NEW HORIZONS WORLDWIDE INC.
NOTICE OF ANNUAL STOCKHOLDERS' MEETING
TO BE HELD MAY 4, 1999
To Our Stockholders:
The Annual Meeting of Stockholders (the "Meeting") of New Horizons
Worldwide, Inc. (the "Company") will be held at the Oyster Point Hotel, 146
Bodman Place, Red Bank, New Jersey, on Tuesday, May 4, 1999, at 10:00 a.m., EDT,
to consider and act upon the following:
1. The election of two Directors whose three-year term of office will expire
in 2002; and
2. The transaction of such other business as may properly come before the
Meeting or any adjournments thereof.
Holders of Common Stock of record at the close of business on March 26,
1999 are entitled to notice of and to vote at the Meeting.
Whether or not you expect to be personally present at the Meeting, please
be sure that the enclosed proxy is properly marked, signed and dated, and
returned without delay in the enclosed prepaid envelope. Such action will not
limit your right to vote in person or to attend the Meeting, but will ensure
your representation if you cannot attend.
By Order of the Board of Directors,
/s/ Stuart O. Smith
Stuart O. Smith
SECRETARY
April 7, 1999
<PAGE>
NEW HORIZONS WORLDWIDE, INC.
500 Campus Drive, Suite 200
Morganville, NJ 07751
PROXY STATEMENT
Mailed On April 7, 1999
ANNUAL MEETING OF STOCKHOLDERS
To be held on May 4, 1999
Proxies in the form enclosed with this Proxy Statement are solicited by the
Board of Directors of New Horizons Worldwide, Inc., a Delaware corporation (the
"Company"), for use at the Annual Meeting of Stockholders to be held on Tuesday,
May 4, 1999, and any adjournments thereof. The time, place and purposes of the
Annual Meeting are stated in the Notice of Annual Meeting which accompanies this
Proxy Statement.
Only stockholders of record as of March 26, 1999 will be entitled to vote
at the Annual Meeting or any adjournments thereof. As of that date, 7,540,028
shares of Common Stock, par value $.01 per share (the "Common Stock"), of the
Company were issued and outstanding. Each share of Common Stock outstanding as
of the record date will be entitled to one vote, and stockholders may vote in
person or by proxy. The Company's Certificate of Incorporation (the
"Certificate") does not provide for cumulative voting rights. Execution of a
proxy will not in any way affect a stockholder's right to attend the Annual
Meeting and vote in person. Any stockholder has the right to revoke a proxy by
written notice to the Secretary of the Company at any time before it is
exercised, including by executing another proxy, bearing a later date, or by
attending the Annual Meeting and voting in person.
A properly executed proxy returned in time to be cast at the Annual Meeting
will be voted in accordance with the instructions contained thereon, if it is
returned duly executed and is not revoked. If no choice is specified on the
proxy, it will be voted "FOR" the election of all of the individuals nominated
by the Board of Directors and "FOR" the other proposals set forth in the Notice
of Annual Meeting.
At the Annual Meeting, in accordance with the Delaware General Corporation
Law and the Company's Certificate of Incorporation, the inspectors of election
appointed by the Board of Directors for the Annual Meeting will determine the
presence of a quorum and will tabulate the results of stockholder voting.
Pursuant to the Company's By-Laws, at the Annual Meeting the holders of a
majority of the outstanding shares of the Company's Common Stock entitled to
vote at the meeting, present in person or by proxy, constitute a quorum. The
shares represented at the Annual Meeting by proxies which are marked, with
respect to the election of Directors, as "withheld" or, with respect to any
other proposal, "abstain," will be counted as shares present for purposes of
determining whether a quorum is present.
Under the rules of the New York Stock Exchange, brokers who hold shares in
street name for beneficial owners have the authority to vote on certain items
when they have not received instructions from such beneficial owners. Under
applicable Delaware law, if a broker returns a proxy and has not voted on a
certain proposal, such broker non-votes will count for purposes of determining
whether a quorum is present.
Pursuant to the Company's By-Laws, at the Annual Meeting, a plurality of
the votes cast is sufficient to elect a nominee as a Director. In the election
of Directors, votes may be cast in favor or withheld; votes that are withheld or
broker non-votes will have no effect on the outcome of the election of
Directors.
