[GRAPHIC OMITTED]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 2, 2000
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders of New Horizons Worldwide, Inc. (the
"Company") will be held at the Newport Beach Marriott Suites Hotel, Newport
Beach, California, on Tuesday, May 2, 2000, at 9:00 a.m., local time, to
consider and act upon the following:
1. The election of three Directors whose three-year term of office will expire
in 2003; and
2. The transaction of such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Holders of Common Stock of record at the close of business on March 31,
2000 are entitled to notice of and to vote at the Annual Meeting.
Whether or not you expect to be personally present at the Annual 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 Annual Meeting, but will
ensure your representation if you cannot attend.
By Order of the Board of Directors,
Stuart O. Smith
SECRETARY
April 6, 2000
<PAGE>
NEW HORIZONS WORLDWIDE, INC.
1231 East Dyer Road, Suite 110
Santa Ana, CA 92705-5605
PROXY STATEMENT
Mailed On April 6, 2000
ANNUAL MEETING OF STOCKHOLDERS
To be held on May 2, 2000
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 2, 2000, 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 31, 2000 will be entitled to vote
at the Annual Meeting or any adjournments thereof. As of that date, 9,692,438
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 Certificate, 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 Common Stock entitled to vote at the Annual 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.
Pursuant to the Company's By-Laws, all other questions and matters brought
before the Annual 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.
1
<PAGE>
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.
2
<PAGE>
SHARE OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth information with respect to Common Stock
owned on March 31, 2000, unless otherwise noted, 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.
Name and Address of Shares Beneficially Percent of
Beneficial Owner Owned Class
------------------ ------------------- --------
Curtis Lee Smith, Jr.............................. 1,237,698 12.9%
1231 East Dyer Road, Suite 110
Santa Ana, CA 92705-5605
Stuart O. Smith................................... 1,837,085 19.1%
1231 East Dyer Road, Suite 110
Sana Ana, CA 92705-5605
Thomas J. Bresnan(1).............................. 548,281 5.7%
David A. Goldfinger(2)............................ 112,775 1.2%
Richard L. Osborne(3)............................. 65,312 *
William H. Heller(4).............................. 71,250 *
Scott R. Wilson(5)................................ 45,000 *
Kenneth M. Hagerstrom(6).......................... 31,250 *
Robert S. McMillan(7)............................. 30,000 *
Charles G. Kinch(8)............................... 2,006 *
Select Equity Group(9)............................ 863,156 9.0%
380 Lafayette Street, 6th Floor
New York, NY 10003
Awad Asset Management, Inc.(10)................... 561,778 5.8%
250 Park Avenue
New York, New York 10177
All Directors and Executive Officers
as a Group (10 persons)......................... 3,980,657 41.4%
* Less than 1%.
(1) Mr. Bresnan's ownership figure includes 507,500 shares which may be
acquired upon the exercise of immediately exercisable stock options.
(2) Mr. Goldfinger's ownership figure includes 50,000 shares which may be
acquired upon the exercise of immediately exercisable stock options.
(3) Mr. Osborne's ownership figure includes 62,500 shares which may be acquired
upon the exercise of immediately exercisable stock options.
(4) Mr. Heller's ownership figure includes 68,750 shares which may be acquired
upon the exercise of immediately exercisable stock options.
(5) Mr. Wilson's ownership figure includes 43,750 shares which may be acquired
upon the exercise of immediately exercisable stock options.
(6) Mr. Hagerstrom's ownership figure includes 31,250 shares which may be
acquired upon the exercise of immediately exercisable stock options.
(7) Mr. McMillan's ownership figure includes 30,000 shares which may be
acquired upon the exercise of immediately exercisable stock options.
(8) Mr. Kinch resigned from the Company effective December 12, 1999.
(9) Based solely upon information in a Schedule 13-G filed with the Securities
and Exchange Commission on February 10, 2000.
