October 8, 2010

 

Dear Shareholder:

 

On behalf of the Board of Directors of DeVry Inc., it is my pleasure to invite you to attend your company’s Annual Meeting of Shareholders at 9:00 a.m., Central Standard Time, Wednesday, November 10, 2010, at DeVry’s home office, 3005 Highland Parkway, Downers Grove, Illinois.

 

We will begin with a discussion of the items listed in the enclosed proxy statement, followed by a report on the progress of DeVry during the last fiscal year. DeVry’s performance also is discussed in the enclosed 2010 Annual Report to Shareholders, which we think you will find to be interesting reading.

 

We look forward to seeing you at the meeting.

 

Thank you.

 

 

TABLE OF CONTENTS

 

 

DEVRY INC.
3005 Highland Parkway
Downers Grove, IL 60515-5799

 

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

To Be Held On

November 10, 2010

 

You are cordially invited to attend the Annual Meeting of Shareholders of DeVry Inc. (“DeVry”) at DeVry’s home office, 3005 Highland Parkway, Downers Grove, Illinois, on Wednesday, November 10, 2010, at 9:00 a.m. Central Standard Time, for the following purposes:

 

(1) To elect Connie R. Curran, Daniel Hamburger, Harold T. Shapiro and Ronald L. Taylor as Class I Directors to serve until the 2013 Annual Meeting of Shareholders and to elect Gary Butler as a Class II Director to serve until the 2011 Annual Meeting of Shareholders;

 

(2) To ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for DeVry for the current fiscal year;

 

(3) To approve the Amended and Restated DeVry Inc. Incentive Plan of 2005;

 

(4) To vote on a proposal submitted by a shareholder, if properly submitted at the meeting; and

 

(5) To consider such other business as may properly come before the meeting or any adjournment thereof.

 

You will find enclosed with this Notice a proxy card and a Proxy Statement for the meeting and a copy of the DeVry Inc. Annual Report for 2010.

 

The Board of Directors has fixed a record date of September 20, 2010. Only shareholders of record on that date are entitled to notice of, and to vote at, the meeting.

 

All shareholders are cordially invited to attend the meeting in person. However, to assure representation at the meeting, you are encouraged to vote by proxy by following the instructions on the enclosed proxy card. Postage is not required for mailing in the United States. Upon written request, DeVry will reimburse shareholders for the cost of mailing proxy cards from outside the United States. You may also vote your shares by telephone or through the Internet by following the instructions set forth on the enclosed proxy card. You may attend the meeting and vote in person even if you have returned a proxy in writing, by telephone or through the Internet.

 

By Order of the Board of Directors,

 

GREGORY S. DAVIS
Secretary

 

October 8, 2010

 

 

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on November 10, 2010 — Our Proxy Statement and the DeVry Inc. Annual Report for 2010 are available at www.proxyvote.com.

 

DEVRY INC.
3005 Highland Parkway
Downers Grove, IL 60515-5799

ANNUAL MEETING OF SHAREHOLDERS, TO BE HELD ON NOVEMBER 10, 2010

 

PROXY STATEMENT

 

PROXIES AND VOTING INFORMATION

 

The Board of Directors of DeVry Inc. (“DeVry”) is sending you this Proxy Statement and the accompanying proxy card to solicit your proxy to vote your shares at DeVry’s Annual Meeting of Shareholders to be held on November 10, 2010, and any adjournment thereof. The solicitation of proxies gives every shareholder an opportunity to vote because your shares can be voted only if you are present or represented by proxy at the meeting. This Proxy Statement and accompanying proxy card are first being sent to shareholders on or about October 8, 2010.

 

When you have returned your proxy, the proxy committee (and each of them, with full powers of substitution) will vote your shares as you direct. Please follow the instructions on the enclosed card, which explain how to submit your proxy by mail, by telephone or through the Internet. If you submit a proxy by telephone or through the Internet, you should not also mail in a card. If you return your proxy to us by any of these means without choices for each proposal, the proxy committee will vote your shares on the unmarked proposals as recommended by DeVry’s Board of Directors. Abstentions, directions to withhold authority and broker non-votes (where a named entity holds shares for a beneficial owner who has not provided voting instructions) will be considered present at the meeting for purposes of a quorum but will not be counted in determining the total number of votes cast. Because each proposal, as required by DeVry’s Restated Certificate of Incorporation (the “Certificate of Incorporation”), requires the affirmative vote of a majority of the shares of Common Stock of DeVry outstanding on the record date, the effect of each of these is the same as a “no” vote. A proxy may be revoked at any time before the proxy is voted at the meeting by: (1) notifying DeVry in writing that the proxy has been revoked, (2) submitting a later-dated proxy by mail, over the telephone or through the Internet, or (3) voting in person at the meeting. The election of Connie R. Curran, Daniel Hamburger, Harold T. Shapiro and Ronald L. Taylor as Class I Directors and the election of Gary Butler as a Class II Director, the ratification of the selection of the independent registered public accounting firm, the approval of the Amended and Restated DeVry Inc. Incentive Plan of 2005 and the shareholder proposal each will require the affirmative vote of a majority of the shares of Common Stock of DeVry outstanding on the record date.

 

If you are a DeVry employee who is a participant in the DeVry Inc. Employee Stock Purchase Plan and/or the DeVry Inc. Success Sharing Retirement Plan’s DeVry Stock Fund, your proxy will serve as direction to the custodian of the DeVry Inc. Employee Stock Purchase Plan or the trustee of the DeVry Inc. Success Sharing Retirement Plan to vote your shares for your account as you have directed. If you submit a proxy without indicating your voting preference, your shares will be voted in the same proportion as shares for which instructions have been received.

 

DeVry will bear the expense of soliciting proxies and will reimburse all shareholders for the expense of sending proxies and proxy material to beneficial owners, including expenditures for foreign mailings. The solicitation initially will be made by mail but also may be made by DeVry employees by telephone, electronic means or personal contact.

 

As of September 20, 2010, DeVry had 70,316,364 shares of Common Stock ($0.01 par value) outstanding. Shareholders are entitled to one vote per share owned on the record date.

 

The current size of the Board of Directors is 11 Directors. The Certificate of Incorporation provides for a Board of Directors that is divided into three classes serving staggered three-year terms. The current members of Class I, whose terms of office expire in November 2010, are Connie R. Curran, Daniel Hamburger, Harold T. Shapiro and Ronald L. Taylor. The Board has nominated them and recommends their re-election as Class I Directors, each for a term to expire in 2013. The Board also recommends the election of Gary Butler as a Class II Director, for a term to expire in 2011, thereby bringing the number of Directors to 12. Mr. Butler has been nominated as a Class II Director in order to make each of the Board’s three classes consist of one-third of the total number of directors constituting the entire Board of Directors in accordance with the Certificate of Incorporation. The Board of Directors has acted to increase the size of the Board of Directors to 12 members, with such change to take effect immediately prior to the 2010 Annual Meeting. All of the nominees have consented to serve as directors if elected at the Annual Meeting of Shareholders.

 

It is intended that all shares represented by a proxy in the accompanying form will be voted for the election of each of Connie R. Curran, Daniel Hamburger, Harold T. Shapiro and Ronald L. Taylor as Class I Directors and Gary Butler as a Class II Director unless otherwise specified in such proxy. A proxy cannot be voted for more than five persons. In the event that a nominee becomes unable to serve as a Director, the proxy committee will vote for the substitute nominee that the Board designates. The Board has no reason to believe that the nominees will become unavailable for election.

 

Each nominee for election as a Director, and each Director continuing in office, is listed below, along with a brief statement of his or her current principal occupation, business experience and other information, including directorships in other public companies held as of the date of this Proxy Statement or within the previous five years. Under the Caption “Relevant Experience,” we describe briefly the particular experience, qualifications, attributes or skills that led to the conclusion that these nominees or continuing directors should serve on the Board. As explained below under the caption “Board of Directors and Board Committee Information — Director Nominating Process and Factors Considered,” the Governance Committee looks at the Board as a whole, attempting to ensure that it possesses the characteristics that the Board believes important to effective governance.

 

Approval by Shareholders

 

The election of the five nominees for Director listed below requires the affirmative vote of a majority of the shares of Common Stock of DeVry outstanding on the record date. Unless otherwise indicated on the proxy, the shares will be voted FOR each of the nominees listed below.

 

The Board of Directors recommends a vote FOR the nominees listed below.

NOMINEES

 

CLASS I — TERM EXPIRES 2013

 

 

CLASS II — TERM EXPIRES 2011

 

INCUMBENT DIRECTORS

 

CLASS II — TERM EXPIRES 2011

 

CLASS III — TERM EXPIRES 2012

 

 

Board of Directors

 

DeVry’s Board of Directors held seven meetings during fiscal year 2010, consisting of four regular meetings and three special meetings. Board members are expected to attend Board meetings, the meetings of the committees on which they serve and the Annual Meeting of Shareholders, except in unusual circumstances. During fiscal year 2010 all incumbent Directors attended 75% or more of the aggregate total number of meetings of the Board of Directors and of the committees on which they served. All of the Directors attended DeVry’s 2009 Annual Meeting of Shareholders. During fiscal year 2010, the Board met in executive session without employee Directors or other employees present at each regular Board of Directors meeting. Dr. Harold Shapiro presided over these sessions as the non-executive Board Chair.

 

Director Independence

 

The Board of Directors has considered whether or not each Director, and Mr. Butler, as a director nominee, has any material relationship with DeVry (either directly or as a partner, shareholder or officer of an organization that has a relationship with DeVry) and has otherwise complied with the requirements for independence under the applicable listing standards of the New York Stock Exchange (“NYSE”).

As a result of this review, the Board of Directors affirmatively determined that all of DeVry’s current Directors and Mr. Butler are “independent” of DeVry and its management within the meaning of the applicable NYSE rules, with the exception of Mr. Taylor and Mr. Hamburger. Mr. Taylor is considered an inside director because of his status as a Senior Advisor to DeVry. In addition, Mr. Hamburger is considered an inside Director because of his employment as President and CEO of DeVry.

 

The Board considered the relationship between DeVry and Northern Trust Corporation, at a subsidiary of which DeVry maintains the bulk of its depository accounts and through which nearly all of DeVry’s disbursement activity is conducted, because Mr. Logan is Executive Vice President and Managing Director, Global Financial Institutions Group, with Northern Trust Global Investments, a business unit of Northern Trust Corporation. In fiscal year 2010, DeVry incurred approximately $1.4 million in fees to Northern Trust Corporation, which were partially offset against compensating balance credits earned on an average outstanding balance of approximately $19.9 million. The Board of Directors concluded, after considering that Mr. Logan had no involvement in the transactions, the lack of materiality of the transactions to DeVry and to Northern Trust Corporation, and the fact that the terms of the transactions are not preferential either to DeVry or to Northern Trust Corporation, that the relationship is not a material one for purposes of the NYSE listing standards and would not influence Mr. Logan’s actions or decisions as a Director of DeVry.

 

The Board also considered the relationship between DeVry and Automatic Data Processing, Inc. (“ADP”) because Mr. Butler is Chief Executive Officer of ADP. In fiscal year 2010, DeVry paid approximately $1.6 million in fees for services purchased in the ordinary course of business relating to benefits solution centers, payroll outsourcing and hosting, COBRA and health care flex spending administration and student refund administration. The Board of Directors concluded, after considering that Mr. Butler had no involvement in the transactions, the lack of materiality of the transactions to DeVry and to ADP, and the fact that the terms of the transactions are not preferential either to DeVry or to ADP, that the relationship is not a material one for purposes of the NYSE listing standards and would not influence Mr. Butler’s actions or decisions as a Director of DeVry.