<PAGE>
Pursuant to the Company's By-Laws, all other questions and matters brought
before the meeting will be decided by the vote of the holders of a majority of
the outstanding shares entitled to vote thereon present in person or by proxy at
the Annual Meeting, unless otherwise provided by law or by the Certificate. In
voting on matters other than the election of Directors, votes may be cast in
favor, against or abstained. Abstentions will count as present for purposes of
the proposal on which the abstention is noted and will have the effect of a vote
against the proposal. Broker non-votes, however, are not counted as present and
entitled to vote for purposes of determining whether a proposal has been
approved and will have no effect on the outcome of such proposal.
The cost of soliciting proxies in the form accompanying this Proxy
Statement will be borne by the Company. In addition to solicitation by mail,
proxies may be solicited by Directors, officers and regular employees of the
Company in person or by mail, telephone, telegraph, facsimile or electronic
mail, following the original solicitation.
Page 2
<PAGE>
SHARE OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth information with respect to Common Stock
owned on March 26, 1999 by each person known by the Company to own beneficially
more than 5% of the Company's outstanding Common Stock at such date, the number
of shares owned by each such person and the percentage of the outstanding shares
represented thereby. The table also lists beneficial ownership of Common Stock
by each of the Company's Directors, each nominee for election as a Director,
each executive officer named in the summary compensation table set forth in this
proxy statement, and all Directors and executive officers as a group.
Shares
Name and Address of Beneficially Percent
of Beneficial Owner Owned Class
------------------- ------------ -------
Curtis Lee Smith, Jr ........................... 1,052,199 14.0%
500 Campus Drive
Morganville, NJ 07751
Stuart O. Smith ................................ 1,423,968 18.9%
500 Campus Drive
Morganville, NJ 07751
Thomas J. Bresnan(1) ........................... 398,625 5.0%
David A. Goldfinger(2) ......................... 80,220 *
Richard L. Osborne(3) .......................... 32,250 *
William H. Heller(4) ........................... 37,000 *
Scott R. Wilson(5) ............................. 26,000 *
Charles G. Kinch(6) ............................ 30,965 *
Kenneth M. Hagerstrom(7) ....................... 11,250 *
Robert S. McMillan(8) .......................... 13,500 *
Palisade Capital Management, L.L.C.(9) ......... 682,700 9.1%
One Bridge Plaza, Suite 695
Fort Lee, New Jersey 07024
Awad Asset Management, Inc.(10) ................ 586,436 7.8%
250 Park Avenue
New York, New York 10177
All Directors and Executive Officers
as a Group (10 persons) ...................... 3,105,977 38.3%
* Less than 1%
(1) Mr. Bresnan's ownership figure includes 391,000 shares which may be
acquired upon the exercise of immediately exercisable stock options.
(2) Mr. Goldfinger's ownership figure includes 30,000 shares which may be
acquired upon the exercise of immediately exercisable stock options.
(3) Mr. Osborne's ownership figure includes 30,000 shares which may be acquired
upon the exercise of immediately exercisable stock options.
(4) Mr. Heller's ownership figure includes 35,000 shares which may be acquired
upon the exercise of immediately exercisable stock options.
(5) Mr. Wilson's ownership figure includes 25,000 shares which may be acquired
upon the exercise of immediately exercisable stock options.
(6) Mr. Kinch's ownership figure includes 30,250 shares which may be acquired
upon the exercise of immediately exercisable stock options.
(7) Mr. Hagerstrom's ownership figure includes 11,250 shares which may be
acquired upon the exercise of immediately exercisable stock options.
(8) Mr. McMillan's ownership figure includes 13,500 shares which may be
acquired upon the exercise of immediately exercisable stock options.
(9) Based solely upon information in a Schedule 13-G filed with the Securities
and Exchange Commission on January 30, 1999
(10) Based solely upon information in a Schedule 13-G filed with the Securities
and Exchange Commission on February 12, 1999.
Page 3
<PAGE>
ELECTION OF DIRECTORS
The Company's Board of Directors consists of seven members divided into
three classes. Each class of Directors is elected to a three-year term. At the
Annual Meeting, two Class I Directors will be elected to a three-year term
ending at the Annual Meeting to be held in 2002.
Unless otherwise directed, the persons named in the accompanying proxy will
vote for the election of the two nominees set forth in the table below as Class
I Directors of the Company for a three-year term. In the event of the death or
inability to act of any of the nominees, the proxies will be voted for the
election of such other person as the Board of Directors may recommend. The Board
of Directors has no reason, however, to anticipate that this will occur. In no
event will the accompanying proxy be voted for more than three nominees or for
persons other than those named below and any such substitute nominee for any of
them.