(10) Based solely upon information in a Schedule 13-G filed with the Securities
and Exchange Commission on February 8, 2000.
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, three Directors will be elected to serve in the class whose
three-year term will expire at the Annual Meeting to be held in 2003.
Unless otherwise directed, the persons named in the accompanying proxy will
vote for the election of the three nominees set forth in the table below as
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 Annual Meeting,
the Directors who will continue in office subsequent to the Annual Meeting, and
certain other information with respect to each individual.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM ENDING IN 2003
Name Age Principal Occupation and History
- ---- --- --------------------------------
STUART O. SMITH (1)(2) 67 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
Holdings Corporation ("NCS"), a Cleveland, Ohio
-based holding company which operated a copper
tubing importing and fabricating business, from
1985 to 1988.
THOMAS J. BRESNAN (1) 47 President, Chief Executive Officer, 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. On
September 1, 1999, Mr. Bresnan became the
Company's Chief Executive Officer. 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.
4
<PAGE>
SCOTT R. WILSON (1) 48 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.
DIRECTORS CONTINUING IN OFFICE
Name Age Principal Occupation and History
- ---- --- --------------------------------
DAVID A. GOLDFINGER (3) 64 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) 62 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.
5
<PAGE>
CURTIS LEE SMITH, JR. 72 Chairman of the Board and Director
(4)(2)
Mr. Smith has served as the Company's Chairman
of the Board and as a Director since July
1986, and had the additional titles and duties
of President from August 1989 through July 1992
and Chief Executive Officer from July 1986 to
August 1999. 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. Mr. Smith also serves as a
Director of Interdent, Inc. and Strategic
Diagnostics Inc., both public companies.
WILLIAM H. HELLER (4) 61 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 the Compensation Committee.
(1) Term as Director expires in 2000; nominee for a three-year term expiring in
2003.
(2) Curtis Lee Smith, Jr., and Stuart O. Smith are brothers.
(3) Term as Director expires in 2001.
(4) Term as Director expires in 2002.
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 two times during the year ended
December 31, 1999.
The Compensation Committee consists of Messrs. William H. Heller, David A.
Goldfinger and Richard L. Osborne. The Compensation 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 two times during the year ended December
31, 1999.
The Board of Directors of the Company held nine meetings during 1999. 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,
1999, Messrs. Osborne, Heller and Goldfinger elected to take all of their 2000
fees in options and Mr. Wilson elected to take half of his 2000 fees in options.
As a result, Messrs. Osborne, Heller and Goldfinger received options to acquire
25,000 shares and Mr. Wilson received options to acquire 12,500 shares. All of
the options have an exercise price of $13.38 per share, become exercisable on
December 1, 2000 and expire on December 1, 2004.
In January 1989, the Compensation Committee granted Mr. Osborne and Mr.
Goldfinger options to acquire 7,812 shares of Common Stock and 15,625 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
$8.96 per share. In 1992, Messrs. Wilson and Heller each were granted
immediately exercisable options to acquire 6,250 shares of Common Stock at an
option price of $5.20 per share. As of December 31, 1999, options granted to
individuals pursuant to the Outside Directors Plan were outstanding to purchase
12,500 shares of Common Stock at an average price of $5.20 per share. In
addition, on September 19, 1996, options to purchase an aggregate of 50,000
shares of Common Stock at an average price of $7.05 were granted to non-employee
Directors of the Company. As of December 31, 1999, options granted to
individuals pursuant to the 1997 Outside Directors Elective Stock Option Plan
were outstanding to purchase 250,000 shares of Common Stock at an average price
of $13.62 per share.
