The Borrower may from time to time prior to the Termination Date on at least five (5) Business Days' prior written notice received by the Agent (which shall promptly advise each Lender thereof) permanently reduce the amount of the Revolving Loan Maximum Commitment (such reduction to be pro rata among the Lenders according to their respective Percentages) to an amount not less than the aggregate unpaid principal amount of the Revolving Loan plus the aggregate undrawn face amount of all outstanding Letters of Credit (together with any reimbursement obligations of the Borrower with respect to such Letters of Credit) then outstanding. Any such reduction shall be in an aggregate amount of $1,000,000 or an integral multiple thereof. Subject to the requirements of Paragraph 20(B), the Borrower may at any time on like notice prior to the Termination Date terminate the Revolving Loan Maximum Commitment upon payment in full of the Revolving Loans and other obligations of the Borrower hereunder pertaining to the Revolving Loans. (F) Letters of Credit; Reimbursement Obligations. Whenever Borrower desires a Letter of Credit, it shall deliver to Agent (who will promptly inform Lenders of the substance thereof) a written notice on an appropriate form of application and containing the original signature of an authorized officer or employee of Borrower ("Notice of Issuance") no later than 10:00 a.m. at least three (3) Business Days in the case of any Letter of Credit other than a Canadian Letter of Credit and at least five (5) Business Days in the case of any Canadian Letter of Credit in advance of the proposed date of issuance. The Notice of Issuance shall specify the amount, beneficiary and other material terms of the proposed Letter of Credit. In lieu of delivery of the above-described Notice of Issuance, Borrower may give Agent (who will promptly inform Lenders of the substance thereof) telephonic notice of the request within the required time of any proposed Letter of Credit under this Paragraph 2(F) provided that such notice is confirmed in writing by delivery to Agent promptly (but in no event later than the proposed date of issuance of such Letter of Credit). Subject to the terms of this Agreement, Agent shall issue the requested Letter of Credit on the proposed date of issuance. Effective immediately on such issuance, and without any further or other act by Agent or any Lender, each Lender will be deemed to have purchased a pro rata undivided interest according to their respective Percentages in all Agent's right, title and interest in, under and to such Letter of Credit including any Canadian Letter of Credit, including Agent's obligations thereunder and Borrower's obligations to reimburse Agent with respect thereto, and each 95 Lender shall, to the extent of its respective Percentage, be responsible to promptly reimburse Agent for any and all payments made by Agent under such Letter of Credit not theretofore reimbursed by Borrower as provided herein. Borrower hereby agrees and acknowledges that any payments made by Agent to any beneficiary of any such Letter of Credit shall constitute advances of the Revolving Loan to Borrower and shall be originally made as Base Rate Loans, which Loans are hereby irrevocably authorized and directed by Borrower. Borrower's obligation to repay Revolving Loans made in accordance with this Paragraph 2(F) shall be unconditional regardless of (i) any lack of validity or enforceability of any L/C Document; (ii) any amendment or waiver of or consent to or departure from, any of the terms of any L/C Document; (iii) the existence of any claim, setoff, defense or other right which Borrower or any Affiliate of Borrower may have at any time against any issuer or beneficiary of any Letter of Credit; (iv) evidence that any L/C Document proves to be forged, fraudulent, invalid or insufficient in any respect or that any statement therein is untrue or inaccurate in any respect, regardless of whether or how such facts or alleged facts are brought to the attention of Agent; (v) payment by the issuer of any Letter of Credit against presentation of a written demand or certificate which does not comply with the terms of such Letter of Credit, except to the extent of the Letter of Credit issuer's gross negligence or willful misconduct with respect to any of the foregoing or (vi) the fact that a Default or an Event of Default has occurred or is continuing. The Agent shall not have any obligation to inquire with respect to the truthfulness or accuracy of any communication delivered by any beneficiary of a Letter of Credit to Agent. (G) Allocation. All payments by Borrower pursuant to this Agreement or any other Loan Document, whether in respect of principal of or interest on Loans, shall be made by Borrower to Agent for the account of Lenders pro rata according to their respective Percentages. The payment of all fees referred to in Paragraph 4(A) shall be made by the Borrower to the Agent for the account of the Lenders entitled thereto pro rata according to their respective Percentages. The payment of all fees referred to in Paragraph 4(B) shall be made to Agent for its own account. All other amounts payable to Agent or any Lender under this Agreement or any other Loan Document shall be paid to Agent for the account of the Person entitled thereto. 3. INTEREST ON THE LOANS. (A) Rate of Interest. All Loans shall be either Base Rate Loans or Eurodollar Rate Loans. To the extent past due, all fees described in Paragraph 4 and all other liquidated Obligations shall constitute principal and shall bear interest hereunder. The 96 outstanding principal balance of all Obligations other than Loans shall bear interest from the date such Obligations become past due until paid in full at a per annum rate equal to the sum of the Base Rate in effect from time to time plus one percent (1.0%). Borrower shall determine whether the Loans shall bear interest determined by reference to the Base Rate or the Eurodollar Rate at the time a Notice of Borrowing is given by the Borrower pursuant to Paragraph 2(B) or at the time a Notice of Conversion or Continuation is given by Borrower pursuant to Paragraph 3(D), as the case may be. To the extent any Loan is outstanding with respect to which notice has not been delivered to Agent in accordance with the terms of this Agreement specifying the basis for determining the applicable rate of interest, then that Loan shall be a Base Rate Loan and shall bear interest at a rate determined by reference to the Base Rate. The Loans shall bear interest, except as otherwise provided in Paragraph 3(D), as follows: (i) If a Base Rate Loan, then at a per annum rate equal to the sum of the Base Rate plus the Applicable Margin in effect from time to time; and (ii) If a Eurodollar Rate Loan, then at a per annum rate equal to the sum of the Eurodollar Rate for the applicable Eurodollar Interest Period plus the Applicable Margin. (B) Interest Payments and Computation. Interest accrued on all Base Rate Loans and other Obligations outstanding in any calendar quarter shall be payable, in arrears, on each Quarterly Payment Date. Interest accrued on all Eurodollar Rate Loans shall be payable, in arrears, on the last day of the applicable Eurodollar Interest Period (and if such Interest Period exceeds three months on the ninetieth day of such Interest Period). Interest on all Eurodollar Rate Loans shall be computed on the basis of a year of 360 days and on all Base Rate Loans shall be computed on the basis of a year of 365 or, where applicable, 366 days and on all Loans shall be computed for the actual number of days elapsed in the period during which interest accrues. In computing interest on any Loan or principal portion of the obligations, the date of the making of the Loan, the date on which such other Obligations become past due or the first day of a Eurodollar Interest Period, as the case may be, shall be included and the date of payment or the expiration date of a Eurodollar Interest Period, as the case may be, shall be excluded; provided that if a repayment of any Loan or principal portion of other obligations is received by Agent after 11:00 a.m. (Chicago time), then the date of payment shall be included in computing interest on such Loan or principal portion of other Obligations. 97 (C) Default Interest. Notwithstanding the rates of interest specified in Paragraph 3(A), effective immediately upon the occurrence of an Event of Default described in Paragraph 19(A), (D) (under clause (i) or clause (ii), but, in the latter of which cases, only if an acceleration has occurred), (E), (G), (H), (I), (J), (K) or (L) or an Event of Default by reason of Borrower's breach of any covenant contained in Paragraph 16, and for as long thereafter as any such Event of Default shall be continuing, the principal balance of all Loans and other obligations then outstanding shall bear interest at a rate which is two percent (2%) per annum in excess of the rate of interest otherwise payable under this Agreement. (D) Conversion or Continuation. Borrower shall have the option (i) to convert at any time all or any part of the outstanding Base Rate Loans in a minimum amount of $500,000 and integral multiples of $500,000 in excess of that amount from a Base Rate Loan to a Eurodollar Rate Loan; (ii) to convert all or any part of the outstanding Eurodollar Rate Loans in a minimum amount of $500,000 and integral multiples of $500,000 in excess of that amount from a Eurodollar Rate Loan to a Base Rate Loan on the expiration date of a Eurodollar Interest Period applicable thereto; or (iii) upon the expiration of any Eurodollar Interest Period applicable to a Eurodollar Rate Loan, to continue all or any portion of a Eurodollar Rate Loan in a minimum amount of $500,000 and integral multiples of $500,000 in excess of that amount as a Eurodollar Rate Loan, and the succeeding Eurodollar Interest Period(s) of such continued Loan shall commence on the expiration date of the Eurodollar Interest Period applicable thereto; provided, that, except pursuant to Paragraph 3(N), no outstanding Loan may be continued as, or be converted into, a Eurodollar Rate Loan when any Event of Default or Default has occurred and is continuing. In the event Borrower shall elect to convert or continue a Loan under this Paragraph 3(D), Borrower shall deliver to Agent (who shall promptly inform Lenders of the substance thereof) a written notice containing the original signature of an authorized officer or employee of Borrower ("Notice of Conversion or Continuation") (i) no later than 10:00 a.m. (Chicago time) at least two (2) Business Days in advance of the proposed conversion date in the case of a conversion to a Base Rate Loan, and (ii) no later than at least three (3) Business Days in advance of the proposed conversion or continuation date in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan. A Notice of Conversion or Continuation shall specify (a) the proposed conversion or continuation date (which shall be a Business Day), (b) the amount of the Loans to be converted or continued, (c) the nature of the proposed conversion or continuation, and (d) in the case of a conversion to, or 98 continuation of, a Eurodollar Rate Loan, the requested Eurodollar Interest Period. In lieu of delivering the above-described Notice of Conversion or Continuation, Borrower may give Agent (who shall promptly inform Lenders of the substance thereof) telephonic notice within the required time of any proposed conversion or continuation under this Paragraph 3(D) provided that such notice is confirmed in writing by delivery to Agent promptly (but in no event later than the proposed conversion or continuation date) of a Notice of Conversion or Continuation. In the event such written confirmation is not delivered to Agent on or before the proposed date of disbursement, neither Agent nor any Lender shall have any obligation to convert or continue such requested Loan. The officers and employees of Borrower authorized to request a borrowing on behalf of Borrower pursuant to Paragraph 2(B) shall also be authorized to request a conversion or continuation hereunder on behalf of Borrower and Agent and each Lender shall be entitled to rely conclusively on such officers' and employees' authority until Agent is notified to the contrary in writing. Neither Agent nor any Lender shall have any duty to verify the authenticity of the signature appearing on any written Notice of Conversion or Continuation and, with respect to an oral request therefor, neither Agent nor any Lender shall have any duty to verify the identity of any person representing himself or herself as one of the officers or employees authorized to make such request. Neither Agent nor any Lender shall incur any liability to Borrower in acting upon any such notice referred to above which Agent or such Lender believes in good faith to have been given by a duly authorized officer or employee authorized to act on behalf of Borrower or for otherwise acting in good faith under this Paragraph 3(D) and, upon conversion or continuation by Agent or such Lender in accordance with this Agreement pursuant to any such notice, Borrower shall have effected the conversion or continuation of Loans hereunder. Any Notice of Conversion or Continuation for conversion to, or continuation of, a Loan (or telephonic notice in lieu thereof) shall be irrevocable and Borrower shall be bound to convert or continue in accordance therewith. (E) Increased Costs; Legal Restrictions. In the event that (a) any law, treaty, rule, regulation, guideline or determination of a court or Governmental Authority or any change therein or interpretation or application thereof by a court or Governmental Authority, enacted or announced after the date hereof (including enactments of amendments to existing laws, treaties, rules, regulations or guidelines), or (b) compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority or 99 quasi-governmental authority, enacted or announced after the date hereof (including enactments of amendments to existing laws, treaties, rules, regulations or guidelines): (i) does or will subject any Lender (or its applicable lending office or any Affiliate of such Lender) to any tax, duty or other charge of any kind which such Lender reasonably determines to be applicable to this Agreement, the Loans or the Obligations, or changes the basis of taxation of payments to such Lender of principal, fees, interest, or any other amount payable hereunder (except for changes in the rate of taxes imposed on or measured by the overall net income of such Lender by the United States of America or any political subdivision or taxing authority thereof or therein, or taxes on or measured by the overall net income of any Affiliate of such Lender by any foreign country or subdivision thereof in which that Affiliate is doing business); or (ii) does or will impose, modify, or hold applicable any reserve, special deposit, compulsory loan, FDIC insurance, capital allocation or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, commitments made, or other credit extended by, or any other acquisition of funds by, any Lender or any applicable lending office of such Lender or any Affiliate of such Lender; or (iii) does or will impose on any Lender or any Affiliate of such Lender any other condition materially more burdensome in nature, extent or consequence than those in existence as of the Restatement Date; and the result of any of the foregoing is to increase the cost to such Lender or any Affiliate of such Lender of making, renewing or maintaining the Loans, or any commitment to make such Loans or, in the case of such Affiliate, issuing or maintaining any Canadian Letter of Credit; then, in any such case, Borrower shall promptly pay to Agent for the account of such Lender or such Affiliate, upon demand, such amount or amounts as may be necessary to compensate such Lender or such Affiliate, for any such additional cost incurred; provided, however, that Borrower shall have no obligations to pay such Lender for any of the foregoing increased costs to the extent they may relate to Base Rate Loans to the extent that the reserve and FDIC insurance requirements are reflected in such definition of "Base Rate" or Eurodollar Rate Loans to the extent that the reserve requirements are reflected in the definition of "Eurodollar Rate." Each Lender and each Affiliate of any Lender shall deliver to the Borrower a written statement of the losses or expenses sustained 100 or incurred, and any reasonable allocation made by such Lender or such Affiliate of such losses and expenses shall be conclusive, absent manifest error. (F) Amount of Eurodollar Rate Loans. Each Eurodollar Rate Loan shall be for a minimum amount of $500,000 and in integral multiples of $500,000 in excess of that amount. (G) Determination of Eurodollar Interest Period. By giving notice as set forth in Paragraphs 2(B) or 3(D), Borrower shall have the option, subject to the other provisions of this Paragraph 3, to specify whether the Eurodollar Interest Period commencing on any such date shall be a one-month, two-month, three-month, six-month or, if in the reasonable judgment of Agent determined to be available to Lenders, twelve-month period. The determination of Eurodollar Interest Periods shall be subject to the following provisions: (i) In the case of immediately successive Eurodollar Interest Periods, each successive Eurodollar Interest Period shall commence on the day on which the next preceding Eurodollar Interest Period expires. (ii) If any Eurodollar Interest Period would otherwise expire on a day which is not a Business Day, the Eurodollar Interest Period shall be extended to expire on the next succeeding Business Day; provided, that if any such Eurodollar Interest Period would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in that month, that Eurodollar Interest Period shall expire on the immediately preceding Business Day. (iii) The Borrower may not select a Eurodollar Interest Period for any Loan the last day of which shall occur later than the Termination Date. (iv) There shall be no more than five (5) Eurodollar Interest Periods in effect at any one time. (H) Substituted Rate of Borrowing. In the event that on any Eurodollar Interest Rate Determination Date the Required Lenders with respect to clause (i) hereof or any Lender with respect to clause (ii) hereof shall have determined (which determination shall be binding upon the parties hereto, absent manifest error) that: (i) by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market or affecting the position of such Lender or any Affiliate of such Lender in 101 such market, adequate and fair means do not exist for ascertaining the applicable interest rates by reference to which the Eurodollar Rate then being determined is to be fixed; or (ii) by reason of (a) any change after the Restatement Date in any applicable law or governmental rule, regulation or order (or any interpretation thereof and including the introduction of any new law or governmental rule, regulation or order) or (b) other circumstances affecting such Lender or any Affiliate of such Lender or the interbank Eurodollar market or the position of such Lender or any Affiliate of such Lender in such market (such as, for example, but not limited to official reserve requirements required by Regulation D of the Federal Reserve Act to the extent not given effect in the Eurodollar Rate), the Eurodollar Rate shall not represent the effective pricing to such Lender or such Affiliate for U.S. Dollar deposits of comparable amounts for the relevant period; then, and in any such event, such Lender shall promptly (and in any event as soon as possible after being notified of a borrowing, conversion or continuation) give notice (by telephone confirmed in writing) to Borrower of such determination. In each such event, Borrower shall pay to Agent for the account of such Lender, upon written demand thereof, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall reasonably determine) as shall be required to cause such Lender to receive interest with respect to its Eurodollar Rate Loans for the Eurodollar Interest Period then in effect and for the Eurodollar Interest Period following that Eurodollar Interest Rate Determination Date (such Interest Periods being each an "Affected Interest Period") at a per annum rate equal to the sum of one and one-eighth percent (1.125%) plus the effective pricing to such Lender for U.S. Dollar deposits to make or maintain its Eurodollar Rate Loans. A certificate as to additional amount or amounts owed such Lender, showing in reasonable detail the basis for the calculation thereof, submitted in good faith to Borrower by such Lender shall, absent manifest error, be presumptively correct and binding upon each of the parties hereto. (I) Required Termination and Prepayment. In the event that on any date any Lender shall have reasonably determined (which determination shall, absent manifest error, be final and conclusive and binding upon each of the parties hereto) that the making or continuation of its Eurodollar Rate Loans has become unlawful by compliance by such Lender in good faith with any law, governmental rule, regulation or order (whether or not having the 102 force of law and whether or not failure to comply therewith would be unlawful), then, and in any such event, such Lender shall promptly give notice (by telephone confirmed in writing) to Borrower of that determination. The obligation of such Lender to make or maintain its Eurodollar Rate Loans during any such period shall be terminated at the earlier of the termination of the Eurodollar Interest Period then in effect or when required by law and Borrower shall, no later than the termination of the Eurodollar Interest Period in effect at the time any such determination pursuant to this Paragraph 3(I) is made or, earlier, when required by law, repay Agent for the account of such Lender the Eurodollar Rate Loans of such Lender, together with all interest accrued thereon. (J) Option of Borrower. In lieu of paying any Lender such additional moneys as are required by Paragraph 3(H) or the prepayment required by Paragraph 3(I), Borrower may, by giving notice (by telephone confirmed promptly in writing) to Agent and such Lender, require such Lender to make the Eurodollar Rate Loan then being requested as a Base Rate Loan or to continue to maintain the outstanding Base Rate Loan then the subject of a Notice of Conversion or continuation as a Base Rate Loan or to convert the Eurodollar Rate Loans then outstanding that are so affected into Base Rate Loans at the end of the then current Eurodollar Interest Period (or at such earlier time as repayment is otherwise required) in the manner contemplated by Paragraph 3(D). (K) Compensation; Breakage Fees. In addition to such amounts as are required to be paid by Borrower pursuant to Paragraphs 3(A) and 3(E), Borrower shall compensate each Lender upon written request by such Lender (which request shall set forth in reasonable detail the basis for requesting such amounts), for all losses, expenses and liabilities, including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain Eurodollar Rate Loans to Borrower which such Lender may sustain (i) if for any reason a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Borrowing (including such Lender's failure to fund its initial Loans hereunder by reason of any Conditions Precedent having not been satisfied by the proposed date of disbursement described in the Notice of Borrowing pertaining to such initial Loans) or a Notice of Conversion or Continuation or in a telephonic request for borrowing or conversion or continuation (including such Lender's failure to fund, convert or continue a Loan by reason of Borrower's failure to deliver to Agent on or before the proposed date of disbursement, conversion or continuation, as the case may be, a written confirmation of such telephonic request for borrowing, conversion or continuation as 103 provided in Paragraphs 2(B) and 3(D), respectively) or a successive Eurodollar Interest Period does not commence after notice therefor is given pursuant to Paragraphs 2(B) or 3(D), (ii) if any prepayment of any Eurodollar Rate Loan occurs for any reason on a date which is not the last day of a Eurodollar Interest Period, (iii) as a consequence of any required conversion of a Eurodollar Rate Loan to a Base Rate Loan as a result of any the events indicated in Paragraph 3(I), and (iv) as a consequence of any other default by Borrower to repay Eurodollar Rate Loans when required by the terms of this Agreement. (L) Eurodollar Rate Taxes; Indemnification. Borrower agrees that: (i) Borrower will pay, prior to the date on which penalties attach thereto, all income, stamp and other taxes, levies, or costs and charges whatsoever hereafter imposed, assessed, levied or collected on or in respect of a Loan solely as a result of the interest rate being determined by reference to the Eurodollar Rate and/or the provisions of this Agreement relating to the Eurodollar Rate and/or the recording, registration, notarization or other formalization of any of the foregoing and/or any payments of principal, interest or other amounts made on or in respect of a Loan when the interest rate is determined by reference to the Eurodollar Rate (all such taxes, levies, costs and charges being herein collectively called "Eurodollar Rate Taxes"); provided that Eurodollar Rate Taxes shall not include taxes imposed on or measured by the overall net income of any Lender by the United States of America or any political subdivision or taxing authority thereof or therein, or taxes on or measured by the overall net income of any Affiliate of any Lender by any foreign country or subdivision thereof in which that Affiliate is doing business. Borrower shall also pay such additional amounts equal to increases in taxes payable by any Lender described in the foregoing proviso which increases are attributable to payments made by Borrower described in this sentence and in the immediately preceding sentence of this Paragraph 3(L)(i). Promptly after the date on which payment of any such Eurodollar Rate Tax is due pursuant to applicable law, the Borrower will, at the request of any Lender, furnish to such Lender evidence, in form and substance satisfactory to such Lender that Borrower has met its obligation under this Paragraph 3(L); and (ii) Borrower will indemnify each Lender against, and reimburse each Lender on demand for, any Eurodollar Rate Taxes, as reasonably determined such by each Lender. Each Lender shall 104 provide the Borrower with appropriate receipts for any payments or reimbursements made by Borrower pursuant to this clause (ii) of Paragraph 3(L). (M) Certain Indemnification. In the event that, as a result of any law, rule, regulation or order (or any interpretation thereof and including the introduction of any new law or governmental rule, regulation or order) that becomes effective after the Restatement Date, a determination is made by any Lender or any Affiliate of any Lender in its sole discretion or by any regulatory authority or entity that reserves must be maintained with any Federal Reserve Bank of the United States or any other regulatory authority or entity (domestic or foreign) having jurisdiction over or with respect to such Lender or such Affiliate in connection with any of the then outstanding Eurodollar Rate Loans (including any applicable reserve requirements against assets held by, or deposits in or for the account of, or advances by any Lender and/or such Affiliate and any applicable reserve requirements not given effect in any prior determination of the Eurodollar Rate), then Borrower agrees to indemnify such Lender and/or such Affiliate and to hold them harmless with respect to the cost of such Lender's and/or such Affiliate's obtaining and/or maintaining any such reserves. The foregoing shall not cover or be applicable to any reserves required to be maintained which are given effect in the determination of the Eurodollar Rate. (N) Eurodollar Rate Loans After Default. After the occurrence of and during the continuance of an Event of Default, Borrower may not elect to have a Loan be made or continued as, or converted to, a Eurodollar Rate Loan after the expiration of any Eurodollar Interest Period then in effect for that Loan. After the occurrence of and during the continuance of a Default, Borrower may not elect to have a Loan be made or continued as, or converted to, a Eurodollar Rate Loan after the expiration of any Eurodollar Interest Period in effect for that Loan, other than a Eurodollar Rate Loan having a Eurodollar Interest Period of one month. (O) Affiliates Not Obligated. No Affiliate of any Lender shall be deemed to be a party to this Agreement or shall have any liability or obligation under this Agreement. (P) Increased Capital. If either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) compliance by any Lender with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and such 105 Lender reasonably determines that the amount of such capital is increased by or based upon the existence of such Lender's obligations under this Agreement and other commitments of this type, then, upon demand by such Lender, Borrower shall immediately pay to Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of Lender's obligations under this Agreement. A certificate as to such amounts submitted to Borrower by such Lender, shall, in the absence of manifest error, be conclusive and binding for all purposes. 4. FEES AND CHARGES. (A) Non-Use Fees. Borrower shall pay to Agent for the account of each Lender pro rata according to their respective Percentages a non-use fee equal to the Applicable Non-Use Fee multiplied by the amount by which the Revolving Loan Maximum Commitment exceeds the sum of the average daily aggregate outstanding principal balance of the Revolving Loan plus the average daily aggregate undrawn face amount of any outstanding Letters of Credit for the period commencing on the Restatement Date and ending on the Termination Date, which shall be payable, in arrears, on each Quarterly Payment Date, and on the Termination Date. Such commitment fees shall be computed based upon a 360-day year and actual days elapsed. (B) Agent's Fees. Borrower shall pay to Agent an agent's fee of $50,000 per annum, payable quarterly in arrears on each Quarterly Payment Date. (C) Letter of Credit Fees. With respect to each Letter of Credit, Borrower shall pay to Agent for the account of each Lender a per annum fee in an amount equal to the Applicable L/C Fee multiplied by the undrawn face amount of such Letter of Credit; provided, however, that at all times during which the principal balance of the obligations bears interest at the post-default rate pursuant to Paragraph 3(C), Borrower shall pay Agent for the account of each Lender a per annum fee in an amount equal to three percent (3%) of the undrawn face amount of such Letter of Credit. Such fee shall be payable, in arrears on each Quarterly Payment Date for the period during which such Letter of Credit is issued or outstanding (or portion thereof). Such fee shall be computed based upon a 360-day year and the actual number of days of the Fiscal Quarter for which such fee is payable. In addition, with respect to each Letter of Credit Borrower shall pay to Agent such fees as are charged by Agent in connection with its issuance of such Letter of Credit, including its standard 106 fees for opening, amending and renewing letters of credit and all other fees associated with issuing or servicing letters of credit. (D) Unpaid Charges. If Borrower fails to pay to any Lender any interest, fees or other charges, or any part thereof, due under this Agreement promptly when due after passage of any applicable grace period the passage of which would give rise to an Event of Default, such Lender may (but shall not be required to) charge the same to Borrower's loan account with such Lender as part of the Obligations, payable on demand. 5. QUARTERLY ACCOUNTINGS BY AGENT. Agent will provide Borrower and each Lender, on a quarterly basis, with a statement, with reasonable detail, of advances, charges and payments made pursuant to this Agreement and the Revolving Note. Such account rendered by Agent shall, absent manifest error, be deemed binding and shall constitute an account statement unless Borrower, in good faith, notifies Agent in writing to the contrary within thirty (30) days after the date of each account rendered. 6. RESERVED. 7. RESERVED. 8. PROCEEDS, PAYMENTS AND APPLICATION. (A) Application and Posting Time. All payments received by Agent will be applied to the Obligations as follows: (i) all cash payments received by Agent, at Chicago, Illinois, including payments made by wire transfer or otherwise made by immediately available funds received by Agent in time for posting to the account of Lenders on the date received, will be credited to Borrower's loan account with each Lender immediately after receipt thereof by Agent; (ii) all cash payments received by Agent, at Chicago, Illinois, including payments made by wire transfer or otherwise made by immediately available funds received by Agent on any day after the cut-off time for posting to the account of Lenders on the date so received, will be credited to Borrower's loan account with each Lender on the next succeeding Business Day; and (iii) all payments in the form of checks and other instruments received by Agent, at Chicago, Illinois will be credited (conditional upon final collection), after allowing two (2) Business Days for collection, to Borrower's loan account with each Lender. For purposes of this Paragraph 8(A), the cut-off time for posting to the account of Lenders shall be 11:00 a.m. (Chicago time). 107 (B) Order of Application; Invalidated Payments. Subject to the application provisions contained in Paragraphs 2(D) and 2(G), at all times prior to the occurrence of an Event of Default, Lenders shall have the continuing and exclusive right to apply all payments to any portion of the Obligations which are due and payable at the time of such payment, and if no Obligations are then due and payable, Lenders shall have the continuing and exclusive right to apply any and all such payments to any portion of the Obligations. After the occurrence of an Event of Default, Lenders shall have the continuing and exclusive right to apply, reverse and reapply any and all payments to any portion of the Obligations. To the extent that Borrower makes a payment or payments to Lenders which payment(s) or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause then, to the extent of such payment received, the Obligations or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment had not been received by Lenders. (C) Sharing of Payments. Each Lender agrees that if it shall, by exercising any right of set-off, counterclaim or otherwise, obtain any payment or other recovery on account of any Loan or Letter of Credit (excluding payments or fees received by any Lender with respect to interest rate protection, currency exchange or similar agreement) in excess of its pro rata share (based on its Percentage) of all payments and other recoveries obtained by all Lenders on account of principal of and interest on the Loans or reimbursement or fees with respect to the Letters of Credit then held by them, the Lender receiving such proportionately greater payment shall purchase such participations in the Loans and Letters of Credit held by the other Lenders, and such other adjustments shall be made, as may be required so that any such excess payment or recovery shall be shared ratably among Lenders; provided, however, that nothing in this Paragraph 8(C) shall impair the right of any Lender to exercise any right of set off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of Borrower owing such Lender other than with respect to the Loans or Letters of Credit. 9. AGENT AS BORROWER'S ATTORNEY. Borrower hereby appoints Agent, or any other Person whom Agent may designate, as Borrower's attorney-in-fact, with power at all times on or before the Termination Date and at all times thereafter until such time as there shall exist no Obligations outstanding, to do all things necessary during the occurrence and 108 continuation of an Event of Default to carry out the terms and provisions of Section 20(B) of this Agreement (provided that unless a delay in the taking of such action may, in Agent's or Agent's counsel's opinion, jeopardize the repayment of the Obligations or portion thereof or materially adversely affect the business operations or prospects of Borrower, Agent shall notify Borrower at least five (5) Business Days prior to Agent's taking action under this sentence). Except as provided in the immediately succeeding sentence, Borrower ratifies and approves all acts of such attorney carried out in accordance with the foregoing. Neither Agent nor the attorney will be liable for any acts or omissions nor for any error of judgment or mistake of fact or law in connection with any of the foregoing, except for its acts of bad faith, willful misconduct or gross negligence. This power, being coupled with an interest, is irrevocable at all times on or before the Termination Date and at all times thereafter until such time as there shall exist no Obligations outstanding. 