 

The Board also considered the relationship between DeVry and Medical Education Technologies, Inc. (“METI”), where Ms. Curran serves as a director. In fiscal year 2010, DeVry purchased from METI approximately $553,000 of medical simulation products. The Board of Directors concluded after considering that Ms. Curran is not an officer of METI and had no involvement in the transactions, the lack of materiality of the transactions to DeVry, and the fact that the terms of the transactions are not preferential either to DeVry or to METI, that the relationship is not a material one for purpose of the NYSE listing standards and would not influence Ms. Curran’s actions or decisions as a Director of DeVry.

 

Board Leadership Structure

 

In accordance with DeVry’s Corporate Governance Principles, the Board believes that it makes its selection of the Board Chair and the CEO in the way that it deems best for the organization and its shareholders and assesses this determination on an ongoing basis. The Board therefore has no specific policy with respect to the separation of the offices of Board Chair and CEO. The Board believes that this issue can be part of the succession planning process and that it is in the best interests of DeVry and its shareholders for the Board to make a determination regarding this issue when it annually elects the Board Chair. Since 2006, the offices of Board Chair and CEO have been held by different individuals, with the Board Chair currently being an independent director. The Board believes that the existing leadership structure currently serves DeVry and its shareholders well.

 

Board Committees

 

The Board has standing Governance, Audit, Compensation, Finance, Academic and Government Relations committees. A current copy of the charters of each of these committees and a current copy of DeVry’s Corporate Governance Principles are available in print from the Secretary of DeVry, 3005 Highland Parkway, Downers Grove, IL 60515-5799, to any shareholder upon written request and can also be found on DeVry’s website, www.devryinc.com. Only Directors who meet the NYSE listing standards definition of “independent” are appointed to the Governance and Compensation committees. Only Directors who meet the NYSE listing standards and the Securities and Exchange Commission definitions of “independent” are appointed to the Audit Committee.

Academic Committee.  Directors Connie R. Curran (Chair), Darren Huston and Ronald L. Taylor serve as members of DeVry’s Academic Committee, which was established to assure that the academic perspective is heard and represented at the highest policy-setting level, and incorporated in all of DeVry’s activities and operations. The purpose of the Committee, which met two times in fiscal year 2010, is to provide oversight of DeVry’s academic policy and input to the Board regarding academic activities. The Committee also has oversight responsibility for risks and exposures related to academic quality, including accreditation, curriculum development and delivery, student persistence and outcomes.

 

Audit Committee.  Directors William T. Keevan (Chair), David S. Brown, Lisa W. Pickrum and Fernando Ruiz serve as members of the Audit Committee, which was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act. The Committee met eight times in fiscal year 2010. The Board of Directors has determined that all of the members of the Audit Committee are “independent” as required by the applicable listing standards of the NYSE and by the applicable rules and regulations issued by the Securities and Exchange Commission. The Board also has determined that the Audit Committee has one “audit committee financial expert” serving on that Committee; namely, William T. Keevan, whose business background may be found on page 6 of this Proxy Statement.

 

The principal duties of the Audit Committee include:

 

 

Additional detail about the Committee’s activities are spelled out in the Committee’s Charter, which was most recently amended and restated by the Board of Directors on May 12, 2010. The report of the Audit Committee appears on page 39 of this Proxy Statement. The Committee also has oversight responsibility for risks and exposures relating to the adequacy and effectiveness of the accounting, information technology, and financial controls, including DeVry’s policies and procedures to assess, monitor and manage exposure to risk (business and financial) and the steps management has taken with respect thereto; DeVry’s adherence to legal, regulatory and ethics compliance programs; and enterprise-wide risk management.

 

Compensation Committee.  Directors Julia A. McGee (Chair), Connie R. Curran, William T. Keevan and Lyle Logan serve as members of the Compensation Committee, which held six meetings in fiscal year 2010, consisting of four regular meetings and two special meetings. The Board of Directors has determined that all of the members of the Compensation Committee are “independent” as defined in the applicable NYSE listing standards. The role of the Compensation Committee is discussed below in the section on “Compensation Discussion and Analysis”. The report of the Compensation Committee appears on page 19 of this Proxy Statement.

 

The principal duties of the Compensation Committee include:

 

 

 

The Compensation Committee also has oversight responsibility for risks and exposures related to employee compensation programs and management succession planning and assesses whether the organization’s compensation practices encourage risk taking that would have a material adverse effect on DeVry. In connection with fulfilling this responsibility, the Compensation Committee reviewed the structure and elements of DeVry’s compensation program and its policies and practices that manage or mitigate such risk, including, the balance of short-term and long-term incentives, use of multiple performance measures, a multi-year vesting schedule for long-term incentives, the stock ownership guidelines, and the implementation of a claw-back policy. Based on this review, we concluded that our compensation program does not encourage excessive risk taking.

 

Finance Committee.  Directors Fernando Ruiz (Chair), David S. Brown, Lyle Logan and Lisa W. Pickrum serve as members of DeVry’s Finance Committee, which met two times during fiscal year 2010. The Committee’s principal duties include review and recommendation with respect to DeVry’s financing policies, including cash flow, capital structure and dividend policy, as well as a risk management policy related thereto. The Committee also has oversight responsibility for risks and exposures related to DeVry’s capital structure and debt.

 

Governance Committee.  Directors Lyle Logan (Chair), David S. Brown and Julia A. McGee serve as members of DeVry’s Governance Committee, which met four times during fiscal year 2010. The Board of Directors has determined that all of the members of the Governance Committee are “independent,” as defined in the applicable NYSE listing standards. In accordance with the Committee’s Charter, its responsibilities include:

 

 

The Governance Committee will consider shareholder recommendations of candidates for Director. Such recommendations should be sent to the Secretary of DeVry. Detailed procedures, including minimum qualifications and specific qualities or skills believed necessary, and the Committee’s process (arising primarily out of DeVry’s By-Laws) for identifying and evaluating nominees, have been codified in DeVry’s policy on the Director Nominating Process, which is described below under the caption “Director Nominating Process and Factors Considered.”

 

Mr. Butler’s candidacy resulted from an extensive search process assisted by the firm of Russell Reynolds Associates, which was retained by the Board for this purpose. The Governance Committee evaluated Mr. Butler against other candidates and the criteria set forth in the policy on Director Nominating Process, which is discussed below, and recommended him to the full Board of Directors for nomination.

 

Government Relations Committee.  Directors Lisa W. Pickrum (Chair), Darren Huston and Ronald L. Taylor serve as members of DeVry’s Government Relations Committee, which met three times during fiscal year 2010. The Committee’s principal duties include assisting DeVry’s management team and the Board in identifying, evaluating and monitoring political and legislative trends, issues and concerns and determining how DeVry can anticipate and adjust to government policy trends in order to more effectively achieve its business goals. The

Committee also has oversight responsibility for risks and exposures related to present and future public policy on education, as well as laws and regulations applicable to DeVry.

 

Director Continuing Education

 

Members of the Board of Directors are encouraged to participate in continuing education and enrichment classes and seminars. During fiscal year 2010, Mr. Keevan attended conferences presented by the American Institute of Certified Public Accountants, the American Bar Association, Corporate Board Member (a director “peer exchange” program) and other organizations. These conferences addressed matters such as current SEC and PCAOB developments, accounting and financial reporting in general, other regulatory and business developments, and corporate governance. He also availed himself of selected on-line continuing professional education courses.

 

Director Nominating Process and Factors Considered

 

The Governance Committee is responsible for making recommendations of nominees for directors to the Board. The Committee’s goal is to put before the shareholders candidates who, with the incumbent directors, will constitute a board that has the characteristics necessary to provide effective oversight for the growing, complex, global educational operations of DeVry and reflects the broad spectrum of students that DeVry serves, including representing a diversity of thought, background, experience and other characteristics. To this end, DeVry’s Corporate Governance Principles provide that nominees are to be selected on the basis of, among other things, knowledge, experience, skills, expertise, diversity, personal and professional integrity, business judgment, time availability in light of other commitments, absence of conflicts of interest and such other relevant factors that the Committee considers appropriate in the context of the interests of DeVry and its Board. When considering nominees, the Committee seeks to ensure that the Board as a whole possesses, and individual members possess at least one of, the following characteristics or expertise:

 

 

The Board has implemented this policy by evaluating each prospective director nominee as well as each incumbent director on the criteria described above and in the context of the composition of the full Board, to determine whether she or he should be nominated to stand for election or re-election. Each determination involves an assessment of the Committee’s effectiveness in carrying out the policy.

 

In screening director nominees, the Committee also reviews potential conflicts of interest, including interlocking directorships and substantial business, civic, and social relationships with other members of the Board that could impair the prospective nominee’s ability to act independently.

 

The Committee will not only consider nominees that it identifies, but will consider nominees submitted by shareholders in accordance with the process for shareholder nominations identified in the By-Laws. Under this process, all shareholder nominees must be submitted in writing to the Secretary of DeVry Inc., 3005 Highland Parkway, Downers Grove, IL 60515-5799, not less than 90 days prior to the anniversary of the immediately preceding Annual Meeting of Shareholders. Such shareholder’s notice shall be signed by the shareholder of record

who intends to make the nomination (or his duly authorized proxy) and shall also include, among other things, the following information:

 

 

In addition to candidates submitted through this By-Law process for shareholder nominations, shareholders may also recommend candidates by following the procedures set forth below under the caption “Communications with Directors.”

 

In identifying potential nominees and determining which nominees to recommend to the Board, the Governance Committee has retained the advisory services of Russell Reynolds Associates. In connection with each vacancy, the Governance Committee develops a specific set of ideal characteristics for the vacant director position. The Governance Committee looks at nominees it identifies and any identified by shareholders on an equal basis using these characteristics and the general criteria identified above.

Board of Directors’ Role in Risk Oversight

 

DeVry’s full Board is responsible for assessing major risks facing DeVry and overseeing management’s plans and actions directed toward their mitigation and/or elimination. The Board has assigned specific elements of the oversight of risk management of DeVry to committees of the Board, as summarized below. Each committee meets periodically with members of management and, in some cases, with outside advisors regarding the matters described below and, in turn, reports to the full Board at least after each meeting regarding any findings.

 

 

Directors (except Mr. Hamburger) were paid an annual retainer of $70,000, paid quarterly. In addition, the Board Chair receives an annual retainer of $120,000. The Chair of the Audit Committee receives an additional annual retainer of $15,000 for such services and the chairs of the other committees each receives an additional annual retainer of $5,000 for their roles as committee chairs. Directors are reimbursed for any reasonable and appropriate expenditures attendant to Board membership.

 

Under the DeVry Inc. Nonqualified Deferred Compensation Plan, a Director may elect to defer all or a portion of Board compensation. Any amount so deferred is, at the Director’s election, valued as if invested in various investment choices made available by the Compensation Committee for this purpose, and is payable in cash in installments or as a lump-sum on or after termination of service as a Director or at a date specified by the Director.