The following table lists the nominees for election at the Meeting, the
Directors who will continue in office subsequent to the Meeting, and certain
other information with respect to each individual.
Nominees for Election for a Three-Year Term Ending in 2002
<TABLE>
<CAPTION>
Name Age Principal Occupation and History
- - ---- --- --------------------------------
<S> <C> <C>
CURTIS LEE SMITH, JR. (1)(4) 71 Chairman of the Board,
Chief Executive Officer and Director
Mr. Smith has served as the Company's Chairman of the Board and Chief Executive
Officer and as a Director since July 1986, and had the additional title and
duties of President from August 1989 through July 1992. Mr. Smith served as
President of National Copper & Smelting Co., a Cleveland, Ohio-based
manufacturer and distributor of copper products, from 1962 to 1985, and as
President of NCS Holdings Corporation ("NCS"), a Cleveland, Ohio-based holding
company which operated a copper tubing importing and fabricating business, from
1985 to 1988. Mr. Smith also serves as a Director of Interdent, Inc. and
Strategic Diagnostics Inc., both public companies.
WILLIAM H. HELLER (1) 60 Director
Mr. Heller was formerly a partner with the public accounting firm of KPMG Peat
Marwick LLP from February 1971 until December 1991, and currently manages his
own asset management firm, William H. Heller & Associates. He was elected as a
Director on July 1, 1992. Mr. Heller also serves as a Director of Ohio Savings
Financial Corporation, a Cleveland, Ohio-based savings and loan holding company;
The New Organics Company, a Boston, Massachusetts-based producer of organic food
products, and Telarc International, Inc., a Cleveland, Ohio-based producer of
compact discs and tapes. Mr. Heller has served as a member of the Company's
Audit Committee during the term of his directorship and is currently serving on
its Compensation Committee.
Page 4
<PAGE>
Directors Continuing in Office
- - ------------------------------
Name Age Principal Occupation and History
- - ---- --- --------------------------------
STUART O. SMITH (2)(4) 66 Vice Chairman of the Board, Secretary and Director
Mr. Smith has served as a Director of the Company since July 1986, as the
Company's Secretary since February 1989 and as Vice Chairman of the Board since
August 1992. Mr. Smith served as a Vice President from July 1986 to August 1992.
Mr. Smith also served as Vice President of National Copper & Smelting Co. from
1962 to 1985 and as Vice President of NCS from 1985 to 1988.
THOMAS J. BRESNAN (2) 46 President, Chief Operating Officer and Director
Mr. Bresnan joined the Company in August 1992 and has served as the Company's
President and Chief Operating Officer since that time. Mr. Bresnan has served as
the Chairman and Chief Executive Officer of New Horizons Education Corporation
since its acquisition by the Company in August 1994. Prior to joining the
Company, Mr. Bresnan served in various executive, marketing, financial and
administrative positions for Capitol American Life Insurance Company, a
Cleveland, Ohio-based specialty insurance provider, from 1984 to 1991. Mr.
Bresnan served as President and Chief Operating Officer of Capitol American Life
Insurance Company during 1991. From January to August 1992, Mr. Bresnan was
President and Chief Executive Officer of Glenbrook Group, Inc., a Cleveland,
Ohio-based company seeking acquisition opportunities. Mr. Bresnan was elected a
Director in May 1993.
SCOTT R. WILSON (2) 47 Director
Mr. Wilson has served as principal outside legal counsel to the Company since
July 1986. Mr. Wilson has been with the law firm of Calfee, Halter & Griswold
LLP, Cleveland, Ohio, since 1977, and has been a partner in such firm since
1985. His practice focuses on mergers and acquisitions and general corporate
law. He was elected a Director in May 1991.
Page 5
<PAGE>
Name Age Principal Occupation and History
- - ---- --- --------------------------------
DAVID A. GOLDFINGER (3) 63 Director
Mr. Goldfinger has served as a Director of the Company since July 1986. Mr.
Goldfinger served as President of U.S. Consolidated, Inc., a Cleveland,
Ohio-based manufacturers' representative agency, from 1966 to 1991. From January
1992 to the present, Mr. Goldfinger has served as President of M.S.C.I.