10. INSURANCE. Borrower shall, at all times on or before the Termination Date and at all times thereafter until such time as there shall exist no Obligations outstanding, at its expense, insure, and maintain insurance, on its tangible assets and real property against loss or damage by fire, flood and earthquake and for general liability, public liability, third party property damage and such other additional types of coverages customarily obtained by insureds in Borrower's industry. All such insurance shall be in such amounts, with such deductibles, under such policies and terms and issued by such insurers, as are customary for Persons engaged in the Borrower's industry. In the event Agent requests, pursuant to the immediately preceding sentence, insurance having terms, deductibles, coverage or insurers which are different than that which is then currently maintained by Borrower, then, provided that Borrower at all times maintains insurance at least as adequate as that which is then currently maintained by Borrower, Borrower shall obtain such requested insurance within thirty (30) days after such request. Borrower shall establish adequate reserves on its books, in amounts in accordance with GAAP, for all hazards and losses for which Borrower is self-insured, underinsured or uninsured. 11. REPORTING. (A) Quarterly Reports. As soon as available after the end of each Fiscal Quarter of DeVry, but in no event later than forty-five (45) days after the end of such Fiscal Quarter, Borrower shall provide Agent (with a copy for each Lender) with unaudited, consolidated and consolidating financial statements of 109 DeVry and its Consolidated Subsidiaries, for such Fiscal Quarter, including statements of earnings, statements of cash flows and balance sheets. All such financial statements shall be (i) prepared on a basis consistent with such statements prepared in prior periods (except by reason of changes in accounting treatment which are permitted by GAAP) and with the annual audited statements of DeVry delivered pursuant to Paragraph 11(B), (ii) prepared in accordance with GAAP (subject to normal year-end adjustments and without footnotes), (iii) accompanied by the financial statements for comparative periods of DeVry's previous fiscal year, and (iv) accompanied by a compliance certificate, substantially in the form of Exhibit C, appropriately certified and signed by DeVry's Chairman, President or Chief Financial Officer stating that such financial statements fairly present the consolidated financial condition of DeVry, no Default or Event of Default has occurred or exists, and that DeVry has complied with the financial covenants contained in Paragraph 16, setting forth the figures providing the basis for such statement with respect to such financial covenants. Borrower shall additionally deliver to Agent (with a copy for each Lender), together with a certification by Borrower's Chairman, President or Chief Financial Officer that the contents of such are fairly presented: (a) concurrently with Borrower's delivery thereof to the United States Department of Education, copies of Borrower's audit reports and default reports prepared pursuant to Title IV of the Higher Education Act of 1965; (b) within sixty (60) days after the end of each Semester ending after the Restatement Date, a statement disclosing the admission level for new students and total enrollment of Borrower's operations in the aggregate, by educational facility; and (c) within forty-five (45) days after the end of each Fiscal Quarter after the Restatement Date, statements of gross profit and loss for each of Borrower's educational facilities. (B) Annual Reports. Borrower shall provide Agent (with a copy for each Lender) with annual audited consolidated and unaudited consolidating financial statements of DeVry and its Consolidated Subsidiaries, including statements of earnings, statements of cash flows and balance sheets ("Financials"), as soon as available and, in any event, within one hundred and twenty (120) days after the end of each of DeVry's fiscal years, which Financials (i) shall be prepared in accordance with GAAP (except for any changes thereto), (ii) shall be accompanied by an opinion, which is unqualified as to DeVry's going concern, of Price Waterhouse, or such other certified public accountants chosen by DeVry acceptable to the Agent, that such Financials fairly present the financial position of the companies being reported upon at the end of such fiscal year and the results of their operations and changes in their financial position for such 110 year in conformity with GAAP consistently applied (except for changes in GAAP with which such accountants concur and which are disclosed in the notes to such Financials) and its examination of such Financials has been made in accordance with generally accepted auditing standards and included such tests of the accounting records and other auditing procedures as considered necessary in the circumstances, (iii) shall be delivered by such accountants to Agent at the address stated in Paragraph 22(B) concurrently with such accountants' delivery thereof to DeVry and (iv) shall be accompanied by a certificate of such accountants stating that, in making the examination necessary for the issuance of the opinion referred to in clause (ii) of this Paragraph 11(B), no knowledge was obtained of any Default or Event of Default (or in the opinion of such accountants, a Default or Event of Default has occurred and is continuing, and, if such is the case, a statement as to the nature thereof) and the independent review and opinion of such accountants of the computation of financial covenants contained in Paragraph 16 hereof; provided, however, if the information set forth in any financial statements of DeVry and its Consolidated Subsidiaries is not sufficient in the opinion of Agent and Lenders to determine Borrower's compliance with the covenants contained in this Agreement, Borrower shall provide additional information as and when requested by Agent on behalf of Lenders as shall be necessary to permit such determination. (C) Communication with Accountants; Other Financial Information. Borrower and DeVry hereby authorize: (i) Agent to communicate directly with their respective independent public accountants, provided that Agent shall promptly inform Borrower or DeVry of the substance thereof; and (ii) such independent public accountants, upon Agent's request, to provide to Agent copies of any financial statements, management reports and workpapers contained in their files with respect to Borrower, DeVry, the Consolidated Subsidiaries and their respective businesses and financial affairs. (D) Reports to SEC. Promptly upon the filing or making thereof, Borrower shall provide to Agent (with a copy for each Lender) copies of each filing and report made by Borrower, DeVry or the Subsidiaries with or to any securities exchange or the Securities and Exchange Commission. (E) Reports of Changes in Subsidiaries. From time to time, Borrower shall provide to Agent (with a copy for each Lender) a written report of any change in the identity of the Subsidiaries, promptly upon the occurrence of such change. (F) Notices Relating to Default. Forthwith upon learning of the occurrence of an Event of Default or a Default, Borrower 111 shall provide to Agent (with a copy for each Lender) written notice thereof, describing the same and the steps being taken by Borrower or DeVry with respect thereto. (G) Notice of Material Adverse Events. Forthwith upon learning of the occurrence of any change, event, action, condition or effect which individually or in the aggregate either (i) impairs the validity or enforceability of any of the Loan Documents, or (ii) materially and adversely affects the consolidated business, operations, licenses, prospects or financial condition of DeVry and its Subsidiaries, taken as a whole, or the ability of DeVry and its Subsidiaries to perform their respective obligations under any of the Loan Documents, Borrower shall provide to Agent (with a copy for each Lender) written notice thereof, describing the same and the steps being taken with respect thereto. (H) Other Reports. In addition to the other reports and statements described in this Paragraph 11, Borrower and DeVry shall provide Agent with such other financial and other reports and information as any Lender may from time to time reasonably request through Agent including any monthly reporting which the Agent may require from time to time. 12. WARRANTIES AND REPRESENTATIONS. Each of the Borrower and DeVry represents and warrants to Agent and Lenders that, as of the Restatement Date and such other dates as are provided below: (A) Corporate Existence. On the Restatement Date and, subject to the exceptions set forth in Paragraph 14(A) below, on each date hereafter on which Borrower requests Lenders to make a Loan or Agent to issue a Letter of Credit hereunder, each of Borrower, DeVry and each Subsidiary is a corporation duly organized and in good standing under the laws of the jurisdiction of its incorporation and each is duly qualified as a foreign corporation and in good standing in all states where the nature and extent of the business transacted by it or the ownership of its assets makes such qualification necessary, except for those jurisdictions in which the failure so to qualify would not have a material adverse effect on the Borrower's, DeVry's and each Subsidiary's financial condition, results of operations, business or prospects. (B) Corporate Authority. The execution and delivery by the Borrower of this Agreement and by Borrower, DeVry and each Subsidiary of the other Loan Documents to which Borrower, DeVry or such Subsidiaries are parties and the performance of the Borrower's obligations hereunder and their respective obligations 112 thereunder: (i) are within the Borrower's, DeVry's and such Subsidiaries' corporate powers; (ii) are duly authorized by the Borrower's, DeVry's and such Subsidiaries' respective Board of Directors and, if necessary, the Borrower's, DeVry's and such Subsidiaries' stockholders; (iii) are not in contravention of the terms of the Borrower's, DeVry's and such Subsidiaries' certificate of incorporation, by-laws or other organizational documents, or of any indenture, agreement or undertaking to which the Borrower, DeVry or any Subsidiary is a party or by which the Borrower, DeVry or any Subsidiary or any of their respective property is bound, the contravention of which would have a material adverse effect on Borrower's, DeVry's or such Subsidiaries' financial condition, results of operations, business or prospects; (iv) do not require any governmental consent, registration or approval which has not been previously obtained; (v) do not contravene any governmental restriction binding upon the Borrower, DeVry or any Subsidiary; and (vi) do not, except as contemplated herein, result in the imposition of any lien, charge, security interest or encumbrance upon any property of the Borrower, DeVry or any Subsidiary under any existing indenture, mortgage, deed of trust, loan or credit agreement or other material agreement or instrument to which the Borrower, DeVry or any Subsidiary is a party or by which it or any of its property may be bound or affected. (C) Binding Effect. On the Restatement Date and on each date hereafter on which Borrower requests Lenders to make a loan or Agent to issue a Letter of Credit hereunder, this Agreement and all of the other Loan Documents to which Borrower, DeVry or any Subsidiary is a party are the legal, valid and binding obligations of Borrower, DeVry and such Subsidiaries and are enforceable against Borrower, DeVry and such Subsidiaries in accordance with their respective terms, except as limited by applicable bankruptcy, reorganization, insolvency or similar laws affecting the enforceability of creditors' rights generally and by general equitable principles. (D) Financial Data. The historical consolidated financial statements, with respect to DeVry, heretofore furnished and to be furnished to Agent in accordance with Paragraph 11, are in accordance with the consolidated books and records of DeVry, fairly present the consolidated financial condition of DeVry at the dates thereof and the results of operations for the periods indicated (subject, in the case of unaudited interim financial statements, to normal year end adjustments), and have been prepared in conformity with GAAP consistently applied throughout the periods reported (except for changes therein as noted in the footnotes to such financial statements). 113 (E) Material Adverse Change. Since March 31, 1996, no change, event, action, condition or effect has occurred which individually or in the aggregate either (i) impairs the validity or enforceability of any of the Loan Documents, or (ii) materially and adversely affects the consolidated business, operations, licenses, prospects or financial condition of DeVry and its Subsidiaries, taken as a whole, or the ability of DeVry and its Subsidiaries to perform their respective obligations under any of the Loan Documents, (F) Tax Liabilities. As of the Restatement Date and on each date hereafter on which Borrower requests Lenders to make a Loan or Agent to issue a Letter of Credit hereunder, Borrower and DeVry have filed and caused each Subsidiary to file all federal, state and local tax reports and returns required by any law or regulation to be filed by it except for extensions duly obtained, and has either duly paid all taxes, duties and charges indicated due on the basis of such returns and reports, or will have made adequate provision for the payment thereof, and the assessment of any material amount of additional taxes in excess of those paid and reported are not reasonably expected. As of the Restatement Date and on each date hereafter on which Borrower requests Lenders to make a Loan or Agent to issue a Letter of Credit hereunder, the reserves for taxes reflected on the balance sheets of Borrower, DeVry or any Subsidiary submitted to Agent in accordance with the terms of Paragraph 11 are adequate in amount for the payment of all liabilities for all taxes (whether or not disputed) of such Person accrued through the date of such balance sheet. As of the Restatement Date, there are no material unresolved questions or claims concerning any tax liability of Borrower, DeVry or any Subsidiary except for DeVry's consolidated federal income tax returns for its taxable years ending June 30, 1988 through June 30, 1991 which are currently under examination by the Internal Revenue Service. (G) Loans; Guaranties. Except for the Obligations and as disclosed on Exhibit F, as of the Restatement Date, Borrower, DeVry and any Subsidiary have no Indebtedness for borrowed money and have not guaranteed the obligations of any other Person. (H) Margin Security. As of the Restatement Date and on each date hereafter on which Borrower requests Lenders to make a Loan or Agent to issue a Letter of Credit hereunder, neither Borrower, DeVry nor any Subsidiary owns any margin security and none of the loans advanced hereunder will be used for the purpose of purchasing or carrying any margin securities or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase any margin securities or for any other purpose not permitted by Regulations G, T, U or X of the Board of Governors of the Federal Reserve System. 114 (I) Subsidiaries. As of the Restatement Date, Exhibit G sets forth a true and correct list of all Subsidiaries and the Exempt Entities. As of the Restatement Date, the net worth of the Exempt Entities does not exceed $500,000. (J) Litigation and Proceedings. As of the Restatement Date and on each date hereafter on which Borrower requests Lenders to make a Loan or Agent to issue a Letter of Credit hereunder, except as disclosed on Exhibit H, no litigation, investigation or proceedings before any arbitrator or governmental tribunal, injunctions, writs, restraining orders, judgments or decrees are pending or outstanding against Borrower, DeVry or any Subsidiary nor is there pending or, to the best of Borrower's knowledge after diligent inquiry, threatened, any such action by or against Borrower, DeVry or any Subsidiary except such actions which are not, in the aggregate, materially adverse to Borrower's, DeVry's or any Subsidiary's financial condition, results of operations, prospects or business. (K) Other Agreements. As of the Restatement Date and on each date hereafter on which Borrower requests Lenders to make a Loan or Agent to issue a Letter of Credit hereunder, except as disclosed on Exhibit H, neither Borrower, DeVry nor any Subsidiary is in default under any contract, lease or commitment to which it is a party or by which it is bound which is material to Borrower's, DeVry's or any Subsidiary's operations, prospects or financial condition, which default either gives the other party to such contract, lease or commitment the right to terminate such contract, lease or commitment or a remedy which would have a material adverse effect on Borrower's, DeVry's or any Subsidiary's business operations, prospects or financial condition. As of the Restatement Date and on each date hereafter on which Borrower requests Lenders to make a Loan hereunder, neither Borrower, DeVry nor any Subsidiary knows of any dispute regarding any contract, lease or commitment which is materially adverse to the continued financial success and well-being of the Borrower, DeVry or any Subsidiary. (L) Employee Controversies. As of the Restatement Date and on each date hereafter on which Borrower requests Lenders to make a Loan or Agent to issue a Letter of Credit hereunder, there are no employee or labor controversies pending, other than employee grievances arising in the ordinary course of business which are, in the aggregate, materially adverse to the continued financial success and well-being of Borrower, DeVry or any Subsidiary. (M) Compliance with Laws and Regulations. The execution and delivery by Borrower of this Agreement and all of the other Loan Documents to which Borrower, DeVry or any Subsidiary is a party and the performance of the Borrower's, DeVry's or any 115 Subsidiary's obligations hereunder and thereunder is not in contravention of any law or laws, the contravention of which would materially adversely affect Borrower's, DeVry's or any Subsidiary's financial condition, results of operations, business or prospects. As of the Restatement Date and on each date hereafter on which Borrower requests Lenders to make a Loan or Agent to issue a Letter of Credit hereunder, Borrower, DeVry and each Subsidiary is in compliance with all laws, orders, regulations and ordinances of all federal, foreign, state and local governmental authorities relating to the business operations and the assets of Borrower, DeVry or such Subsidiary, except for laws, orders, regulations and ordinances, the violation of which would not have a material adverse effect on Borrower's, DeVry's or such Subsidiary's financial condition, prospects, results of operations or business. Without limiting the generality of the foregoing and notwithstanding any limitations contained therein as of the Restatement Date and on each date hereafter on which Borrower requests Lenders to make a Loan or Agent to issue a Letter of Credit hereunder, all of Borrower's, DeVry's and each Subsidiary's operations are in compliance with (i) all laws, regulations and standards, the violation of which would terminate or materially impair Borrower's, DeVry's or any Subsidiary's eligibility for participation, if applicable, in student financial assistance programs under Title IV of the Higher Education Act of 1965, 20 U.S.C., 1070 et seq., (ii) the federal Truth-in-Lending Act, 15 U.S.C., 1601 et seq., and all other consumer credit laws applicable to Borrower, DeVry or any Subsidiary in connection with the advancing of student loans, except for such laws and regulations the violation of which, in the aggregate, will not result in the assessment of penalties and damages claims against Borrower, DeVry or any Subsidiary in excess of the greater of (a) $5,000,000 or (b) 10% of Consolidated Tangible Net Worth, (iii) all statutory and regulatory requirements for authorization to provide post-secondary education in the jurisdictions in which its educational facilities are located, and (iv) if applicable, all requirements for continuing its accreditations from the North Central Association of Schools and Colleges. (N) Patents, Trademarks and Licenses. As of the Restatement Date and on each date hereafter on which Borrower requests Lenders to make a Loan or Agent or any Affiliate of any Lender to issue a Letter of Credit hereunder, Borrower, DeVry or any Subsidiary possesses adequate licenses, accreditations, patents, patent applications, copyrights, copyright applications, service marks, trademarks and trade names to conduct their respective businesses. As of the Restatement Date and on each date hereafter on which Borrower requests Lenders to make a Loan or Agent to issue a Letter of Credit hereunder, except as otherwise permitted by Paragraph 14(G), all such property and 116 interests in property are, and will continue to be, owned by Borrower, DeVry or any Subsidiary, as the case may be, free and clear of conflicting claims and uses of all other Persons. (O) ERISA. Except as set forth on Exhibit I, neither Borrower, DeVry, any Subsidiary nor any ERISA Affiliates maintain any Benefit Plan or contribute to any Multiemployer Plan. Borrower has given to Agent a summary plan description of each Plan of Borrower, DeVry, each Subsidiary or each ERISA Affiliate in existence as of the Restatement Date. Borrower has made available to Agent copies of all Plans of Borrower, DeVry, each Subsidiary and each ERISA Affiliate which are in existence as of the Restatement Date. Each Plan of Borrower, DeVry, each Subsidiary or each ERISA Affiliates, which is intended to be a qualified plan under section 401(a) of the Internal Revenue Code as currently in effect, has been determined by the Internal Revenue Service to be qualified under section 401(a) of the Internal Revenue Code, and the trust related thereto is exempt from federal income tax under section 501(a) of the Internal Revenue Code. Except as set forth on Exhibit I, neither Borrower, DeVry, any Subsidiary nor any ERISA Affiliates have breached any of the responsibilities, obligations or duties imposed on it by ERISA with respect to any of their respective Plans, which breach has given rise to, or which would in the future give rise to, any material obligation to pay money. Neither Borrower, DeVry, any Subsidiary nor any ERISA Affiliates nor any fiduciary of or any trustee to any of their respective Plans has engaged in a nonexempt "prohibited transaction" described in section 406 of ERISA or section 4975 of the Internal Revenue Code, which transaction have given rise to, or which would in the future give rise to any material obligation to pay money. (P) Use of Proceeds. All advances of the Revolving Loan on and after the Restatement Date have been and will be used by Borrower in accordance with all corporate laws applicable to Borrower (and in accordance with Borrower's Certificate of Incorporation and By-Laws) and in a manner which is consistent with all applicable laws and statutes, as in effect as of the respective dates of such uses. (Q) Fiscal Year. Each of Borrower and DeVry has established for all purposes, including accounting purposes, a fiscal year based upon a twelve-month period ending June 30. (R) Compliance with Environmental and Safety Laws. As of the Restatement Date and on each date hereafter on which Borrower requests Lenders to make a Loan or Agent to issue a Letter of Credit hereunder, (i) the operations of Borrower, DeVry, and each Subsidiary comply in all material respects with all applicable 117 federal, state or local environmental statutes and regulations; (ii) none of the operations of Borrower, DeVry or any Subsidiary are subject to any judicial or administrative proceedings alleging the violation of any federal, state or local environmental, health or safety statute or regulation; (iii) none of the operations of the Borrower, DeVry or any Subsidiary are the subject of federal, state or local investigation evaluating whether any remedial action is needed to respond to a release of any hazardous or toxic waste, substance or constituent, or any other substance into the environment, which remedial action may materially adversely affect Borrower's, DeVry's or any Subsidiary's business operations, prospects or financial condition; (iv) none of Borrower, DeVry or the Subsidiaries have filed any notice under any federal, state or local law indicating past or present treatment, storage or disposal of a hazardous waste or reporting a spill or release of a hazardous or toxic waste, substance or constituent, or any other substance into the environment; and (v) none of Borrower, DeVry and the Subsidiaries have contingent liabilities in connection with any release of any hazardous or toxic waste, substance or constituent or any other substance into the environment, which materially and adversely affects Borrower's business operations, prospects or financial condition. (S) Survival of Warranties. All representations and warranties of Borrower contained in this Agreement and of Borrower, DeVry and each Subsidiary in each of the other Loan Documents to which Borrower, DeVry or a Subsidiary is a party shall survive the execution and delivery of this Agreement or such other Loan Documents, unless otherwise provided herein or therein. 13. GENERAL AFFIRMATIVE COVENANTS. Each of Borrower and DeVry covenants that, at all times on or before the Termination Date and at all times thereafter until such time as there shall exist no Obligations outstanding: (A) Reimbursement of Loan Operating Costs. Borrower shall pay to Agent, for Agent's account, within thirty (30) days of Agent's demand therefor, any and all fees, costs and expenses which Agent pays to a bank or other similar institution arising out of or in connection with the forwarding by Lenders to Borrower, or any other Person on Borrower's behalf, of proceeds of Loans made by Lenders to Borrower pursuant to this Agreement. Notwithstanding the foregoing, Borrower shall not be obligated to reimburse Agent or any Lender for any fees, costs or expenses incurred or paid by Agent or any Lender in connection with (a) travel to and from any negotiations and other meetings with participants or assignees of the obligations the primary purpose 118 of which is to discuss or resolve Agent or any Lender's and such participants' or assignees' relative rights and duties with respect to one another or such parties' collective position with respect to issues relating to this Agreement or the other Loan Documents, (b) communications, written or otherwise, with participants and assignees of the Obligations, including, notices and reports relating to Borrower, or (c) wire transfer expenses to and from participants and assignees of the Obligations. (B) Notice of Claims. Borrower shall notify Agent in writing, promptly upon Borrower's learning thereof, of (i) any pending or threatened litigation affecting Borrower, DeVry or any Subsidiary, whether or not the claim is considered by Borrower to be covered by insurance, involving in the aggregate in excess of the greater of (a) $5,000,000 and (b) 10% of Consolidated Tangible Net Worth or (ii) the institution of any administrative or arbitration proceeding or investigation, or the receipt by Borrower, DeVry or any Subsidiary of any notice or order from any regulatory body or agency having jurisdiction over the Borrower, which litigation, proceeding, investigation, notice or order, might materially and adversely affect the operations, prospects, financial condition or business of Borrower, DeVry or any Subsidiary and involves in the aggregate in excess of 10% of Consolidated Tangible Net Worth. Without limiting the generality of the foregoing and notwithstanding any limitation therein, Borrower shall notify Agent (who shall promptly advise Lenders of the substance thereof), in writing, promptly upon Borrower's learning thereof, of (a) any action, decision or recommendation by a review committee or board of any educational accreditation association to discontinue any educational accreditation of Borrower, DeVry or any Subsidiary, (b) any notice from any state educational licensing board of a state in which Borrower, DeVry or any Subsidiary has a school of a denial to Borrower, DeVry or any Subsidiary, as the case may be, of operating authority in such state and (c) any proposed limitations, suspensions, fines, penalties, terminations or findings of noncompliance by any Governmental Authority or private guaranty agency with respect to the eligibility of Borrower, DeVry or any Subsidiary to participate in student financial assistance programs which, in the case of (c) only, would have a material adverse effect on the financial condition, results of operations or business of Borrower, DeVry or any Subsidiary. (C) Conduct of Business. Subject to the exceptions set forth in Paragraph 14(A) below, each of Borrower and DeVry shall maintain, and shall cause each of the Subsidiaries to maintain, its legal existence and shall limit its operations to, the same general line of business as that previously conducted by Borrower, DeVry and any Subsidiary. Borrower shall maintain, and cause DeVry and any Subsidiary to maintain, in full force and 119 effect (or shall renew prior to the termination or expiration of any of the following) all licenses, accreditations, consents, approvals, bonds, franchises, leases, patents, copyrights, contracts, trademarks, trade names and other rights, the absence of which would have a material and adverse effect on the financial condition or business operations or prospects of Borrower, DeVry or any Subsidiary. Without limiting the generality of the foregoing and notwithstanding any limitation contained therein, each of Borrower and DeVry shall maintain, and shall cause each of the Subsidiaries to maintain, in full force and effect, as applicable (i) its eligibility to participate in all student financial assistance programs in which and to the extent that it currently participates, except where the failure to maintain such eligibility to participate in which would not have a material adverse effect on the financial condition, results of operations or business of Borrower, DeVry or any Subsidiary, (ii) its accreditations from the North Central Association of Schools and Colleges, and (iii) its licenses to provide postsecondary education in all jurisdictions where it is so licensed, except where the failure to maintain such licenses would not have a material adverse effect on the financial condition, results of operations or business of Borrower, DeVry or any Subsidiary. Each of Borrower and DeVry shall comply, and cause each Subsidiary to comply, with all applicable laws and regulations of any federal, state or local governmental authority, except for such laws and regulations the violation of which would not have a material adverse effect on Borrower's, DeVry's or such Subsidiary's financial condition, results of operations or business. Without limiting the generality of the foregoing and notwithstanding any limitations contained therein, Borrower, DeVry and each Subsidiary shall comply with the Truth-in-Lending Act, 15 U.S.C., 1601 et seq., all regulations promulgated thereunder, and all other consumer credit laws applicable to it in connection with the advancing of student loans, except for such laws and regulations the violation of which, in the aggregate, may not result in the assessment of penalties and damages claims against Borrower, DeVry or the respective Subsidiary, as the case may be, in excess of the greater of (a) $5,000,000 or (b) 10% of Consolidated Tangible Net Worth. Notwithstanding anything in this Paragraph 13(C) or elsewhere in this Agreement to the contrary, in the event that Borrower, DeVry or the respective Subsidiary, as the case may be, shall have failed to comply with any covenant contained in this Paragraph 13(C), other than those stated in the first sentence hereof, it shall have thirty (30) days from the date of such failure to cure such failure before such failure shall constitute an Event of Default. (D) Claims and Taxes. Each of Borrower and DeVry shall pay or cause to be paid, and cause each Subsidiary to pay or cause to 120 be paid, all license fees, bonding premiums and related taxes and charges, and shall pay, or cause to be paid, all of its real and personal property taxes, assessments and charges and all of its franchise, income, unemployment, use, excise, old age benefit, withholding, sales and other taxes and other governmental charges assessed against it, or payable by it, at such times and in such manner as to prevent any penalty from accruing or any lien or charge (other than liens for taxes not yet delinquent) from attaching to its property for a period longer than five (5) Business Days, provided that the Borrower, DeVry or the respective Subsidiary, as the case may be, shall have the right to contest in good faith, by an appropriate proceeding promptly initiated and diligently conducted, the validity, amount or imposition of any such tax, assessment or charge, and upon such good faith contest to delay or refuse payment thereof, if (i) Borrower, DeVry or any Subsidiary establishes adequate reserves in accordance with GAAP to cover such contested taxes, assessments or charges, and (ii) such contest does not have a material adverse effect on the financial condition, results of operations, business or prospects of Borrower, DeVry or any Subsidiary or the ability of Borrower or DeVry to pay any of the Obligations. (E) ERISA. Each of Borrower and DeVry shall deliver, and cause each Subsidiary to deliver, to Agent promptly upon becoming aware of any "prohibited transaction," as such term is defined in section 4975 of the Internal Revenue Code, in connection with any Plan or any trust created thereunder, which has given rise to, or which would in the future give rise to, any material obligation of Borrower, DeVry any Subsidiary or any ERISA Affiliates to pay money, a written notice specifying the nature thereof, what action Borrower, DeVry, such Subsidiary or such ERISA Affiliate, as applicable, has taken, and, when known, any action taken or threatened by the Internal Revenue Service or the Pension Benefit Guaranty Corporation with respect thereto. (F) Environmental and Safety Laws. Each of Borrower and DeVry will conduct, and cause each Subsidiary to conduct, its business so as to comply in all material respects with all environmental, health and safety laws and regulations in all jurisdictions in which it is or may at any time be doing business, including the federal Resource Conservation and Recovery Act, the federal Comprehensive Environmental Response, Compensation and Liability Act, the federal Clean Water Act, the federal Clean Air Act and the federal Occupational Safety and Health Act; provided that nothing contained in this Paragraph 13(F) shall prevent Borrower, DeVry or any Subsidiary from contesting, in good faith by appropriate legal proceedings, any such law, regulation, interpretation thereof or application thereof, provided, further, that each of Borrower and DeVry shall 121 comply, and cause any Subsidiary to comply, with the order of any court or other governmental body of applicable jurisdiction relating to such laws unless Borrower, DeVry or any Subsidiary shall currently be prosecuting an appeal or proceedings for review and shall have secured a stay of enforcement or execution or other arrangement postponing enforcement or execution pending such appeal or proceedings for review. If Borrower, DeVry or any Subsidiary shall (a) receive notice that any violation of any federal, state or local environmental, health or safety law or regulation may have been committed or is about to be committed by Borrower, DeVry or any Subsidiary, (b) receive notice that any administrative or judicial complaint or order has been filed or is about to be filed against Borrower, DeVry or any Subsidiary alleging violations of any federal, state or local environmental law or regulation or requiring Borrower to take any action in connection with the release of any hazardous or toxic waste, substance or constituent, or any other substance into the environment, (c) receive any notice from a federal, state, or local governmental agency or private party alleging that Borrower, DeVry or any Subsidiary may be liable or responsible for costs associated with a response to or cleanup of a release of toxic waste, substance or constituent, or any other substance into the environment or any damages caused thereby, (d) receive any notice that Borrower, DeVry or any Subsidiary is subject to federal, state or local investigation evaluating whether any remedial action is needed to respond to the release of any hazardous or toxic waste, substance or constituent, or any other substance into the environment, or (e) receive any notice that any properties or assets of Borrower, DeVry, or any Subsidiary are subject to a lien in favor of any governmental entity for any liability under federal, state or local environmental laws or regulations or damages arising from or costs incurred by such governmental entity in response to a release of a hazardous or toxic waste, substance or constituent, or any other substance into the environment, then each of Borrower and DeVry shall, and shall cause such Subsidiary to, promptly provide Agent with a copy of such notice, and in no event later than within fifteen (15) days from receipt thereof by Borrower, DeVry or such Subsidiary. Within fifteen (15) days of Borrower's, DeVry's or any Subsidiary's having learned of the enactment or promulgation of any federal, state or local environmental law/or regulation pertaining specifically to Borrower, DeVry or any Subsidiary or to Borrower's, DeVry's or such Subsidiary's industry which may result in any material adverse change in the condition, financial or otherwise, of Borrower, DeVry or such Subsidiary, each of Borrower and DeVry shall, and shall cause such Subsidiary to, provide Agent with notice thereof. (G) Books, Records and Inspections. (a) Borrower and DeVry will maintain, and cause each Subsidiary to maintain, complete 122 and accurate books and records; (b) permit, and cause each Subsidiary to permit, access at reasonable times by the Agent, and each Lender to its books and records; (c) permit, and cause each Subsidiary to permit, the Agent, and each Lender to inspect at reasonable times its properties and operations; and (d) permit, and cause each Subsidiary to permit, the Agent, and each Lender to discuss its business, operations and financial condition with its officers. 