 

As long-term incentive compensation for Directors, each non-employee Director received restricted stock units commonly referred to at DeVry as “Full-Value Shares” with an estimated value of $70,000 directly following the 2009 Annual Meeting of Shareholders. Each full-value share represents the right to receive one share of DeVry Inc. common stock following the satisfaction of the vesting period. The Full-Value Shares vest at a rate of 33.33% per year over three years. Prior to fiscal year 2010, Directors received stock options as long-term incentive compensation.

 

During fiscal year 2011, the Compensation Committee approved a revision to the compensation paid to Board Members. Effective as of the November 2010 Annual Meeting of Shareholders, the estimated value of Full-Value

Shares awarded to Directors directly following each Annual Meeting shall be increased to $100,000. The Compensation Committee also increased the additional annual retainer paid to the Chairs of the Audit Committee and Compensation Committees to $20,000 and $15,000, respectively. All other aspects of Board compensation will remain unchanged.

 

This table discloses all compensation provided in fiscal year 2010 to the Directors of DeVry (other than Mr. Hamburger who received no compensation for his service as a Director).

 

 

 

 

The aggregate number of option awards outstanding at June 30, 2010 for each of the Directors was as set forth below. Prior to fiscal year 2010, Board members received grants of stock options instead of restricted stock units upon their election or re-election to the Board.

 

 

Shareholders and other interested parties wishing to communicate with the Board of Directors or any member or committee of the Board of Directors are encouraged to send any communication to: Secretary, DeVry Inc., 3005 Highland Parkway, Downers Grove, IL 60515-5799 and should prominently indicate on the outside of the envelope that it is intended for the board of directors, or a member or committee of the board of directors. Any such communication must be in writing, must set forth the name and address of the shareholder (and the name and address of the beneficial owner, if different), and must state the form of stock ownership and the number of shares beneficially owned by the shareholder making the communication. DeVry’s Secretary will compile and periodically forward all such communication to the Board of Directors.

 

Various DeVry policies and procedures, including the Code of Business Conduct and Ethics, which applies to DeVry’s directors, officers and all other employees, and annual questionnaires completed by all DeVry directors, director nominees and executive officers, require disclosure of transactions or relationships that may constitute conflicts of interest or otherwise require disclosure under applicable Securities and Exchange Commission rules. The Governance Committee also reviews annually the continuing independence of DeVry’s non-employee directors under applicable law or rules of the NYSE and reports its findings to the Board of Directors in connection with its independence determinations. The Governance Committee reviews and evaluates Director transactions or relationships with DeVry, including the results of any investigation, and makes a recommendation to the Board of Directors with respect to whether a conflict or violation exists or will exist or whether a director’s independence is or would be impaired. The Board of Directors, excluding any director who is the subject of the recommendation, receives the report of the Governance Committee and makes the relevant determination.

 

No relationships or transactions existed or occurred between DeVry and any officer, director or nominee for director, or any affiliate of or person related to any of them, since the beginning of DeVry’s last fiscal year of the type and amount that are required to be disclosed under applicable Securities and Exchange Commission rules.

 

Shareholders, employees and other interested persons are encouraged to communicate or report any complaint or concern regarding financial statement disclosures, accounting, internal accounting controls, auditing matters or violations of DeVry’s Code of Business Conduct and Ethics (collectively, “Accounting Complaints”) to the General Counsel of DeVry Inc. at the following address:

 

General Counsel
DeVry Inc.
3005 Highland Parkway
Downers Grove, IL 60515-5799

 

Accounting Complaints also may be submitted in a sealed envelope addressed to the Chair of the Audit Committee, in care of the General Counsel, at the address indicated above, and labeled with a legend such as: “To Be Opened Only by the Audit Committee.” Any person making such a submission who would like to discuss an Accounting Complaint with the Audit Committee should indicate this in the submission and should include a telephone number at which he or she may be contacted if the Audit Committee deems it appropriate.

 

Employees may also report Accounting Complaints using any of the reporting procedures specified in DeVry’s Code of Business Conduct and Ethics. All reports by employees shall be treated confidentially and may be made anonymously. DeVry will not discharge, demote, suspend, threaten, harass or in any manner discriminate against any employee in the terms and conditions of his or her employment based upon any lawful actions taken by such employee with respect to the good faith submission of Accounting Complaints.

 

DeVry has adopted a Code of Business Conduct and Ethics (the “Code”) that applies to its directors, officers (including the CEO, the Chief Financial Officer and the Controller) and all other employees. The Code is intended to promote:

 

 

The Code is available in print, without charge, from the Secretary of DeVry, 3005 Highland Parkway, Downers Grove, IL 60515-5799, to any shareholder upon written request and is also available on DeVry’s website, www.devryinc.com. DeVry posts any amendments to or waivers from the Code (to the extent applicable to DeVry’s directors and executive officers) on DeVry’s website, www.devryinc.com.

 

The table below sets forth the number and percentage of outstanding shares of Common Stock beneficially owned by (1) each person known by DeVry to own beneficially more than five percent of the Common Stock, (2) each Director of DeVry, (3) each nominee for election as Director, (4) each Named Executive Officer, and (5) all Directors and officers of DeVry as a group, in each case as of June 30, 2010, except as otherwise noted. DeVry believes that each individual or entity named has sole investment and voting power with respect to the shares of Common Stock indicated as beneficially owned by them, except as otherwise noted.

 

Amount and Nature of Beneficial Ownership

 

 

 

 

Stock Ownership Guidelines

 

In February 2010, the Board of Directors adopted stock ownership guidelines that apply to all Directors and executive officers of DeVry, including the NEOs. Under the guidelines, all executive officers are expected to maintain ownership of DeVry stock equal to a multiple of his or her current base salary (as adjusted from time to time), as follows: the CEO — three times current base salary; all other NEOs — two times current base salary; and all other executive officers — one times current base salary. All directors are expected to maintain ownership of DeVry stock equal to a multiple of three times his or her current annual retainer (as adjusted from time to time). Shares that count toward satisfaction of the Guidelines include DeVry stock directly and/or beneficially owned, DeVry stock held in DeVry’s Profit Sharing 401(k) Retirement Plan or other private accounts, vested Full-Value Shares, and the after-tax value of unvested Full-Value Shares and/or vested options, provided that these can make up no more than 50% of the ownership requirement. All initial participants will have until February 2015 to achieve his or her respective expected stock ownership level, and all new participants will have until five years following the date of hire to achieve his or her respective expected stock ownership level.

 

The Compensation Committee of the Board of Directors (the “Compensation Committee”) hereby furnishes the following report to the shareholders of DeVry in accordance with rules adopted by the Securities and Exchange Commission. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis of this Proxy Statement with DeVry’s management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

 

This report is submitted on behalf of the members of the Compensation Committee:

 

Julia A. McGee, Chair
Connie R. Curran
William T. Keevan
Lyle Logan

 

This section provides an overview and analysis for fiscal year 2010 of our compensation program and policies, the material compensation decisions of the Board of Directors and the Compensation Committee made under the program and policies, how the Board of Directors and the Compensation Committee made those decisions and the material factors the Board of Directors and the Compensation Committee considered in making those decisions. Later in this Proxy Statement, under the heading “Executive Compensation” you will find a series of tables and related narratives containing specific information about the compensation earned or paid in fiscal year 2010 to the following individuals, whom we refer to as our Named Executive Officers or “NEOs”:

 

 

The discussion below is intended to help you understand the detailed information provided in those tables and related narratives and put that information into context within our overall compensation program. When we use the words “we,” “our” or “us,” they refer to DeVry.

 

Executive Compensation Philosophy and Objectives

 

For fiscal year 2010, the overall goals of our compensation program were to serve the essential purpose of the organization, which were to empower students to achieve their educational and career goals, and to maximize the long-term return to our stakeholders. We designed our program to:

 

 

As part of our compensation philosophy, we believe we should pay our NEOs total compensation that is competitive with other alternatives available to them in the marketplace and that a significant portion of each NEO’s total compensation should be variable — with both upside potential and downside risk — depending upon the performance of DeVry and of the individual. In addition, we believe we should maintain a clear, straightforward and transparent approach to our executive compensation program.

How the Compensation Committee Determined Executive Compensation

 

Role of the Compensation Committee

 

The Compensation Committee has responsibility for establishing, implementing and monitoring adherence to our compensation program. The Compensation Committee’s role is to oversee, on behalf of the Board and for the benefit of DeVry and its shareholders, our compensation and benefit plans and policies and their effective execution, including reviewing and approving equity awards to directors and NEOs, and reviewing and approving annually all compensation decisions relating to our NEOs. The Compensation Committee meets periodically to review the design and effective functioning of our executive compensation program, including approving compensation levels and performance targets, reviewing management performance, and approving annual cash incentive compensation distributions and long-term incentive compensation awards. The Compensation Committee operates under a written Charter, a copy of which is available on DeVry’s website, www.devryinc.com.

 

Role of Executive Officers and Management

 

The Compensation Committee invites select members of management to participate in its meetings. The CEO and Senior Vice President of Human Resources were regular attendees at Compensation Committee meetings in fiscal year 2010. The Compensation Committee also invited the CFO and General Counsel to provide perspective and participate in its meetings from time to time. Management’s role was to contribute input and analysis to the Compensation Committee’s discussions. At the Compensation Committee’s direction and request, management made recommendations to the Compensation Committee with respect to the key elements of our executive compensation program for fiscal year 2010, which are discussed in more detail below. The CEO and Senior Vice President of Human Resources with input from the CFO recommended the aggregate dollars to be available to all of DeVry’s employees for increases in base salaries (known as the “merit pool”), as well as the guidelines under which merit increases to base salaries of employees were to be made. The CEO and Senior Vice President of Human Resources with input from the CFO recommended the aggregate dollars available to be distributed to eligible employees under DeVry’s Management Incentive Plan (“MIP”) for fiscal year 2010, and made specific recommendations to the Compensation Committee with respect to MIP awards for members of the Senior Leadership Team that reports directly to the CEO. Similarly, the CEO and Senior Vice President of Human Resources with input from the CFO made recommendations to the Compensation Committee concerning the aggregate number of stock options and restricted stock units to be awarded to deserving employees under DeVry’s long-term incentive plans for fiscal year 2010, and made specific recommendations with respect to individual equity awards to members of the Senior Leadership Team. As we discuss below, our CEO made specific recommendations to the Compensation Committee for his direct reports, including the other NEOs, regarding performance goals, increases to their annual base salaries, MIP awards and long-term incentive compensation grants for fiscal year 2010. After receiving the recommendations of management, the Compensation Committee gave feedback on the recommendations, regularly met in executive session for further discussion and analysis, and consulted with outside advisors. It approved the overall magnitude of MIP awards and equity grants, and all compensation decisions for the NEOs other than Mr. Hamburger. The Compensation Committee made all final compensation decisions with respect to the NEOs (other than Mr. Hamburger) and the independent members of the Board approved all compensation decisions for Mr. Hamburger.

 

Role of Independent Consultants

 

For fiscal year 2010, management used widely-published surveys (provided by Watson Wyatt, Towers Perrin and Mercer) to help inform many of the decisions related to the total compensation of its executive team. The Compensation Committee engaged The Delves Group to review management’s recommendations and provide data and insights that ensure that our executive compensation program is fair, reasonable, and consistent with our compensation objectives. The role of the outside consultants involved in our compensation processes was purely advisory in nature and the Compensation Committee retained ultimate responsibility for its compensation-related decisions.