Holdings, Inc., a Tavernier, Florida-based private consulting and investment
corporation. Mr. Goldfinger has served as a member of the Company's Compensation
Committee and Audit Committee during the term of his directorship.
RICHARD L. OSBORNE (3) 61 Director
Mr. Osborne has served as a consultant to the Company since July 1986, and was
elected to the Company's Board of Directors in January 1989. He has served as
the Executive Dean of the Weatherhead School of Management, Case Western Reserve
University, Cleveland, Ohio, since 1971. Mr. Osborne is also a management
consultant, and serves on the Board of Directors of Ohio Savings Financial
Corporation, a Cleveland, Ohio-based savings bank holding company, Myers
Industries, Inc., an Akron, Ohio-based manufacturer of plastic and rubber parts
for the automotive and other industries, and NCS HealthCare, Inc., a Cleveland,
Ohio-based provider of pharmacy services to long-term care institutions, as well
as several privately held corporations. Mr. Osborne has served as a member of
the Company's Compensation Committee and Audit Committee during the term of his
directorship.
<FN>
(1) Term as Director expires in 1999; nominee for a three-year term expiring in 2002.
(2) Term as Director expires in 2000.
(3) Term as Director expires in 2001.
(4) Curtis Lee Smith, Jr., and Stuart O. Smith are brothers.
</FN>
</TABLE>
Page 6
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors has two standing Committees: the Audit Committee and
the Compensation Committee.
The Audit Committee, of which Messrs. David A. Goldfinger, Richard L.
Osborne and William H. Heller are members, oversees the accounting functions of
the Company, including matters related to the appointment and activities of the
Company's auditors. The Audit Committee met 2 times during the year ended
December 31, 1998.
Until March 20, 1998, the Compensation Committee consisted of Messrs.
Curtis Lee Smith, Jr., David A. Goldfinger and Richard L. Osborne. Effective as
of March 20, 1998, William H. Heller replaced Curtis Lee Smith, Jr. as a member
of the Compensation Committee. The Committee reviews and makes recommendations
as well as certain decisions concerning executive salaries and bonuses. It also
administers the Company's Omnibus Equity Plan approved by the stockholders of
the Company at the Annual Meeting of Stockholders held on May 5, 1998. The
Compensation Committee met three times during the year ended December 31, 1998.
The Board of Directors of the Company held 9 meetings during 1998. All of
the Directors attended at least 75% of the meetings of the Board of Directors
and each Committee on which each served.
Directors who are not employees of the Company receive an annual fee of
$20,000, payable quarterly. Such fee is intended to compensate the Directors for
all Board and Committee meetings. At the meeting of the Board held on November
26, 1997 and at the Annual Meeting of Stockholders held May 5, 1998, the 1997
Outside Directors Elective Stock Option Plan was approved. Pursuant to this plan
each non-employee Director is permitted to elect to take one-half or all of his
fees in options by electing to do so at a date specified in the plan and prior
to January 1 of the year for which fees would be payable. On December 1, 1998
Messrs. Osborne and Heller elected to take all of their 1999 fees in options and
Messrs. Goldfinger and Wilson elected to take half. As a result, Messrs.
Osborne, and Heller received options to acquire 20,000 shares and Messrs.
Goldfinger and Wilson received options to acquire 10,000 shares. All of the
options have an exercise price of $19.00 per share, become exercisable on
December 1, 1999 and expire on December 1, 2003.
In January 1989, the Compensation Committee granted Mr. Osborne and Mr.
Goldfinger options to acquire 6,250 shares of Common Stock and 12,500 shares of
Common Stock, respectively, under the Company's Outside Directors Stock Option
Plan. These options became exercisable on July 9, 1989 at an option price of
$11.20 per share. In 1992, Messrs. Wilson and Heller each were granted
immediately exercisable options to acquire 5,000 shares of Common Stock at an
option price of $6.50 per share. As of March 26, 1999, options granted to
individuals pursuant to the Outside Directors Plan were outstanding to purchase
10,000 shares of Common Stock at an average price of $7.36 per share. In
addition, on September 19, 1996, options to purchase an aggregate of 40,000
shares of Common Stock at an average price of $8.81 were granted to non-employee
Directors of the Company. As of March 26, 1999, options granted to individuals
pursuant to the 1997 Outside Directors Elective Stock Option Plan were
outstanding to purchase 130,000 shares of Common Stock at an average price of
$17.19 per share.