14. GENERAL NEGATIVE COVENANTS. Each of Borrower and DeVry covenants that, at all times on or before the Termination Date and at all times thereafter until such time as there shall exist no Obligations outstanding: (A) Consolidations, Mergers and Asset Acquisitions. Borrower and DeVry shall not, and shall not permit any Subsidiary to, (i) liquidate or dissolve, consolidate with, or merge into or with, any other Person, or purchase or otherwise acquire all or substantially all of the assets of any Person (or of any division thereof) or (ii) make any other material change in business objectives, purposes, operations or prospects of the Borrower, DeVry or any Subsidiary which adversely affects the repayment of the Obligations; provided, that (a) DeVry and the Becker Subsidiaries may undertake the Becker Transaction, (b) following consummation of the Becker Transaction, The Becker CPA Review, Inc. and Becker CPA Review Course Ltd., a California limited partnership, may be liquidated and dissolved, (c) so long as both immediately before and after giving effect thereto, no Default or Event of Default shall exist, DeVry or any Subsidiary may make additional acquisitions of all or substantially all of the assets of any Person; provided, further, that the aggregate consideration paid for the acquisitions permitted by the foregoing clause (c) when added to the aggregate consideration paid for Investments made pursuant to Paragraph 14(B)(vi) shall not exceed $5,000,000 in total fair market value during the term of this Agreement, and (d) Special Purpose Subsidiaries may acquire assets of Borrower, DeVry and the Subsidiaries. For purposes of determining whether a Default or Event of Default exists with respect to the financial covenants set forth in Paragraph 16 (both immediately before and after giving effect to the foregoing actions) compliance with such covenants shall be calculated as of the end of the most recently ended Fiscal Quarter as if, without double-counting, all actions permitted by the foregoing clause (c) and all other actions undertaken in conformity with the provisos set forth in Paragraph 14(B)(vi), 14(C), 14(H) and 14(I) occurring since the end of most recently ended Fiscal Quarter had occurred as of the last day of such Fiscal Quarter. 123 (B) Investments. Borrower and DeVry shall not, and shall not permit any Subsidiary to, make or permit to exist any Investment in any Person; provided, however, that Borrower may make any of the following Investments at such times when no Default or Event of Default has occurred and to the extent such would not otherwise result in the occurrence of an Event of Default or Default and may permit to exist: (i) Investments in short-term obligations issued by, or guaranteed by, the United States Government and Investments in any tax-free municipal bonds, (ii) Investments in negotiable certificates of deposit, bankers' acceptances, eurodollar time deposits or money market securities issued, or money market funds offered, by any Lender, any Affiliate of any Lender, or by any bank or branch of a bank having an office in New York City or Chicago and having capital and surplus of at least $250,000,000 in the aggregate at all times, (iii) Investments in commercial paper issued by any Lender or in commercial paper rated Pl or Al by Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively, (iv) Investments existing as of the Restatement Date in amounts and in such entities which are described on Exhibit J, (v) additional Investments by Borrower in DeVry Canada or any Special Purpose Subsidiary and additional Investments by DeVry in Subsidiaries which are Subsidiaries on the Restatement Date, (vi) so long as both immediately before and after giving effect thereto, no Default or Event of Default shall exist, Investments by DeVry in Subsidiaries which become Subsidiaries after the Restatement Date, provided, that the aggregate consideration paid for such Investments when added to the aggregate consideration paid for any acquisitions made pursuant to Paragraph 14(A)(c) shall not exceed $5,000,000 in total fair market value during the term of this Agreement, (vii) additional Investments by DeVry in an aggregate amount not to exceed $2,000,000 at any one time outstanding, (viii) loans and advances permitted by Paragraph 14(C) below; and (ix) Investments in the Exempt Entities in an aggregate amount at any one time outstanding of not greater than $1,000,000; it being understood that any Investment made pursuant to any of clauses (i) through (iii) of this Paragraph 14(B) shall continue to be permitted pursuant to such clause throughout the term of such Investment irrespective of whether such Investment continues to meet the requirements of such clause throughout its term, but only if the term of such Investment expires within one (1) year from the date such Investment fails to meet such requirements. For purposes of determining whether a Default or Event of Default exists with respect to the financial covenants set forth in Paragraph 16 (both immediately before and after giving effect to the foregoing actions) compliance with such covenants shall be calculated as of the end of the most recently ended Fiscal Quarter as if, without double-counting, all such actions and all other actions undertaken in conformity with the provisos set forth in Paragraphs 14(A)(c), 14(C), 14(H) and 14(I) 124 occurring since the end of most recently ended Fiscal Quarter had occurred as of the last day of such Fiscal Quarter. (C) Distributions and Loans. Except for loans set forth on Exhibit J hereto, Borrower and DeVry shall not, and shall not permit any Subsidiary to, directly or indirectly, declare, pay or make any dividend or distribution (in cash, property or obligations) on any shares of any class of capital stock (now or hereafter outstanding) of Borrower, DeVry or any Subsidiary or on any warrants, options or other rights with respect to any shares of any class of capital stock (now or hereafter outstanding) of Borrower, DeVry or any Subsidiary (other than dividends or distributions payable in its common stock or warrants to purchase its common stock or splitups or reclassifications of its stock into additional or other shares of its common stock) or apply, or permit any Subsidiary to apply directly or indirectly, any funds, property or assets to the redemption, retirement purchase or other acquisition of any shares of any class of capital stock (now or hereafter outstanding) of Borrower, any Subsidiary or any option, warrant or other right to acquire shares of capital stock of Borrower, any Subsidiary, or make, or permit any Subsidiary to make, any loans, advances or other extensions of credit to any Person; provided, that so long as both immediately before and after giving effect thereto no Default or Event of Default shall exist, (i) Borrower and DeVry may, and may permit any Subsidiary to, directly or indirectly declare or pay cash dividends upon any of Borrower's, DeVry's or any Subsidiary's stock, (ii) Borrower may make loans to DeVry and any Special Purpose Subsidiary, and DeVry may make loans to the Subsidiaries, (iii) Borrower, DeVry or the Subsidiaries (other than Special Purpose Subsidiaries) may make loans to their respective officers or employees, or pay any management or similar fees, and (iv) Borrower, DeVry or the Subsidiaries may redeem, retire, purchase or otherwise acquire, directly or indirectly, any of Borrower's, DeVry's or any Subsidiary's capital stock or any warrants therefor; provided, further, that (i) Borrower and DeVry shall not and shall not permit DeVry or any Subsidiary to make cash payments of director's fees in excess of $500,000, in the aggregate, during any fiscal year and (ii) Borrower shall not make cash dividends or make loans in an aggregate amount (for all such loans and dividends, collectively) in excess of $1,000,000 during the term of this Agreement to DeVry to fund, directly or indirectly, the costs, expenses and indemnities in connection with any secondary offerings of DeVry's capital stock. For purposes of determining whether a Default or Event of Default exists with respect to the financial covenants set forth in Paragraph 16 (both immediately prior and after giving effect to the foregoing actions) compliance with such covenants shall be calculated as of the end of the most recently ended Fiscal Quarter as if, without double- counting, all such actions and all other actions undertaken in 125 conformity with the provisos set forth in Paragraphs 14(A)(c), 14(B)(vi), 14(H) and 14(I) occurring since the end of most recently ended Fiscal Quarter had occurred as of the last day of such Fiscal Quarter. (D) Transactions With Affiliates. Borrower and DeVry shall not enter into, or be a party to any transaction with any of their respective Affiliates or stockholders, except in the ordinary course of business and pursuant to the reasonable requirements of their respective businesses and upon fair and reasonable terms no less favorable to Borrower or DeVry, as the case may be, than would be obtained in a comparable arm's length transaction with a Person which is not an Affiliate or stockholder. Without limiting the provisions of the immediately preceding sentence, Borrower and DeVry shall not, and not permit any Subsidiary, to make any loans or advances or other transfers to its Affiliates. Nothing contained in this Paragraph 14(D) shall be deemed to prohibit: (i) transactions expressly permitted by Paragraph 14(B) or 14(C); (ii) transactions consummated prior to the Restatement Date or pursuant to agreements in existence at the Restatement Date; (iii) payments to officers and directors pursuant to indemnities contained in Borrower's, DeVry's or any Subsidiary's certificate of incorporation, by-laws or other organizational documents or any indemnity agreement to which Borrower, Devry or any Subsidiary is a party. (E) Asset Disposition, etc. Borrower and DeVry shall not, and not permit any Subsidiary to, sell, assign, lease, transfer, contribute, convey or otherwise dispose of, or grant options, warrants or other rights with respect to, any of its assets to any Person, except for: (i) any sale, assignment, transfer, lease, contribution, conveyance or other disposition made in the ordinary course of its business; or (ii) in the case of Borrower, any sale, assignment, transfer, lease, contribution, conveyance or other disposition made to a Special Purpose Subsidiary; or (iii) in the case of DeVry or any Subsidiary (other than Borrower), any sale assignment, transfer, lease, contribution, conveyance or other disposition made to a Subsidiary which, if not Borrower, shall have duly executed and delivered to the Agent for the benefit of the Lenders a Guaranty; or (iv) any licensing of intellectual property of DeVry or any Subsidiary made pursuant to a licensing or royalty agreement; 126 provided, that: (a) if such licensing is to any Person other than DeVry or its Subsidiaries it shall be made for fair consideration; and (b) after giving effect to such licensing the Borrower, DeVry and each Subsidiary shall be in compliance with the provisions of Paragraph 13(c) above. (F) Conditional Sales. Borrower shall not make a sale of any of its assets to any customer on a bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment, or any other repurchase or return basis nor shall Borrower provide any services subject to rebate or return of any consideration received by Borrower, except as otherwise required by law or as is otherwise customarily provided by Borrower. (G) Encumbrances. Except as set forth on Exhibit K, Borrower and DeVry will not, and shall not permit any Subsidiary to, create, incur, assume or suffer to exist any security interest, mortgage, pledge, lien or other encumbrance of any nature whatsoever on any of its assets, other than: (i) liens securing the payment of taxes, either not yet delinquent or the validity of which is being contested in good faith in accordance with the provisions of Paragraph 13(D); (ii) deposits under workmen's compensation, unemployment insurance, social security and other similar laws, or to secure the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure indemnity, performance or other similar bonds for the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure statutory obligations or surety or appeal bonds, or to secure indemnity, performance or other similar bonds in the ordinary course of business; (iii) liens which arise by operation of law; (iv) zoning restrictions, easements, licenses, covenants and other restrictions affecting the use of the real estate or interests therein of Borrower or its Subsidiaries which do not have a materially adverse effect on Borrower's or its Subsidiaries' business operations, prospects or financial condition or the value of the real estate or interests therein of Borrower or its Subsidiaries; and (v) purchase money liens and security interests granted in connection with the purchase of equipment or real estate to secure purchase money Indebtedness permitted under Paragraph 14(H). (H) Indebtedness. Borrower and DeVry shall not, and shall not permit any Subsidiary to, incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any indebtedness for borrowed money or for the deferred purchase price for the acquisition of property; provided, that so long as both immediately prior and after giving effect thereto no Default or Event of Default shall exist, Borrower may, and may permit DeVry or any Subsidiary (other than a Special Purpose Subsidiary) 127 to, incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any indebtedness for borrowed money or for the deferred purchase price for the acquisition of property, except Indebtedness which by its terms is structurally or contractually senior in right of payment, remedial rights or otherwise to the Obligations; provided, further, that for purposes of determining whether a Default or Event of Default exists with respect to the financial covenants set forth in Paragraph 16 (both immediately prior and after giving effect to the foregoing actions) compliance with such covenants shall be calculated as of the end of the most recently ended Fiscal Quarter as if, without double-counting, all such actions and all other actions undertaken in conformity with the provisos set forth in Paragraphs 14(A)(c), 14(B)(vi), 14(C) and 14(I) occurring since the end of most recently ended Fiscal Quarter had occurred as of the last day of such Fiscal Quarter. (I) Guarantees. Borrower and DeVry shall not, and shall not permit any Subsidiary to, guaranty, endorse or otherwise in any way become or be responsible for obligations of any other Person; provided, that so long as both immediately prior and after giving effect thereto no Default or Event of Default shall exist, Borrower and DeVry may and may permit any Subsidiary (other than a Special Purpose Subsidiary) to, guarantee, endorse or otherwise in any way become or be responsible for obligations of any other Person; provided, that for purposes of determining whether a Default or Event of Default exists with respect to the financial covenants set forth in Paragraph 16 (both immediately prior and after giving effect to the foregoing actions) compliance with such covenants shall be calculated as of the end of the most recently ended Fiscal Quarter as if, without double- counting, all such actions and all other actions undertaken in conformity with the provisos set forth in Paragraphs 14(A)(c), 14(B)(vi), 14(C) and 14(H) occurring since the end of most recently ended Fiscal Quarter had occurred as of the last day of such Fiscal Quarter. (J) Amendment of Certificate of Incorporation or By-Laws. Provided that Borrower furnishes to Agent a copy of such amendment, certified by the Secretary of State of Delaware, within ten (10) days after the date such amendment is filed with such Secretary of State, Borrower may amend its Certificate of Incorporation so long as such amendment does not have a materially adverse effect on Borrower's, DeVry's or any Subsidiary's operations, prospects or financial condition. (K) ERISA. Borrower shall not, and shall not permit DeVry nor any of the Subsidiaries nor any of their respective ERISA Affiliates to engage in any transaction in connection with which Borrower or any Subsidiary or any of their respective ERISA 128 Affiliates could be subject to either a material civil penalty assessed pursuant to section 502(i) of ERISA or material tax imposed by section 4975 of the Internal Revenue Code. (L) Transfer of DeVry Canada Stock. Borrower shall not sell, transfer or otherwise dispose of the outstanding capital stock of DeVry Canada. DeVry shall not sell, transfer or otherwise dispose of the outstanding capital stock of the Becker Subsidiaries. 15. RESERVED. 16. FINANCIAL COVENANTS. (A) DeVry covenants that it shall, at all times after the Restatement Date and so long as any of the Obligations are outstanding: (i) Maintain a Consolidated Tangible Net Worth for each Fiscal Quarter commencing with the Fiscal Quarter ending June 30, 1996 equal to (a) $5,000,000 plus (b) an amount equal to the sum of seventy-five percent (75%) of DeVry's Consolidated Net Income (without reduction for any Fiscal Quarter where the Consolidated Net Income is negative) for each of the Fiscal Quarters subsequent to June 30, 1996; (ii) Maintain a Fixed Charge Coverage Ratio for the four consecutive Fiscal Quarter period ending June 30, 1996 and for each succeeding four consecutive Fiscal Quarter period ending thereafter which equals or exceeds 1.8:1; provided, that each component of the definition of Fixed Charge Coverage Ratio shall be calculated over the then applicable four consecutive Fiscal Quarter period; and (iii) Maintain a Debt Coverage Ratio for each Fiscal Quarter ending during the period set forth below of not greater than the ratio set forth below opposite such Fiscal Quarter: Fiscal Quarters ending between Ratio June 30, 1996 and June 29, 1997 3.50:1 June 30, 1997 and June 29, 1998 3.25:1 June 30, 1998 and the Termination Date 3.00:1 129 (B) DeVry covenants that, at all times after the Restatement Date and for so long as any of the Obligations are outstanding, DeVry shall not, and shall not permit its Subsidiaries to, make Capital Expenditures in an aggregate amount, on a consolidated basis, in excess of $25,000,000 in any fiscal year of DeVry. 17. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT (A) The effectiveness of this Agreement is expressly conditioned upon the fulfillment of each of the following conditions precedent ("Conditions Precedent") in a manner reasonably satisfactory to Agent: (i) No Default or Event of Default shall exist as of the Restatement Date; (ii) Borrower shall have delivered or Agent shall have otherwise obtained: (a) a Revolving Note in the form attached hereto as Exhibit A; (b) a Guaranty duly executed by DeVry and each Subsidiary (other than DeVry Canada); (c) a copy of the current Certificate of Incorporation of Borrower, DeVry and of each Subsidiary (other than DeVry Canada), certified by the Secretary of State of its jurisdiction of organization; (d) certificate of good standing for the Borrower, DeVry and each Subsidiary (other than DeVry Canada) from the Secretary of State of Delaware and from each other state where the nature and extent of the business transacted by it or the ownership of its assets makes such qualification necessary, except for those jurisdictions in which the failure so to qualify would not have a material adverse effect on the Borrower's, DeVry's or the respective Subsidiary's financial condition, results of operations, business or prospects; (e) the opinions of Mayer, Brown & Platt, counsel to Borrower, DeVry and each Subsidiary (other than DeVry Canada), and of Borrower's, DeVry's and each Subsidiary's (other than DeVry Canada) general counsel, dated the Restatement Date, substantially in the form of Exhibit L; 130 (f) the certificate of the Chairman and Chief operating officer of Borrower dated the date hereof, certifying to the best of their knowledge after diligent inquiry (A) to the truth and accuracy, as of the Restatement Date, of the representations and warranties of Borrower contained in this Agreement and (B) that no Default or Event of Default shall exist as of the Restatement Date; (g) the Certificates of each of the Secretaries of Borrower, DeVry and each Subsidiary (other than DeVry Canada) certifying as to (1) the accuracy and the due adoption of its Board of Directors' resolutions authorizing the Loan Documents, (2) the names, incumbency and signatures of its officers and (3) the accuracy and currency of a copy of its By-Laws; and (h) such other documents as may be reasonably required by Agent. (B) RESERVED. (C) Each advance of the Revolving Loan and issuance of any Letter of Credit after the Restatement Date is expressly conditioned upon the fulfillment of the following conditions precedent in a manner reasonably satisfactory to Agent: (i) No Default or Event of Default shall exist as of the date of such advance or issuance of such Letter of Credit, as the case may be; and (ii) Borrower shall have delivered to Agent a Notice of Borrowing with respect to such advance or a written notice pursuant to Paragraph 2(B) with respect to such Letter of Credit, as the case may be. 18. TERMINATION, ACCELERATION AND DEMAND. (A) Term. This Agreement shall terminate on August 1, 1999 ("Termination Date"), subject to the terms and provisions of Paragraph 22(E) and of any other provisions of this Agreement or any other Loan Document which specifically provide for the continuation of obligations, duties, representations and warranties beyond such termination. Upon the Termination Date, all of Borrower's Obligations to Agent and each Lender, whether or not incurred under this Agreement, or any amendment or supplement thereto, under any Revolving Note, any other Loan Document or otherwise, shall become immediately due and payable without notice or demand. 131 (B) Repayment and Acceleration of Loans. That portion of the Obligations evidenced by the Revolving Note shall be payable in accordance with the terms set forth in such note, respectively, unless and until there shall exist an Event of Default under this Agreement or this Agreement shall be terminated, in which case, such Obligations shall become immediately due and payable pursuant to Paragraphs 18(A) or 19, respectively. (C) Repayment and Acceleration of Interest and Fees. That portion of the Obligations constituting interest and fees shall be payable in accordance with the terms set forth in Paragraphs 3 and 4, respectively, unless and until there shall exist an Event of Default under this Agreement or this Agreement shall be terminated, in which case such obligations shall become immediately due and payable pursuant to Paragraph 18(A) or 19, respectively. (D) Certain Obligations Payable on Demand; Waivers. All obligations, other than those referred to in Paragraphs 18(B) and (C) above, and each portion thereof, shall be payable by Borrower on demand at Agent's address set forth in Paragraph 22(B), unless and until there shall exist an Event of Default or this Agreement shall be terminated, in which case such obligations shall become immediately due and payable pursuant to Paragraph 18(A) or 19, respectively. With respect to all Obligations, Borrower waives to the fullest extent permitted by law presentment and protest of any instrument and notice thereof, notice of default and all other notices to which Borrower might otherwise be entitled by operation of law and recourse to security will not be required at any time. 19. EVENTS OF DEFAULT. Each of the following occurrences shall constitute an "Event of Default" under this Agreement: (A) Borrower shall fail to pay, when due, any of the principal portion of the Obligations or, within five (5) days of becoming due, any of the interest portion fees or other charges constituting part of the Obligations or, within ten (10) days of becoming due, any other Obligations; or (B) Borrower, DeVry or any Subsidiary shall commit, or there shall arise or exist, any material breach of any covenant of this Agreement or any of the other Loan Documents, which breach (other than a breach of Paragraph 14(A) or 14(L) which shall constitute an immediate Event of Default) continues uncured for thirty (30) days after the earlier of (i) actual knowledge thereof by Borrower, DeVry or any Subsidiary, as the case may be, 132 or (ii) written notice thereof has been given by Agent or any Lender to Borrower; or (C) Any representation or warranty made by Borrower, DeVry or any Subsidiary in this Agreement or any of the other Loan Documents or in any certificate, document or financial or other statement furnished at any time by Borrower, DeVry or any Subsidiary, as the case may be, in writing pursuant hereto or thereto, shall prove to have been untrue or misleading in any material respect as of the date when made; or (D) Borrower, DeVry or any guarantor of the Obligations shall (i) default in any payment of principal or interest on any of its indebtedness (excluding the Obligations), or in the payment of any written contingent obligation in respect of the indebtedness or obligations of any other Person when due (after giving effect to any applicable grace period), whether by acceleration or otherwise, and the aggregate principal amount of such indebtedness or contingent obligation exceeds $2,500,000, the grace period, if any, provided in the instrument or agreement under which such indebtedness or contingent obligation was created has expired and such default entitles the holder of such indebtedness or contingent obligation to accelerate payment of such indebtedness or contingent obligation, or (ii) default in the observance or performance of any other agreement or condition relating to any such indebtedness or contingent obligation or contained in any instrument or agreement evidencing, securing or relating to such indebtedness or contingent obligation, and the grace period, if any, provided in such agreement, or instrument has expired and such default entitles the holder of such indebtedness or contingent obligation to accelerate payment of such indebtedness or contingent obligation; or (E) Borrower, DeVry or any Subsidiary shall make an assignment for the benefit of creditors, call a meeting of its creditors for the recomposition or readjustment of debts, or commence any case, proceeding or other action (i) under any existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts; or (ii) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets; or (iii) there shall be commenced involuntarily against Borrower, DeVry or any Subsidiary any such case, proceeding or other action and such case, proceeding or other action is not dismissed before the earlier of thirty (30) days from the commencement of such action or the entering of an 133 order of relief for such action; or (iv) there shall be commenced against Borrower, DeVry or any Subsidiary any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets and such case, proceeding or other action is not dismissed before the earlier of thirty (30) days from the commencement thereof or the entry of an order of relief for such action; or (v) Borrower, DeVry or any Subsidiary shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth above in this Paragraph 19(E); or (vi) Borrower, DeVry or any Subsidiary shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (F) Any of the acts or events described in Paragraph 19(G) shall be commenced by or against, or occur with respect to, DeVry Canada or any guarantor of the Obligations which has generated annual revenues in excess of $4,000,000 in its most recently ended fiscal year; or (G) One or more judgments or decrees shall be entered against Borrower, DeVry on any of their respective property or assets, the portion of liability for which is not covered by insurance and in the aggregate exceeds $2,500,000, and all such judgments or decrees shall not have been vacated, satisfied, discharged or stayed or bonded pending appeal within sixty (60) days from the entry thereof; or (H) DeVry or any other guarantor of the Obligations shall fail in any material respect to perform or observe any term, covenant or agreement in any Guaranty; or any Guaranty is for any reason partially (including with respect to future advances) or wholly revoked or invalidated or otherwise ceases to be in full force and effect, or DeVry or any other such guarantor or any other Person contests in any manner the validity or enforceability thereof or denies that it has any further liability or obligation thereunder; or (I) (i) Dennis J. Keller and Ronald L. Taylor (either individually or, upon death or disability, by their respective estates, personal representatives or heirs) shall cease to collectively own and control (on a fully-diluted basis and free from any voting trusts or similar arrangements which restrict their ability to vote) more than ten percent (10%) of the issued and outstanding capital voting stock of DeVry, or (ii) DeVry shall cease to own directly or indirectly all of the issued and outstanding capital stock of Borrower and of the Becker Subsidiaries; or 134 (J) Dennis J. Keller or Ronald L. Taylor shall at any time for any reason other than death or disability, cease to serve as senior officers of Borrower or shall cease to perform the duties presently performed by them; or (K) The U.S. Department of Education shall have, pursuant to Subpart G of 34 C.F.R., Part 668, regarding Borrower's eligibility to participate in federal student financial assistance programs, notified Borrower of any suspension or termination affecting such eligibility, the ineligibility to participate in which would have a material adverse effect on Borrower's financial condition, results of operations or business, and such notification shall not have been withdrawn, suspended or otherwise terminated within thirty (30) days from such notification; or (L) The default rate on Stafford loans, Perkins loans, or the aggregate of all student loans made by Borrower to students at Borrower's educational facilities in the aggregate shall exceed twenty-five percent (25%) of the principal of all such loans which have reached their repayment period. Upon the occurrence of any Event of Default described above, Agent may, and at the direction of the Required Lenders shall, (i) by notice to Borrower, declare the obligations to be due and payable forthwith, whereupon the same immediately become due and payable; provided, however, that, upon the occurrence of an Event of Default described in Paragraph 19(E), all obligations shall automatically become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by Borrower to the fullest extent permitted by law, (ii) terminate the Revolving Loan Maximum Commitment or (iii) all Letters of Credit shall be deemed drawn and shall be cash collateralized in accordance with Paragraphs 2(F) and 20(B). 20. LENDER'S RIGHTS AND REMEDIES. (A) Equitable Relief. Borrower recognizes that in the event Borrower fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy of law may prove to be inadequate relief to Agent; therefore, Borrower agrees that Agent, if Agent so requests, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. (B) Cash Collateral for Letters of Credit. Upon the occurrence of an Event of Default under Paragraph 19(E), upon the request of Agent at any time after the occurrence of any other Event of Default or upon termination of the Revolving Maximum 135 Loan Commitment, Borrower shall immediately deliver to Agent, for the benefit of each issuer of a Letter of Credit then outstanding, as cash collateral for Borrower's reimbursement obligations to such issuers, cash in an amount equal to the then undrawn face amount of such Letters of Credit plus the then projected amount of all fees associated therewith for the respective effective periods of such Letters of Credit calculated on such undrawn face amount. Such cash collateral shall be granted to Agent subject to agreements and instruments executed by Borrower and in form and substance acceptable to Agent and such issuers. 21. AGENT (A) Actions; Indemnification. Each Lender authorizes Agent to act on behalf of such Lender under this Agreement and any other Loan Document and, in the absence of other written instructions from Required Lenders received from time to time by Agent, to exercise such powers hereunder and thereunder as are specifically delegated to or required of Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Each Lender agrees (which agreement shall survive any termination of this Agreement) to indemnify Agent, pro rata according to such Lender's respective Percentage, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against Agent in any way relating to or arising out of this Agreement and any other Loan Document, including the reimbursement of Agent for all reasonable out-of-pocket expenses (including reasonable attorneys' fees) incurred by Agent hereunder or in connection herewith or in enforcing the Obligations of Borrower or any Person under this Agreement or any other Loan Document, in all cases as to which Agent is not reimbursed by Borrower, including the failure of Borrower to reimburse Agent for any Letter of Credit; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from Agent's gross negligence or wilful misconduct. Agent shall not be required to take any action hereunder or under any other Loan Document, or to prosecute or defend any suit in respect of this Agreement or any other Loan Document, unless it is indemnified to its satisfaction by Lenders against loss, costs, liability and expense. If any indemnity in favor of Agent shall become impaired, Agent may call for additional indemnity and cease to do the acts indemnified against until such additional indemnity is given. 