 

The Compensation Committee and management analyzed and considered survey data provided by the consultants to help provide a broad perspective on the marketplace and market trends given DeVry’s stated

objective of paying compensation that is competitive with other marketplace alternatives. This survey data was one of many pieces of information included in a subjective process of determining executive compensation. The Compensation Committee used the survey data as general guidance, together with its own knowledge, experience and discretion, in establishing each of the individual elements of NEO compensation for its executives. The Compensation Committee did not target any specific percentile levels in establishing compensation levels and opportunities.

 

The Role of Performance

 

A significant portion of the total compensation of the NEOs is performance-based, tied, on one hand, to the financial performance of DeVry and/or their specific functional or operating unit, and on the other hand to their individual performance. Under DeVry’s operating philosophy that quality leads to growth, we believe that this places appropriate emphasis on academic quality, student service and career outcomes, thereby helping us to achieve our most significant short-term and long-term objectives. The Compensation Committee used specific goals and objectives to measure performance, and these goals and objectives played an important role in establishing the amounts paid to our NEOs in each element of our executive compensation program.

 

Performance Goals and Measures

 

We have a confidential five-year strategic plan containing various milestones, which was developed by our executive management team and approved by our Board. The plan is rigorously reviewed and updated each February. At the outset of fiscal year 2010, our executive management team recommended, and our Board subsequently approved, a fiscal year operating plan based upon our five-year strategic plan. The specific, quantitative goals set for organizational evaluation and NEO performance in fiscal year 2010 were, in turn, derived from our 2010 operating plan.

 

The Compensation Committee continued its recent practice of using earnings per share and annual revenue as the key measures of organizational performance. For fiscal year 2010, DeVry’s organizational performance goals were revenue of $1,779 million and earnings per share of $2.85.

 

The Compensation Committee used operating unit revenue and operating income as key measures in assessing the performance of NEOs in operating roles in fiscal year 2010. We do not disclose the particular operating unit performance goals utilized in our annual cash incentive program (MIP) or otherwise. We consider such information confidential, as its disclosure would cause competitive harm. The internal revenue and earnings goals for the various operating segments flowed from the DeVry organization-wide goals.

 

The Compensation Committee considered the organization’s performance goals to represent the best estimate of what the organization could deliver, if management, individually and collectively, were to materially satisfy its goals and objectives for the year. The Compensation Committee intended all the goals to be aggressive yet achievable. At the time the Compensation Committee set these goals, it expected that it would take extraordinary performance on the part of management to exceed them to the extent necessary to yield maximum incentive payouts under our MIP. We believe that DeVry’s incentive plans have successfully implemented its philosophy of pay for performance in fiscal year 2010 because they focused management and the entire organization on key value drivers and performance incentives to deliver strong results.

 

Individual Performance Goals

 

At the beginning of fiscal year 2010, the Compensation Committee approved individual performance goals and objectives for the CEO. The CEO also worked collaboratively with the other NEOs in developing their individual performance goals and to assign weightings to them to place additional emphasis on tactical priorities. These individual performance goals reflected functional results or operating unit performance appropriate for each NEO’s respective role. Each stressed the building of academic outcomes, organizational strength and advancement of DeVry’s core values. The individual performance goals are factors in determining base salary, annual cash incentive compensation (MIP) and long-term incentive compensation. The individual performance goals intentionally include elements that can be rated objectively as well as elements that are of a subjective nature. This allows the evaluator — the Compensation Committee in the case of the NEOs — to assess the individual’s performance

objectively, while utilizing its discretion to make adjustments based on the individual’s perceived contributions and other subjective criteria.

 

The primary individual performance goals and objectives that the Compensation Committee set for our CEO, Mr. Hamburger, were to:

 

 

The primary individual performance goals and objectives set for our CFO, Mr. Gunst, in his role as the head of a critical function for DeVry, were to:

 

 

• Lead risk management and insurance efforts across the organization;

 

 

The primary individual performance goals and objectives set for Mr. Pauldine, Mr. Riehs and Mr. Hughson as operating division heads were to:

 

 

These goals were selected by the Compensation Committee in the case of the CEO, and the CEO in the case of the NEOs, because they were reflective of management’s role in DeVry achieving the overall goals set forth in the fiscal year 2010 operating plan and, in turn, our long-term strategic objectives. At the same time, these goals were selected because they were reflective of a number of qualities we expect of all of our executives, such as behaviors that:

 

 

Elements of Executive Compensation

 

The key elements of our executive compensation program for fiscal year 2010 were unchanged from fiscal year 2009:

 

 

The Compensation Committee aimed to provide total cash compensation to each NEO that was market-competitive, combining a stable base salary element with two at-risk elements (annual cash incentive awards and long-term incentive awards) available to be earned based upon individual and organizational performance. For example, approximately 75% of the CEO’s total compensation was at-risk in fiscal 2010, consistent with the nature of our compensation program. We believe this approach helps reinforce a culture of performance by recognizing individual potential and rewarding results.

 

The following is a description for fiscal year 2010 of the three main components of our compensation program, the purpose of each, and the role each played in fiscal year 2010 in meeting the overarching objectives of our compensation program for our NEOs.

 

Annual Base Salary

 

We pay base salaries as a secure, predictable component of cash compensation, which is essential for attracting and retaining talented executives. An initial base salary is negotiated at the outset of employment, thereby establishing it as satisfactory to the executive and thus, by inference, consistent with current market conditions. The Compensation Committee then adjusts base salaries, effective as of the early part of each succeeding fiscal year to reflect the executive’s prior performance and to respond to changes in market conditions.

 

The Compensation Committee evaluated the CEO’s annual base salary early in fiscal year 2010. Its evaluation took into account actual results versus the performance targets and goals previously set for DeVry and for him for fiscal year 2009, which are described above under “Individual Performance Goals.” The Compensation Committee also considered its interaction with Mr. Hamburger, its observation of his performance throughout fiscal year 2009 and the perceived market for CEOs, thus adding a further discretionary element to its evaluation. The Compensation Committee believes that our executive compensation program is better because of this element, as it allows for the consideration of unforeseen circumstances and factors that cannot be measured with precision. DeVry did exceptionally well in fiscal year 2009, particularly in a year of unprecedentedly difficult economic conditions. The CEO contributed materially to these favorable results and achieved or exceeded nearly all of his individual performance objectives for fiscal year 2009. The Committee felt these considerations, taken alone, were sufficient to justify a significant increase in Mr. Hamburger’s base salary. At the same time, the Committee took into account additional considerations, including the uncertain economic outlook at the time and the conservative approach taken with respect to merit increases throughout the organization. As a result, for fiscal year 2010, the Compensation Committee set Mr. Hamburger’s annual base salary at $755,679, which represented approximately a 2.0% increase over his fiscal year 2009 salary. The Compensation Committee increased the CEO’s salary because the Compensation Committee wanted to reward the CEO for DeVry’s and the CEO’s excellent performance during the previous fiscal year, as well as for his consistently strong executive performance, his success in building a high quality executive team, his potential to continue building a positive future for DeVry and to ensure that his salary is comparable to the salaries of chief executive officers at other companies in the marketplace.

 

Mr. Hamburger recommended the annual base salary of each of the other NEOs at the outset of fiscal year 2010. His recommendations were made in consultation with the Senior Vice President of Human Resources, and they were based upon their experience with and analysis of the market at that time, their monitoring of the compensation levels at other companies in DeVry’s market and Mr. Hamburger’s assessment of each NEO’s performance for the prior year. Generally, the CEO made his assessments for adjustment of the other NEOs’ fiscal year 2010 salaries, based on the following seven criteria:

 

(1) DeVry’s overall financial performance compared to the prior year operating plan;

(2) Each NEO’s performance against his previously established individual goals and objectives;

 

(3) Each NEO’s effectiveness in instilling a culture of teamwork, student service and integrity;

 

(4) Each NEO’s expected future contributions;

 

 

(6) The general merit increase parameters set for all employees in the organization; and

 

(7) Discretion based on interaction and observation throughout the year.

 

We believe that the annual base salaries paid in fiscal year 2010 to each NEO served our executive compensation objectives to:

 

 

Annual Cash Incentive Compensation

 

The MIP is a portion of executive cash compensation. It is an annual cash incentive program designed to motivate and reward our NEOs and other management employees by putting a substantial portion of cash compensation at risk and paying annual incentives depending upon the extent to which DeVry’s financial objectives and each NEO’s respective individual performance goals are met or exceeded. We determine and pay the MIP payments for a particular fiscal year only after that fiscal year has ended (i.e., in the beginning of the next fiscal year). Thus, MIP awards for fiscal year 2010 were determined and paid in the early part of fiscal year 2011, after the results for fiscal year 2010 were known and confirmed.

 

The Compensation Committee considered three primary items in determining the amounts of MIP awards for fiscal year 2010:

 

(1) MIP Targets;

 

(2) Organizational and/or operating unit performance; and

 

(3) Individual performance.

 

An NEO’s ability to hit his or her MIP Target is based 70% on the organization’s and/or applicable operating unit’s achievement of its performance metrics and 30% on the achievement of his or her individual performance goals.

 

2010 NEO MIP Targets

 

MIP Targets were set for each NEO as a percentage of base salary at the outset of the fiscal 2010 year. The CEO’s MIP Target is 100% of base salary, pursuant to his employment agreement, which is discussed in more detail below. MIP Targets for the other NEOs are recommended by the CEO and approved by the Compensation Committee. The possible payouts derived from the MIP Targets for all of the NEOs are set forth on the 2010 Grants of Plan Based Awards table on page 31 below.

 

Organizational, Operating Unit and Individual Performance Measures

 

As discussed above, the Compensation Committee selected DeVry earnings per share, DeVry revenues, operating unit revenue and operating income as the measures most reflective of management’s role in DeVry achieving its operating plan. The Compensation Committee used individual performance because it believed that this measure served to advance our short-term goal of each NEO meeting his respective individual performance goals for the year, which the Compensation Committee believed would, on a combined basis, help DeVry meet its aggregate goals. These various measures were allocated to best align the measurements with each NEOs respective role and the goals of the organization and our compensation programs. The relative percentages assigned to each of

the organizational, operating unit and individual performance goals for each NEO for fiscal year 2010 were as follows:

 

 

MIP Payouts for Fiscal Year 2010

 

MIP payouts for each NEO can be as low as zero but also provide an overachievement opportunity of up to 200% of MIP Target, which rewards exceptional performance compared to expectations, over-delivery of strategic initiatives, and/or achievement of initiatives not contemplated at the time goals were set.

 

The Committee awarded Mr. Hamburger a MIP payout of $1,339,969 which was approximately 177% of his MIP Target. In doing so, it took into account that DeVry’s organizational goals were well satisfied as it over-performed against its fiscal year 2010 operating plan in terms of both revenue and earnings per share. In addition, the Committee evaluated Mr. Hamburger’s achievement of his personal performance goals and found his performance in that regard to be outstanding.

 

The process was essentially the same for the other NEOs, except that the CEO reviewed each NEO’s performance, and the CEO’s recommendations were reviewed and approved by the Committee. NEO MIP awards were based on an evaluation of individual performance and the extent to which DeVry’s goals, and in the case of Messrs. Pauldine and Riehs, their respective operating unit goals, were met or exceeded. Please see “Executive Compensation — 2010 Summary Compensation Table” below for specific information about annual cash incentive (MIP) awards for the NEOs.