Page 7
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The table below shows information concerning the annual and long-term
compensation for services in all capacities to the Company for each of the past
three fiscal years, of all those persons, who were, (i) the Chief Executive
Officer, and (ii) the other four most highly compensated executive officers of
the Company (the "Named Officers") during 1998:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-term
Annual Compensation Compensation All Other
Name and Principal Position Year Salary Bonus(1) Other(1) Options/SARs Compensation(2)
- - --------------------------- ---- ------ -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Curtis Lee Smith, Jr. 1998 $160,000 $ - $ - - $ 11,079
Chairman of the Board, Chief 1997 168,626 - - - 10,601
Executive Officer and Director 1996 162,031 - - - 10,601
Thomas J. Bresnan 1998 237,693 172,500 - 10,000 -
President, Chief Operating Officer 1997 231,658 45,000 - - -
and Director 1996 224,486 70,000 - - 4,750
Kenneth M. Hagerstrom 1998 139,583 51,210 - 12,500 -
President, Company-owned 1997 101,524 15,124 - 25,000 -
Center Division 1996 91,466 - - - -
Charles G. Kinch 1998 197,000 60,037 - 22,500 -
President, Chief Operating Officer 1997 190,000 - - 55,000 -
New Horizons Computer Learning 1996 174,011 - - - -
Centers, Inc.
Robert S. McMillan 1998 150,000 33,586 - 10,000 -
Vice President, Chief Financial 1997 149,100 3,500 - 25,000 -
Officer and Treasurer 1996 132,100 3,500 - - -
<FN>
(1) No Named Officer received perquisites or other personal benefits having a value exceeding the lesser of 10% of such executive's
salary and bonus for 1998, 1997, and 1996 or $50,000. Pursuant to the terms of Mr. Bresnan's employment agreement, he received
an interest-free loan from the Company in the amount of $250,000 payable on September 30, 1997. Had the loan carried a market
interest rate, Mr. Bresnan would have paid $7,482 in interest in 1997 and $13,976 during 1996. In 1997 and 1996, the Company,
in the form of a bonus, forgave $45,000 and $45,000 respectively, of Mr. Bresnan's loan. Mr. Bresnan paid off the loan in
September 1997.
(2) Amounts of All Other Compensation reported for Curtis Lee Smith, Jr. represent premiums paid by the Company on insurance
policies for the benefit of such persons. The amounts of All Other Compensation reported for Mr. Bresnan represents the
Company's matching contribution under its 401(k) Profit Sharing Plan. Through the end of 1996, the Company matched
participating employee's contributions to the Plan to the extent of 50% of the participant's salary reduction up to the
maximum allowable under the Internal Revenue Code.
</FN>
</TABLE>
Page 8
<PAGE>
<TABLE>
<CAPTION>
OPTION EXERCISES AND YEAR-END VALUES
The table below shows information with respect to the unexercised options to purchase the Company's Common Stock granted
under the Company's Key Employees Stock Option Plan (the "Employees Plan") to the Named Officers and held by them at December 31,
1998.
Number of Unexercised Options Held Value of Unexercised
at In-the-Money Options at
December 31, 1998 December 31, 1998*
----------------------------------- -------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- - ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Curtis Lee Smith, Jr ........................... -- -- $ -- $ --
Thomas J. Bresnan .............................. 381,000 54,000 5,878,875 768,950
Kenneth M. Hagerstrom .......................... 5,000 32,500 37,825 280,613
Charles G. Kinch ............................... 11,000 66,500 107,900 664,363
Robert S. McMillan ............................. 5,000 30,000 49,075 299,750
<FN>
* Based on the difference between the exercise price of such options and the closing price of a share of the Company's Common Stock
on the NASDAQ National Market System on December 31, 1998 ($23.125).
</FN>
</TABLE>
<TABLE>
<CAPTION>
OPTION AWARDS
The table below shows additional information on the stock options granted in 1998 under the Employees Plan to Named
Officers, which are reflected in the Summary Compensation Table.