136 (B) Funding Reliance, etc. Unless Agent shall have been notified by telephone, confirmed in writing, by any Lender by 12:00 noon (Chicago time) on the day prior to a proposed date of disbursement of a proposed borrowing that such Lender will not make available the amount which would constitute its Percentage of such borrowing on the date specified therefor, Agent may assume that such Lender has made such amount available to Agent and, in reliance upon such assumption, make available to Borrower a corresponding amount. If such amount is made available by such Lender to Agent on a date after the date of such borrowing, such Lender shall pay to Agent on demand interest on such amount at the Federal Funds Effective Rate for the number of days from the date of such borrowing to the date on which such amount becomes immediately available to Agent, together with such other compensatory amounts as may be required to be paid by such Lender to Agent pursuant to the Rules for Interbank Compensation of the Council on International Banking or the Clearinghouse Compensation Committee, as the case may be, as in effect from time to time. A statement of Agent submitted to any Lender with respect to any amounts owing under this Paragraph 21(B) shall be conclusive, in the absence of manifest error. If such amount is not in fact made available to Agent by such Lender within three (3) Business Days after the date of such borrowing, Agent shall be entitled to recover such amount, with interest thereon at the rate per annum then applicable to the Loans comprising such borrowing, within three (3) Business Days after demand, from Borrower. (C) Exculpation. Neither Agent nor any of its directors, officers, employees or agents shall be liable to any Lender for any action taken or omitted to be taken by it under this Agreement or any other Loan Document, or in connection herewith or therewith, except for its own wilful misconduct or gross negligence, nor shall they be responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of this Agreement or any other Loan Document, nor for any inquiry regarding the performance by Borrower of its Obligations hereunder or thereunder. Agent shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which it believes to be genuine and to have been presented by a proper Person. (D) Successor. Agent may resign as such at any time upon at least ten (10) days' prior notice to Borrower and all Lenders, such resignation not to be effective until a successor Agent is in place. If Agent at any time shall resign, the Required Lenders may appoint another Lender as a successor Agent which shall thereupon become Agent hereunder. If no successor Agent shall have been so appointed by the Required Lenders, and shall 137 have accepted such appointment, within thirty (30) days after the retiring Agent's giving notice of resignation, then the retiring Agent may, on behalf of Lenders, appoint a successor Agent, which shall be one of Lenders or a financial institution reasonably acceptable to Borrower organized under the laws of the United States and having a combined capital and surplus of at least $1,000,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall be entitled to receive from the retiring Agent such documents of transfer and assignment as such successor Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges, and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. (E) Loans by Agent. Agent shall have the same rights and powers with respect to the Loans made by it or any of its Affiliates as any Lender and may exercise the same as if it were not Agent. (F) Credit Decisions. Each Lender acknowledges that it has, independently of Agent and each other Lender, and based on the financial information of Borrower and such other documents, information and investigations as it has deemed appropriate, made its own credit decision to enter this Agreement and make Loans hereunder. Each Lender also acknowledges that it will, independently of Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement or any other Loan Document. (G) Copies, etc. Agent shall give prompt notice to each Lender of each notice or request required or permitted to be given to Agent by Borrower pursuant to the terms of this Agreement. Notwithstanding anything herein contained to the contrary, all notices to and communications with Borrower under this Agreement and the other Loan Documents shall be effected by Lenders through Agent. Neither Agent nor any Lender will have any obligation to distribute any information to other Lenders except for information which was given to Agent or such Lender in its capacity as Agent or Lender, as the case may be. 138 22. MISCELLANEOUS. (A) Waivers, Amendments, etc. The provisions of this Agreement and of each Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by Borrower and Required Lenders; provided that no such amendment, modification or waiver: (a) which would modify any requirement hereunder that any particular action be taken by all Lenders or by the Required Lenders shall be effective unless consented to by each Lender; (b) which would modify this Paragraph 22(A), change the definition of "Required Lenders", change any Percentage for any Lender, reduce any fees (other than fees pursuant to Paragraph 4(B)), extend the Termination Date or subject any Lender to any additional obligations shall be made without the consent of each Lender; (c) which would extend the due date for, or reduce the amount of, any payment or prepayment of principal of or interest on any Loan (or reduce the principal amount of or rate of interest on any Loan) shall be made without the consent of the holder of such Loan; or (d) which would affect adversely the interests, rights or obligations of Agent in its capacity as Agent hereunder shall be made without consent of Agent. No failure or delay on the part of Agent or any Lender in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by Agent or any Lender under this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. (B) Notices. All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by telex or by facsimile and addressed or delivered to it at its address set forth on the signature pages hereof or at such other address as may be designated by such party from time to time in a notice complying 139 as to delivery with the terms of this Section to the other parties. Any notice, if mailed and properly addressed with postage prepaid, shall be deemed given when received; any notice, if transmitted by telex or facsimile, shall be deemed given when transmitted (answerback confirmed in the case of telexes and receipt confirmed in the case of facsimiles). (C) Costs and Expenses. Borrower agrees to pay on demand all expenses of Agent (including the reasonable fees and out-of pocket expenses of counsel to Agent and of local counsel, if any, who may be retained by counsel to Agent (in consultation with Borrower)) in connection with (a) the negotiation, preparation, execution and delivery of this Agreement and of each other Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to this Agreement or any other Loan Document as may from time to time hereafter be required, whether or not the transactions contemplated hereby are consummated; and (b) the consideration of legal questions relevant hereto and thereto and the negotiation of any restructuring or "work-out", whether or not consummated, of any Obligations. Borrower also agrees to reimburse Agent and each Lender upon demand for all reasonable out-of-pocket expenses (including attorneys' fees and legal expenses) incurred by Agent or such Lender in enforcing the obligations of Borrower under this Agreement or any other Loan Document. Such expenses of Agent, each Lender (including the reasonable fees and expenses of counsel) will be reflected in documentation in reasonable detail furnished to Borrower. (D) Indemnification. In consideration of the execution and delivery of this Agreement by each Lender and the extension of the Loans and other financial accommodations contemplated hereby, Borrower hereby indemnifies, exonerates and holds Agent and each Lender and each of its officers, directors, employees and agents (the "Indemnified Parties") free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses actually incurred in connection therewith (irrespective of whether such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to: 140 (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan; (b) the entering into and performance of this Agreement and any other Loan Document by any of the Indemnified Parties; (c) any investigation, litigation, or proceeding related to any acquisition or proposed acquisition by Borrower or any Subsidiary of all or any portion of the stock or all or substantially all the assets of any Person, whether or not Agent or such Lender is party thereto; or (d) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or releases from, any real property owned or operated by the Borrower or any of its Subsidiaries of any Hazardous Material (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under CERCLA, any so-called "Superfund" or "Superlien" law, or any other federal, state, local or other statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability or standards of conduct concerning, any Hazardous Material), regardless of whether caused by, or within the control of, Borrower or any of its Subsidiaries, except for (i) any such Indemnified Liabilities arising for the account of a particular Indemnified Party (individually and not as a co-conspirator with Borrower or any of its Affiliates) by reason of the relevant Indemnified Party's gross negligence, bad faith, misuse of confidential information or wilful misconduct (as determined by a judgment of a court of competent jurisdiction in a final, nonappealable order), and (ii) any settlement of any claim or action effected without Borrower's written consent (provided such consent was not unreasonably delayed or withheld) and if and to the extent that the foregoing undertaking may be unenforceable for any reason, Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. Subject to applicable laws and ethical rules (as to the interpretation of which the Indemnified Parties may rely upon the advice of their respective counsel) with respect to civil litigation or civil proceedings relating to any Indemnified Liability, the Indemnified Parties will agree to be represented by one law firm for any one jurisdiction, which counsel shall be subject to Borrower's approval (and which approval shall not be unreasonably withheld or delayed). 141 Borrower may participate in any defense with its own counsel, but may not direct or control the defense of any Indemnified Party. (E) Survival. The obligations of Borrower under Paragraphs 3(L), 3(M) and 22(C), and the obligations of Lenders under Paragraph 21(A) shall in each case survive any termination of this Agreement. The representations and warranties made by Borrower in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document. (F) Severability. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such other Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. (G) Headings. The various headings of this Agreement and of each other Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such other Loan Document or any provisions hereof or thereof. (H) Counterparts, Effectiveness, etc. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be executed by Borrower and Agent and be deemed to be an original and all of which shall constitute together but one and the same agreement. This Agreement shall become effective when counterparts hereof executed on behalf of Borrower and each Lender (or notice thereof satisfactory to Agent) shall have been received by Agent and notice thereof shall have been given by Agent to Borrower and each Lender. (I) Governing Law; Entire Agreement. This Agreement and each other Loan Document shall each be deemed to be a contract made under and governed by the internal laws of the State of Illinois. This Agreement and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. (J) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided that: (a) Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of all Lenders; and 142 (b) the rights of sale, assignment and transfer of Lenders are subject to Paragraph 22(K). (K) Assignments and Participations. Assignments by any Lender of, and the granting of participations in, all or a portion of its rights and obligations under this Agreement (including all or a portion of its agreements hereunder ("Assignable Commitments"), its Loans and Letters of Credit made or issued with respect hereto and owing to it ("Assignable Loans")) shall be subject to the following terms and conditions: (a) Each Lender may, upon the giving in writing to Agent of at least five (5) prior Business Days' notice, assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Assignable Commitments and Assignable Loans) subject only to the conditions set forth in clause (b) below. Each assignee under this clause (a) shall be approved by Agent and Borrower, such approval by Borrower not to be unreasonably withheld. (b) Any assignments made pursuant to this Paragraph 22(K) shall comply with the following conditions: (ii) each such assignment shall identify each of the facilities being assigned, and while the percentages assigned may vary by facility, as to each such facility such assignment shall be of a constant, and not a varying, percentage of the aggregate rights and assignable obligations of Lenders under this Agreement and shall cover the same aggregate percentage of such Lenders' Assignable Loans and Assignable Commitments; (iii) the amount of the Assignable Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment (as defined below) with respect to such assignment) shall (except in the case of assignments to other Lenders) not be less than $5,000,000 (and an integral multiple of $1,000,000) or constitute the whole Assignable Commitment of such Lender and all of such Lender's Assignable Loans; (iv) each such assignment shall be to an Eligible Assignee; (v) no such assignment shall require Borrower to file a registration statement with the Securities and Exchange Commission or apply to qualify any Assignable Commitment, 143 Assignable Loan or interest in any Note, or any interest in any thereof, under the "blue sky" or other securities law of any jurisdiction; (vi) except in the case of assignments to any other Lenders, in no event shall any assigning Lender making an assignment pursuant to clause (b) of this Paragraph 22(K) make any assignments if after taking such assignment into effect such Lender's Assignable Commitments would be less than $10,000,000, unless such assignment is of all of such Assignable Commitments; provided that upon any prepayment permitted under this Agreement such amounts shall be reduced by the same percentage as such prepayment bears to the assigning Lender's initial Assignable Commitments; (vii) the parties to each such assignment shall: (A) execute and deliver to Agent, for its acceptance and recording in the Register, an Assignment and Assumption Agreement substantially in the form of Exhibit M (an "Assignment"), (B) pay to the Agent in immediately available funds a processing and recordation fee of $3,000, and (C) in the case of the assignee, if it is a Non-United States Person, execute and deliver to the Agent either (i) five Internal Revenue Service Forms 1001 or (ii) five Internal Revenue Service Forms 4224 together with five Internal Revenue Service Forms W-9, or any successor forms, as appropriate, properly completed and claiming complete exemption from withholding and deduction of United States Federal Taxes as of the date of such Assignment; (viii) such assignment will not result in the payment offset by Borrower with respect to any then outstanding Loan; (ix) Borrower would, under Paragraph 3(E), 3(H), 3(K), 3(L), 3(M) or 3(P) of this Agreement, be obligated to make any payment to or for the account of any Assignee, Borrower shall only be obligated to make such payment to the extent that it would have been obliged to make such payment to the assigning Lender. 144 (c) Agent shall maintain at its address set forth on the signature page hereto a copy of each Assignment delivered to and accepted by it and a register for the recordation of the names and addresses of Lenders and the agreements of, and principal amount of the Loans owing to, each Lender from time to time (the "Register"). Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment, (i) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment, have the rights and obligations of a Lender hereunder, and all references to any Lender hereunder or in any of the other Loan Documents shall include such assignee, and (ii) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment, relinquish its rights and be released from its unmatured obligations under this Agreement (and, in the case of an Assignment covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto); provided that any assigning Lender shall retain any rights to indemnification which accrued to it hereunder with respect to events prior to the date of its Assignment to the assignee. The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon Agent's receipt of an Assignment executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, Agent shall, if such Assignment has been completed and is in substantially the form of Exhibit M (and is accompanied by any Internal Revenue Service forms required by clause (c)(vi)(C) of this Paragraph 22(K)), (i) accept such Assignment, (ii) record the information contained therein in the Register, and (iii) give prompt notice thereof to Borrower. Any Eligible Assignee in respect of which an Assignment is so recorded is herein called an "Assignee". 145 (e) Any Lender may sell participations to one or more participants in or to all or a portion of its rights and obligations under this Agreement (including all or a portion of its agreements hereunder and its Loans); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the owner of any such Loans made by such Lender for all purposes of this Agreement, (iv) Borrower, Agent and other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, (v) participants shall be entitled to the cost and yield protection provisions contained in Paragraphs 3(E), 3(L), 3(M) and 3(P) of this Agreement; provided that Borrower shall not be under any obligation to pay to or for the account of any such participant any greater amount than it would have been obliged to pay to or for the account of Lender from which it acquired its participation, (vi) no participant (other than an Affiliate of such Lender) shall have any right to require such Lender to take or omit to take any action under this Agreement or any Loan Document, except actions extending any scheduled maturity of any Loan or the Termination Date of any Commitment in which the participant has a participation, reducing the interest rate, fees or commissions on, any such Loans in which such participation was sold or forgiving any principal of or interest, fees or commissions payable on such Loans, and (vii) no participant may exercise any such right of setoff except with the consent of Required Lenders. Each Lender agrees to incorporate the requirements set forth in clauses (vi) and (vii) above into each participation agreement which such Lender enters into with any participant. Borrower-agrees that if amounts outstanding under this Agreement are due and unpaid, or shall have been 146 declared or shall have become due and payable, each participant shall, to the extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement or such Note; provided that any participant exercising such right shall be obligated to share with Lenders, as if such participant were a "Lender" hereunder, the amount of any such setoff; and provided, further, that if all or any portion of such excess payment or other recovery is thereafter recovered from the participant by or on behalf of Borrower, the participant's obligation to share such excess payment shall be rescinded and such payment shall be returned to participant to the extent of such recovery. (g) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Paragraph 22(K), disclose to the Assignee or participant or proposed assignee or participant any information relating to Borrower furnished to such Lender by or on behalf of Borrower; provided that, prior to any such disclosure, the Assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any confidential information relating to Borrower received by it from such Lender to the same extent as Lenders hereunder. (L) Other Transactions. Nothing contained herein shall preclude Agent or any other Lender from engaging in any debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with Borrower or any of its Affiliates in which Borrower or such Affiliate is not restricted hereby from engaging with any other Person. (M) Waiver of Jury Trial. AGENT, LENDERS AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF AGENT, SUCH LENDERS, OR BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR AGENT AND SUCH LENDERS TO ENTER INTO THIS AGREEMENT. (N) Submission to Jurisdiction. Borrower hereby irrevocably submits to the non-exclusive jurisdiction of any Illinois State or Federal court sitting in Chicago, Illinois over any action or proceeding arising out of or relating to this 147 Agreement or the Loan Documents, and Borrower hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Illinois State or Federal court. Borrower, on behalf of itself and each Subsidiary, hereby irrevocably waives, to the fullest extent permitted by law, any objection it may now or hereafter have to the laying of venue in any such action or proceeding in any such court as well as any right it may now or hereafter have, to remove any such action or proceeding, once commenced, to another court on the grounds of forum non conveniens or otherwise. Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Borrower agrees not to institute any legal action or proceeding against Agent or any Lender or the directors, officers, employees, agents or property of any thereof, arising out of or relating to this Agreement, in any court other than the one hereinabove specified in this Paragraph 22(N). Nothing in this Paragraph 22(N) shall affect the right of Agent or any Lender to serve legal process in any other manner permitted by law or affect the right of Agent or any Lender to bring any action or proceeding against Borrower or its properties in the courts of any other jurisdictions. (O) Restatement. Borrower acknowledges that this Agreement amends and restates in its entirety the Existing Agreement. Borrower further acknowledges that all Revolving Loans (as such term is defined in the Existing Agreement) currently outstanding and all Existing L/C's shall upon satisfaction in full of all Conditions Precedent be deemed to be Revolving Loans and Letters of Credit hereunder. 148 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. KELLER GRADUATE SCHOOL OF MANAGEMENT, INC. By: /s/Ronald L. Taylor Title: President Address: One Tower Lane Suite 1000 Oakbrook Terrace Illinois 60181 Telecopy No.:(630)571-7700 Attention: Norman M. Levine BANK OF AMERICA ILLINOIS, as Agent By: /s/David L. Graham Title: Vice President Address: 231 South LaSalle Street Chicago, Illinois 60697 Telecopy No.: (312) 828-1974 Attention: David Graham 149 Percentage - ---------- 56.0173731% BANK OF AMERICA ILLINOIS, as Lender By: /s/Christine M. Tierney Title: Senior Vice President Address: 231 South LaSalle Street Chicago, Illinois 60697 Telecopy No.: (312) 828-5120 Attention: David Stang Domestic Office: 231 South LaSalle Street Chicago, Illinois 60697 Eurodollar Office: 231 South LaSalle Street Chicago, Illinois 60697 150 27.489141% THE NORTHERN TRUST COMPANY By: /s/J. Graham Leonard Title: Vice President Address: 50 South LaSalle Street Chicago, IL 60675 Telecopy No.: (312) 444-7028 Attention: J. Graham Leonard, Division I Domestic Office: 50 South LaSalle Street Chicago, IL 60675 Eurodollar Office: 50 South LaSalle Street Chicago, IL 60675 151 16.4934851% HARRIS TRUST AND SAVINGS BANK By: /s/R.L. Dell 'Artino Title: Vice President Address: 111 West Monroe Street Chicago, IL 60690 Telecopy No.: (312) 461-2591 Attention: EMI/II Domestic Office: 111 West Monroe Street Chicago, IL 60690 Eurodollar Office: 111 West Monroe Street Chicago, IL 60690 - ------- 100.00% 152 ACCEPTANCE AND ACKNOWLEDGEMENT DeVry, Inc. hereby acknowledges and agrees to make such deliveries as are required by it and comply with the covenants and other provisions applicable to it contained in this Agreement. DeVry, Inc. By: /s/Ronald L. Taylor Name: Ronald L. Taylor Title: President Notice Address: DeVry Inc. One Tower Lane, Suite 1000 Oakbrook Terrace, IL 60181 Attention: Ronald L. Taylor Telephone: (630) 574-1919 Facsimile: (630) 574-1903 Copies of all notices shall also be sent to: Mayer, Brown & Platt 1675 Broadway New York, NY 10019 Attention: James B. Carlson Telephone: (212) 506-2515 Facsimile: (212) 262-1910 153 EXHIBIT A FORM OF REPLACEMENT GLOBAL REVOLVING NOTE $85,000,000 June 12, 1996 Chicago, Illinois FOR VALUE RECEIVED, the undersigned, KELLER GRADUATE SCHOOL OF MANAGEMENT, INC., a Delaware corporation with its chief executive office located at One Tower Lane, Suite 1000, Oakbrook Terrace, IL 60181 ("Borrower"), promises to pay to the order of BANK OF AMERICA ILLINOIS, as agent (in such capacity, "Agent") for itself and the other financial institutions (individually, "Lender," and collectively, "Lenders") which are, or may become, parties to that certain Amended and Restated Financing Agreement dated as of June 12, 1996 (the "Financing Agreement"), EIGHTY- FIVE MILLION AND NO/100THS DOLLARS ($85,000,000) or such lesser amount as may be outstanding hereunder from time to time. The Revolving Loan evidenced by this Replacement Global Revolving Note ("Revolving Note") shall be repaid in accordance with the terms and provisions of the Financing Agreement. This Revolving Note is issued pursuant to, and entitled to the benefits of, the Financing Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loan evidenced hereby is made and is to be repaid, including a description of the terms and conditions under which the Revolving Loan may or is required to be prepaid and the unpaid aggregate principal balance of this Revolving Note may or shall be accelerated and for a description of the collateral security for this Revolving Note and the respective rights of the parties therein. Capitalized terms used herein without definition shall have the respective meanings set forth in the Financing Agreement. The Borrower also promises to pay interest on the unpaid aggregate principal amount of the Revolving Loan in accordance with the terms and provisions of the Financing Agreement from the Restatement Date until the Revolving Loan shall have been paid in full. All payments of principal and interest in respect of this Revolving Note shall be made to Agent for the benefit and account of the Lenders in lawful money of the United States of America in same day funds at Agent's principal office in Chicago, Illinois or at such other place as shall be designated in writing by Agent for such purpose in accordance with the terms of the Financing Agreement. 154 This Revolving Note is a replacement for Borrower's Replacement Global Revolving Note dated April 14, 1994 (the "Prior Note") payable to the order of the Agent (f/k/a Continental Bank N.A.) and evidences indebtedness evidenced thereby and nothing herein contained or implied shall be construed or deemed to render the Prior Note or the indebtedness evidenced thereby paid or satisfied or any guaranty thereof or collateral security therefor released, discharged or otherwise prejudicially affected in any manner whatsoever. The Financing Agreement and this Revolving Note shall be governed by, and shall be construed and enforced in accordance with, the laws of the State of Illinois, without regard to its conflicts of laws rules. The terms of this Revolving Note are subject to amendment only in the manner set forth in the Financing Agreement. The Borrower promises to pay all costs and expenses, including reasonable attorneys' and legal assistants' fees, and disbursements incurred in collection and enforcement of this Revolving Note or any appeal of a judgment rendered hereon. The Borrower and the endorsers of this Revolving Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demands thereafter. IN WITNESS HEREOF, the Borrower has caused this Revolving Note to be executed and delivered by its duly authorized officer, as to the day and year and at the place first above written. KELLER GRADUATE SCHOOL OF MANAGEMENT, INC. By: ------------------- Title: Attest: ---------------- By: --------------------------------- Secretary 155 GUARANTY FOR VALUE RECEIVED and in consideration of any loan or other financial accommodation heretofore or hereafter at any time made or granted to Keller Graduate School of Management, Inc., a Delaware corporation (hereinafter called the "Debtor"), by the lenders who are or may become party to that certain Amended and Restated Financing Agreement, dated as of June 12, 1996 (as from time to time, in whole or in part, amended, modified, supplemented, restated, refinanced, refunded or renewed, the "Credit Agreement"), among the undersigned, the lenders who are or from time to time become party thereto (the "Lenders"), and Bank of America Illinois, as agent for the Lenders (the "Agent"), the "undersigned" hereby unconditionally guarantees the full and prompt payment when due, whether at stated maturity, by required prepayment, declaration, demand, acceleration or otherwise (including amounts that would become due but for the operation of the automatic stay under section 362(a) of the Bankruptcy Code (11 U.S.C., 362(a)), and at all times thereafter, of all obligations of the Debtor to the Agent and the Lenders in their respective capacities under the Credit Agreement, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, or now or hereafter existing, or due or to become due (all such obligations being hereinafter collectively called "Liabilities"), and the undersigned further agrees to pay all expenses (including attorneys' fees and legal expenses) paid or incurred by the Agent and the Lenders in endeavoring to collect the Liabilities, or any part thereof, and in enforcing this guaranty. 1. The undersigned agrees that, in the event of the dissolution or insolvency of the Debtor or the undersigned, or the inability of the Debtor or the undersigned to pay its debts as they mature, or an assignment by the Debtor or the undersigned for the benefit of creditors, or the institution of any proceeding by or against the Debtor or the undersigned alleging that the Debtor or the undersigned is insolvent or unable to pay its debts as they mature, and if such event shall occur at a time when any of the Liabilities may not then be due and payable, the undersigned will pay to the Agent for the benefit of the Lenders forthwith the full amount which would be payable hereunder by the undersigned if all Liabilities were then due and payable. 2. To secure all obligations of the undersigned hereunder, the Agent for the benefit of the Lenders shall have a lien upon and security interest in (and may, without demand or notice of any kind, at any time and from time to time when any amount shall 156 be due and payable by the undersigned hereunder, appropriate and apply toward the payment of such amount, in such order of application as the Agent may elect) any and all balances, credits, deposits (general or special, time or demand, provisional or final), accounts or moneys of or in the name of the undersigned now or hereafter with the Agent or any Lender and any and all property of every kind or description of or in the name of the undersigned now or hereafter, for any reason or purpose whatsoever, in the possession or control of, or in transit to, the Agent or the Lenders or any agent or bailee for the Agent or the Lenders. 3. This guaranty shall in all respects be a continuing, absolute and unconditional guaranty, and shall remain in full force and effect (notwithstanding, without limitation, the dissolution of the undersigned) until all of the Liabilities have been paid in full, subject to discontinuance as to the undersigned only upon receipt by the Agent of written notice from the undersigned, or any person duly authorized and acting on behalf of the undersigned, of the discontinuance hereof as to the undersigned; provided, however, that no such notice of discontinuance shall affect or impair any of the agreements and obligations of the undersigned hereunder with respect to any and all Liabilities existing prior to the time of receipt of such notice by the Agent, any and all Liabilities created or acquired thereafter pursuant to any previous commitments made by the Agent or the Lenders, any and all extensions or renewals of any of the foregoing, any and all interest on any of the foregoing, and any and all expenses paid or incurred by the Agent and the Lenders in endeavoring to collect any of the foregoing and in enforcing this guaranty against the undersigned; and all of the agreements and obligations of the undersigned under this guaranty shall, notwithstanding any such notice of discontinuance, remain fully in effect until all such Liabilities (including any extensions or renewals of any thereof) and all such interest and expenses shall have been paid in full. 4. The undersigned further agrees that, if at any time all or any part of any payment theretofore applied by the Agent or the Lenders to any of the Liabilities is or must be rescinded or returned by the Agent or the Lenders for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of the Debtor), such Liabilities shall, for the purposes of this guaranty, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by the Agent or the Lenders, and this guaranty shall continue to be effective or be reinstated, as the case may be, as to such Liabilities, all as though such application by the Agent or the Lenders had not been made. 157 5. The Agent may, from time to time, whether before or after any discontinuance of this guaranty, at its sole discretion and without notice to the undersigned, take any or all of the following actions: (a) retain or obtain a security interest in any property to secure any of the Liabilities or any obligation hereunder, (b) retain or obtain the primary or secondary obligation of any obligor or obligors, in addition to the undersigned, with respect to any of the Liabilities, (c) extend or renew for one or more periods (whether or not longer than the original period), or alter or exchange, any of the Liabilities, or release or compromise any obligation of the undersigned hereunder or any obligation of any nature of any other obligor with respect to any of the Liabilities, (d) release its security interest in, or surrender, release or permit any substitution or exchange for, all or any part of any property securing any of the Liabilities or any obligation hereunder, or extend or renew for one or more periods (whether or not longer than the original period) or release, compromise, alter or exchange any obligations of any nature of any obligor with respect to any such property, and (e) resort to the undersigned for payment of any of the Liabilities, whether or not the Agent (i) shall have resorted to any property securing any of the Liabilities or any obligation hereunder or (ii) shall have proceeded against any other obligor primarily or secondarily obligated with respect to any of the Liabilities (all of the actions referred to in preceding clauses (i) and (ii) being hereby expressly waived by the undersigned). 6. Any amounts received by the Agent from whatsoever source on account of the Liabilities may be applied by it toward the payment of such of the Liabilities, and in such order of application, as the Agent may from time to time elect. 7. No payment made by or for the account of the undersigned pursuant to this guaranty shall entitle the undersigned by subrogation or otherwise to any payment by the Debtor or from or out of any property of the Debtor and the undersigned shall not exercise any right or remedy against the Debtor or any property of the Debtor by reason of any performance by the undersigned of this guaranty. The undersigned waives, to the fullest extent permitted by law, all rights of the undersigned against the Debtor, arising out of any payment by the undersigned under this guaranty, whether arising by way of any subrogation, contribution, reimbursement or otherwise and agrees that, to the extent that any such rights may not be waived under applicable law, it will contribute such rights to the Debtor as a capital contribution concurrently with the arising of such rights. 8. The undersigned hereby expressly waives: (a) notice of the acceptance by the Agent of this guaranty, (b) notice of the 158 existence or creation or non-payment of all or any of the Liabilities, (c) presentment, demand, notice of dishonor, protest and all other notices whatsoever, and (d) all diligence in collection or protection of or realization upon the Liabilities or any thereof, any obligation hereunder, or any security for or guaranty of any of the foregoing. 9. The Lenders may, from time to time, without notice to the undersigned, assign or transfer any or all of the Liabilities or any interest therein; and, notwithstanding any such assignment or transfer or any subsequent assignment or transfer thereof, such Liabilities shall be and remain Liabilities for the purposes of this guaranty, and each and every immediate and successive assignee or transferee of any of the Liabilities or of any interest therein shall, to the extent of the interest of such assignee or transferee in the Liabilities, be entitled to the benefits of this guaranty to the same extent as if such assignee or transferee were a Lender; provided, however, that, unless the assigning or transferring Lender shall otherwise consent in writing, such Lender shall have an unimpaired right, prior and superior to that of any such assignee or transferee, to enforce this guaranty, for the benefit of the Lender, as to those of the Liabilities which the Lender has not assigned or transferred. 10. The undersigned hereby warrants to the Agent and the Lenders that the undersigned now has and will continue to have independent means of obtaining information concerning the affairs, financial condition and business of the Debtor. The Agent and the Lenders shall not have any duty or responsibility to provide the undersigned with any credit or other information concerning the affairs, financial condition or business of the Debtor which may come into the Agent's or any of the Lenders' possession. 