 

We believe that the annual incentive compensation that we paid for fiscal year 2010 to each NEO served our executive compensation objectives to:

 

 

Long-Term Incentive Compensation

 

In fiscal year 2010 the Compensation Committee continued its reliance on long-term incentive vehicles to align the long-term interests of management and shareholders. In doing so, the Compensation Committee encourages its executives to focus on the behaviors and initiatives that will lead to increased long-term value to our students and other stakeholders. The Compensation Committee believes that long-term equity compensation also is an important retention tool and, thus, the Compensation Committee has chosen to use a four-year vesting schedule for equity grants to encourage longer-term focus and retention.

 

The Compensation Committee made equity grants to each of the NEOs in the early part of fiscal year 2010. The Committee took into account the same seven criteria described in the “Annual Base Salary” section above in determining the size of these grants. The Compensation Committee targeted the value of the long-term equity compensation for each NEO to represent a substantial percentage of total compensation to serve two

complementary objectives of our compensation program: the long-term retention of quality executives and the creation of long-term value.

 

The Compensation Committee granted Incentive Stock Options (ISOs) up to the $100,000 IRS limitation applicable to each one-year vesting period. To the extent this limitation was met for any NEO, the remaining portion of the award was issued in the form of non-qualified stock options. The Compensation Committee recognizes that DeVry may not receive a tax deduction for ISOs. The Compensation Committee weighed this consideration against the benefit ISOs provide to employees and the consequent enhancement to DeVry’s ability to attract and retain executives and determined it was in DeVry’s best interest to continue utilizing ISOs in the manner described.

 

Prior to fiscal year 2010, the Compensation Committee had used only stock options as long-term incentives for NEOs. In fiscal year 2010, the Compensation Committee began granting restricted stock units commonly referred to by DeVry as “performance shares” to NEOs, in addition to stock options. The Compensation Committee has determined that 70% of long-term incentive compensation will continue to be in the form of stock options, with the remaining 30% in the form of performance shares. Performance shares are granted under the DeVry Inc. Incentive Plan of 2005. Some key design elements of the performance share program are:

 

 

Details concerning fiscal year 2010 stock option and performance share grants for the NEOs appear in the 2010 Grants of Plan-Based Awards table on page 31. The Compensation Committee awarded the option and performance share grants reflected in the table based on an evaluation of individual performance and the extent to which DeVry’s goals, and in the case of Messrs. Pauldine and Riehs their respective operating unit goals, were met or exceeded.

 

We believe that the long-term incentive compensation granted in fiscal year 2010 to each NEO served our executive compensation objectives to:

 

 

All Other Compensation

 

In general, we do not provide perquisites to our NEOs that are not available to other employees, with the exception of these:

 

 

Perquisites make up the smallest portion of each NEO’s total compensation package. The nature and quantity of perquisites provided by DeVry did not change materially in fiscal year 2010 versus 2009, consistent with our philosophy that perquisites should not represent a primary component of our compensation program. The Compensation Committee periodically reviews the perquisite program and allowances provided to each NEO to determine if adjustments are appropriate.

 

The “All Other Compensation” column of the 2010 Summary Compensation Table shows the amounts of perquisite compensation we provided for fiscal year 2010 to each of the NEOs.

 

Deferred Compensation

 

DeVry maintains the DeVry Inc. Nonqualified Deferred Compensation Plan (the “Deferred Plan”). The Deferred Plan is a voluntary, non-tax qualified, deferred compensation plan for executives and directors to save for retirement by deferring a portion of their current compensation until termination of service with DeVry or other specified dates. We credit matching contributions to participants’ accounts under the Deferred Plan to the extent their matching contributions to our tax-qualified Success Sharing 401(k) Retirement Plan are limited by the Internal Revenue Code. The Deferred Plan enables the NEOs and other employees with a certain level of annual compensation ($110,000 for fiscal year 2010) to save a portion of their income for retirement on a scale consistent with other employees not subject to IRS limits. We did not contribute to the Deferred Plan except as a matching contribution to amounts the NEOs contributed during the 2010 fiscal year. We do not have a defined benefit pension plan, and, therefore, our Success Sharing 401(k) Retirement Plan and the Deferred Plan are the only retirement savings vehicles for executives.

 

Employment Agreements

 

DeVry and Mr. Hamburger entered into an employment agreement effective November 15, 2006 that provides for an initial base salary, annual salary increases and annual cash incentive during the term and sets forth the severance benefits that will be provided upon termination of his employment under certain conditions.

 

DeVry and each of Mr. Gunst and Mr. Pauldine entered into employment agreements effective October 12, 2009, and DeVry and Mr. Hughson entered into an employment agreement effective September 9, 2009. Mr. Gunst’s new employment agreement replaces the employment agreement that DeVry entered into with him on July 24, 2006. Aside from Mr. Hamburger and Mr. Gunst, none of the NEOs previously had employment agreements. The employment agreements set forth, among other things, the severance benefits that will be provided upon certain employment termination scenarios.

 

The Compensation Committee believes that the employment agreements with Messrs. Gunst, Hughson and Pauldine provide:

 

 

Each of these employment agreements is discussed in detail in the narrative accompanying the Summary Compensation Table under the caption “Employment Agreements,” and DeVry’s obligation to provide severance benefits in accordance with the agreements is discussed beginning on page 34 under the caption “2010 Potential Payments Upon Termination or Change-in-Control.”

 

Deductibility of Compensation

 

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for certain compensation in excess of $1 million per year paid to “covered employees,” defined as the chief executive officer and the three other most highly compensated officers (other than the chief financial officer) employed as executive officers at year-end. Certain compensation, including “performance-based compensation,” may qualify for an exemption from the deduction limit if it satisfies certain requirements under Section 162(m). The

Compensation Committee views the tax deductibility of executive compensation as one factor to be considered in the context of its overall compensation philosophy. The Compensation Committee reviews each material element of compensation on a continuing basis and takes steps to assure deductibility if that can be accomplished while still remaining faithful to our executive compensation philosophy and objectives.

 

Base salaries do not qualify as “performance-based compensation” under Section 162(m). However the base salaries of DeVry’s NEOs are below the $1 million level. Amounts paid to an executive that are excludable from gross income, such as Success Sharing Retirement Plan contributions reflected in the “All Other Compensation” column in the Summary Compensation Table, are not subject to Section 162(m). Incentive compensation paid by DeVry in fiscal year 2010 under the MIP that is based on DeVry performance is expected to qualify as “performance-based compensation.” Gains on the exercise of stock options in fiscal year 2010 by persons who were covered employees at the end of the fiscal year qualify as performance-based compensation under Section 162(m).

 

Changes for Fiscal Year 2011

 

Incentive Compensation Recoupment Policy

 

DeVry has adopted an incentive compensation recoupment policy, which is applicable to all executive officers and is being implemented in the underlying plan and agreements. The policy provides that in addition to any other remedies available to DeVry (but subject to applicable law), if the Board of Directors or any committee of the Board of Directors determines that it is appropriate, DeVry may recover (in whole or in part) any incentive payment, commission, equity award or other incentive compensation received by an executive officer of DeVry to the extent that such incentive payment, commission, equity award or other incentive compensation is or was paid on the basis of any financial results that were subsequently restated due to conduct determined by the independent directors to have been as a result of the executive officer’s knowing or intentional fraudulent or illegal conduct.

EXECUTIVE COMPENSATION

2010 SUMMARY COMPENSATION TABLE

 

This table shows the compensation of DeVry’s Chief Executive Officer, Chief Financial Officer and each of the other NEOs for the fiscal years 2010, 2009 and 2008, which ended June 30, 2010, June 30, 2009 and June 30, 2008, respectively.

 

 

 

 

Employment Agreement with Mr. Hamburger

 

DeVry and Mr. Hamburger are parties to an employment agreement dated as of November 15, 2006, which provides for (i) an initial salary of $675,000 per year, subject to annual increases (but no decreases), (ii) an annual cash incentive under the MIP targeted at 100% of base salary, (iii) benefits and perquisites made available to senior management generally, and (iv) reimbursement of expenses consistent with DeVry’s policy in effect from time to time.

 

Employment Agreements with Mr. Gunst, Mr. Hughson and Mr. Pauldine

 

During part of fiscal year 2010, DeVry and Mr. Gunst were parties to an employment agreement dated as of July 24, 2006, which provided for (i) an initial salary of $275,000 per year, subject to annual review, and (ii) benefits made available to senior management generally. Effective October 12, 2009, DeVry entered into an employment agreement with each of Mr. Gunst (replacing his prior employment agreement) and Mr. Pauldine. Effective September 9, 2009 DeVry entered into an employment agreement with Mr. Hughson. Each of these employment agreements provides for (i) a base salary, subject to annual increases (but no decreases unless in the case of an across-the-board percentage reduction affecting all executives equally at the NEO’s respective level); (ii) an annual cash incentive under the MIP targeted as a percentage of base salary; (iii) benefits and perquisites made available to senior management generally; (iv) reimbursement of expenses consistent with DeVry’s policy in effect from time to time; and (v) severance benefits that will be provided upon certain terminations of employment, which are

described beginning on page 34 under the caption “2010 Potential Payments Upon Termination or Change-in-Control.”

 

2010 GRANTS OF PLAN-BASED AWARDS

 

This table sets forth information for each NEO with respect to (1) estimated future payouts under non-equity incentive plan awards that could have been earned for fiscal year 2010, (2) estimated future payouts under equity incentive plan awards that could have been earned for fiscal year 2010 and (3) restricted stock units granted in fiscal year 2010.

 

 

 

 

 

2010 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

 

This table sets forth information for each NEO with respect to each grant of options to purchase DeVry common stock that was made at any time, has not yet been exercised, and remained outstanding at June 30, 2010.

 

 

 

 

 

2010 Option Exercises and Stock Vested

 

This table sets forth information concerning (1) the exercise during fiscal year 2010 of options to purchase shares of common stock by each of the NEOs and (2) the dollar amount realized on exercise of the exercised options.

 

 

 

 

2010 Nonqualified Deferred Compensation

 

This table sets forth the contributions by each NEO and DeVry for fiscal year 2010, the earnings accrued on each NEO’s account balance in 2010 and the account balance at June 30, 2010 under the Deferred Plan.

 

 

 

 

 

Deferred Compensation Plan

 

The Deferred Plan covers directors and selected key employees approved for participation by the Compensation Committee. All of the named executive officers are eligible to participate in the Plan. Under the Deferred Plan as it applies to employees, participants may make an advance election to defer up to 50% of salary and up to 100% of annual cash incentive (MIP) compensation until termination of service with DeVry or certain other specified dates. DeVry credits matching contributions to participants’ accounts under the Deferred Plan to the extent they have elected to defer the maximum amount under DeVry’s Success Sharing Retirement Plan and their matching contributions to the Success Sharing Retirement Plan are limited by applicable Internal Revenue Code provisions. DeVry may also credit participants’ accounts with discretionary success sharing contributions. Participants are fully vested in their own deferral and matching contributions, plus earnings, and will vest in discretionary contributions, if any, as determined by the Compensation Committee. Participants may elect to have their Deferred Plan accounts credited with earnings based on various investment choices made available by the Compensation Committee for this purpose. Participants can elect to have account balances paid in a lump sum or in installments. Distributions are generally made or commence in January of the year following termination of employment (but not earlier than six months after termination) or January of the year in which the specified payment date occurs. In the event of death before benefits commence, participants’ accounts will be paid to their beneficiaries in a lump sum.