Percentage
of Total
Options Potential Realizable Value
Granted to at Assumed Annual Rates of
Options Employees in Exercise Expiration Stock Price Appreciation
Name Granted 1998 Price Date for Option Term
- - ---- ------- ------------ -------- ---------- --------------------------
5% 10%
--------- ---------
<S> <C> <C> <C> <C> <C> <C>
Curtis Lee Smith, Jr .................. -- -- $ -- $ -- $ --
Thomas J. Bresnan ..................... 10,000 (1) 8.7% 12.78 01/22/04 158,645 250,871
Kenneth M. Hagerstrom ................. 12,500 (2) 10.9% 12.78 01/22/04 198,307 313,589
Charles G. Kinch ...................... 10,000 (1) 8.7% 12.78 01/22/04 156,645 250,871
Charles G. Kinch ...................... 12,500 (2) 10.9% 12.78 01/22/04 198,307 313,589
Robert S. McMillan .................... 5,000 (1) 4.3% 12.78 01/22/04 79,323 125,436
Robert S. McMillan .................... 5,000 (2) 4.3% 12.78 01/22/04 79,323 125,436
<FN>
(1) Represents options awarded under the Employees Plan. With the exception of certain options previously awarded to Mr.
Bresnan, all options outstanding under the Employee Plan vest at the rate of 20% per year commencing on the first anniversary
of the grant date. All outstanding options have been awarded at an exercise price equal to the fair market value of a share
of Common Stock on the date of grant, and expire between the sixth to the tenth anniversary of the date of grant. In general,
employees may exercise vested options awarded under the Employees Plan for a period of three months following the date of the
cessation of their employment with the Company.
(2) Represents options awarded as part of individual bonus arrangements. Under these arrangements, the officers could elect to
receive one-half of their bonus in stock options. For each $3 of cash bonus foregone the officer could receive an option to
purchase one share of Common Stock. The options have an exercise price of $12.78 per share, which was the fair market value of
a share of Common Stock on the date of grant. These options become exercisable equally on the first and second anniversary of
the date of the grant and expire on approximately the sixth anniversary of such date.
</FN>
</TABLE>
Page 9
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The Company's compensation programs are intended to provide its executive
officers with a mix of salary, benefits and incentive compensation arrangements
that are: (i) consistent with the interests of stockholders; (ii) competitive
with the arrangements provided by other companies in the industry; (iii)
commensurate with each executive's performance, experience and responsibilities;
and (iv) sufficient to attract and retain highly qualified executives. In making
its recommendations concerning adjustments to salaries and awards under the
other compensation plans, the Committee considers the financial condition and
performance of the Company during the prior year and the Company's success in
achieving financial, operational and other strategic objectives. The Committee
also makes an assessment of the contributions of the individual executive
officer to the Company's performance and to the achievement of its objectives,
as well as the success of the executive in achieving objectives which may have
been set for such individual. In assessing individual performance, the Committee
also seeks to recognize individual contributions during periods when the Company
experienced adverse business or financial conditions.
For purposes of determining whether the Company's compensation packages are
competitive, the companies with which the Company compares itself are those
included in the peer group index set forth in the Stockholder Return Performance
Presentation contained elsewhere in this proxy statement. While the Committee
does not establish a targeted range for the Company's overall executive
compensation within the peer group, its review of publicly available information
indicates that the compensation level of the Company's Chief Executive Officer
has historically been significantly below the average compensation paid to Chief
Executive Officers of peer group companies. Such information also indicates that
the base salary levels for the Company's other executive officers have been
slightly greater than those of similar executives at peer group companies. In
previous years bonuses paid to the Company's executive officers were generally
lower than those paid to executive officers of the peer group companies. For
1998, however, bonuses paid to the Company's executive officers were
significantly greater than those paid to peer group executive officers primarily
as a result of the company's performance. Option awards to peer group executives
vary widely from company to company and from year to year and appear to be
based, in part, on the level of salaries and bonuses paid. It is believed that
the option awards to the Company's executive officers are within the range of
variability and are warranted by the nature of the industry in which the Company
operates and the Company's recent performance.
Each component of an executive's compensation package is intended to assist
in attaining one or more of the objectives outlined above. The Company attempts
to provide its executives with base salaries and benefits that are competitive
with those of comparable companies and commensurate with the performance,
experience and responsibilities of each executive. Through salary adjustments
and bonuses, the Company also seeks to provide its executives with incentives to
improve the Company's financial and operational performance by providing a
method for rewarding individual performance. Finally, the Company's Key
Employees' Stock Option Plan and The Omnibus Equity Plan have been used to
provide executive officers with an opportunity to acquire a proprietary interest
in the Company, thereby providing these individuals with increased incentive to
promote the long-term interests of the Company's stockholders.