11. The undersigned hereby warrants and agrees that: (a) the undersigned is a corporation duly existing and in good standing under the laws of the state of its incorporation, and the undersigned is duly qualified and in good standing and authorized to do business in each jurisdiction where, because of the nature of its activities or properties, such qualification is required, (b) the undersigned has full corporate power and authority to execute and deliver this guaranty, (c) the execution, delivery and performance by the undersigned of this guaranty are within the undersigned's corporate powers, have been duly authorized by all necessary action, have received all necessary governmental approval (if any shall be required) and do not and will not contravene or conflict with any provision of law or of the organizational documents of the undersigned or of any agreement binding upon the undersigned, (d) this guaranty is the legal, 159 valid and binding obligation of the undersigned enforceable against the undersigned in accordance with its terms, except as enforceability may be limited by bankruptcy or other laws relating to or affecting creditors' rights generally or by equitable principles, and (e) this guaranty will directly or indirectly benefit the undersigned. 12. No delay on the part of the Agent in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Agent of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy; nor shall any modification or waiver of any of the provisions of this guaranty be binding upon the Agent except as expressly set forth in a writing duly signed and delivered on behalf of the Agent for the benefit of the Lenders. No action of the Agent permitted hereunder shall in any way affect or impair the rights of the Agent and the obligations of the undersigned under this guaranty. For the purposes of this guaranty, Liabilities shall include all obligations of the Debtor to the Agent and the Lenders, notwithstanding any right or power of the Debtor or anyone else to assert any claim or defense as to the invalidity or unenforceability of any such obligation, and no such claim or defense shall affect or impair the obligations of the undersigned hereunder. The obligations of the undersigned under this guaranty shall be absolute and unconditional irrespective of any circumstance whatsoever which might constitute a legal or equitable discharge or defense of the undersigned. The undersigned hereby acknowledges that there are no conditions to the effectiveness of this guaranty. 13. 13. This guaranty shall be binding upon the undersigned, and upon any successors and assigns of the undersigned; and to the extent that the Debtor or any of the undersigned is either a partnership or a corporation, all references herein to the Debtor and to the undersigned, respectively, shall be deemed to include any successor or successors, whether immediate or remote, to such partnership or corporation. If more than one party shall execute this guaranty, the term "undersigned," as used herein, shall mean all parties executing this guaranty and each of them, and all such parties shall be jointly and severally obligated hereunder. 14. THIS GUARANTY HAS BEEN DELIVERED AT CHICAGO, ILLINOIS, AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO ITS PRINCIPLES OF CHOICE OF LAW. WHEREVER POSSIBLE EACH PROVISION OF THIS GUARANTY SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS GUARANTY SHALL BE PROHIBITED BY OR INVALID UNDER SUCH LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT 160 OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS GUARANTY. 15. The undersigned hereby irrevocably agrees that any legal action or proceeding pertaining to this guaranty may be brought in the courts of the State of Illinois, County of Cook, or of the United States of America for the Northern District of Illinois. The undersigned hereby irrevocably agrees that service of process in such action or proceeding may be made either by mailing, by registered or certified mail, postage prepaid, a copy of the summons or complaint, or other legal process in such action or proceeding to the undersigned at the address shown on the signature page hereof. Service of process in any such action or proceeding, effected as aforesaid, shall be effective upon receipt by the undersigned and shall be deemed personal service upon the undersigned and shall be legal and binding upon the undersigned for all purposes. The undersigned hereby waives, to the fullest extent permitted by law, any objection it may now or hereafter have to the laying of venue in any such action or proceeding in any such court as well as any right it may now or hereafter have to remove any such action or proceeding, once commenced, to another court on the grounds of forum non conveniens or otherwise. 16. The undersigned hereby expressly waives any right to a trial by jury in any action or proceeding to enforce or defend any rights (a) under this guaranty or under any amendment, instrument, document or agreement delivered or which may in the future be delivered in connection herewith or (b) arising from any banking relationship existing in connection with this guaranty, and agrees that any such action or proceeding shall be tried before a court and not before a jury. * * * * * 161 IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed as of this 12th day of June, 1996. DEVRY EDUCATIONAL DEVELOPMENT CORPORATION By: /s/Ronald L. Taylor Name: Ronald L. Taylor Title: President Address: One Tower Lane Suite 1000 Oakbrook Terrace, Illinois 60181 162 GUARANTY FOR VALUE RECEIVED and in consideration of any loan or other financial accommodation heretofore or hereafter at any time made or granted to Keller Graduate School of Management, Inc., a Delaware corporation (hereinafter called the "Debtor"), by the lenders who are or may become party to that certain Amended and Restated Financing Agreement, dated as of June 12, 1996 (as from time to time, in whole or in part, amended, modified, supplemented, restated, refinanced, refunded or renewed, the "Credit Agreement"), among the undersigned, the lenders who are or from time to time become party thereto (the "Lenders"), and Bank of America Illinois, as agent for the Lenders (the "Agent"), the "undersigned" hereby unconditionally guarantees the full and prompt payment when due, whether at stated maturity, by required prepayment, declaration, demand, acceleration or otherwise (including amounts that would become due but for the operation of the automatic stay under section 362(a) of the Bankruptcy Code (11 U.S.C., 362(a)), and at all times thereafter, of all obligations of the Debtor to the Agent and the Lenders in their respective capacities under the Credit Agreement, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, or now or hereafter existing, or due or to become due (all such obligations being hereinafter collectively called "Liabilities"), and the undersigned further agrees to pay all expenses (including attorneys' fees and legal expenses) paid or incurred by the Agent and the Lenders in endeavoring to collect the Liabilities, or any part thereof, and in enforcing this guaranty. 1. The undersigned agrees that, in the event of the dissolution or insolvency of the Debtor or the undersigned, or the inability of the Debtor or the undersigned to pay its debts as they mature, or an assignment by the Debtor or the undersigned for the benefit of creditors, or the institution of any proceeding by or against the Debtor or the undersigned alleging that the Debtor or the undersigned is insolvent or unable to pay its debts as they mature, and if such event shall occur at a time when any of the Liabilities may not then be due and payable, the undersigned will pay to the Agent for the benefit of the Lenders forthwith the full amount which would be payable hereunder by the undersigned if all Liabilities were then due and payable. 2. To secure all obligations of the undersigned hereunder, the Agent for the benefit of the Lenders shall have a lien upon and security interest in (and may, without demand or notice of any kind, at any time and from time to time when any amount shall 163 be due and payable by the undersigned hereunder, appropriate and apply toward the payment of such amount, in such order of application as the Agent may elect) any and all balances, credits, deposits (general or special, time or demand, provisional or final), accounts or moneys of or in the name of the undersigned now or hereafter with the Agent or any Lender and any and all property of every kind or description of or in the name of the undersigned now or hereafter, for any reason or purpose whatsoever, in the possession or control of, or in transit to, the Agent or the Lenders or any agent or bailee for the Agent or the Lenders. 3. This guaranty shall in all respects be a continuing, absolute and unconditional guaranty, and shall remain in full force and effect (notwithstanding, without limitation, the dissolution of the undersigned) until all of the Liabilities have been paid in full, subject to discontinuance as to the undersigned only upon receipt by the Agent of written notice from the undersigned, or any person duly authorized and acting on behalf of the undersigned, of the discontinuance hereof as to the undersigned; provided, however, that no such notice of discontinuance shall affect or impair any of the agreements and obligations of the undersigned hereunder with respect to any and all Liabilities existing prior to the time of receipt of such notice by the Agent, any and all Liabilities created or acquired thereafter pursuant to any previous commitments made by the Agent or the Lenders, any and all extensions or renewals of any of the foregoing, any and all interest on any of the foregoing, and any and all expenses paid or incurred by the Agent and the Lenders in endeavoring to collect any of the foregoing and in enforcing this guaranty against the undersigned; and all of the agreements and obligations of the undersigned under this guaranty shall, notwithstanding any such notice of discontinuance, remain fully in effect until all such Liabilities (including any extensions or renewals of any thereof) and all such interest and expenses shall have been paid in full. 4. The undersigned further agrees that, if at any time all or any part of any payment theretofore applied by the Agent or the Lenders to any of the Liabilities is or must be rescinded or returned by the Agent or the Lenders for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of the Debtor), such Liabilities shall, for the purposes of this guaranty, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by the Agent or the Lenders, and this guaranty shall continue to be effective or be reinstated, as the case may be, as to such Liabilities, all as though such application by the Agent or the Lenders had not been made. 164 5. The Agent may, from time to time, whether before or after any discontinuance of this guaranty, at its sole discretion and without notice to the undersigned, take any or all of the following actions: (a) retain or obtain a security interest in any property to secure any of the Liabilities or any obligation hereunder, (b) retain or obtain the primary or secondary obligation of any obligor or obligors, in addition to the undersigned, with respect to any of the Liabilities, (c) extend or renew for one or more periods (whether or not longer than the original period), or alter or exchange, any of the Liabilities, or release or compromise any obligation of the undersigned hereunder or any obligation of any nature of any other obligor with respect to any of the Liabilities, (d) release its security interest in, or surrender, release or permit any substitution or exchange for, all or any part of any property securing any of the Liabilities or any obligation hereunder, or extend or renew for one or more periods (whether or not longer than the original period) or release, compromise, alter or exchange any obligations of any nature of any obligor with respect to any such property, and (e) resort to the undersigned for payment of any of the Liabilities, whether or not the Agent (i) shall have resorted to any property securing any of the Liabilities or any obligation hereunder or (ii) shall have proceeded against any other obligor primarily or secondarily obligated with respect to any of the Liabilities (all of the actions referred to in preceding clauses (i) and (ii) being hereby expressly waived by the undersigned). 6. Any amounts received by the Agent from whatsoever source on account of the Liabilities may be applied by it toward the payment of such of the Liabilities, and in such order of application, as the Agent may from time to time elect. 7. No payment made by or for the account of the undersigned pursuant to this guaranty shall entitle the undersigned by subrogation or otherwise to any payment by the Debtor or from or out of any property of the Debtor and the undersigned shall not exercise any right or remedy against the Debtor or any property of the Debtor by reason of any performance by the undersigned of this guaranty. The undersigned waives, to the fullest extent permitted by law, all rights of the undersigned against the Debtor, arising out of any payment by the undersigned under this guaranty, whether arising by way of any subrogation, contribution, reimbursement or otherwise and agrees that, to the extent that any such rights may not be waived under applicable law, it will contribute such rights to the Debtor as a capital contribution concurrently with the arising of such rights. 8. The undersigned hereby expressly waives: (a) notice of the acceptance by the Agent of this guaranty, (b) notice of the 165 existence or creation or non-payment of all or any of the Liabilities, (c) presentment, demand, notice of dishonor, protest and all other notices whatsoever, and (d) all diligence in collection or protection of or realization upon the Liabilities or any thereof, any obligation hereunder, or any security for or guaranty of any of the foregoing. 9. The Lenders may, from time to time, without notice to the undersigned, assign or transfer any or all of the Liabilities or any interest therein; and, notwithstanding any such assignment or transfer or any subsequent assignment or transfer thereof, such Liabilities shall be and remain Liabilities for the purposes of this guaranty, and each and every immediate and successive assignee or transferee of any of the Liabilities or of any interest therein shall, to the extent of the interest of such assignee or transferee in the Liabilities, be entitled to the benefits of this guaranty to the same extent as if such assignee or transferee were a Lender; provided, however, that, unless the assigning or transferring Lender shall otherwise consent in writing, such Lender shall have an unimpaired right, prior and superior to that of any such assignee or transferee, to enforce this guaranty, for the benefit of the Lender, as to those of the Liabilities which the Lender has not assigned or transferred. 10. The undersigned hereby warrants to the Agent and the Lenders that the undersigned now has and will continue to have independent means of obtaining information concerning the affairs, financial condition and business of the Debtor. The Agent and the Lenders shall not have any duty or responsibility to provide the undersigned with any credit or other information concerning the affairs, financial condition or business of the Debtor which may come into the Agent's or any of the Lenders' possession. 11. The undersigned hereby warrants and agrees that: (a) the undersigned is a corporation duly existing and in good standing under the laws of the state of its incorporation, and the undersigned is duly qualified and in good standing and authorized to do business in each jurisdiction where, because of the nature of its activities or properties, such qualification is required, (b) the undersigned has full corporate power and authority to execute and deliver this guaranty, (c) the execution, delivery and performance by the undersigned of this guaranty are within the undersigned's corporate powers, have been duly authorized by all necessary action, have received all necessary governmental approval (if any shall be required) and do not and will not contravene or conflict with any provision of law or of the organizational documents of the undersigned or of any agreement binding upon the undersigned, (d) this guaranty is the legal, 166 valid and binding obligation of the undersigned enforceable against the undersigned in accordance with its terms, except as enforceability may be limited by bankruptcy or other laws relating to or affecting creditors' rights generally or by equitable principles, and (e) this guaranty will directly or indirectly benefit the undersigned. 12. No delay on the part of the Agent in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Agent of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy; nor shall any modification or waiver of any of the provisions of this guaranty be binding upon the Agent except as expressly set forth in a writing duly signed and delivered on behalf of the Agent for the benefit of the Lenders. No action of the Agent permitted hereunder shall in any way affect or impair the rights of the Agent and the obligations of the undersigned under this guaranty. For the purposes of this guaranty, Liabilities shall include all obligations of the Debtor to the Agent and the Lenders, notwithstanding any right or power of the Debtor or anyone else to assert any claim or defense as to the invalidity or unenforceability of any such obligation, and no such claim or defense shall affect or impair the obligations of the undersigned hereunder. The obligations of the undersigned under this guaranty shall be absolute and unconditional irrespective of any circumstance whatsoever which might constitute a legal or equitable discharge or defense of the undersigned. The undersigned hereby acknowledges that there are no conditions to the effectiveness of this guaranty. 13. 13. This guaranty shall be binding upon the undersigned, and upon any successors and assigns of the undersigned; and to the extent that the Debtor or any of the undersigned is either a partnership or a corporation, all references herein to the Debtor and to the undersigned, respectively, shall be deemed to include any successor or successors, whether immediate or remote, to such partnership or corporation. If more than one party shall execute this guaranty, the term "undersigned," as used herein, shall mean all parties executing this guaranty and each of them, and all such parties shall be jointly and severally obligated hereunder. 14. THIS GUARANTY HAS BEEN DELIVERED AT CHICAGO, ILLINOIS, AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO ITS PRINCIPLES OF CHOICE OF LAW. WHEREVER POSSIBLE EACH PROVISION OF THIS GUARANTY SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS GUARANTY SHALL BE PROHIBITED BY OR INVALID UNDER SUCH LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT 167 OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS GUARANTY. 15. The undersigned hereby irrevocably agrees that any legal action or proceeding pertaining to this guaranty may be brought in the courts of the State of Illinois, County of Cook, or of the United States of America for the Northern District of Illinois. The undersigned hereby irrevocably agrees that service of process in such action or proceeding may be made either by mailing, by registered or certified mail, postage prepaid, a copy of the summons or complaint, or other legal process in such action or proceeding to the undersigned at the address shown on the signature page hereof. Service of process in any such action or proceeding, effected as aforesaid, shall be effective upon receipt by the undersigned and shall be deemed personal service upon the undersigned and shall be legal and binding upon the undersigned for all purposes. The undersigned hereby waives, to the fullest extent permitted by law, any objection it may now or hereafter have to the laying of venue in any such action or proceeding in any such court as well as any right it may now or hereafter have to remove any such action or proceeding, once commenced, to another court on the grounds of forum non conveniens or otherwise. 16. The undersigned hereby expressly waives any right to a trial by jury in any action or proceeding to enforce or defend any rights (a) under this guaranty or under any amendment, instrument, document or agreement delivered or which may in the future be delivered in connection herewith or (b) arising from any banking relationship existing in connection with this guaranty, and agrees that any such action or proceeding shall be tried before a court and not before a jury. * * * * * 168 IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed as of this 12th day of June, 1996. DEVRY CPA REVIEW COURSE, INC. By: /s/Ronald L. Taylor Name: Ronald L. Taylor Title: President Address: One Tower Lane Suite 1000 Oakbrook Terrace, Illinois 60181 169 GUARANTY FOR VALUE RECEIVED and in consideration of any loan or other financial accommodation heretofore or hereafter at any time made or granted to Keller Graduate School of Management, Inc., a Delaware corporation (hereinafter called the "Debtor"), by the lenders who are or may become party to that certain Amended and Restated Financing Agreement, dated as of June 12, 1996 (as from time to time, in whole or in part, amended, modified, supplemented, restated, refinanced, refunded or renewed, the "Credit Agreement"), among the undersigned, the lenders who are or from time to time become party thereto (the "Lenders"), and Bank of America Illinois, as agent for the Lenders (the "Agent"), the "undersigned" hereby unconditionally guarantees the full and prompt payment when due, whether at stated maturity, by required prepayment, declaration, demand, acceleration or otherwise (including amounts that would become due but for the operation of the automatic stay under section 362(a) of the Bankruptcy Code (11 U.S.C., 362(a)), and at all times thereafter, of all obligations of the Debtor to the Agent and the Lenders in their respective capacities under the Credit Agreement, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, or now or hereafter existing, or due or to become due (all such obligations being hereinafter collectively called "Liabilities"), and the undersigned further agrees to pay all expenses (including attorneys' fees and legal expenses) paid or incurred by the Agent and the Lenders in endeavoring to collect the Liabilities, or any part thereof, and in enforcing this guaranty. 1. The undersigned agrees that, in the event of the dissolution or insolvency of the Debtor or the undersigned, or the inability of the Debtor or the undersigned to pay its debts as they mature, or an assignment by the Debtor or the undersigned for the benefit of creditors, or the institution of any proceeding by or against the Debtor or the undersigned alleging that the Debtor or the undersigned is insolvent or unable to pay its debts as they mature, and if such event shall occur at a time when any of the Liabilities may not then be due and payable, the undersigned will pay to the Agent for the benefit of the Lenders forthwith the full amount which would be payable hereunder by the undersigned if all Liabilities were then due and payable. 2. To secure all obligations of the undersigned hereunder, the Agent for the benefit of the Lenders shall have a lien upon and security interest in (and may, without demand or notice of any kind, at any time and from time to time when any amount shall 170 be due and payable by the undersigned hereunder, appropriate and apply toward the payment of such amount, in such order of application as the Agent may elect) any and all balances, credits, deposits (general or special, time or demand, provisional or final), accounts or moneys of or in the name of the undersigned now or hereafter with the Agent or any Lender and any and all property of every kind or description of or in the name of the undersigned now or hereafter, for any reason or purpose whatsoever, in the possession or control of, or in transit to, the Agent or the Lenders or any agent or bailee for the Agent or the Lenders. 3. This guaranty shall in all respects be a continuing, absolute and unconditional guaranty, and shall remain in full force and effect (notwithstanding, without limitation, the dissolution of the undersigned) until all of the Liabilities have been paid in full, subject to discontinuance as to the undersigned only upon receipt by the Agent of written notice from the undersigned, or any person duly authorized and acting on behalf of the undersigned, of the discontinuance hereof as to the undersigned; provided, however, that no such notice of discontinuance shall affect or impair any of the agreements and obligations of the undersigned hereunder with respect to any and all Liabilities existing prior to the time of receipt of such notice by the Agent, any and all Liabilities created or acquired thereafter pursuant to any previous commitments made by the Agent or the Lenders, any and all extensions or renewals of any of the foregoing, any and all interest on any of the foregoing, and any and all expenses paid or incurred by the Agent and the Lenders in endeavoring to collect any of the foregoing and in enforcing this guaranty against the undersigned; and all of the agreements and obligations of the undersigned under this guaranty shall, notwithstanding any such notice of discontinuance, remain fully in effect until all such Liabilities (including any extensions or renewals of any thereof) and all such interest and expenses shall have been paid in full. 4. The undersigned further agrees that, if at any time all or any part of any payment theretofore applied by the Agent or the Lenders to any of the Liabilities is or must be rescinded or returned by the Agent or the Lenders for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of the Debtor), such Liabilities shall, for the purposes of this guaranty, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by the Agent or the Lenders, and this guaranty shall continue to be effective or be reinstated, as the case may be, as to such Liabilities, all as though such application by the Agent or the Lenders had not been made. 171 5. The Agent may, from time to time, whether before or after any discontinuance of this guaranty, at its sole discretion and without notice to the undersigned, take any or all of the following actions: (a) retain or obtain a security interest in any property to secure any of the Liabilities or any obligation hereunder, (b) retain or obtain the primary or secondary obligation of any obligor or obligors, in addition to the undersigned, with respect to any of the Liabilities, (c) extend or renew for one or more periods (whether or not longer than the original period), or alter or exchange, any of the Liabilities, or release or compromise any obligation of the undersigned hereunder or any obligation of any nature of any other obligor with respect to any of the Liabilities, (d) release its security interest in, or surrender, release or permit any substitution or exchange for, all or any part of any property securing any of the Liabilities or any obligation hereunder, or extend or renew for one or more periods (whether or not longer than the original period) or release, compromise, alter or exchange any obligations of any nature of any obligor with respect to any such property, and (e) resort to the undersigned for payment of any of the Liabilities, whether or not the Agent (i) shall have resorted to any property securing any of the Liabilities or any obligation hereunder or (ii) shall have proceeded against any other obligor primarily or secondarily obligated with respect to any of the Liabilities (all of the actions referred to in preceding clauses (i) and (ii) being hereby expressly waived by the undersigned). 6. Any amounts received by the Agent from whatsoever source on account of the Liabilities may be applied by it toward the payment of such of the Liabilities, and in such order of application, as the Agent may from time to time elect. 7. No payment made by or for the account of the undersigned pursuant to this guaranty shall entitle the undersigned by subrogation or otherwise to any payment by the Debtor or from or out of any property of the Debtor and the undersigned shall not exercise any right or remedy against the Debtor or any property of the Debtor by reason of any performance by the undersigned of this guaranty. The undersigned waives, to the fullest extent permitted by law, all rights of the undersigned against the Debtor, arising out of any payment by the undersigned under this guaranty, whether arising by way of any subrogation, contribution, reimbursement or otherwise and agrees that, to the extent that any such rights may not be waived under applicable law, it will contribute such rights to the Debtor as a capital contribution concurrently with the arising of such rights. 8. The undersigned hereby expressly waives: (a) notice of the acceptance by the Agent of this guaranty, (b) notice of the 172 existence or creation or non-payment of all or any of the Liabilities, (c) presentment, demand, notice of dishonor, protest and all other notices whatsoever, and (d) all diligence in collection or protection of or realization upon the Liabilities or any thereof, any obligation hereunder, or any security for or guaranty of any of the foregoing. 9. The Lenders may, from time to time, without notice to the undersigned, assign or transfer any or all of the Liabilities or any interest therein; and, notwithstanding any such assignment or transfer or any subsequent assignment or transfer thereof, such Liabilities shall be and remain Liabilities for the purposes of this guaranty, and each and every immediate and successive assignee or transferee of any of the Liabilities or of any interest therein shall, to the extent of the interest of such assignee or transferee in the Liabilities, be entitled to the benefits of this guaranty to the same extent as if such assignee or transferee were a Lender; provided, however, that, unless the assigning or transferring Lender shall otherwise consent in writing, such Lender shall have an unimpaired right, prior and superior to that of any such assignee or transferee, to enforce this guaranty, for the benefit of the Lender, as to those of the Liabilities which the Lender has not assigned or transferred. 10. The undersigned hereby warrants to the Agent and the Lenders that the undersigned now has and will continue to have independent means of obtaining information concerning the affairs, financial condition and business of the Debtor. The Agent and the Lenders shall not have any duty or responsibility to provide the undersigned with any credit or other information concerning the affairs, financial condition or business of the Debtor which may come into the Agent's or any of the Lenders' possession. 11. The undersigned hereby warrants and agrees that: (a) the undersigned is a corporation duly existing and in good standing under the laws of the state of its incorporation, and the undersigned is duly qualified and in good standing and authorized to do business in each jurisdiction where, because of the nature of its activities or properties, such qualification is required, (b) the undersigned has full corporate power and authority to execute and deliver this guaranty, (c) the execution, delivery and performance by the undersigned of this guaranty are within the undersigned's corporate powers, have been duly authorized by all necessary action, have received all necessary governmental approval (if any shall be required) and do not and will not contravene or conflict with any provision of law or of the organizational documents of the undersigned or of any agreement binding upon the undersigned, (d) this guaranty is the legal, 173 valid and binding obligation of the undersigned enforceable against the undersigned in accordance with its terms, except as enforceability may be limited by bankruptcy or other laws relating to or affecting creditors' rights generally or by equitable principles, and (e) this guaranty will directly or indirectly benefit the undersigned. 12. No delay on the part of the Agent in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Agent of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy; nor shall any modification or waiver of any of the provisions of this guaranty be binding upon the Agent except as expressly set forth in a writing duly signed and delivered on behalf of the Agent for the benefit of the Lenders. No action of the Agent permitted hereunder shall in any way affect or impair the rights of the Agent and the obligations of the undersigned under this guaranty. For the purposes of this guaranty, Liabilities shall include all obligations of the Debtor to the Agent and the Lenders, notwithstanding any right or power of the Debtor or anyone else to assert any claim or defense as to the invalidity or unenforceability of any such obligation, and no such claim or defense shall affect or impair the obligations of the undersigned hereunder. The obligations of the undersigned under this guaranty shall be absolute and unconditional irrespective of any circumstance whatsoever which might constitute a legal or equitable discharge or defense of the undersigned. The undersigned hereby acknowledges that there are no conditions to the effectiveness of this guaranty. 13. 13. This guaranty shall be binding upon the undersigned, and upon any successors and assigns of the undersigned; and to the extent that the Debtor or any of the undersigned is either a partnership or a corporation, all references herein to the Debtor and to the undersigned, respectively, shall be deemed to include any successor or successors, whether immediate or remote, to such partnership or corporation. If more than one party shall execute this guaranty, the term "undersigned," as used herein, shall mean all parties executing this guaranty and each of them, and all such parties shall be jointly and severally obligated hereunder. 14. THIS GUARANTY HAS BEEN DELIVERED AT CHICAGO, ILLINOIS, AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO ITS PRINCIPLES OF CHOICE OF LAW. WHEREVER POSSIBLE EACH PROVISION OF THIS GUARANTY SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS GUARANTY SHALL BE PROHIBITED BY OR INVALID UNDER SUCH LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT 174 OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS GUARANTY. 15. The undersigned hereby irrevocably agrees that any legal action or proceeding pertaining to this guaranty may be brought in the courts of the State of Illinois, County of Cook, or of the United States of America for the Northern District of Illinois. The undersigned hereby irrevocably agrees that service of process in such action or proceeding may be made either by mailing, by registered or certified mail, postage prepaid, a copy of the summons or complaint, or other legal process in such action or proceeding to the undersigned at the address shown on the signature page hereof. Service of process in any such action or proceeding, effected as aforesaid, shall be effective upon receipt by the undersigned and shall be deemed personal service upon the undersigned and shall be legal and binding upon the undersigned for all purposes. The undersigned hereby waives, to the fullest extent permitted by law, any objection it may now or hereafter have to the laying of venue in any such action or proceeding in any such court as well as any right it may now or hereafter have to remove any such action or proceeding, once commenced, to another court on the grounds of forum non conveniens or otherwise. 