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 1999:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-term
------------------- 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. (3) 1999 $163,077 $ - $ - - $ 17,434
Chairman of the Board 1998 160,000 - - - 11,079
and Director 1997 168,626 - - - 10,601
Thomas J. Bresnan (3) 1999 278,078 - - 12,500 -
President, Chief Executive Officer, 1998 237,693 172,500 - 12,500 4,750
Chief Operating Officer 1997 231,658 45,000 - - -
and Director
Kenneth M. Hagerstrom 1999 200,000 - - 62,500 -
President, Company-owned 1998 139,583 51,210 - 12,500 -
Center Division 1997 101,524 15,124 - 25,000 -
Charles G. Kinch (4) 1999 216,827 40,000 - 12,500 -
President, Chief Operating Officer 1998 197,000 60,037 - 22,500 -
New Horizons Computer Learning 1997 190,000 - - 55,000 -
Centers, Inc.
Robert S. McMillan 1999 160,000 4,000 - 12,500 -
Vice President, Chief Financial 1998 150,000 33,586 - 10,000 -
Officer and Treasurer 1997 149,100 3,500 - 25,000 -
</TABLE>
(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
1999, 1998, and 1997 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. In 1997, the Company, in the form of a bonus, forgave $45,000 of Mr.
Bresnan's loan. Mr. Bresnan paid off the loan in September 1997. Pursuant
to a promissory note dated August 31, 1999, Mr. Bresnan received an
interest free loan from the Company in the amount of $300,000 payable on
August 31, 2004. Had the loan carried a market interest rate, Mr. Bresnan
would have paid $10,703 in interest in 1999. Pursuant to a promissory note
dated October 14, 1999, Mr. Hagerstrom received an interest free loan from
the Company in the amount of $100,000 payable on October 14, 2004. Had the
loan carried a market interest rate, Mr. Hagerstrom would have paid $1,940
in interest in 1999.
(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.
(3) Mr. Smith served as the Company's Chief Executive Officer until September
1, 1999. On that date, Mr. Bresnan became the Company's Chief Executive
Officer.
(4) Mr. Kinch resigned from the Company effective December 12, 1999.
8
<PAGE>
OPTION EXERCISES AND YEAR-END VALUES
The table below shows information with respect to the unexercised options
to purchase the Common Stock granted under the Key Employees Stock Option Plan
and the Omnibus Equity Plan to the Named Officers and held by them at December
31, 1999.
<TABLE>
<CAPTION>
Number of Unexercised Options Held Value of Unexercised
at In-the-Money Options at
December 31, 1999 December 31, 1999*
---------------------------------- --------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------ ---------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Curtis Lee Smith, Jr....................... -- -- $ -- $ --
Thomas J. Bresnan.......................... 533,750 22,500 3,028,981 164,988
Kenneth M. Hagerstrom...................... 15,625 93,750 153,609 563,869
Charles G. Kinch........................... 40,625 0 57,559 0
Robert S. McMillan......................... 16,875 39,375 22,553 184,853
<FN>
* Based on the difference between the exercise price of such options and the closing price of a share of the Common Stock on Nasdaq
on December 31, 1999 ($11.875).
</FN>
</TABLE>
OPTION AWARDS
The table below shows additional information on the stock options granted
in 1999 under the Omnibus Equity Plan to Named Officers, which are reflected in
the Summary Compensation Table.
<TABLE>
<CAPTION>
Percentage
of Total
Options Potential Realizable Value
Granted to at Assumed Annual Rates of
Options Employees in Exercise Expiration Stock Price Appreciation
Name Granted 1999 Price Date for Option Term
- ----------------------------- ------- ------------ -------- ---------- ---------------------------
5% 10%
--------- ---------
<S> <C> <C> <C> <C> <C> <C>
Curtis Lee Smith, Jr......... -- -- $ -- -- $ -- $ --
Thomas J. Bresnan............ 12,500 (1) 4.6% 17.00 01/15/05 -- 50,446
Kenneth M. Hagerstrom........ 62,500 (1) 22.8% 17.00 01/15/05 -- 252,330
Robert S. McMillan........... 12,500 (1) 4.6% 17.00 01/15/05 -- 50,446
Charles G. Kinch............. 12,500 (1) 4.6% 17.00 01/15/05 -- 50,446
<FN>
(1) Represents options awarded under the Omnibus Equity Plan. All such options 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 on the sixth anniversary of the date of grant. In general,
employees may exercise vested options awarded under the Omnibus Equity Plan for a period of three months following the date of
the cessation of their employment with the Company.