While the Committee seeks to assure that the Company's compensation
programs further the objectives described above and considers the various
factors outlined above in making compensation decisions, it does not take a
highly formalized or objective approach to determining compensation. Instead,
the Committee gives consideration to these various factors in subjectively
evaluating the compensation of each individual executive. While the subjective
nature of the Committee's decisions made it difficult to specifically identify
the relative importance of each of these various factors, in making compensation
decisions for 1998, the Committee generally gave greater weight to the Company's
performance, as measured by net income, and its subjective assessment of
individual performance, than to other factors.
Page 10
<PAGE>
In 1993, Congress adopted Section 162(m) of the Internal Revenue Code,
Section 162(m) limits the ability of public companies to deduct compensation in
excess of $1,000,000 paid to certain executive officers, unless such
compensation is "performance based" within the meaning of Section 162(m).
Section 162(m) also imposes certain requirements on the composition of
compensation committees. With the substitution of William H. Heller for Curtis
Lee Smith, Jr. as of March 20, 1998, the Compensation Committee of the Company
satisfies such requirements.
1998 COMPENSATION DECISIONS
BASE SALARY AND BENEFITS. The base salaries and benefits provided to
executive officers for 1998 were established by the Committee in accordance with
the compensation philosophy discussed above. The Committee determined to make
individual salary adjustments with respect to certain executive officers of the
Company, based on the Committee's subjective evaluation of the executive's
performance and the contribution to the Company.
BONUSES. During 1998 the executive officers of the Company, other than the
Chief Executive Officer, participated in individual bonus arrangements tied to
various measures of the Company's performance. Under these arrangements, certain
of the officers could elect to receive one-half of their bonus in stock options.
For each $3 of cash bonus foregone the officer could receive an option to
purchase one share of Common Stock. The options have an exercise price of $12.78
per share, which was the fair market value of a share of Common Stock on the
date of grant. The aggregate value of awards under terms of the bonus
arrangements was $407,333, a portion of which was paid through the issuance of
options to acquire 30,000 shares of Common Stock which become exercisable
equally on the first and second anniversary of the date of the grant and expire
on the sixth anniversary of such date. For accounting purposes, however, the
compensation expense recorded for these awards was $627,684.
STOCK OPTIONS. During the 1998 fiscal year, the Company awarded 115,053
stock options to employees of the Company.
CHIEF EXECUTIVE OFFICER COMPENSATION
Curtis Lee Smith, Jr.'s compensation is determined on the basis of the
Committee's subjective assessment of his performance, measured by the Company's
financial condition, results of operations and success in achieving strategic
objectives. The Committee also considers the responsibilities associated with
Mr. Smith's position and the level of compensation provided to Chief Executive
Officers of other companies in the industry. Mr. Smith did not participate in
the Committee's actions with respect to his compensation while serving as a
member of the Committee.
Although the Committee reviews Mr. Smith's compensation on an annual basis,
no adjustments were made to Mr. Smith's salary during 1998. Mr. Smith's base
salary was last adjusted in December 1990, at which time the Committee voted
(with Mr. Smith abstaining) to increase his salary from $175,000 to $200,000.
Mr. Smith declined this salary increase. In June 1992, Mr. Smith voluntarily
reduced his salary from $175,000 to $160,000 in connection with a restructuring
in the Company's business and related cost-cutting measures. The Committee
determined not to pay Mr. Smith a bonus during 1998.
Mr. Smith is the beneficial owner of approximately 14.0% of the issued and
outstanding Common Stock. As a consequence of his significant ownership interest
in the Company, Mr. Smith elected, at the time of the Company's initial public
offering, to renounce any rights that he might otherwise have to participate in
the Company's stock option plans. Accordingly, Mr. Smith did not receive any
option awards during 1998.
THE 1998 COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Richard L. Osborne
David A. Goldfinger
William H. Heller
Page 11
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Until March 20, 1998, the Compensation Committee of the Board of Directors
included Curtis Lee Smith, Jr., the Company's Chairman and Chief Executive
Officer.
During 1995 and 1996 Mr. Curtis Lee Smith, Jr. obtained loans from the
Company at interest rates equivalent to the Company's cost of borrowing money.
The principal amounts on these loans totaled $624,981 at December 31, 1998.