16. The undersigned hereby expressly waives any right to a trial by jury in any action or proceeding to enforce or defend any rights (a) under this guaranty or under any amendment, instrument, document or agreement delivered or which may in the future be delivered in connection herewith or (b) arising from any banking relationship existing in connection with this guaranty, and agrees that any such action or proceeding shall be tried before a court and not before a jury. * * * * * 175 IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed as of this 12th day of June, 1996. DEVRY INC. By: /s/Ronald L. Taylor Name: Ronald L. Taylor Title: President Address: One Tower Lane Suite 1000 Oakbrook Terrace, Illinois 60181 EX-10 3 176 EXHIBIT 10(d) ------------- DeVRY INC. PROFIT SHARING RETIREMENT PLAN ----------------------------------------- (As Amended and Restated Effective as of July 1, 1992) Mayer, Brown & Platt Chicago 177 I, , Secretary of Keller Graduate School of Management, Inc., hereby certify that the attached document is a full, true and complete copy of DeVRY INC. PROFIT SHARING RETIREMENT PLAN, as presently in effect. Dated this day of , 1992. ---------------------- Secretary as Aforesaid (SEAL) 178 TABLE OF CONTENTS PAGE ---- SECTION 1 General 1 1.1. History, Purpose and Effective Date 1 1.2. Related Companies and Employers 1 1.3. Trust Agreement, Plan Administration 1 1.4. Plan Year 2 1.5. Valuation Date 2 1.6. Applicable Laws 2 1.7. Gender and Number 2 1.8. Notices 2 1.9. Form and Time of Elections 2 1.10. Evidence 2 1.11. Action by Employers 2 1.12. No Reversion to Employers 3 1.13. Plan Supplements 3 1.14. Defined Terms 3 SECTION 2 Participation in Plan 4 2.1. Eligibility for Participation 4 2.2. Inactive Participation 4 2.3. Plan Not Contract of Employment 4 2.4. Leased Employees 5 SECTION 3 Service 6 3.1. Year of Service 6 3.2. Hour of Service 6 3.3. One Year Break in Service 7 SECTION 4 Pre-Tax and Rollover Contributions 8 4.1. Amount of Pre-Tax Contributions 8 4.2. Payment of Pre-Tax Contributions 8 4.3. Variation, Discontinuance and Resumption of Pre-Tax Contributions 8 4.4. Rollover Contributions and Transfers 8 4.5. Compensation 9 SECTION 5 Employer Contributions 10 5.1. Matching Contributions 10 5.2. Discretionary Profit Sharing Contributions 10 5.3. Limitations on Amount of Employer Contributions 10 5.4. Payment of Employer Contributions 10 179 SECTION 6 Investment of the Trust Fund 11 6.1. Investment Funds 11 6.2. Investment Fund Accounting 12 6.3. Investment Fund Elections 12 6.4. Transfers Between Investment Funds 12 SECTION 7 Plan Accounting 13 7.1. Participants' Accounts 13 7.2. Adjustment of Participants' Accounts 13 7.3. Allocation and Crediting of Contributions and Forfeitures 15 7.4. Statement of Plan Interest 16 SECTION 8 Limitations on Compensation, Contributions and Allocations 17 8.1. Reduction of Contribution Rates 17 8.2. Limitations on Annual Additions 17 8.3. Excess Annual Additions 18 8.4. Combined Plan Limitation 18 8.5. $7,000 Limitation 18 8.6. Code Section 401(k)(3) Testing 19 8.7. Correction Under Section 401(k) Test 21 8.8. Code Section 401(m)(2) Testing 21 8.9. Correction Under Section 401(m) Test 22 8.10. Multiple Use of Alternative Limitation 23 8.11. Highly Compensated 23 8.12. Plan Disaggregation 24 SECTION 9 Vesting and Termination Dates 25 9.1. Determination of Vested Interest 25 9.2. Accelerated Vesting 25 9.3. Termination Date 25 9.4. Distribution Only Upon Separation From Service 25 SECTION 10 Loans and Withdrawals of Contributions While Employed 27 10.1. Loans to Participants 27 10.2. Withdrawals on Account of Hardship 29 10.3. Hardship Withdrawals 30 10.4. Withdrawals On or After Age 59-1/2 31 10.5. Form of Withdrawal 31 SECTION 11 Distributions 33 11.1. Distributions to Participants After Termination of Employment 33 180 11.2. Direct Rollover 34 11.3. Distributions to Beneficiaries 34 11.4. Special Rules Governing Annuity Elections 35 11.5. Limits on Commencement and Duration of Distributions 36 11.6. Beneficiary Designations 38 11.7. Facility of Payment 39 11.8. Interests Not Transferable 39 11.9. Absence of Guaranty 39 11.10. Missing Participants or Beneficiaries 40 11.11. Treatment of Nonvested and Partially Vested Accounts 40 11.12. Application of Forfeitures 41 11.13. Form of Payment 41 11.14. Disability Distribution 41 SECTION 12 The Committee 42 12.1. Membership and Authority 42 12.2. Allocation and Delegation of Committee Responsibilities and Powers 43 12.3. Uniform Rules 43 12.4. Information to be Furnished to Committee 43 12.5. Committee's Decision Final 43 12.6. Exercise of Committee's Duties 43 12.7. Remuneration and Expenses 44 12.8. Indemnification of the Committee 44 12.9. Resignation or Removal of Committee Member 44 12.10. Appointment of Successor Committee Members 44 SECTION 13 Amendment and Termination 45 13.1. Amendment 45 13.2. Termination 45 13.3. Merger and Consolidation of the Plan, Transfer of Plan Assets 45 13.4. Distribution on Termination and Partial Termination 46 13.5. Notice of Amendment, Termination or Partial Termination 46 Appendix A - Defined Terms Supplement A - Top Heavy 181 DeVRY INC. PROFIT SHARING RETIREMENT PLAN ----------------------------------------- (As Amended and Restated Effective as of July 1, 1992) SECTION 1 General ------- 1.1. History, Purpose and Effective Date. Effective June 30, 1979, Keller Graduate School of Management, Inc., a Delaware corporation (the "Company"), established the Keller Graduate School of Management, Inc. Profit Sharing Plan (the "Plan") so that it, and each Related Company (as defined in subsection 1.2) which, with the consent of the Company, adopts the Plan may assist their eligible employees in providing for their future security. The Plan was amended and restated effective as of July 1, 1987. Effective as of July 1, 1991, the Plan was renamed the DeVRY Inc. Profit Sharing Retirement Plan. The following provisions constitute an amendment, restatement and continuation of the Plan as in effect immediately prior to July 1, 1992, the "Effective Date" of the Plan as set forth herein. To the extent that any provisions of the Plan as set forth herein specifically provide for an effective date prior to July 1, 1992, such provisions shall constitute an amendment of the Plan as in effect on such date. The Plan is intended to qualify as a profit sharing plan under section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"). 1.2. Related Companies and Employers. The term "Related Company" means any corporation or trade or business during any period during which it is, along with the Company, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in sections 414(b) and 414(c), respectively, of the Code. The Company and each Related Company, which, with the Company's consent, adopts the Plan are referred to below collectively as the "Employers" and individually as an "Employer". 1.3. Trust Agreement, Plan Administration. All contribu tions made under the Plan will continue to be held, managed and controlled by one or more trustees (the "Trustee") acting under a Trust which forms a part of the Plan. The terms of the Trust as in effect on the Effective Date are set forth in a Trust Agreement known as DeVRY Inc. Profit Sharing Retirement Trust. The authority to control and manage the operation and administration of the Plan is vested in a committee (the "Committee") which consists of one or more persons as described in subsection 12.1. The members of the Committee shall be the "named fiduciaries", as described in section 402 of the Employee 182 Retirement Income Security Act of 1974, as amended ("ERISA"), with respect to their authority under the Plan. Except as otherwise expressly provided in subsection 12.1, the Company shall be the administrator of the Plan and shall have the rights, duties and obligations of an "administrator" as that term is defined in section 3(16)(A) of ERISA and of a "plan administrator" as that term is defined in section 414(g) of the Code. 1.4. Plan Year. The term "Plan Year" means the twelve- consecutive-month period beginning on each July 1. 1.5. Valuation Date. Effective August 1, 1993, the term "Valuation Date" means the last day of each calendar month. From the period July 1, 1992 until July 31, 1993, the term "Valuation Date" means the last day of each calendar quarter. 1.6. Applicable Laws. The Plan shall be construed and administered in accordance with the internal laws of the State of Illinois to the extent that such laws are not preempted by the laws of the United States of America. 1.7. Gender and Number. Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular. 1.8. Notices. Any notice or document required to be filed with the Committee under the Plan will be properly filed if delivered or mailed by registered mail, postage prepaid, to the Committee, in care of the Company, at its principal executive offices. Any notice required under the Plan may be waived by the person entitled to notice. 1.9. Form and Time of Elections. Unless otherwise specified herein, each election permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification or revocation thereof, shall be in writing filed with the Committee at such times and in such form as the Committee shall require. 1.10. Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties. 1.11. Action by Employers. Any action required or permitted to be taken by any Employer which is a corporation shall be by resolution of its Board of Directors, or by a duly authorized person or persons. Any action required or permitted 183 to be taken by any Employer which is a partnership shall be by a general partner of such partnership or by a duly authorized person or persons. 1.12. No Reversion to Employers. No part of the corpus or income of the Trust shall revert to any Employer or be used for, or diverted to, purposes other than for the exclusive benefit of Participants and other persons entitled to benefits under the Plan, except as specifically provided in the Trust Agreement. 1.13. Plan Supplements. The provisions of the Plan as applied to any Employer or any group of employees of any Employer may, with the consent of the Company, be modified or supplemented from time to time by the adoption of one or more Supplements. Each Supplement shall form a part of the Plan as of the Supplement's effective date. In the event of any inconsistency between a Supplement and the Plan document, the terms of the Supplement shall govern. 1.14. Defined Terms. Terms used frequently with the same meaning are indicated by initial capital letters, and are defined throughout the Plan. Appendix A contains an alphabetical listing of all such terms and the subsections in which they are defined. 184 SECTION 2 Participation in Plan --------------------- 2.1. Eligibility for Participation. Subject to the conditions and limitations of the Plan, each individual who was a Participant in the Plan immediately prior to the Effective Date will continue as such on and after that date, and each employee of an Employer who was not a Participant in the Plan immediately prior to the Effective Date will become a "Participant" in the Plan on the first day of the first calendar quarter coincident with or following the Effective Date on which he meets the following requirements: (a) he has completed one Year of Service (as defined in subsection 3.1); (b) he is not a member of a collective bargaining unit as to which retirement benefits have been the subject of good faith bargaining unless the Plan has been extended to the collective bargaining unit under a currently effective collective bargaining agreement; and (c) for periods beginning on and after April 1, 1993, he is not a temporary employee of an Employer (that is, an employee who is not a regular full-time employee or a regular part-time employee). Notwithstanding the foregoing provisions of this subsection 2.1, if an individual is employed or reemployed by an Employer on or after the first calendar quarter coincident with or next following the date on which he first meets the requirements of paragraph (a) above, he shall become a Participant in the Plan immediately upon meeting the requirements of paragraphs (b) and (c) above if such individual has not incurred a One Year Break in Service (described in subsection 3.3) or, if the individual has incurred a One Year Break in Service, retroactive, from the first day of the Plan Year during which he again completes a Year of Service. 2.2. Inactive Participation. Once an eligible employee becomes a Participant in the Plan, he will remain a Participant as long as he continues to have an Account balance under the Plan for all purposes under the Plan except the contribution provisions of Sections 4 and 5 and, unless such Participant is an employee of an Employer or a Related Company, the withdrawal and loan provisions of Section 10. 185 2.3. Plan Not Contract of Employment. The Plan does not constitute a contract of employment, and participation in the Plan will not give any employee or Participant the right to be retained in the employ of any Employer nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. 2.4. Leased Employees. If a person satisfies the requirements of section 414(n) of the Code and applicable Treasury regulations for treatment as a "Leased Employee", such Leased Employee shall not be eligible to participate in this Plan or in any other plan maintained by an Employer or a Related Company which is qualified under section 401(a) of the Code, but, to the extent required by section 414(n) of the Code and applicable Treasury regulations, such person shall be treated as if the services performed by him in such capacity were performed by him as an employee of a Related Company which has not adopted the Plan; provided, however, that no such service shall be credited: (a) for any period during which not more than 20 percent of the workforce of the Employers and the Related Companies that is not Highly Compensated (as defined in subsection 8.11) consists of Leased Employees and the Leased Employee is a participant in a money purchase pension plan maintained by the leasing organization which (i) provides for a nonintegrated employer contribution of at least 10 percent of compensation, (ii) provides for full and immediate vesting, and (iii) covers all employees of the leasing organization (beginning with the date they become employees), other than those employees excluded under section 414(n)(5) of the Code; or (b) for any other period unless the Leased Employee provides satisfactory evidence to the Employer or Related Company that he meets all of the conditions of this subsection 2.4 and applicable law required for treatment as a Leased Employee. 186 SECTION 3 Service ------- 3.1. Year of Service. The term "Year of Service" means, with respect to any employee, any Plan Year during which he completes at least 1,000 Hours of Service (as defined in subsection 3.2), subject to the following: (a) For purposes of subsection 2.1: (i) the term Year of Service shall not include any Plan Year commencing prior to the date on which the employee first completes an Hour of Service; (ii) the 12-consecutive-month period commencing on the date on which the employee first completes an Hour of Service shall be deemed to be a Year of Service if he completes at least 1,000 Hours of Service during such 12-consecutive-month period. (b) For purposes of Section 9, if an individual is employed or reemployed by an Employer after incurring a One Year Break in Service, his number of Years of Service accrued prior to such break shall be counted only if the individual completes a Year of Service following the date of his employment or reemployment. (c) For all purposes of the Plan, a Participant's number of Years of Service accrued after five consecutive One Year Breaks in Service shall be disregarded for purposes of determining the nonforfeitable percentage of his benefit under the Plan derived from Employer contributions which accrued prior to such break. Service shall include service with DeVRY Inc. and Bell & Howell Company prior to August 7, 1987 for those individuals who were employees of DeVRY Inc. on such date and eligible to participate in the Bell & Howell Profit Sharing Retirement Plan. 3.2. Hour of Service. The term "Hour of Service" means, with respect to any employee, each hour for which he is paid or entitled to payment for the performance of duties for an Employer or a Related Company or for which back pay, irrespective of mitigation of damages, has been awarded to the employee or agreed to by an Employer or a Related Company, subject to the following: 187 (a) An employee shall be credited with the number of regularly scheduled working hours included in the time period on the basis of which payment to the employee is calculated for any period during which he performs no duties for an Employer or a Related Company (irrespective of whether the employment relationship has terminated) by reason of a vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence but for which he is directly or indirectly paid or entitled to payment by an Employer or a Related Company; provided, however, that an employee shall not be credited with more than 501 Hours of Service under this paragraph (a) for any single continuous period during which he performs no duties for an Employer or a Related Company. Payments considered for purposes of the foregoing sentence shall include payments unrelated to the length of the period during which no duties are performed but shall not include payments made solely as reimbursement for medically-related expenses or solely for the purpose of complying with applicable workmen's compensation, unemployment compensation or disability insurance laws. (b) Solely for purposes of determining whether an employee has incurred a One Year Break in Service, the employee shall be credited, to the extent not otherwise credited in accordance with the foregoing provisions of this subsection 3.2, with 8 Hours of Service for each day (up to a maximum of 40 Hours of Service for each calendar week) for any period during which the employee is absent from active employment with an Employer or Related Company by reason of the employee's pregnancy, the birth of a child of the employee, or the placement of a child with the employee in connection with the employee's adoption of such child, and, in each case, the care of such child immediately after its birth or placement; provided that in no event shall more than 501 Hours of Service be credited under this paragraph (b). Hours of Service credited in accordance with the foregoing sentence shall be credited for the Plan Year during which the absence begins to the extent that such crediting would prevent the employee from incurring a One Year Break in Service during that year and, in each other case, shall be credited in the immediately following Plan Year. 3.3. One Year Break in Service. The term "One Year Break in Service" means, with respect to any employee, any Plan Year during which he completes fewer than 501 Hours of Service. 188 SECTION 4 Pre-Tax and Rollover Contributions ---------------------------------- 4.1. Amount of Pre-Tax Contributions. Subject to the limitations set forth in Section 8 and such additional rules as the Committee may establish on a uniform and nondiscriminatory basis, for any Plan Year a Participant may elect to have his salary or wages reduced and a corresponding amount contributed on his behalf to the Plan by his Employer as a "Pre-Tax Contribution", which amount shall not be less than 2 percent nor more than 15 percent of his Compensation (as defined in subsection 4.5) for that year; provided, however, that for periods ending before April 1, 1993, such amount shall not be greater than 10 percent of his Compensation. Any election pursuant to this subsection 4.1 shall be submitted to the Committee in such form and at such time as the Committee may require. 4.2. Payment of Pre-Tax Contributions. Pre-Tax Contributions shall be made each payroll period, and shall be paid to the Trustee by the Employer on the earliest date on which such contributions can reasonably be segregated from the Employer's general assets, but not later than the last day of the month following the month of the payroll deduction. 4.3. Variation, Discontinuance and Resumption of Pre-Tax Contributions. Subject to such rules and restrictions as the Committee may establish on a uniform and nondiscriminatory basis, a Participant may elect to change his Pre-Tax Contribution rate (but not retroactively) within the range specified in subsection 4.1, to discontinue having contributions made for him at any pay period or to have them resumed; provided, however, a Participant who discontinues his Pre-Tax Contributions (including by reason of any suspension required under paragraph 10.3(c)) may not resume such contributions until the first day of the calendar quarter coincident with or next following the 6-month period beginning on the date that such contributions are discontinued. 4.4. Rollover Contributions and Transfers. Subject to the terms of this subsection, effective as of January 1, 1991, a Participant or an employee who meets the requirements of subsection 2.1 other than paragraph (a) thereof may, with the consent of the Committee: (a) for years beginning on or after January 1, 1993, contribute part or all of an eligible rollover contribution (as defined in section 402 of the Code) (also referred to as a "direct rollover"), 189 (b) for years ending before January 1, 1993, contribute part or all of a qualified total distribution (as defined in section 402(a)(5)(E) of the Code), or (c) for all years, make a rollover contribution (as described in section 408(d)(3) of the Code) (a "participant rollover") which, under the applicable provisions of the Code, is permitted to be rolled over to an eligible retirement plan provided that such contribution must be paid over to the Trustee on or before the sixtieth day after receipt by the Participant or employee of the distribution. In addition, a plan qualified under section 401(a) of the Code and holding amounts for the benefit of a Participant or an employee may, with such individual's consent, and the consent of the Committee, transfer such amounts to the Plan; provided, however, no amounts may be transferred pursuant to this subsection 4.4 if such amounts are subject to the provisions of section 401(a)(11) of the Code, and further provided no transfer may be made of amounts unless the Plan is not required, pursuant to Q&A-3(b) of Treas. Reg.,1.411(d)-4, to preserve any section 411(d)(6) protected benefits accrued under the transferor plan with respect to such amounts. If an employee who is not otherwise a Participant makes a rollover contribution to the Plan, he shall be treated as a Participant only with respect to the amounts so contributed or transferred until he has met all of the requirements for Plan participation set forth in subsection 2.1. 4.5. Compensation. A Participant's "Compensation" shall mean his total wages and other compensation as shown in Box 1 (or predecessor or successor thereto) on any Form W-2 issued by an Employer for that portion of the Plan Year during which he is eligible to participate in the Plan, determined prior to any reductions thereof made in accordance with the provisions of any plan maintained by an Employer and intended to meet the requirements of section 125 or 401(k) of the Code and excluding noncash prizes, taxable relocation, taxable educational assistance, severance and amounts realized from the exercise of stock options, up to a maximum amount for the Plan Year of $150,000 ($200,000 for Plan Years beginning prior to July 1, 1994) or such other amount as may be permitted for any year under section 401(a)(17) of the Code, taking into account for purposes of such limitation any proration required in situations where "family members" (as defined in sections 401(a)(17) and 414(q)(6) of the Code) and their Compensation must be aggregated, or where Compensation is computed with respect to a period of less than a 190 full year (other than on account of mid-year commencement or cessation of active participation in the Plan). 191 SECTION 5 Employer Contributions ---------------------- 5.1. Matching Contributions. Subject to the conditions and limitations of Section 8, each Employer shall make a "Matching Contribution" to the Plan on behalf of each Participant employed by such Employer who makes a Pre-Tax Contribution to the Plan in an amount equal to one percent of such Participant's Compensation for the month that any such Pre-Tax Contribution is made. 5.2. Discretionary Profit Sharing Contributions. Subject to the conditions and limitations of Section 8, each Employer shall make a "Discretionary Profit Sharing Contribution" for a Plan Year in the amount, if any, determined by such Employer in its sole discretion. Any such contribution shall be allocated to Participants' Accounts (defined in subsection 7.1) in accordance with the provisions of subsection 7.3. 5.3. Limitations on Amount of Employer Contributions. In no event shall the sum of the Discretionary Profit Sharing Contribution and Matching Contribution made by an Employer for any Plan Year exceed the limitations imposed by section 404 of the Code on the maximum amount deductible on account thereof by that Employer for that year. 5.4. Payment of Employer Contributions. Each Employer's Discretionary Profit Sharing Contribution and Matching Contribution under the Plan for any Plan Year shall be paid to the Trustee, without interest, no later than the time prescribed by law for filing the Employer's federal income tax return, including any extensions thereof. 192 SECTION 6 Investment of the Trust Fund ---------------------------- 6.1. Investment Funds. One or more "Investment Funds" may be established under the Trust from time to time for the investment of Participants' Accounts. As of July 1, 1994, the Investment Funds are as follows: (a) a "Value Equity Fund", which shall be invested and reinvested in common or capital stocks of issuers other than a Related Company (except that the Value Equity Fund may be invested in common or capital stock of a Related Company to the extent that any such stock is held in a commingled fund), bonds, debentures, or preferred stocks converted into such common or capital stocks, and other similar types of investments; (b) a "Growth Equity Fund", which shall be invested and reinvested in common or capital stocks that are expected to have high growth rates of issuers other than a Related Company (except that the Growth Equity Fund may be invested in common or capital stock of a Related Company to the extent that any such stock is held in a commingled fund), bonds, debentures, or preferred stocks converted into such common or capital stocks, and other similar types of investments; (c) a "Fixed Income Fund", which shall be invested primarily in intermediate-term bonds, and in part in commercial mortgages, the income or return from which is fixed, limited or determinable in advance by the terms of a contract, document or instrument creating or evidencing such property or interest in property, or by the terms of the acquisition thereof; (d) a "Balanced Fund", which shall be invested and reinvested partly in common or capital stocks and partly in bonds of issuers other than a Related Company (except that the Balanced Fund may be invested in Common Stocks or bonds of a Related Company to the extent such stocks or bonds are held in a commingled fund); (e) a "Money Market Reserves Fund" which shall be invested and reinvested in short term securities issued by the U.S. Government; 193 (f) a "Stock Fund", which shall be invested by the Trustee solely in qualifying employer securities of DeVRY Inc. purchased by the Trustee on the open market; and (g) a "Loan Fund", which shall consist only of promissory notes evidencing loans to Participants in accordance with subsection 10.1. 6.2. Investment Fund Accounting. The Committee shall maintain or cause to be maintained separate subaccounts for each Participant in each of the Investment Funds to separately reflect his interests in each such Fund and the portion thereof that is attributable to each of his Accounts. 6.3. Investment Fund Elections. At the time that a Participant enrolls in the Plan and effective as of any January 1, April 1, July 1, or October 1 thereafter, each Participant may specify the percentage of contributions and forfeitures (as provided in subsection 11.11) subsequently credited to his Accounts that are to be invested in each of the Investment Funds, subject to such rules and limitations as the Committee may determine. As of July 1, 1994, a Participant's investment elections may be made in multiples of 5 percent (but no less than 10% to any one Investment Fund), provided, that allocations to the Stock Fund shall not exceed 25% of contributions and forfeitures. Separate elections with respect to different types of contributions may not be made. During any period in which no direction is on file with the Committee, contributions and forfeitures credited to a Participant shall be invested in the Money Market Reserves Fund. Any elections under this subsection 6.3 and subsection 6.4 shall be made at such times and in such form as the Committee may require. 6.4. Transfers Between Investment Funds. Subject to the provisions of subsection 6.3 and such administrative rules as may be applicable to any Investment Fund, effective as of the first day of any calendar quarter, a Participant may elect to transfer the value of his Accounts held in any Investment Fund to any other Investment Fund then made available to such Participant; provided, however, no transfers may be made from another Investment Fund to the Stock Fund and no amounts may be transferred directly from the Fixed Income Fund to the Money Market Reserves Fund; further provided, that such transfers shall be subject to such rules and limitations as the Committee may establish. Subject to the provisions of this subsection 6.4, as of July 1, 1994, transfers may be made in multiples of 5 percent (but no less than 10% may transferred to any one Investment Fund). 194 SECTION 7 Plan Accounting --------------- 7.1. Participants' Accounts. The Committee shall maintain (or cause to be maintained) the following "Accounts" in the name of each Participant: (a) a "Pre-Tax Account," which shall reflect Pre-Tax Contributions, rollover contributions and transferred amounts (other than after-tax amounts included in paragraph (d) next below), if any, made by the Participant or on his behalf and the income, losses, appreciation and depreciation attributable thereto; (b) a "Matching Account," which shall reflect Matching Contributions, if any, made on his behalf and forfeitures, if any, allocated to him in accordance with subsection 7.3 and the income, losses, appreciation and depreciation attributable thereto; (c) a "Discretionary Account", which shall reflect Discretionary Profit Sharing Contributions, if any, and forfeitures, if any, allocated to him in accordance with subsection 7.3, and the income, losses, appreciation and depreciation attributable thereto; and (d) an "After-Tax Transfer Account," which shall reflect transferred amounts attributable to after tax- contributions made by the Participant, if any, and the income, losses, appreciation and depreciation attributable thereto. The Accounts provided for in this subsection 7.1 shall be for accounting purposes only, and there shall be no segregation of assets within the Investment Funds among the separate Accounts. Reference to the "balance" in a Participant's Accounts means the aggregate of the balances in the subaccounts maintained in the Investment Funds attributable to these Accounts. 7.2. Adjustment of Participants' Accounts. As of each Valuation Date prior to or coincident with his Distribution Date (as described in subsection 11.1), the Accounts of a Participant shall be adjusted in the following manner and order: 195 (a) first, the balances of the subaccounts of all such Participants under each of the Investment Funds, other than the Loan Fund, shall be adjusted upward or downward, pro rata, according to the balances so that the total of the balances equal the then Fair Market Value (as defined below) of such Investment Fund; (b) next, there shall be allocated and credited to each Participant's Loan Fund subaccount and charged to the Participant's subaccounts under the other Investment Funds any loan made to such Participant and any interest which has accrued thereon since the last preceding Valuation Date in accordance with paragraph 10.1(b); (c) next, there shall be charged to each Participant's Loan Fund subaccount and credited to the Participant's subaccounts under the other Investment Funds in accordance with paragraph 10.1(e) any payments of principal and interest received by the Trustee from such Participant since the last preceding Valuation Date; (d) next, there shall be allocated and credited to each such Participant's appropriate Account the contributions and forfeitures, if any, that are to be allocated and credited as of that date in accordance with the provisions of subsection 7.3; and (e) finally, there shall be charged to the proper subaccount for each Account of each Participant under each of the Investment Funds all payments, withdrawals, distributions and quarterly transfers among Investment Funds made to or on account of that Participant since the last preceding Valuation Date that have not been charged previously. The "Fair Market Value" of an Investment Fund as at any date means the then net worth of that Investment Fund, as determined by the Trustee in accordance with the provisions of the Trust and, to the extent held under that fund, exclusive of: (i) Discretionary Profit Sharing Contributions, if any, received by the Trustee for the period elapsed since the close of the last preceding Plan Year; (ii) Pre-Tax and Matching Contributions, rollover contributions and transferred amounts, if any, 196 received by the Trustee for the period elapsed since the last preceding Valuation Date; (iii) forfeitures, if any, arising under the Plan during the period elapsed since the close of the last preceding Plan Year; and (iv) any payments of interest and repayments of principal with respect to any loans under subsection 10.1 received by the Trustee since the last preceding Valuation Date. 7.3. Allocation and Crediting of Contributions and Forfeitures. Subject to the provisions of Section 8, contributions and forfeitures shall be allocated and credited as follows: (a) Pre-Tax Contributions, Matching Contributions, rollover contributions and transferred amounts made by or on behalf of a Participant for any month (or calendar quarter for periods prior to August 1, 1993) shall be credited to that Participant's appropriate Accounts as of the Valuation Date coinciding with or next following the last day of such month (or calendar quarter). (b) As of the last day of each Plan Year, the Discretionary Profit Sharing Contribution of each Employer for that Plan Year and any forfeitures pursuant to subsection 11.11 attributable to prior Discretionary Profit Sharing Contributions by an Employer shall be allocated among and credited to the appropriate Accounts of Participants who completed a Year of Service during that Plan Year, excluding Participants who were not employed by the Employer on the last day of the year, but including Participants who were not employed by the Employer on the last day of that year because of death, retirement on or after age 62 or total and permanent disability, pro rata, according to the proportion the Participant's total units (described below) with respect to such year bear to the total units awarded to all Participants with respect to such year. For purposes of this subsection 7.3, a Participant shall receive one unit for each full $100 of Compensation received by him during the year if he has completed fewer than 10 Years of Service with the Employers and Related Companies or two units for each full $100 of Compensation received by him during the year if he has completed ten or more Years of Service with the Employers and Related Companies as of the last day of the Plan Year. 197 (c) As of the last day of each Plan Year, any forfeitures pursuant to section 11.11 attributable to prior Matching Contributions by an Employer shall be allocated among and credited to the appropriate Accounts of Participants in the manner described in paragraph (b) above; provided, however, only Participants who made Pre-Tax Contributions during such Plan Year shall be eligible for an allocation and for purposes of determining the proportion of such a Participant's total units, only Participants who made Pre-Tax Contributions during such year shall be included. For purposes of this Section 7, Discretionary Profit Sharing Contributions for any Plan Year shall be considered to have been made on the last day of that year, regardless of when paid to the Trustee. 7.4. Statement of Plan Interest. As soon as practicable after the last day of each Plan Year, the Committee shall provide each Participant with a statement reflecting the balances of his Accounts. 198 SECTION 8 Limitations on Compensation, Contributions and Allocations ---------------------------------------------------------- 8.1. Reduction of Contribution Rates. To conform the operation of the Plan to sections 401(a)(4), 401(k)(3), 401(m), 402(g) and 415(c) of the Code, the Committee may unilaterally modify or revoke any Pre-Tax Contribution election made by a Participant pursuant to subsection 4.1, or may reduce (to zero if necessary) the level of Matching Contributions to be made on behalf of Highly Compensated Participants pursuant to subsection 5.1. 