 

2010 Potential Payments Upon Termination or Change-in-Control

 

DeVry provides benefits to certain of the NEOs upon termination of employment from DeVry in specific circumstances. These benefits are in addition to the benefits to which these NEOs would be entitled upon a termination of employment generally (i.e., vested retirement benefits accrued as of the date of termination, stock awards that are vested as of the date of termination and the right to elect continued health coverage pursuant to COBRA). In addition, DeVry’s equity compensation plans and the stock award agreements used to implement them provide for accelerated vesting of outstanding stock awards in the event of a change in control of DeVry, regardless of whether a termination of employment occurs.

 

Employment Agreements

 

Mr. Hamburger

 

The employment agreement of Mr. Hamburger was effective as of November 15, 2006 in connection with his assumption of the duties of President and Chief Executive Officer of DeVry. The employment agreement provides that either party may terminate Mr. Hamburger’s employment upon 180 days’ advance notice, except that DeVry may terminate his employment immediately for any reason, Mr. Hamburger may terminate his employment immediately for “good reason”, and his employment will automatically terminate immediately in the event of death or disability. The agreement provides the following severance benefits:

 

 

 

i. an immediate payment equal to 24 times his monthly base salary;

 

ii. an immediate payment equal to a pro rata portion of the average MIP award paid to him for the two years prior to his termination; and

 

iii. immediate vesting of all outstanding stock options.

 

For purposes of the agreement:

 

(i) “cause” means Mr. Hamburger’s conviction of a felony or a crime involving monies, other property, fraud or embezzlement; (ii) “good reason” exists if Mr. Hamburger is not accorded the duties and responsibilities described in the agreement, if his duties or responsibilities are materially or substantially reduced, if he is not paid amounts owed under the agreement within 10 days’ notice to DeVry, or if DeVry otherwise breaches the agreement; (iii) “disability” means a physical or mental disability that causes Mr. Hamburger to be unable to perform his duties under the agreement for a period of 180 days; and (iv) “change in control” means a sale of substantially all of DeVry’s assets or the acquisition by another entity of a majority of DeVry’s common stock.

 

Mr. Gunst, Mr. Hughson and Mr. Pauldine

 

Prior to October 12, 2009, DeVry had an employment arrangement with Mr. Gunst, which was effective as of July 24, 2006 and which provided that if he was terminated by DeVry for other than for death, disability or cause, DeVry would have paid him 12 months of continued salary. Aside from Mr. Hamburger and Mr. Gunst, none of the NEOs previously had employment agreements.

 

On October 12, 2009, DeVry entered into employment arrangements with Mr. Gunst and Mr. Pauldine, and with Mr. Hughson on September 9, 2009. Mr. Gunst’s employment agreement replaced his previous employment arrangement. These employment agreements provide, among other things, that if the NEO’s employment with DeVry is terminated by DeVry without “cause” or by the NEO with “good reason” and the NEO executes a release of claims, then the NEO will be entitled to the following benefits:

 

 

In the case of Mr. Pauldine, his employment arrangement also provides that if his termination occurs after the day that is 18 months prior to his 55th birthday, he will be treated as having been terminated due to “retirement” for purposes of all outstanding stock options and other equity awards that include a definition of the term “retirement,” including both those outstanding on the date of the employment agreement and those thereafter granted.

 

In addition, the employment arrangements with Mr. Gunst, Mr. Pauldine and Mr. Hughson provide that if the NEO’s employment with DeVry is terminated by DeVry without “cause” or by the NEO with “good reason” during a “change in control period” and the NEO executes a release of claims, then the NEO will be entitled to the following benefits:

 

 

For purposes of these employment agreements:

 

(i) “cause” means (A) the commission of a felony or other crime involving moral turpitude or the commission of any other act or omission involving misappropriation, dishonesty, fraud, illegal drug use or breach of fiduciary duty, (B) willful failure to perform duties as reasonably directed by the CEO or the CEO’s designee, (C) the NEO’s gross negligence or willful misconduct with respect to the performance of the NEO’s duties under the employment agreement, (D) obtaining any personal profit not fully disclosed to and approved by DeVry’s Board of Directors in connection with any transaction entered into by, or on behalf of, DeVry, or (E) any other material breach of the employment agreement or any other agreement between the NEO and DeVry; (ii) “change in control period” means the period commencing on the date of a “Change in Control” (as defined in the DeVry Inc. Incentive Plan of 2005) and ending on the 12-month anniversary of such date; (iii) “good reason” means, without the NEO’s consent, (A) material diminution in title, duties, responsibilities or authority, (B) reduction of base salary, MIP target or employee benefits except for across-the-board changes for executives at the NEO’s level, (C) exclusion from executive benefit/compensation plans, (D) material breach of the employment agreement that DeVry has not cured within 30 days after the NEO has provided DeVry notice of the material breach which shall be given within 60 days of the NEO’s knowledge of the occurrence of the material breach, or (E) resignation in compliance with securities, corporate governance or other applicable law (such as the US Sarbanes-Oxley Act) as specifically applicable to the NEO; (iv) “MIP award” means the amount actually awarded the NEO under the MIP, as in effect from time to time, upon the achievement of specific DeVry-wide and personal performance goals of the NEO that will be determined each fiscal year by the NEOs direct supervisor and/or the Compensation Committee as necessary and appropriate to comply with DeVry policy; and (v) “MIP target” means the percentage of the NEO’s base salary established as the target under the MIP, as adjusted from time to time.

 

Equity Award Plans

 

The provisions of the equity award agreements under which options and performance shares are held by employees, including the NEOs, provide for the immediate vesting of unvested options and of performance shares at the target levels in the event of a change in control of DeVry. The provisions of the equity award agreements under which options and performance shares were granted to employees, including the NEOs, in fiscal year 2010 provide the following:

 

 

2010 Potential Severance Payments

 

The tables set forth below quantify the additional benefits as described above that would be paid to each NEO under the following termination of employment or change in control events, assuming such event occurred on June 30, 2010.

 

Termination of Employment — No Change in Control

 

 

Termination of Employment Following Change in Control

 

 

 

 

Change in Control — No Termination of Employment

 

 

 

 

DeVry currently maintains four equity compensation plans: the 1994 Stock Incentive Plan, the 1999 Stock Incentive Plan, the 2003 Stock Incentive Plan and the DeVry Inc. Incentive Plan of 2005. DeVry’s shareholders have approved each of these plans.

 

The following table summarizes information, as of June 30, 2010, relating to these equity compensation plans under which DeVry’s Common Stock is authorized for issuance.

 

 

 

 

To Our Shareholders:

 

The Audit Committee of DeVry Inc., which met eight times during the last fiscal year, consists of four independent Directors and operates under a written charter that conforms to the Securities and Exchange Commission’s implementing regulations and to the NYSE listing standards.

 

Management is responsible for DeVry’s internal controls and the financial reporting process by which it prepares the financial statements. DeVry’s independent registered public accounting firm is responsible for performing an independent audit of the annual financial statements of DeVry and expressing an opinion on those statements. The Audit Committee monitors DeVry’s financial reporting processes, including its internal control systems. The principal duties of the Audit Committee include:

 

 

With respect to DeVry’s audited financial statements for the fiscal year ended June 30, 2010:

 

 

In reliance upon the Audit Committee’s reviews and discussions with both management and PricewaterhouseCoopers LLP referred to above, management’s representations and the report of PricewaterhouseCoopers LLP on DeVry’s audited financial statements, the Audit Committee has recommended to the Board of Directors that the audited financial statements for the fiscal year ended June 30, 2010 be included in DeVry’s Annual Report on Form 10-K to be filed with the Securities and Exchange Commission.

 

In addition, the Audit Committee has appointed, subject to shareholder ratification, PricewaterhouseCoopers LLP as DeVry’s independent registered public accounting firm for the fiscal year 2011.

 

This Audit Committee Report is not to be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that DeVry specifically incorporates this Report by reference, and is not otherwise to be deemed filed under such Acts.

 

William T. Keevan, Chair

David S. Brown

Lisa W. Pickrum

Fernando Ruiz

 

The Audit Committee appointed PricewaterhouseCoopers LLP (“PwC”) as DeVry’s independent registered public accounting firm for the fiscal year ended June 30, 2010. DeVry’s shareholders ratified the engagement at the Annual Meeting of Shareholders on November 11, 2009. In addition to engaging PwC to audit the consolidated financial statements for DeVry and its subsidiaries for the year and review the interim financial statements included in DeVry’s Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission, the Audit Committee also engaged PwC to provide various other audit and audit related services — e.g., auditing of DeVry’s compliance with student financial aid program regulations.

 

The Sarbanes-Oxley Act of 2002 prohibits an independent public accountant from providing certain non-audit services for an audit client. DeVry engages various other professional service providers for these non-audit services as required. Other professional advisory and consulting service providers are engaged where the required technical expertise is specialized and cannot be economically provided by employee staffing. Such services include, from time to time, business and asset valuation studies, and services in the fields of law, human resources, information technology, employee benefits and tax structure and compliance.

 

The aggregate amounts included in DeVry’s financial statements for fiscal year 2010 and 2009 for fees billed or to be billed by PwC for audit and other professional services, respectively, were as follows:

 

 

Audit Fees — Includes all services performed to comply with generally accepted auditing standards in conjunction with the annual audit of DeVry’s financial statements and the audit of internal control over financial reporting. In addition, this category includes fees for services in connection with DeVry’s statutory and regulatory filings, consents and review of filings with the Securities and Exchange Commission such as the annual report on Form 10-K, quarterly reports on Form 10-Q and Current Reports on Form 8-K. Also included are services rendered in connection with the required annual audits of DeVry’s compliance with the rules and procedures promulgated for the administration of federal and state student financial aid programs.

 

Audit Related Fees — Includes all assurance and related services such as various state regulatory filings and due diligence related to acquisitions.

 

Tax Fees — Includes all services related to tax compliance, tax planning, tax advice, assistance with tax audits and responding to requests from DeVry’s tax department regarding technical interpretations, applicable laws and regulations, and tax accounting. DeVry’s Audit Committee has considered the nature of these services and concluded that these services may be provided by the independent registered public accounting firm without impairing its independence.

 

All Other Fees — Includes subscriptions for on-line accounting research services and fees for continuing professional education sessions.

 

The Audit Committee, at each of its regularly scheduled meetings, and on an interim basis as required, reviews all engagements of PwC for audit and all other services. Prior to the Audit Committee’s consideration for approval, management provides the Audit Committee with a description of the reason for and nature of the services to be provided along with an estimate of the time required and approximate cost. Following such review, each proposed service is approved, modified or denied as appropriate. A record of all such approvals is maintained in the files of the Audit Committee for future reference. All services provided by PwC during the past year were approved by the Audit Committee prior to their undertaking.