These loans are evidenced by demand notes and are secured by the proceeds from
certain life insurance policies on Mr. Curtis Lee Smith, Jr.
Richard L. Osborne, a member of the Compensation Committee of the Board of
Directors, provides certain consulting services to the Company. Mr. Osborne
received $30,000 in consulting fees from the Company during 1998. At the meeting
of the Board of Directors held on March 20, 1998, William H. Heller replaced
Curtis Lee Smith, Jr. as a member of the Compensation Committee. During 1998,
Mr. Heller received $24,000 in consulting fees from the Company.
The Company believes that these transactions were on terms no less
favorable than would have been available in similar transactions with
unaffiliated third parties.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the Exchange Act")
requires the Company's officers and Directors and persons who own 10% or more of
a registered class of the Company's equity securities to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Commission and
the Nasdaq Stock Market. Officers, Directors and 10% or greater stockholders are
required by Commission regulations to furnish the Company with copies of all
Forms 3, 4, and 5 which they file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all of its officers, Directors and 10% or
greater stockholders complied with all filing requirements applicable to them
with respect to transactions during the fiscal year ended December 31, 1998,
except that Mr. Stuart O. Smith inadvertently omitted to report one charitable
gift transaction. Mr. Smith did, however, promptly report the inadvertent
omission when it was brought to his attention.
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<PAGE>
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a graph comparing the yearly percentage changes in the
cumulative stockholder return on the Company's Common Stock against the
cumulative total return of the NASDAQ Market Index (U.S.) and a
Company-determined peer group for the period commencing January 1, 1994 and
ended December 31, 1998. The peer group companies are primarily involved in the
instructor-led delivery of technology training. The companies in the peer group
are: Canterbury Information Technology, Inc.; Learning Tree International, Inc.;
Aris Corp.; and Wave Technologies International, Inc. The Company believes this
peer group represents its industry and marketplace. In the Company's proxy
statement for the 1998 Annual Meeting of Stockholders the Company's peer group
included Mastering, Inc., which was acquired in 1998 and is no longer publicly
traded. Aris Corp. has been added to the peer group to replace Mastering, Inc.
The graph assumes that the value of the investment in the Company's Common Stock
and each index was $100 at January 1, 1994 and that all dividends, if any, were
reinvested.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
01/01/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
"NEW HORIZONS WORLDWIDE, INC." ................. 100.00 111.67 68.33 186.67 191.67 308.33
PEER GROUP INDEX ............................... 100.00 56.25 50.24 128.46 125.97 46.85
NASDAQ MARKET INDEX ............................ 100.00 104.99 136.18 169.23 207.00 291.96
</TABLE>
Page 13
<PAGE>
AUDITORS
The Company has retained Deloitte & Touche LLP, independent certified
public accountants, to serve as its independent auditors for the year ending
December 31,1999. Such firm has served as the Company's auditors since 1997. It
is expected that a member of the firm will be present at the Meeting, and will
be available to respond to appropriate questions.
OTHER MATTERS
The Board of Directors is not aware of any matter to come before the
Meeting other than those identified in the Notice of Annual Meeting of
Stockholders. If other matters, however, properly come before the Meeting, it is
the intention of the persons named in the accompanying proxy to vote in
accordance with their best judgment on such matters insofar as the proxies are
not limited to the contrary.
Any stockholder who wishes to submit a proposal for inclusion in the proxy
materials to be distributed by the Company in connection with its Annual Meeting
of Stockholders to be held in 2000 must do so no later than December 10, 1999.
To be eligible for inclusion in the 2000 proxy materials of the Company,
proposals must conform to the requirements set forth in Regulation 14A under the
Securities Exchange Act of 1934.
Upon the receipt of a written request from any stockholder, the Company
will mail, at no charge to the stockholder, a copy of the Company's Annual
Report on Form 10-K, including financial statements and schedules required to be
filed with the Securities and Exchange Commission pursuant to Rule 13a-1 under
the Securities Exchange Act of 1934, for the Company's most recent year. Written
requests for such report should be directed to:
Investor Relations Department
New Horizons Worldwide, Inc.
500 Campus Drive, Suite 200
Morganville, NJ 07751
You are urged to sign and return your proxy promptly in the enclosed return
envelope to make certain your shares will be voted at the Meeting.
By Order of the Board of Directors,
/s/ Stuart O. Smith
Stuart O. Smith
Secretary
Page 14