8.2. Limitations on Annual Addition. Notwithstanding any other provisions of the Plan to the contrary, a Participant's Annual Addition (as defined below) for any Plan Year shall not exceed an amount equal to the lesser of: (a) $30,000 (or, if greater, 1/4 of the dollar limitation in effect under section 415(b)(1)(A) of the Code); or (b) 25 percent of the Participant's Section 415 Compensation (defined below) for that Plan Year , calculated as if each Section 415 Affiliate (defined below) were a Related Company, reduced by any Annual Addition for the Participant for the Plan Year under any other defined contribution plan of an Employer or a Related Company or Section 415 Affiliate, provided that, if any other such plan has a similar provision, the reduction shall be pro rata. The term "Annual Addition" means, with respect to any Participant for any Plan Year the sum of all contributions (excluding rollover contributions and transfers) and forfeitures allocated to a Participant's Accounts under the Plan for such year pursuant to subsection 7.3, regardless of whether any such amounts (or portions thereof) are subsequently distributed in accordance with subsections 8.5, 8.7, 8.9 or 8.10. The term Annual Addition shall also include employer contributions allocated for a Plan Year to any individual medical account (as defined in section 415(l) of the Code) of a Participant and any amount allocated for a Plan Year to the separate account of a Participant for payment of post-retirement medical benefits under a funded welfare benefit plan (as described in section 419A(d)(2) of the Code), which is maintained by an Employer or a Related Company or a Section 415 Affiliate. A Participant's "Section 415 Compensation" shall mean the Participant's Compensation (determined without regard to the limitation under section 401(a)(17) of the Code), less any elective contributions made on 199 the Participant's behalf for the Plan Year to a plan sponsored by an Employer or a Related Company that are not currently includable in income pursuant to sections 125 or 402(a)(8) of the Code. "Section 415 Affiliate" means any entity that would be a Related Company if the ownership test of section 414 of the Code were "more than 50 percent" rather than "at least 80 percent". For purposes of applying the limitations of section 415 of the Code, the limitation year shall be the Plan Year. 8.3. Excess Annual Additions. If, as a result of the allocation of forfeitures, a reasonable error in estimating a Participant's Compensation or such other mitigating circumstances as the Commissioner of Internal Revenue shall prescribe, the Annual Additions for a Participant for a Plan Year exceed the limitations set forth in subsection 8.2, the excess amounts shall be held in suspense as necessary, and credited to such Participant's Account in the next following Plan Year in accordance with Treas. Reg., 1.415-6(b)(6)(ii) after any Pre-Tax Contributions are first returned. Any Pre-Tax Contributions returned to the Participant in accordance with this subsection 8.3 shall be disregarded for purposes of subsections 8.5, 8.6, 8.9 and 8.10. 8.4. Combined Plan Limitation. If a Participant also participates in any defined benefit plan (as defined in section 415(k) of the Code) maintained by an Employer or a Related Company or Section 415 Affiliate, the aggregate benefits payable to, or on account of, the Participant under such plan together with this Plan shall be determined in a manner consistent with section 415(e) of the Code. The benefit provided for the Participant under the defined benefit plan shall be adjusted to the extent necessary so that the sum of the "defined benefit fraction" and the "defined contribution fraction" (as such terms are defined in section 415(e) of the Code and applicable regulations thereunder) calculated with regard to such Participant does not exceed 1.0. For purposes of this subsection 8.4, all qualified defined benefit plans (whether or not terminated) of the Employers, Related Companies and Section 415 Affiliates shall be treated as one defined benefit plan. 8.5. $7,000 Limitation. In no event shall the Pre-Tax Contributions for a Participant under the Plan (together with elective deferrals under any other cash-or-deferred arrangement maintained by an Employer or a Related Company) for any taxable year exceed $7,000 or such other amount as may be permitted under section 402(g) of the Code. If during any taxable year a Participant is also a participant in another cash or deferred arrangement, and if his elective deferrals under such other arrangement together with his Pre-Tax Contributions exceed the maximum amount permitted for the Participant for that year under 200 section 402(g) of the Code, the Participant, not later than March 1 following the close of such taxable year, may request the Committee to direct the Trustee to distribute all or a portion of such excess to him, with any allocable gains or losses for that Plan Year (determined in accordance with any reasonable method adopted by the Committee for that Plan Year that either (i) conforms to the accounting provisions of Section 7 and is consistently applied to the distribution of excess deferrals under this subsection 8.5 and excess contributions under subsections 8.7, 8.9 and 8.10 to all affected Participants, or (ii) satisfies any alternative method set forth in applicable Treasury regulations. Any such request shall be in writing and shall include adequate proof of the existence of such excess, as determined by the Committee in its sole discretion. If the Committee is so notified, such excess amount shall be distributed to the Participant no later than the April 15 following the close of the Participant's taxable year. In addition, if the applicable limitation for a Plan Year happens to be exceeded with respect to this Plan alone, or this Plan and another plan or plans of the Employers and Related Companies, the Committee shall direct such excess Pre-Tax Contributions (with allocable gains or losses) to be distributed to the Participant as soon as practicable after the Committee is notified of the excess deferrals by the Company, an Employer or the Participant, or otherwise discovers the error (but no later than the April 15 following the close of the Participant's taxable year). Notwithstanding the foregoing provisions of this subsection 8.5, the dollar amount of any distribution due hereunder shall be reduced by the dollar amount of any Pre-Tax Contributions previously distributed to the same Participant pursuant to subsection 8.7, provided, however, that for purposes of subsections 8.2 and 8.6, the correction under this subsection 8.5 shall be deemed to have occurred before the correction under subsection 8.7. 8.6. Code Section 401(k)(3) Testing. For any Plan Year, the amount by which the average of the Deferral Percentages (as defined below) of each eligible employee who is Highly Compen sated (the "Highly Compensated Group Deferral Percentage") exceeds the average of the Deferral Percentages of each eligible employee who is not Highly Compensated (the "Non-Highly Compen sated Group Deferral Percentage") shall be less than or equal to either (i) a factor of 1.25 or (ii) both a factor of 2 and a difference of 2. "Deferral Percentage" for any eligible employee for a Plan Year shall be determined by dividing his Pre-Tax Contributions for the year by his Compensation for the year, subject to the following special rules: (a) any employee eligible to participate in the Plan at any time during a Plan Year in accordance with 201 subsection 2.1 (without regard to any suspension imposed by any other provision hereunder) shall be counted, whether or not any Pre-Tax Contributions are made on his behalf for the year; (b) the Deferral Percentage for any Highly Compensated Participant who is eligible to participate in the Plan and who is also eligible to make other elective deferrals under one or more other cash or deferred arrangements described in section 401(k) of the Code maintained by an Employer or a Related Company for a plan year that ends with or within the Plan Year (other than a plan or arrangement subject to mandatory disaggregation under applicable Treasury regulations), shall be determined as if all such elective deferrals were made on his behalf under the Plan; (c) for purposes of determining the Deferral Percentage of a Highly Compensated Participant who is a 5-percent owner (as defined in section 416(i)(1)(B) of the Code) of an Employer or a Related Company or one of the ten most highly-paid employees of all the Employers and Related Companies, the Pre-Tax Contributions and Compensation of such Participant shall include the Pre- Tax Contributions and Compensation for the Plan Year of his family members (as defined in section 414(q)(6) of the Code), and any such family members shall be disregarded as separate employees in determining the Highly Compensated and Non-Highly Compensated Group Deferral Percentages; (d) excess Pre-Tax Contributions distributed to a Participant under subsection 8.5 shall be counted in determining such Participant's Deferral Percentage, except in the case of a distribution to a non-Highly Compensated Participant required to comply with section 401(a)(30) of the Code; (e) if this Plan is aggregated with one or more other plans for purposes of section 410(b) of the Code (other than the average benefit percentage test), this subsection 8.6 shall be applied as if all such plans were a single plan; provided, however, that for Plan Years beginning after 1989, such aggregated plans must all have the same plan year; and (f) all Participants who are members of a single collective bargaining unit shall be tested separately under this subsection 8.6. 202 Application of this subsection 8.6 shall be made in accordance with section 401(k)(3) of the Code and applicable regulations thereunder. 8.7. Correction Under Section 401(k) Test. In the event that the Highly Compensated Group Deferral Percentage for any Plan Year does not initially satisfy one of the tests referred to in subsection 8.6, the Committee shall direct the Trustee to distribute to Highly Compensated Participants enough of their Pre- Tax Contributions under the leveling method described in applicable Treasury regulations, with any allocable gains or losses for such Plan Year determined in accordance with any reasonable method adopted by the Committee for that Plan Year that either (i) conforms to the accounting provisions of Section 7 and is consistently applied to making corrective distributions under this subsection 8.7 and subsections 8.5, 8.9 and 8.10 to all affected Participants or (ii) satisfies any alternative method set forth in applicable Treasury regulations, so that the Highly Compensated Group Deferral Percentage meets one of the tests referred to in subsection 8.6. The amount to be distributed to any Participant pursuant to this subsection 8.7 shall be reduced by the amount of any Pre-Tax Contributions distributed to him for the taxable year ending with or within such Plan Year pursuant to subsection 8.5. To the extent any distribution of excess contributions is required pursuant to this subsection 8.7 for any Plan Year, such distribution shall be made after the close of the Plan Year in which the excess arose and in no event later than the close of the Plan Year following such Plan Year. 8.8. Code Section 401(m)(2) Testing. For any Plan Year, the amount by which the average of the Contribution Percentages (as defined below) of each eligible employee who is Highly Compensated (the "Highly Compensated Group Contribution Per centage") exceeds the average of the Contribution Percentages of each eligible employee who is not Highly Compensated (the "Non- Highly Compensated Group Contribution Percentage") shall be less than or equal to either (i) a factor of 1.25 or (ii) both a factor of 2 and a difference of 2. The "Contribution Percentage" for any eligible employee for a Plan Year shall be determined by dividing his Matching Contributions for the year by his Compensation for the year, subject to the following special rules: (a) any employee eligible to participate in the Plan at any time during a Plan Year in accordance with subsection 2.1 (without regard to any suspension imposed by any other provision hereunder) shall be counted, whether or not any Matching Contributions are made for him for the year; 203 (b) the Contribution Percentage for any Highly Compensated Participant who is eligible to participate in the Plan and who is also eligible to participate in one or more other qualified plans maintained by an Employer or a Related Company with a plan year that ends with or within the Plan Year (other than a plan subject to mandatory disaggregation under applicable Treasury regulations) with after-tax or matching contributions shall be determined as if all such contributions were made under the Plan; (c) for purposes of determining the Contribution Percentage of a Highly Compensated Participant who is a 5-percent owner (as defined in section 416(i)(1)(B) of the Code) of an Employer or a Related Company or one of the ten most highly-paid employees of all the Employers and Related Companies, the Matching Contributions and Compensation of such Participant shall include the Matching Contributions and Compensation for the Plan Year of his family members (as defined in section 414(q)(6) of the Code), and any such family members shall be disregarded as separate employees in determining the Highly Compensated and Non-Highly Compensated Group Contribution Percentages; (d) if this Plan is aggregated with one or more other plans for purposes of section 410(b) of the Code (other than the average benefit percentage test), this subsection 8.9 shall be applied as if all such plans were a single plan; provided, however, that for Plan Years beginning after 1989, such aggregated plans must all have the same plan year; and (e) all Participants who are members of a single collective bargaining unit shall be tested separately under this subsection 8.8. Application of the provisions of this subsection 8.8 shall be made in accordance with the requirements of section 401(m)(2) of the Code and the regulations thereunder. 8.9. Correction Under Section 401(m) Test. In the event that the Highly Compensated Group Contribution Percentage for any Plan Year does not initially satisfy one of the tests referred to in subsection 8.8, the Committee shall direct the Trustee to distribute to Highly Compensated Participants enough of their Matching Contributions under the leveling method described in applicable Treasury regulations, with any allocable gains or losses for such Plan Year determined in accordance with any 204 reasonable method adopted by the Committee for that Plan Year that either (i) conforms to the accounting provisions of Section 7 and is consistently applied to making corrective distributions under this subsection 8.9 and subsections 8.5, 8.7 and 8.10 to all affected Participants or (ii) satisfies any alternative method set forth in applicable Treasury regulations, so that the Highly Compensated Group Contribution Percentage meets one of the tests referred to in subsection 8.8. Notwithstanding the foregoing provisions of this subsection 8.9, any such excess Matching Contributions that are not yet vested in accordance with subsection 9.1 shall be forfeited as of the end of the Plan Year to which such corrective distributions relate (and treated in the same manner as any other forfeiture under the Plan). The Committee shall make any distribution required under this subsection 8.9 for any Plan Year after the close of the Plan Year in which such excess contributions were contributed and in no event later than the close of the Plan Year following such Plan Year. 8.10. Multiple Use of Alternative Limitation. Effective for Plan Years beginning on or after January 1, 1989, notwith standing any other provision of this Section 8, if the 1.25 factors referred to in subsections 8.6 and 8.8 are both exceeded for a Plan Year, the leveling method of correction prescribed in subsection 8.9 shall be continued until the aggregate limit set forth in Treas. Reg., 1.401(m)-2(b)(3) is satisfied for such Plan Year. 8.11. Highly Compensated. An employee or Participant shall be "Highly Compensated" for any Plan Year if during that Plan Year or the preceding Plan Year, he: (a) was at any time a 5 percent owner of an Employer or a Related Company; (b) received Compensation in excess of $75,000 (indexed for cost-of-living adjustments under section 415(d) of the Code); (c) received Compensation in excess of $50,000 (indexed for cost-of-living adjustments under section 415(d) of the Code), and was in the top-paid group of employees (as defined below) for such year; or (d) was at any time an officer and received Compensation greater than 50 percent of the amount in effect under section 415(b)(1)(A) of the Code for such year, provided that the officers taken into account under this paragraph (d) shall be limited to 50 or, if 205 less, the greater of 3 individuals or 10 percent of the employees of all the Employers and Related Companies; provided, however, that an employee in category (b), (c) or (d) above for the current Plan Year who does not fall within at least one such category for the preceding Plan Year shall not be considered Highly Compensated for the current Plan Year unless he is also among the 100 most highly-paid employees of all the Employers and Related Companies for such current year. An employee shall be considered to be in the "top-paid group" of employees for any year if such employee is in the group consisting of the top 20 percent of the active employees of all the Employers and Related Companies when ranked on the basis of Compensation paid during such year. In determining the total number of active employees in a year, the following provisions shall apply: (i) the term "employee" shall include a leased employee who is treated as an employee pursuant to the provisions of section 414(n)(2) of the Code, other than any individual who is covered by a safe-harbor plan described in section 414(n)(5) of the Code; and (ii) the following employees shall be disregarded: employees who have not attained age 21 by the end of the year; employees who by the end of the year have not completed 6 months of service (including service in the immediately preceding year); employees who normally work fewer than 17-1/2 hours per week; employees who normally work fewer than 6 months during any year; and non-resident aliens with no U.S. source income. 8.12. Plan Disaggregation. Notwithstanding the foregoing provisions of this Section 8, for Plan Years prior to 1992, testing under subsections 8.6, 8.8 and 8.10 and correction under subsections 8.7, 8.9 and 8.10 may be performed separately with respect to different groups of eligible employees under the Plan as determined by the Committee, provided that each such group meets the requirements of applicable regulations under section 401(a)(4) of the Code. 206 SECTION 9 Vesting and Termination Dates ----------------------------- 9.1. Determination of Vested Interest. The interest of a Participant in his Discretionary Account and Matching Account shall become fully vested and nonforfeitable in accordance with the following schedule: Years of Service Vested Percentage Fewer than 1 0 1 but fewer than 2 20 2 but fewer than 3 40 3 but fewer than 4 60 4 but fewer than 5 80 5 or more 100 A Participant shall at all times have a nonforfeitable interest in his Pre-Tax Account and After-Tax Transfer Account. 9.2. Accelerated Vesting. Notwithstanding the foregoing provisions of this Section 9, a Participant shall have a fully vested, nonforfeitable interest in all his Accounts when he attains age 62, dies or becomes permanently disabled while employed by an Employer or a Related Company. In addition, in the event of the Plan's termination (in accordance with subsection 13.2) or partial termination (as determined under applicable law and regulations) or the complete discontinuance of Employer contributions to the Plan, each affected Participant shall have a fully vested, nonforfeitable interest in all his Accounts. For purposes of the Plan, a Participant will be considered permanently disabled if, on account of physical or mental disability, he no longer is capable of performing the duties assigned to him by his Employer or of any other position at the Employer for which the employee is reasonably qualified or which condition constitutes total disability under the Federal Social Security Act. 9.3. Termination Date. A Participant's "Termination Date" shall be the date on which his employment with the Employers and Related Companies terminates for any reason. 9.4. Distribution Only Upon Separation From Service. Subject to subsection 11.14, notwithstanding any other provision of the Plan to the contrary, a Participant may not commence distribution of his Pre-Tax Account pursuant to Section 11, even though his employment with the Employers and Related Companies has terminated, unless or until he also has a "separation from 207 service" within the meaning of section 401(k)(2)(B) of the Internal Revenue Code. The foregoing restriction shall not apply, however, if the Participant's termination of employment occurs in connection with the sale by an Employer to an unrelated corporation of at least 85 percent of the assets of a trade or business, or the sale of its interest in a subsidiary to an unrelated entity, provided (a) the Participant remains employed in such trade or business or by such subsidiary after the sale, (b) the Employer continues to maintain the Plan after the sale, (c) no transfer of the Participant's Accounts occurs or is scheduled to occur after the sale pursuant to subsection 13.3 to a plan of such subsidiary or of the purchaser of such assets (or any entity affiliated therewith), and (d) the Participant receives distribution of his Pre-Tax Account under the Plan in a lump sum by the end of the second calendar year after the year in which the sale occurs. 208 SECTION 10 Loans and Withdrawals of Contributions While Employed ----------------------------------------------------- 10.1. Loans to Participants. The Committee, upon written request by a Participant who is an employee of an Employer or Related Company, or who is otherwise required to be given the opportunity to borrow under applicable regulations, in such form as the Committee may require and accompanied by the application fee established by the Committee, may authorize a loan to be made to the Participant of up to one-half of the balance in his Pre- Tax Account subject to the following: (a) No loan shall be made to a Participant if, immediately after such loan, the sum of the outstanding balances (including principal and interest) of all loans made to him under this Plan and under any other qualified retirement plans maintained by the Related Companies would exceed $50,000, reduced by the excess, if any, of: (i) the highest outstanding balance of all loans to the Participant from the plans during the one-year period ending on the day immediately before the date on which the loan is made; over (ii) the outstanding balance of loans from the plans to the Participant on the date on which such loan is made; and no loan shall be made to a Participant if the aggregate amount of that loan and the outstanding balance of any other loans to the Participant from the Plan would exceed one-half of the total vested balance of the Participant's Accounts under the Plan as of the date the loan is made. (b) Each loan to a Participant shall be charged against his Pre-Tax Account and the Investment Funds in which his Pre-Tax Account is invested in accordance with his election; provided, however, loans may not be charged against the Stock Fund. If a Participant does not elect the method of charging his Investment Funds, the loan shall be charged against each Investment Fund other than the Stock Fund in the same ratio as the value of his interest in such Fund bears to the total of his Pre-Tax Account excluding the Stock Fund. 209 (c) Each loan shall be evidenced by a written note providing for: (i) a reasonable repayment period of not more than 5 years from the date of the loan (or such longer period as the Committee may permit for a loan used to acquire a dwelling which, within a reasonable period of time, will be used as the Participant's principal residence); (ii) a reasonable rate of interest; (iii) substantially equal payments of principal and interest over the term of the loan no less frequently than quarterly; and (iv) such other terms and conditions as the Committee shall determine. (d) Promissory notes shall be held by the Trustee in the Loan Fund. (e) Payments of principal and interest to the Trustee with respect to any loan to a Participant: (i) shall reduce the outstanding balance with respect to that loan; (ii) shall reduce the balance of the Loan Fund holding the promissory note reflecting that loan; (iii) shall be credited to the Participant's Pre-Tax Account; and (iv) shall be invested in the Investment Funds (other than the Loan Fund) in accordance with his most recent investment directions. (f) A Participant's obligation to repay a loan (or loans) from the Plan shall be secured by the Participant's vested interest in the Plan. (g) Generally, loan repayments will be made by payroll deductions. However, during any period when payroll deduction is not possible or is not permitted under applicable law, repayment will be made by personal check. 210 (h) The loan may be prepaid in full or in part at any time without penalty, subject to such rules as the Committee may establish with respect to the minimum amount of any partial prepayment. (i) Any loan to a Participant shall become immediately due and payable upon his termination of employment with the Employers and Related Companies if he does not continue to be a party in interest to the Plan after such termination, unless such Participant's Accounts are scheduled to be transferred to a qualified plan of an employer that is not a Related Company pursuant to subsection 13.3. Notwithstanding any other provision of the Plan to the contrary, if the outstanding balance of principal and interest on any loan is not paid within 30 days of the expiration of its term or upon acceleration in accordance with the preceding sentence, a default shall occur and the Trustee shall apply all or a portion of the Participant's vested interest in the Plan in satisfaction of such outstanding obligation, but only to the extent such vested interest (or portion thereof) is then distributable under applicable provisions of the Code. If necessary to satisfy the entire outstanding obligation, such application of the Participant's vested interest may be executed in a series of actions as amounts credited to the Participant's Account become distributable. (j) If distribution is to be made to a Beneficiary in accordance with subsection 11.3, any outstanding promissory note of the Participant shall be canceled and the unpaid balance of the loan, together with any accrued interest thereon, shall be treated as a distribution to or on behalf of the Participant immediately prior to commencement of distribution to the Beneficiary. (k) A Participant may have no more than two loans outstanding at a time. (l) The Committee shall establish uniform procedures for applying for a loan, evaluating loan applications, and setting reasonable rates of interest, which shall be communicated to Participants in writing. 10.2. Withdrawals On Account of Hardship. In the event of a Hardship (as defined in subsection 10.3), a Participant whose Termination Date has not yet occurred may elect to withdraw all or part of his interest in his Pre-Tax Account at intervals no 211 shorter than 12 months, as provided and in the order set forth below: (a) up to 100% of the portion of his Pre-Tax Account attributable to rollover contributions; (b) up to 100% of his Pre-Tax Contributions; and (c) up to 100% of the earnings credited on his Pre-Tax Contributions prior to January 1, 1989. 10.3. Hardship Withdrawals. A withdrawal will not be considered to be made on account of "Hardship" unless the following requirements are met: (a) The withdrawal is requested because of an immediate and heavy financial need of the Participant, and will be so deemed if the Participant represents that the withdrawal is made on account of: (i) expenses for medical care described in section 213(d) of the Code incurred by the Participant, the Participant's spouse or any dependent of the Participant (as defined in section 152 of the Code) or necessary for such persons to obtain such medical care; (ii) the purchase (excluding mortgage payments) of a principal residence of the Participant; (iii) payment of tuition and related educational fees for the next 12 months of post- secondary education for the Participant, or his spouse, children or dependents; (iv) the need to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence; or (v) any other circumstances of immediate and heavy financial need identified as such in revenue rulings, notices or other documents of the Internal Revenue Service of general applicability. (b) The withdrawal must also be necessary to satisfy the immediate and heavy financial need of the Participant. It will be considered necessary if the Committee determines that the amount of the withdrawal does not exceed the amount required to relieve the 212 financial need (taking into account any applicable income or penalty taxes resulting from the withdrawal) and if the need cannot be satisfied from other sources that are reasonably available to the Participant. In making this determination, the Committee may reasonably rely on the Participant's written representation that the need cannot be relieved: (i) through reimbursement or compensation by insurance or otherwise; (ii) by reasonable liquidation of the Participant's assets, to the extent such liquidation would not itself give rise to an immediate and heavy financial need; (iii) by ceasing to make Pre-Tax Contributions to the Plan (or any other plan of the Employer permitting deferral of compensation); or (iv) by a loan pursuant to subsection 10.1 or by borrowing from commercial sources on reasonable commercial terms. (c) Notwithstanding any other provision of the Plan, Pre-Tax and Matching Contributions by or on behalf of the Participant shall be suspended as of the first day of the pay period coincident with or next following the date of the Hardship withdrawal and such contributions may not be resumed until the first day of the calendar quarter coincident with or next following the 6-month period beginning on the date of such suspension. A Participant shall not fail to be treated as an eligible employee for purposes of subsections 8.6 and 8.8 merely because of the application of this paragraph (c). 10.4. Withdrawals On or After Age 59-1/2. A Participant whose Termination Date has not yet occurred may elect to withdraw all or part of his interest in his Pre-Tax Account on or after the date he attains age 59-1/2, at intervals no shorter than 12 months, as provided and in the order set forth below: (a) up to 100% of his Pre-Tax Contributions; (b) up to 100% of the earnings credited on his Pre-Tax Contributions; and (c) up to 100% of the portion of his Pre-Tax Account attributable to rollover contributions. 213 10.5. Form of Withdrawal. For purposes of subsections 10.2 and 10.4, a Participant's Pre-Tax Account shall be valued as of the Valuation Date immediately preceding the withdrawal. Withdrawals from the Stock Fund shall be made in either cash or shares of DeVRY Inc. common stock, as the Participant elects or, if the Participant does not elect, withdrawals pursuant to subsection 10.2 shall be made in cash and withdrawals pursuant to subsection 10.4 shall be made in shares of DeVRY Inc. common stock. For purposes of subsections 10.2 and 10.4, each withdrawal by a Participant shall be charged against the Investment Funds in which his Pre-Tax Account is invested in accordance with his election. If a Participant does not elect the method of charging his withdrawal, the withdrawal shall be charged against the Investment Funds (other than the Stock Fund) according to descending level of investment risk and the Stock Fund shall be charged last. 214 SECTION 11 Distributions ------------- 11.1. Distributions to Participants After Termination of Employment. If a Termination Date occurs with respect to a Participant (for a reason other than his death), the vested portions of his Accounts shall be distributed in accordance with the following provisions of this subsection 11.1, subject to the provisions of subsection 11.2 and subsection 11.5: (a) If the value of the vested portions of the Parti cipant's Accounts (including any loans outstanding on his Termination Date) does not exceed $3,500, determined as of the Valuation Date next following his Termination Date such vested portions, less any outstanding loan balance distributable in accordance with subsection 10.1(i), shall be distributed to the Participant as soon as practicable after the Valuation Date next following his Termination Date, in a lump sum payment. (b) If the value of the vested portions of the Partici pant's Accounts (including any loans outstanding on his Termination Date) exceeds $3,500, determined as of the Valuation Date next following his Termination Date, such vested portions, less any outstanding loan balance distributable in accordance with subsection 10.1(i), shall be distributed (or shall begin to be distributed) to the Participant on (or as soon as practicable after) the Distribution Date he elects, by one of the following methods chosen by the Participant: (i) by payment in a lump sum, or (ii) by payment in a series of substantially equal annual or more frequent installments for a period not exceeding 10 years, or (iii) by purchase from an insurance company and distribution to him of an annuity contract providing for periodic distributions to him or to him and his Beneficiary for his life (with or without a period certain) or their joint lives, subject to the provisions of subsection 11.4; 215 provided, however, that if the value of the vested portions of the Participant's Accounts is reduced to less than $3,500 as of any Valuation Date prior to a Distribution Date selected by the Participant, on account of investment losses or payment to an alternate payee pursuant to a qualified domestic relations order, such reduced Account balance shall be distributed to the Participant as soon as practicable after such Valuation Date. (c) "Distribution Date" shall mean the Valuation Date as of which a payment in any form is made pursuant to this Section 11; provided, however, that in the event of an election of an annuity under paragraph (b)(iii) above, the Distribution Date shall be no later than the date payment is irrevocably made on behalf of the Participant to the insurance company issuing the annuity contract. 11.2. Direct Rollover. Effective January 1, 1993, if the distributee of a distribution under paragraphs (a) or (b)(i) of subsection 11.1 or any other eligible rollover distribution (as defined in section 402 of the Code or related regulations or notices) under the Plan: (a) elects in such form and at such time as the Committee may prescribe to have part or all of the distribution paid directly to an eligible retirement plan (as defined in section 401(a)(31)(D) of the Code), and (b) specifies an eligible retirement plan to which the distribution is to be paid, the distribution shall be made in the form of a direct trustee-to- trustee rollover to the plan so specified. 11.3. Distributions to Beneficiaries. Subject to subsection 11.2 and subsection 11.5, the following rules shall apply if a Participant dies while any vested portions of his Accounts remain undistributed: (a) If the Participant dies before benefit payments to him have commenced or an annuity contract has been purchased, the vested balance of his Accounts less any outstanding loan balance distributable in accordance with paragraph 10.1(j), shall be distributed as soon as practicable after the Valuation Date following the date of his death, to his Beneficiary (as defined in subsection 11.6) in a lump sum payment. 216 (b) If a Participant dies after benefit payments to him have commenced, the vested balance, if any, of his Accounts shall continue to be distributed to his Beneficiary in accordance with the method of distribution selected by the Participant; provided, however, that the Beneficiary may elect to have such vested balance paid in a lump sum payment as soon as practicable after the Valuation Date next following the Participant's death. 11.4. Special Rules Governing Annuity Elections. If a married Participant elects distribution in the form of an annuity pursuant to paragraph 11.1(b)(iii), the following rules shall apply and shall supersede any other provision of the Plan to the contrary: (a) The vested portions of the Participant's Accounts, less any outstanding loan balance distributable in accordance with paragraph 10.1(i), shall be used to purchase a nontransferable "Joint and Survivor Annuity" (that is, an annuity payable for the life of the Participant with a survivor annuity payable for the life of his spouse which is not less than 50 percent of the amount of the annuity payable during the joint lives of the Participant and spouse), unless the Participant elects another form of annuity and, if applicable, a Beneficiary other than his spouse, with the consent of his spouse to such form and Beneficiary, during the 90-day period immediately preceding his Distribution Date, which Distribution Date shall be no earlier than 30 days after his receipt of a written explanation from the Committee of the terms and conditions of the Joint and Survivor Annuity and the effect of an election of a different annuity form. (b) No consent by the spouse to the election of a form of annuity other than the Joint and Survivor Annuity and, if applicable, Beneficiary other than the spouse shall be effective unless it is in writing, acknowledges the effect of such consent and is witnessed by a notary public (unless the Committee determines that there is no spouse, that the spouse cannot be located or that consent may be waived because of such other circumstances as regulations or rulings under Code section 417 set forth). (c) During the period between his election of an annuity and his Distribution Date, no loan may be made to a Participant pursuant to subsection 10.1, no amount may be withdrawn by the Participant pursuant to 217 subsection 10.2 or 10.4 and no amount may be distributed to the Participant pursuant to subsection 11.1, in any form other than a Joint and Survivor Annuity, without the written consent of the spouse as provided in paragraph (b) of this subsection 11.4. (d) Subject to paragraph (e) below, if the Participant dies during the period between his election of an annuity and his Distribution Date, the vested portions of his Accounts (less any amounts credited to the Loan Fund, which shall be distributed in accordance with paragraph 10.1(j)) shall be paid to his spouse in the form of a life annuity as of the Valuation Date next following the date the Participant would have attained age 65 or, if the spouse so elects, as soon as practicable after the Valuation Date next following his death; provided, however, that a spouse to whom payment is due under this paragraph (d) may elect to have such vested portions, if any, distributed in the form of a lump sum payment. (e) The provisions of paragraph (d) above shall not apply, and distribution upon the death of the Participant shall be made in accordance with subsection 11.3, if the spouse consents to the designation of a Beneficiary other than the spouse in accordance with subsection 11.6 during the period between the Participant's election of an annuity and his death, and acknowledges that such consent to the Participant's designation of such Beneficiary constitutes the spouse's consent to the Participant's waiver of a qualified preretirement survivor annuity payable to the spouse in accordance with section 417 of the Code. (f) A Participant may revoke his election pursuant to this subsection 11.4, and may make a new election of any form of distribution permitted under paragraph 11.1(b), at any time during the 90-day period immediately preceding his Distribution Date; provided, however, that if the effect of such revocation is to select a distribution form other than a Joint and Survivor Annuity, it shall be ineffective without the written consent of his spouse in accordance with paragraph (b) of this subsection 11.4 to the new form of distribution and, if applicable, a Beneficiary other than the spouse. (g) A spouse's consent in accordance with paragraph (b) of this subsection 11.4 shall be irrevocable. 