 

The Audit Committee has adopted a policy for approving all permitted audit, audit-related, tax and non-audit services to be provided by PwC in advance of the commencement of such services, except for those considered to be

de minimis by law for non-audit services. Information regarding services performed by the independent registered public accounting firm under this de minimis exception is presented to the Audit Committee for information purposes at each of its meetings. There is no blanket pre-approval provision within this policy. For fiscal year 2010, none of the services provided by PwC were provided pursuant to the de minimis exception to the pre-approval requirements contained in the applicable rules of the Securities and Exchange Commission. Audit Committee consideration and approval generally occurs at a regularly scheduled Audit Committee meeting. For projects that require an expedited decision because they should begin prior to the next regularly scheduled meeting, requests for approval may be circulated to the Audit Committee by mail, telephonically or by other means for its consideration and approval. When deemed necessary, the Audit Committee has delegated pre-approval authority to its Chair. Any engagement of the independent registered public accounting firm under this delegation will be presented for informational purposes to the full Audit Committee at their next meeting.

 

SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Audit Committee of the Board of Directors has appointed PricewaterhouseCoopers LLP, as independent registered public accounting firm for DeVry and its subsidiaries for fiscal year 2011. The Board of Directors recommends to the shareholders that the selection of PricewaterhouseCoopers LLP as independent registered public accounting firm for DeVry and its subsidiaries be ratified. If the shareholders do not ratify the selection of PricewaterhouseCoopers LLP, the selection of independent registered public accounting firm will be reconsidered by the Audit Committee. Representatives of PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting of Shareholders with the opportunity to make a statement, if they desire to do so, and to be available to respond to appropriate questions from shareholders.

 

Approval by Shareholders

 

The ratification of the selection of PricewaterhouseCoopers LLP as independent registered public accounting firm for DeVry for fiscal year 2011 will require the affirmative vote of a majority of the shares of Common Stock of DeVry outstanding on the record date. Unless otherwise indicated on the proxy, the shares will be voted FOR ratification of the selection of PricewaterhouseCoopers LLP as independent registered public accounting firm for DeVry for fiscal year 2011.

 

The Board of Directors recommends a vote FOR Proposal No. 2, ratification of the selection of PricewaterhouseCoopers LLP as independent registered public accounting firm for DeVry for fiscal year 2011.

 

APPROVAL OF AMENDED AND RESTATED DEVRY INC. INCENTIVE PLAN OF 2005

 

The shareholders of DeVry initially approved the DeVry Inc. Incentive Plan of 2005 (the “2005 Plan”) in 2005. The Board has approved the amended and restated 2005 Plan, subject to shareholder approval. The revised terms of the 2005 Plan (i) increase by 3,000,000 the number of shares of common stock of DeVry available for issuance under the 2005 Plan; (ii) provide for a “clawback” of benefits in certain circumstances; and (iii) add “invested capital” as an available performance goal.

 

As of September 20, 2010, approximately 1,071,904 shares of common stock were available for new grants under the 2005 Plan, 87,510 shares of common stock were available for new stock option grants under DeVry’s Incentive Plan of 2003, and no shares were available under the Company’s other stock incentive plans. Additional shares are necessary in order to continue to make market-competitive grants under the 2005 Plan. (We are asking for shareholder approval at the 2010 annual meeting, because annual grants are typically made in August of each fiscal year, and the current number of additional shares may not cover the grants scheduled to be made prior to the 2011 annual meeting.)

Description of the Amended and Restated 2005 Plan

 

The 2005 Plan provides for the award of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, performance stock, performance cash awards, annual management incentive awards and other stock or cash awards (“Awards”). Currently, Awards in the form of stock options and restricted stock units are made under the 2005 Plan.

 

A summary of the principal features of the 2005 Plan is provided below, but is qualified in its entirety by reference to the full text of the amended and restated 2005 Plan that is attached to this proxy statement as Appendix A.

 

Shares Available for Issuance and Award Limits

 

The aggregate number of shares of common stock that may be issued under the 2005 Plan is 6,000,000 (subject to the adjustment provisions discussed below). The 6,000,000 shares includes the 3,000,000 authorized under the 2005 Plan as initially approved and the additional 3,000,000 authorized under the 2005 Plan as amended and restated.

 

Shares issued under the 2005 Plan may be authorized but unissued shares or treasury shares. No participant in the 2005 Plan may receive in any fiscal year: (i) stock options relating to more than 150,000 shares, (ii) restricted stock or restricted stock units relating to more than 50,000 shares, (iii) SARs relating to more than 125,000 shares, or (iv) performance shares relating to more than 50,000 shares. No non-employee director may receive in any fiscal year stock options relating to more than 15,000 shares or restricted stock units relating to more than 5,000 shares. The number of shares that may be issued under the 2005 Plan for awards other than stock options and SARs may not exceed a total of 2,000,000 shares. (Each of the above limits is subject to the adjustment provisions discussed below.) All of the available shares may be issued as incentive stock options. The maximum amount that may be earned under performance cash awards by any participant who is a covered employee within the meaning of Section 162(m) of the Internal Revenue Code in any fiscal year may not exceed $1,000,000.

 

No Award granted under the 2005 Plan may be transferred, except by will or the laws of descent and distribution, or as permitted by the Committee with respect to a stock option.

 

Administration and Eligibility

 

The 2005 Plan is administered by the Compensation Committee of the Board (the “Committee”) which consists of two or more directors, each of whom satisfy the “non-employee director” definition under Rule 16b-3 of the Securities Exchange Act of 1934 (“Exchange Act”), the definition of “outside director” under Section 162(m) of the Internal Revenue Code, and any applicable requirements established by the New York Stock Exchange. The Committee approves the aggregate Awards and the individual Awards for the most senior elected officers and non-employee directors. The Committee has delegated its authority to grant Awards to other participants to the Chief Executive Officer or other designated officers in accordance with the terms of the 2005 Plan. The Chief Executive Officer or such other officer authorized to select employees to receive such option shares and other awards will provide written notice of all such action to the Committee. The Committee or other designated officer has the discretion to set the type and amount of Awards and the other terms and conditions of Awards. (To the extent such authority has been delegated, and other than for purposes of amending or terminating the 2005 Plan, reference in this summary to the “Board” mean the Committee, or the designated officer of the Company, as applicable.)

 

All employees of DeVry and its subsidiaries and all non-employee directors of DeVry are eligible to participate in the 2005 Plan. On September 30, 2010, approximately 320 employees and all non-employee directors participated in the 2005 Plan.

 

Awards

 

Stock Options

 

Stock options granted by the Committee to employees may be either incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”), and stock options granted to non-employee directors are NSOs. The exercise

price of any stock option must be equal to or greater than the fair market value of the shares on the date of the grant. Fair market value shall be determined by the Committee, and currently means the closing price on the last trading day preceding the day of the grant, as reported for the New York Stock Exchange in The Wall Street Journal. The term of a stock option cannot exceed 10 years.

 

ISOs are subject to the additional restrictions set forth in Section 422 of the Internal Revenue Code.

 

Restricted Stock and Restricted Stock Units

 

Restricted stock consists of shares of common stock that are transferred by DeVry to a participant, subject to substantial risk of forfeiture and to restrictions on their sale or other transfer by the participant. Restricted stock units are the right to receive shares of common stock at a future date in accordance with the terms of such grant upon the attainment of certain conditions specified by the Committee which are subject to substantial risk of forfeiture and restrictions on their sale or other transfer by the participant. The Committee determines the eligible participants to whom, and the time or times at which, grants of restricted stock or restricted stock units will be made, the number of shares or units to be granted, the time or times within which the shares covered by such grants will be subject to forfeiture, the time or times at which the restrictions will terminate, and all other terms and conditions of the grants. Restrictions or conditions could include, but are not limited to, the attainment of performance goals (as described below), continuous service with DeVry, the passage of time or other restrictions or conditions.

 

Performance Stock

 

The Committee has the authority to grant performance stock to selected participants and to set the terms and conditions of such Award. A participant who is granted performance stock has the right to receive shares or cash equal to the fair market value of such shares at a future date in accordance with the terms of such grant and upon the attainment of performance goals specified by the Committee.

 

The award of performance stock to a participant will not create any rights in such Participant as a shareholder of DeVry until the issuance of common stock with respect to an Award.

 

SARs

 

The Committee has the authority to grant SARs to participants and to determine the number of shares subject to each SAR, the term of the SAR, the time or times at which the SAR may be exercised, and all other terms and conditions of the SAR. A SAR is a right, denominated in shares of common stock, to receive, upon exercise of the right, without payment to DeVry an amount, payable in shares, in cash or a combination thereof, that is equal to the excess of: (i) the fair market value of common stock on the date of exercise of the right; over (ii) the fair market value of common stock on the date of grant of the right, multiplied by the number of shares for which the SAR is exercised.

 

An SAR may be granted in tandem with a stock option or on a free-standing basis. The exercise price of a tandem SAR will equal the exercise price of the related option, and its term will not exceed the term of the related option. A tandem SAR will expire upon exercise of the related stock option, and a related stock option will expire upon exercise of the SAR. The grant price of a free-standing SAR will be the fair market value of a share of common stock on the date of grant, and its term may not exceed 10 years.

 

Performance Cash Awards

 

The Committee has the authority to grant performance stock to selected participants and to set the terms and conditions of such Award. A participant who is granted performance cash awards has the right to receive a payment in cash upon the attainment of performance goals specified by the Committee. The Committee may substitute shares of common stock for the cash payment otherwise required to be made pursuant to a performance cash award.

 

Annual Management Incentive Awards

 

The Committee has the authority to grant management incentive awards to designated executive officers of DeVry. Management incentive awards will be paid out of an incentive pool equal to five percent of DeVry’s

consolidated operating earnings for the applicable fiscal year. The Committee will allocate an incentive pool percentage of up to 20% to each designated Participant for each fiscal year. For purposes of the 2005 Plan, “consolidated operating earnings” means the consolidated earnings before income taxes of DeVry, computed in accordance with generally accepted accounting principles, but excluding the effects of special items. Special items include: (i) gains or losses on the disposition of a business, (ii) changes in tax or accounting regulations or laws, or (iii) the effect of a merger or acquisition, as determined in accordance with generally accepted accounting principles. The participant’s incentive award then will be determined by the Committee based on the participant’s allocated portion of the incentive pool subject to adjustment in the sole discretion of the Committee. In no event may the portion of the incentive pool allocated to a participant who is a covered employee under Section 162(m) of the Internal Revenue Code be increased in any way, including as a result of the reduction of any other Participant’s allocated portion.

 

Other Stock or Cash Awards

 

The Committee may award shares of common stock or cash to participants. Such Awards may be subject to other terms and conditions, which may vary from time to time and among participants, as the Committee determines to be appropriate. However, an outright grant of stock will not be made unless it is offered in exchange for cash compensation that has otherwise already been earned by the recipient.

 

Performance Goals

 

Awards of restricted stock, restricted stock units, performance stock, performance cash awards and other incentives made under the 2005 Plan to employees who are designated by the Committee as members of the Company’s senior leadership team shall be subject to the attainment of performance goals relating to one or more business criteria within the meaning of Section 162(m) of the Internal Revenue Code, including, but not limited to: cash flow; cost; ratio of debt to debt plus equity; profit before tax; economic profit; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings per share; operating earnings; economic value added; ratio of operating earnings to capital spending; free cash flow; net profit; net sales; sales growth; price of the common stock; return on net assets, equity, invested capital or shareholders’ equity; market share; or total return to shareholders. Awards of stock options under the 2005 Plan may be made subject to attainment of such performance goals.

 

Any performance criteria may be used to measure the performance of DeVry as a whole or any business unit of DeVry and may be measured relative to a peer group or index. Any performance criteria may be adjusted to include or exclude special items as described above.

 

Payment for Stock Options and Withholding Taxes

 

Payment of the exercise price of a stock option may be made (i) in cash, (ii) by the transfer to DeVry of shares owned by the participant having a fair market value on the date of transfer equal to the option exercise price (or certification of ownership of such shares), (iii) cash received from a broker-dealer to whom the participant has submitted an exercise notice together with irrevocable instructions to deliver to the Company an amount of proceeds from the sale of the shares subject to the Award to pay the exercise price; (iv) by directing the Company to withhold shares of common stock otherwise issuable in connection with the Award having a fair market value equal to the amount required to be withheld; or (v) in such other manner as may be authorized by the Committee. Payment of withholding taxes associated with an Award shall be made in a manner authorized by the Committee, including directing DeVry to withhold shares otherwise issuable in connection with the Award having a fair market value equal to the amount required to be withheld.

 

Clawback Provision

 

The 2005 Plan includes a provision that permits the Committee to include in any Award to a participant who is an officer subject to Section 16 of the Exchange Act a provision requiring forfeiture and/or recoupment of any portion of an Award that (a) was granted, vested and/or settled based on financial results that were subsequently restated, and/or (b) has its value affected by such restated financials. Restated financials means any financial results

that are subsequently restated due to conduct by the participant that the independent members of the Board (or committee thereof) determines is knowingly and intentionally fraudulent or illegal.

 

Amendment/Termination of the 2005 Plan

 

The Board or the Committee has the authority to amend the 2005 Plan, provided, however, that neither the Board nor the Committee may amend the 2005 Plan in a manner which would reduce the amount of any existing Award or change its existing terms and conditions without the participant’s consent. No material amendment of the Plan shall be made without shareholder approval.

 

No Award shall be made more than ten years after the adoption of the Plan by the Board.

 

Committee’s Right to Modify Awards

 

Any Award may be modified, forfeited, or canceled, in whole or in part, by the Committee if and to the extent permitted in the 2005 Plan or applicable agreement entered into in connection with the Award or with the consent of the participant to whom such Award was granted. The Committee may grant Awards on terms and conditions different than those specified in the 2005 Plan to comply with the laws and regulations of any foreign jurisdiction, or to make the Awards compliant under such laws and regulations.

 

Neither the Board nor the Committee may cancel any outstanding stock option or SAR for the purpose of reissuing the option or SAR to the participant at a lower exercise price, or reduce the exercise price of an outstanding option or SAR.

 

Change in Control

 

Except as otherwise determined by the Committee at the time of grant of an Award, upon a Change in Control of DeVry (as defined in Section 14 of the 2005 Plan), all performance goals shall be deemed achieved at target levels and all other terms and conditions met; all outstanding stock options and SARs shall become vested and exercisable; all restrictions on restricted stock and restricted stock units shall lapse; all performance stock shall be delivered; all performance cash awards and restricted stock units shall be paid out as promptly as practicable; all annual management incentive awards shall be paid out based on the consolidated operating earnings of the immediately preceding year or such other method of payment as may be determined by the Committee at the time of award or thereafter but prior to the Change in Control; and all other stock or cash awards shall be delivered or paid.

 

Adjustments

 

In the event of any change affecting the shares of common stock by reason of stock dividend, stock split, reverse stock split, spin-off, recapitalization, merger, consolidation, reorganization, share combination, exchange of shares, stock rights offering, liquidation, extraordinary cash dividend, disaffiliation of a subsidiary or similar event, the Committee shall make such adjustments (if any) as it deems appropriate and equitable, in its discretion, to outstanding awards to reflect such event.

 

In the event of any merger, consolidation, or reorganization of DeVry with or into another corporation which results in DeVry’s outstanding securities being converted into or exchanged for different securities, cash, or other property, there shall be substituted on an equitable basis as determined by the Committee, for each share of common stock subject to an Award, the number and kind of shares of stock, other securities, cash, or other property to which holders of common stock of DeVry are entitled pursuant to the transaction.

 

Substitution and Assumption of Awards

 

The Board or the Committee may authorize the issuance of Awards in connection with the assumption of, or substitution for, outstanding benefits previously granted to individuals who become employees of DeVry or any subsidiary as the result of any merger, consolidation, acquisition of property or stock, or reorganization other than a Change in Control, upon such terms and conditions as it deems appropriate.

Reuse of Shares

 

If a stock option granted under the 2005 Plan expires or is terminated or canceled without having been fully exercised, if restricted stock is forfeited or terminated or cancelled, or if restricted stock units, performance shares or SARs are forfeited or terminated or cancelled without the issuance of all of the shares subject thereto, the shares covered by such Awards will again be available for use under the 2005 Plan. Shares covered by an Award granted under the 2005 Plan are not counted as used unless and until they are actually issued and delivered to a participant. Any shares covered by a SAR are counted as used only to the extent shares are actually issued to the participant upon exercise of the SAR. Shares covered by an Award granted under the 2005 Plan that is settled in cash are not counted as used.

 

Federal Income Tax Consequences

 

The following is a summary of the federal income tax consequences of the 2005 Plan. It is based on the federal tax laws and regulations currently in effect and existing administrative rulings of the Internal Revenue Service. Participants may also be subject to state and local taxes in connection with the grant of Awards under the 2005 Plan. Participants should consult with their individual tax advisers to determine the tax consequences associated with Awards granted under the 2005 Plan. This information may not be applicable to employees of foreign subsidiaries or to employees who are not residents of the United States.

 

ISOs

 

A participant generally does not recognize taxable income upon the grant or exercise of an ISO. If the participant does not dispose of the stock acquired upon exercise of the ISO within two years after the date of grant and one year after the date of exercise, then upon the subsequent sale of the shares, the participant recognizes income in an amount equal to the difference, if any, between the exercise price of the shares and the fair market value of those shares on the date of sale. The income is taxed at long-term capital gains rates and DeVry is not entitled to a federal income tax deduction. The holding period requirements are waived when a participant dies.

 

If a participant sells ISO shares before having held them for at least one year after the date of exercise and two years after the date of grant, the participant recognizes ordinary income to the extent of the lesser of: (i) the gain realized upon the sale, or (ii) the difference between the exercise price and the fair market value of the shares on the date of exercise. Any additional gain is treated as long-term or short-term capital gain depending upon how long the participant has held the shares prior to disposition. In the year of disposition, DeVry receives a federal income tax deduction in an amount equal to the ordinary income which the participant recognizes as a result of the disposition.

 

Upon exercise of an ISO, the excess of the fair market value over the exercise price is an item of tax preference for purposes of determining the alternative minimum tax.

 

NSOs

 

A participant does not recognize taxable income upon the grant of an NSO. Upon the exercise of the NSO, the participant recognizes ordinary income to the extent the fair market value of the shares on the date of exercise exceeds the exercise price. DeVry receives an income tax deduction in an amount equal to the ordinary income that the participant recognizes upon the exercise of the NSO. When the participant sells these shares, any gain or loss recognized by the participant is treated as either short-term or long-term capital gain or loss, depending on how long the participant held the shares.

 

Restricted Stock

 

A participant who receives restricted stock does not generally recognize taxable income at the time of the Award. Instead, the participant recognizes ordinary income in the first taxable year in which his or her interest in the shares becomes either: (i) freely transferable, or (ii) no longer subject to substantial risk of forfeiture. The amount of taxable income is equal to the then fair market value of the shares.

 

A participant may make an election under Section 83(b) of the Internal Revenue Code within 30 days of grant to recognize the income at the time he or she receives restricted stock in an amount equal to the fair market value of

the restricted stock (less any cash paid for the shares) on the date of the Award. The participant is responsible for remitting to the Company the withholding tax obligation that arises at the time the ordinary income is recognized. When the participant sells the shares, the tax basis will be equal to the fair market value on the date of grant, and the holding period for capital gains purposes begins on the date of the grant. If the participant forfeits the shares subject to the Section 83(b) election, the participant will not be entitled to any deduction, refund, or loss for tax purposes (other than a capital loss with respect to the amount previously paid by the participant), and the Company will have to include the amount that it previously deducted from its gross income in the taxable year of the forfeiture.

 

DeVry receives a compensation expense deduction in an amount equal to the ordinary income recognized by the participant in the taxable year in which restrictions lapse (or in the taxable year of the award if, at that time, the participant had filed a timely election to accelerate recognition of income).

 

Other Awards

 

In the case of an exercise of an SAR or an Award of restricted stock units, performance stock, performance units, or common stock or cash, the participant will generally recognize ordinary income in an amount equal to the fair market value of any shares received on the date of payment or delivery, or any cash received. In that taxable year, DeVry will receive a federal income tax deduction in an amount equal to the ordinary income that the participant has recognizes.

 

Deduction Limit

 

Under Section 162(m) of the Internal Revenue Code, DeVry may not deduct compensation of more than $1,000,000 that is paid to an individual who is either DeVry’s chief executive officer or one of the three other most highly-compensated officers (other than the chief financial officer) for that taxable year as reported in DeVry’s proxy statement. The limitation on deductions does not apply to certain types of compensation, including qualified performance-based compensation. DeVry believes that Awards in the form of stock options, performance-based restricted stock, restricted stock units, performance stock, performance cash awards, SARs and cash payments under management incentive awards made under the 2005 Plan constitute qualified performance-based compensation and, as such, will be exempt from the $1,000,000 limitation on deductible compensation.

 

Options Granted Under the 2005 Plan

 

It is not possible at this time to determine all of the stock option grants that will be made in the future under the 2005 Plan. As of September 30, 2010, a total of 1,474,900 stock options with exercise prices ranging from $34.53 to $57.74 have been granted under the 2005 Plan since it was first adopted. These grants are as follows: Daniel Hamburger (CEO and President): 605,725; Richard M. Gunst (CFO and Treasurer): 99,725; David J. Pauldine (President, DeVry University): 104,475; Steve Riehs (President, DeVry Online Services): 44,100; William B. Hughson (President, HealthCare Group): 23,725; all current executives as a group: 1,117,720; all non-employee directors as a group: 30,625; each nominee for election as a director: 0; each associate of any executive, non-employee director or nominee: 0; each other person with 5% of such awarded options: 0; and all employees who are not executive officers as a group: 326,555. On September 30, 2010, the closing price of a share of the Company’s common stock on the NYSE was $45.89.

 

Approval by Shareholders

 

In order to be adopted, the amended and restated 2005 Plan, which includes an increase in the number of shares available under it, must be approved by the affirmative vote of a majority of the shares of Common Stock of DeVry outstanding on the record date. Unless otherwise indicated on the proxy, the shares will be voted FOR the amended and restated DeVry Inc. Incentive Plan of 2005, including the increase in the number of shares available.

 

The Board of Directors recommends a vote FOR the approval of the amended and restated DeVry Inc. Incentive Plan of 2005.

PROPOSAL NO. 4

SHAREHOLDER PROPOSAL OF PEOPLE FOR THE ETHICAL TREATMENT OF ANIMALS (PETA)

 

Eliminating Medically Unnecessary Surgeries

 

RESOLVED, that the board is encouraged to enact a policy prohibiting all medically unnecessary surgeries in the teaching program at Ross University School of Veterinary Medicine. Such a policy would only permit surgeries to be performed on an animal when that same animal stands to benefit from the surgery or when such a surgery would be deemed appropriate in a clinical context.