218 11.5. Limits on Commencement and Duration of Distributions. The following distribution rules shall be applied in accordance with sections 401(a)(9) and 401(a)(14) of the Code and applicable regulations thereunder, including the minimum distribution incidental benefit requirement of Treas. Reg., 1.401(a)(9)-2, and shall supersede any other provision of the Plan to the contrary: (a) Unless the Participant elects otherwise, in no event shall distribution commence later than 60 days after the close of the Plan Year in which the latest of the following events occurs: the Participant's attainment of age 65; the 10th anniversary of the year in which the Participant began participating in the Plan; or the Participant's Termination Date. (b) Notwithstanding any other provision herein to the contrary, distribution of the Participant's Accounts shall commence by lump sum cash payment of his entire Account balances on or before the Required Beginning Date and each December 31 thereafter or, if the Participant elects, by minimum annual distributions based upon the Participant's life expectancy and calculated in accordance with Treas. Reg., 1.401(a)(9)-1 no later than his "Required Beginning Date", that is, April 1 of the calendar year following the calendar year in which he attains age 70-1/2, unless the Participant attained age 70-1/2 prior to January 1, 1988 (during a Plan Year when he was not a 5 percent or more owner, as described in Code section 416), in which case his Required Beginning Date will be delayed until his Termination Date. (c) The life expectancy of a Participant or a Beneficiary will be determined in accordance with Tables V and VI of Treas. Reg., 1.72-9, and shall not be recalculated unless the Participant elects otherwise prior to his Required Beginning Date. (d) In the event of an annuity payment, distribution payments shall be made over the life of the Participant or over the lives of such Participant and his Beneficiary (or over a period not extending beyond the life expectancy of such Participant or the life expectancy of such Participant and his Beneficiary). (e) If a Participant dies after distribution of his vested interest in the Plan has begun, the remaining portion of such vested interest, if any, shall be distributed to his Beneficiary at least as rapidly as 219 under the method of distribution used prior to the Participant's death. (f) If a Participant dies before distribution of his vested interest in the Plan has begun, distribution of such vested interest to his Beneficiary shall be completed by December 31 of the calendar year in which the fifth anniversary of the Participant's death occurs; provided, however, that this five-year rule shall not apply to a natural person designated as Beneficiary by the Participant or under the specific terms of the Plan, if (i) such vested interest will be distributed over the life of such designated Beneficiary (or over a period not extending beyond the life expectancy of such Beneficiary), (ii) such distribution to the Beneficiary begins not later than December 31 of the calendar year following the calendar year in which the Participant died or, if such Beneficiary is the Participant's surviving spouse, not later than December 31 of the calendar year following the calendar year in which the Participant would have attained age 70-1/2, and (iii) the Beneficiary elects not to have the five-year rule apply. (g) If the Participant's surviving spouse is his Beneficiary and such spouse dies before distribution to such spouse begins, paragraph (f) shall be applied as if the surviving spouse were the Participant. (h) For purposes of paragraph (e) and (f), distribution of a Participant's vested interest in the Plan is considered to begin on his Required Beginning Date; provided, however, that distribution irrevocably begun in the form of an annuity shall be considered to begin on the date it actually commences. 11.6. Beneficiary Designations. The term "Beneficiary" shall mean the Participant's surviving spouse. However, if the Participant is not married, or if the Participant is married but his spouse consents to the designation of a person other than the spouse, the term Beneficiary shall mean such person or persons as the Participant designates to receive the vested portions of his Accounts upon his death (or to be his co-annuitant beneficiary under a term certain, in the event of distribution in the form of 220 an annuity contract). Such designation may be made, revoked or changed (without the consent of any previously-designated Beneficiary except his spouse) only by an instrument signed by the Participant and received by the Committee prior to his death. A spouse's consent to the designation of a Beneficiary other than the spouse shall be in writing, shall acknowledge the effect of such designation, shall be witnessed by a Plan representative or a notary public and shall be effective only with respect to such consenting spouse. In default of such designation, or at any time when there is no surviving spouse and no surviving Beneficiary designated by the Participant, his Beneficiary shall be his surviving children (per stirpes) or, if he has no children, the estate of the last to die of the Participant or his designated Beneficiary. For purposes of the Plan, "spouse" means the person to whom the Participant is legally married at the relevant time. Notwithstanding the foregoing provisions of this subsection 11.6, no spousal consent to the designation of a person other than, or in addition to, the spouse as Beneficiary shall be required if (i) the Participant and his spouse are legally separated or the Participant has been abandoned (under applicable state law) and the Participant has a court order to that effect or (ii) it is established to the satisfaction of the Committee that the spouse's consent cannot be obtained because there is no spouse, because the spouse cannot be located or because of such other circumstances as may be prescribed in applicable Treasury regulations. 11.7. Facility of Payment. Notwithstanding the provisions of this Section 11, if, in the Committee's opinion, a Participant or Beneficiary is under a legal disability or is in any way incapacitated so as to be unable to manage his financial affairs, the Committee may direct the Trustee to make payment to a relative or friend of such person for his benefit until claim is made by a conservator or other person legally charged with the care of his person or of his estate. Thereafter, any benefits under the Plan to which such Participant or Beneficiary is entitled shall be paid to such conservator or other person legally charged with the care of his person or his estate. 11.8. Interests Not Transferable. The interests of a Participant and other persons entitled to benefits under the Plan are not subject to the claims of their creditors and may not be voluntarily or involuntarily assigned, alienated or encumbered, except in the case of a qualified domestic relations order which relates to the provision of child support, alimony payments or marital rights of a spouse, child or other dependent of a Participant and which meets such requirements as may be imposed by section 414(p) of the Code or regulations issued thereunder. Notwithstanding any other provision of the Plan to the contrary, such a domestic relations order may permit distribution of the 221 entire portion of the vested Account balance of a Participant awarded to his alternate payee, in a lump sum payment as soon as practicable after the Committee determines that such order is qualified, without regard to whether the Participant would himself be entitled under the terms of the Plan to withdraw or receive a distribution of such vested amount at that time. 11.9. Absence of Guaranty. Neither the Committee, the Trustee nor the Employers in any way guarantee the Trust Fund from loss or depreciation. The Employers do not guarantee any payment to any person. The liability of the Trustee to make any payment is limited to the available assets of the Trust Fund. 11.10. Missing Participants or Beneficiaries. Each Participant and each Beneficiary designated by the Participant must file with the Committee from time to time in writing his post office address and each change of post office address. Any communication, statement or notice addressed to a Participant or Beneficiary at his last post office address filed with the Committee or, in the case of a Participant, if no address is filed with the Committee then at his last post office address as shown on the Employers' records, will be binding on the Participant and his Beneficiary for all purposes of the Plan. Neither the Employers, the Committee nor the Trustee will be required to search for or locate a Participant or Beneficiary. 11.11. Treatment of Nonvested and Partially Vested Accounts. If a Termination Date occurs with respect to a Participant who is not fully vested in his Accounts, the following rules shall apply: (a) The unvested portion of his Accounts shall be forfeited as of the earlier of the date as of which the vested portions of his Accounts are distributed to him or the date the Participant incurs five consecutive One Year Breaks in Service. 222 (b) If a Participant who received a distribution is reemployed by an Employer or Related Company before he incurs five consecutive One Year Breaks in Service, the amount forfeited under paragraph (a) above shall be restored (subject to the following provisions of this paragraph (b)), without adjustment for earnings and losses after the forfeiture, subject to the following: (i) If the Participant received a distribution of the vested portion of his Accounts on account of his previous termination of employment, the amount forfeited shall not be restored unless the Participant repays to the Trustee the full amount of such distribution (without adjustment for any subsequent earnings or losses thereon) before the earlier of the fifth anniversary of his reemployment or the close of five consecutive One Year Breaks in Service commencing after the distribution, in which event the amount forfeited shall be restored as soon as practicable after the repayment. (ii) The restoration shall be made first from current forfeitures, if any, under the Plan and then, if necessary, from a special Employer contribution to the Plan. (iii) A restoration shall not be considered an Annual Addition for purposes of subsection 8.2. (iv) The amount restored shall be maintained in separate subaccounts within the Participant's Matching and Discretionary Accounts and his vested interest in each subaccount shall be determined by adding the amount of the prior distributions from such Accounts to his separate subaccounts from such Accounts to his separate subaccount balances before applying the schedule set forth in subsection 9.1 and then subtracting the amounts of the prior distributions from the amounts derived after application of such schedule. (c) If the Participant is reemployed by an Employer or Related Company after he incurs five consecutive One Year Breaks in Service, such reemployment shall have no effect on the forfeiture under paragraph (a) above. 11.12. Application of Forfeitures. Any forfeiture of Discretionary Profit Sharing Contributions or Matching Contributions and earnings thereon during a Plan Year pursuant to 223 subsection 11.11 shall be used first to restore any prior forfeitures as required by subsection 11.11, and then shall be allocated to Participants for the Plan Year in which such forfeiture occurs in accordance with subsection 7.3 of the Plan. 11.13. Form of Payment. Payments shall be made in cash, unless the Participant elects to have the portion of his Accounts invested in the Stock Fund distributed in whole shares of DeVRY Inc. common stock. 11.14. Disability Distribution. Notwithstanding any other provision of the Plan to the contrary, a Participant who is disabled, within the meaning of section 401(k)(2)(B) of the Code, may elect immediate distribution of his Account balance without regard to whether his Termination Date or separation from service has occurred. 224 SECTION 12 The Committee ------------- 12.1. Membership and Authority. The Committee referred to in subsection 1.3 shall consist of a committee of one or more members appointed by the Company's Board of Directors. Except as otherwise specifically provided in this Section 12, in controlling and managing the operation and administration of the Plan, the Committee shall act by a majority of its then members, by meeting or by writing filed without meeting, and shall have the following discretionary authority, powers, rights and duties in addition to those vested in it elsewhere in the Plan or Trust: (a) to adopt such rules of procedure and regulations as, in its opinion, may be necessary for the proper and efficient administration of the Plan and as are consistent with the provisions of the Plan; (b) to enforce the Plan in accordance with its terms and with such applicable rules and regulations as may be adopted by the Committee; (c) to determine conclusively all questions arising under the Plan, including the power to determine the eligibility of employees and the rights of Participants and other persons entitled to benefits under the Plan and their respective benefits, and to remedy any ambiguities, inconsistencies or omissions of whatever kind; (d) to maintain and keep adequate records concerning the Plan and concerning its proceedings and acts in such form and detail as the Committee may decide; (e) to direct all payments of benefits under the Plan; (f) to perform the functions of a "plan administrator" as defined in section 414(g) of the Code, for purposes of Section 7 and for purposes of establishing and implementing procedures to determine the qualified status of domestic relations orders (in accordance with the requirements of section 414(p) of the Code) and to administer distributions under such qualified orders; (g) to employ agents, attorneys, accountants or other persons (who may also be employed by or represent the Employers) for such purposes as the Committee considers necessary or desirable to discharge its duties; and 225 (h) to establish a claims procedure in accordance with section 503 of ERISA. The certificate of a majority of the members of the Committee that the Committee has taken or authorized any action shall be conclusive in favor of any person relying on the certificate. 12.2. Allocation and Delegation of Committee Responsi bilities and Powers. In exercising its authority to control and manage the operation and administration of the Plan, the Committee may allocate all or any part of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked at any time. Any member or delegate exercising Committee responsibilities and powers under this subsection shall periodically report to the Committee on its exercise thereof and the discharge of such responsibilities. 12.3. Uniform Rules. In managing the Plan, the Committee shall uniformly apply rules and regulations adopted by it to all persons similarly situated. 12.4. Information to be Furnished to Committee. The Employers and Related Companies shall furnish the Committee such data and information as may be required for it to discharge its duties. The records of the Employers and Related Companies as to an employee's or Participant's period of employment, termination of employment and the reason therefor, leave of absence, reemployment and compensation shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish to the Committee such evidence, data or information as the Committee considers desirable to carry out the Plan. 12.5. Committee's Decision Final. Any interpretation of the Plan and any decision on any matter within the discretion of the Committee made by the Committee shall be binding on all persons. A misstatement or other mistake of fact shall be corrected when it becomes known, and the Committee shall make such adjustment on account thereof as it considers equitable and practicable. 12.6. Exercise of Committee's Duties. Notwithstanding any other provisions of the Plan, the Committee shall discharge its duties hereunder solely in the interests of the Participants and other persons entitled to benefits under the Plan, and: 226 (a) for the exclusive purpose of providing benefits to Participants and other persons entitled to benefits under the Plan; and (b) with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. 12.7. Remuneration and Expenses. No remuneration shall be paid from the Plan to any Committee member as such. However, the reasonable expenses (including the fees and expenses of persons employed by it in accordance with paragraph 12.1(g)) of a Committee member incurred in the performance of any Committee function shall be reimbursed by the Employers. 12.8. Indemnification of the Committee. The Committee and the individual members thereof shall be indemnified by the Employers against any and all liabilities, losses, costs and expenses (including legal fees and expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or its members by reason of the performance of any Committee function if the Committee or such members did not act dishonestly or in willful violation of the law or regulation under which such liability, loss, cost or expense arises. 12.9. Resignation or Removal of Committee Member. A Committee member may resign at any time by giving ten days' advance written notice to the Employers, the Trustee and the other Committee members. The Company may remove any Committee member by giving advance written notice to him, the Trustee and the other Committee members. 12.10. Appointment of Successor Committee Members. The Company's Board of Directors may fill any vacancy in the member ship of the Committee and shall give prompt written notice thereof to the other Committee members, the other Employers and the Trustee. While there is a vacancy in the membership of the Committee, the remaining Committee members shall have the same powers as the full Committee until the vacancy is filled. 227 SECTION 13 Amendment and Termination ------------------------- 13.1. Amendment. While the Company expects to continue the Plan, it necessarily reserves the right, subject to the provisions of the Trust Agreement, to terminate the Plan or to amend it from time to time, except that no amendment will reduce a Participant's interest in the Plan to less than an amount equal to the amount he would have been entitled to receive if he had resigned from the employ of the Employers and the Related Companies on the day of the amendment. 13.2. Termination. The Plan will terminate as to all of the Employers on any day specified by the Company if advance written notice of the termination is given to the other Employers. Employees of any Employer shall cease active participation in the Plan (and will be treated as inactive Participants in accordance with subsection 2.2) on the first to occur of the following: (a) the date on which that Employer, by appropriate action communicated in writing to the Company, ceases to be a contributing sponsor of the Plan; (b) the date that Employer is judicially declared bank rupt or insolvent; or (c) the dissolution, merger, consolidation, reorganiza tion or sale of that Employer, or the sale by that Employer of all or substantially all of its assets, except that, subject to the provisions of subsection 13.3, with the consent of the Company, in any such event arrangements may be made whereby the Plan will be continued by any successor to that Employer or any purchaser of all or substantially all of that Employer's assets, in which case the successor or purchaser will be substituted for the Employer under the Plan. 13.3. Merger and Consolidation of the Plan, Transfer of Plan Assets. The Committee in its discretion may direct the Trustee to transfer all or a portion of the assets of this Plan to another defined contribution plan of the Employers or Related Companies which is qualified under section 401(a) of the Code or, in the event of the sale of stock of an Employer or all or a portion of the assets of an Employer, to a qualified plan of an employer which is not a Related Company. In the case of any merger or consolidation with, or transfer of assets and liabilities to, any other plan, provision shall be made so that each affected Participant in the Plan on the date thereof (if the 228 Plan, as applied to that Participant, then terminated) would receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately prior to the merger, consolidation or transfer if the Plan, as applied to him, had then terminated. 13.4. Distribution on Termination and Partial Termination. Upon termination or partial termination of the Plan, all benefits under the Plan shall continue to be paid in accordance with Sections 10 and 11 as such section may be amended from time to time. 13.5. Notice of Amendment, Termination or Partial Termination. Affected Participants will be notified of an amendment, termination or partial termination of the Plan as required by law. 229 APPENDIX A DEFINED TERMS 7.1 - Accounts 7.1 - After-Tax Transfer Account 8.2 - Annual Additions 6.1 - Balanced Fund 11.6 - Beneficiary 1.1 - Code 1.3 - Committee 1.1 - Company 4.5 - Compensation 8.8 - Contribution Percentage 8.6 - Deferral Percentage 7.1 - Discretionary Account 5.1 - Discretionary Profit Sharing Contributions 11.1 - Distribution Date 1.1 - Effective Date 1.2 - Employer 7.2 - Fair Market Value 6.1 - Fixed Income Fund 6.1 - Growth Equity Fund 10.3 - Hardship 8.11 - Highly Compensated 8.8 - Highly Compensated Group Contribution Percentage 8.6 - Highly Compensated Group Deferral Percentage 3.2 - Hour of Service 6.1 - Investment Funds 11.4 - Joint and Survivor Annuity 2.4 - Leased Employee 6.1 - Loan Fund 7.1 - Matching Account 5.2 - Matching Contribution 6.1 - Money Market Reserves Fund 8.8 - Non-Highly Compensation Group Contribution Percentage 8.6 - Non-Highly Compensated Group Deferral Percentage 3.3 - One Year Break in Service 2.1 - Participant 1.1 - Plan 1.4 - Plan Year 1.5 - Valuation Dates 6.1 - Value Equity Fund 7.1 - Pre-Tax Account 4.1 - Pre-Tax Contribution 1.2 - Related Company 11.5 - Required Beginning Date 8.2 - Section 415 Affiliate 8.2 - Section 415 Compensation 6.1 - Stock Fund 9.3 - Termination Date 1.3 - Trust Agreement 7.2 - Trust Fund 1.3 - Trustee 3.1 - Year of Service 230 SUPPLEMENT A TO DEVRY INC. PROFIT SHARING RETIREMENT PLAN ----------------------------------------- (Top-Heavy Status) Application A-1. This Supplement A to DeVRY Inc. Profit Sharing Retirement Plan (the "Plan") shall be applicable on and after the date on which the Plan becomes Top-Heavy (as described in subsection A-4). Definitions A-2. Unless the context clearly implies or indicates the contrary, a word, term or phrase used or defined in the Plan is similarly used or defined for purposes of this Supplement A. Affected A-3. For purposes of this Participant Supplement A, the term "Affected Participant" means each Participant who is employed by an Employer or a Related Company during any Plan Year for which the Plan is Top- Heavy; provided, however, the term "Affected Participant" shall not include any Participant who is covered by a collective bargaining agreement if retirement benefits were the subject of good faith bargaining between his Employer and his collective bargaining representative. Top-Heavy A-4. The Plan shall be "Top-Heavy" for any Plan Year if, as of the Determination Date for that year (as described in paragraph (a) next below), the present value of the benefits attributable to Key Employees (as defined in subsection A-5) under all Aggregation Plans (as defined in subsection A-8) exceeds 60 percent of the present value of all benefits under such plans. The foregoing determination 231 shall be made in accordance with the provisions of section 416 of the Code. Subject to the preceding sentence: (a) The Determination Date with respect to any plan for purposes of determining Top- Heavy status for any plan year of that plan shall be the last day of the preceding plan year or, in the case of the first plan year of that plan, the last day of that year. The present value of benefits as of any Determination Date shall be determined as of the accounting date or valuation date coincident with or next preceding the Determination Date. If the plan years of all Aggregation Plans do not coincide, the Top-Heavy status of the Plan on any Determination Date shall be determined by aggregating the present value of Plan benefits on that date with the present value of the benefits under each other Aggregation Plan determined as of the Determination Date of such other Aggregation Plan which occurs in the same calendar year as the Plan's Determination Date. (b) Benefits under any plan as of any Determination Date shall include the amount of any distributions from that plan made during the plan year which includes the Determination Date (including distributions under a terminated plan which, if it had not been terminated, would have been required to be included in an aggregation group) or during any of the 232 preceding four plan years, but shall not include any amounts attributable to employee contributions which are deductible under section 219 of the Code, any amounts attributable to employee- initiated rollovers or transfers made after December 31, 1983 from a plan maintained by an unrelated employer, or, in case of a defined contribution plan, any amounts attributable to contributions made after the Determination Date unless such contributions are required by section 412 of the Code or are made for the plan's first plan year. (c) Benefits attributable to a participant shall include benefits paid or payable to a beneficiary of the participant, but shall not include benefits paid or payable to any participant who has not performed services for an Employer or Related Company during any of the five plan years ending on the applicable Determination Date; provided, however, that if a participant performs no services for five years and then performs services, the benefits attributable to such participant shall be included. (d) The accrued benefit of any participant who is a Non- Key Employee with respect to a plan but who was a Key Employee with respect to such plan for any prior plan year shall not be taken into account. 233 (e) The accrued benefit of a Non-Key Employee shall be determined under the method which is used for accrual purposes for all plans of the Employer and Related Companies; or, if there is not such a method, as if the benefit accrued not more rapidly than the slowest accrual rate permitted under section 411(b)(1)(C) of the Code. (f) The present value of benefits under all defined benefit plans shall be determined on the basis of a 6 percent per annum interest factor and the 1984 Unisex Pension Mortality Table, with a one-year setback. Key Employee A-5. The term "Key Employee" means an employee or deceased employee (or beneficiary of such deceased employee) who is a Key Employee within the meaning ascribed to that term by section 416(i) of the Code. Subject to the preceding sentence, the term Key Employee includes any employee or deceased employee (or beneficiary of such deceased employee) who at any time during the plan year which includes the Determination Date or during any of the four preceding plan years was: (a) an officer of any Employer or Related Company with Compensation in excess of 50 percent of the amount in effect under section 415(b)(1)(A) of the Code for the calendar year in which that year ends; provided, however, that the maximum number of employees who shall be considered Key Employees 234 under this paragraph (a) shall be 50; (b) one of the 10 employees owning the largest interests in any Employer or any Related Company (disregarding any ownership interest which is less than 1/2 of one percent), excluding any employee for any plan year whose Compensation did not exceed the applicable amount in effect under section 415(c)(1)(A) of the Code for the calendar year in which that year ends; (c) a 5 percent owner of any Employer or of any Related Company; or (d) a 1 percent owner of any Employer or any Related Company having Compensation in excess of $150,000. Compensation A-6. The term "Compensation" for purposes of this Supplement A generally means compensation within the meaning of section 415(c)(3) of the Code for that year, not exceeding $150,000 or such larger amount as may be permitted for any year under Code section 401(a)(17). However, for Plan Years beginning on or after January 1, 1989, solely for purposes of determining who is a Key Employee, the term "Compensation" means compensation as defined in Code section 414(q)(7). Non-Key Employee A-7. The term "Non-Key Employee" means any employee (or beneficiary of a deceased employee) who is not a Key Employee. Aggregation Plan A-8. The term "Aggregation Plan" means the Plan and each other 235 retirement plan (including any terminated plan) maintained by an Employer or Related Company which is qualified under section 401(a) of the Code and which: (a) during the plan year which includes the applicable Determination Date, or during any of the preceding four plan years, includes a Key Employee as a participant; (b) during the plan year which includes the applicable Determination Date or, during any of the preceding four plan years, enables the Plan or any plan in which a Key Employee participates to meet the requirements of section 401(a)(4) or 410 of the Code; or (c) at the election of the Employer, would meet the requirements of sections 401(a)(4) and 410 if it were considered together with the Plan and all other plans described in paragraphs (a) and (b) next above. Required A-9. The term "Required Aggregation Aggregation Plan" means a plan described in Plan either paragraph (a) or (b) of subsection A-8. Permissive A-10. The term "Permissive Aggregation Aggregation Plan" means a plan Plan described in paragraph (c) of subsection A-8. Minimum A-11. For any Plan Year during Contribution which the Plan is Top-Heavy, the minimum amount of Employer contributions and forfeitures, excluding elective contributions as 236 defined in Code section 401(k) and employer matching contributions as defined in Code section 401(m), allocated to the Accounts of each Affected Participant who is employed by an Employer or Related Company on the last day of that year (whether or not he has completed 1,000 Hours of Service during that year), who is a Non-Key Employee and who is not entitled to a minimum benefit for that year under any defined benefit Aggregation Plan which is top-heavy shall, when expressed as a percentage of the Affected Participant's Compensation, be equal to the lesser of: (a) 3%; or (b) the percentage at which Employer contributions (including Employer contributions made pursuant to a cash or deferred arrangement) and forfeitures are allocated to the Accounts of the Key Employee for whom such percentage is greatest. For purposes of the preceding sentence, compensation earned while a member of a group of employees to which the Plan has not been extended shall be disregarded. Paragraph (b) next above shall not be applicable for any Plan Year if the Plan enables a defined benefit plan described in paragraph A-8(a) or A-8(b) to meet the requirements of section 401(a)(4) or 410 for that year. Employer contributions for any Plan Year during which the Plan is Top-Heavy shall be allocated first to non-Key Employees until the requirements of this subsection A-11 have been met and, to the extent necessary to comply with the provisions of this subsection A-11, additional 237 contributions shall be required of the Employers. Aggregate A-12. For any Plan Year during Benefit Limit which the Plan is Top-Heavy, paragraphs (2)(B) and (3)(B) of section 415(e) of the Code shall be applied by substituting "1.0" for "1.25". EX-10 4 238 EXHIBIT 10(e) ------------- EXHIBIT A FIRST AMENDMENT TO DeVRY INC. PROFIT SHARING RETIREMENT PLAN (AS AMENDED AND RESTATED EFFECTIVE AS OF JULY 1, 1992) WHEREAS, Keller Graduate School of Management, Inc. (the "Company") maintains the DeVry Inc. Profit Sharing Retirement Plan (the "Plan"); and WHEREAS, amendment of the Plan is now deemed desirable; NOW, THEREFORE, by virtue and in exercise of the amending authority reserved to the Company under subsection 13.1 of the Plan, the Plan is hereby amended in the following particulars: 1. Effective as of April 1, 1996, by substituting the phrase "shall not be less than 1 percent nor more than 15 percent" for the phrase "shall not be less than 2 percent nor more than 15 percent" where the latter phrase appears in the first sentence of subsection 4.1 of the Plan. 2. Effective as of April 1, 1996, by deleting subsection 5.1 of the Plan and substituting the following therefor: "5.1. Matching Contributions. Subject to the conditions and limitations of Section 8, with respect to any payroll period, each Employer shall make a 'matching contribution' to the Plan on behalf of each Participant employed by such Participant in an amount equal to 1% of such Participant's Compensation for such payroll period if the Participant's Pre-Tax Contributions are equal to 1 percent of his Compensation for such period and in an amount equal to 1 1/2 percent of such Participant's Compensation for such payroll period if the Participant's Pre-Tax Contributions are at least 2 percent of his Compensation for such period." 3. Effective October 1, 1996, by deleting the second sentence of subsection 6.3 of the Plan and substituting the following therefor: "A Participant's investment elections shall be made in multiples of 5 percent, [provided that allocations to the Stock Fund shall not exceed 25% of contributions and forfeitures]." 4. Effective October 1, 1996, by deleting the last sentence of subsection 6.4 of the Plan and substituting the following therefor: "Subject to the provisions of this subsection 6.4, transfers among Investment Funds shall be made in multiples of 5 percent." EX-21 5 239 EXHIBIT 21 ---------- SUBSIDIARIES OF THE REGISTRANT ------------------------------ DeVry Inc.: Subsidiaries: Keller Graduate School of Management, Inc. DeVry Educational Development Corp. Becker CPA Review Corp. DeVry/Becker Educational Development Corp. Becker CPA Review, Inc. (1) Newton Becker Limited (2), a Hong Kong Corporation Becker C.P.A. Review Limited (2), an Israeli Corporation Keller Graduate School of Management, Inc.: Subsidiaries: DeVry Canada, Inc., a Canadian corporation DeVry Institute of Technology, Inc. a Delaware corporation Missouri Institute of Technology, Inc., a Missouri corporation Provost & Associates, Inc., an Illinois corporation _______________________________ 1 Subsidiary of Becker CPA Review Corp. 2 Subsidiary of DeVry/Becker Educational Development Corp. EX-23 6 240 EXHIBIT 23 ---------- CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the incorporation by reference in the registration statement on Form S-8 (No. 33-44563) of DeVry Inc. of our report dated August 6, 1996 appearing on page of this Form 10-K. Price Waterhouse LLP Chicago, Illinois September 24, 1996 EX-27 7
5 1000 YEAR JUN-30-1996 JUN-30-1996 29948 0 16287 6603 3290 61567 120724 49283 178089 52460 0 0 0 166 57121 178089 258948 260007 155254 227309 0 16130 1063 32698 13453 19245 0 0 0 19245 1.14 1.14
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