</FN>
</TABLE>
Employment Agreements
- ---------------------
THOMAS J. BRESNAN. By letter agreements dated July 27, 1999 and January 4,
2000, the Company and Thomas J. Bresnan entered into an agreement relating to
Mr. Bresnan's employment with the Company and his relocation to California.
First, Mr. Bresnan's base salary was increased to $300,000 effective as of
September 7, 1999. Secondly, the Company agreed to lend Mr. Bresnan up to
$700,000 in the form of an interest free loan to facilitate the closing of the
purchase of Mr. Bresnan's new residence. Any amount borrowed in excess of
$300,000 was to be repaid with the proceeds of the sale of Mr. Bresnan's
previous home. The $300,000 balance is payable in full on the fifth anniversary
of the date of borrowing. In the event of a change of control of the Company (as
defined under the Omnibus Equity Plan) that may occur within three years of the
date of the first letter agreement, any amounts owed Mr. Bresnan under the loan
will be forgiven. Furthermore, in the event of a change of control of the
Company during such period, Mr. Bresnan will receive a lump sum payment of
$1,000,000 and an excise tax gross up payment should Section 280G of the
Internal Revenue Code of 1986, as amended, be applicable to any amounts received
by Mr. Bresnan. In addition, all of Mr. Bresnan's options to acquire shares of
the Company's Common Stock which are not then otherwise fully exercisable shall
become fully exercisable, and, should Mr. Bresnan elect to relocate within
eighteen months of such change of control, the Company will reimburse him for
the reasonable costs of moving his family and up to $60,000 of any loss on the
resale of his California residence.
9
<PAGE>
KENNETH M. HAGERSTROM. By letter agreement dated January 4, 2000, Mr.
Hagerstrom was provided certain severance pay benefits made available to certain
key executives of the Company. By its terms, Mr. Hagerstrom is entitled to
receive a salary continuation benefit equal to the sum of his then base salary
and the cost of purchasing health insurance under COBRA for a period of six
months should Mr. Hagerstrom's employment be terminated by the Company without
good cause, by Mr. Hagerstrom for good reason, or as a result of Mr.
Hagerstrom's death or disability. In addition, Mr. Hagerstrom is entitled to
receive a lump sum benefit of $425,000 (less applicable withholding taxes) not
more than one day after a change of control of the Company, if such change of
control should occur on or before December 31, 2001 and Mr. Hagerstrom remains
employed by the Company or a subsidiary of the Company through the date of the
change of control. He is also entitled to receive an excise tax gross up payment
should Section 280G of the Internal Revenue Code, as amended, be applicable to
any amounts received in connection with such change of control. These benefits
are in addition to any other benefits payable by the Company to Mr. Hagerstrom.
By the terms of the letter agreement, Mr. Hagerstrom confirmed the
confidentiality, non-competition, non-solicitation and non-interference
covenants that apply to him. For purposes of the letter agreement, "change of
control" has the same meaning as given such term in the Omnibus Equity Plan.
"Good cause" is defined to mean (i) any fraud, misappropriation or embezzlement
in connection with the business of the Company or any subsidiary, (ii) any act
of gross negligence, gross corporate waste or disloyalty with respect to the
Company, (iii) any conviction of or nolo contendere plea to a felony or a first
degree misdemeanor that has a material detrimental effect on the Company, (iv)
repeated absenteeism, illegal drug use or excessive alcohol consumption, (v)
gross neglect in the performance of duties in the event such gross neglect has
not been cured within specified time limits, (vi) any public conduct that has a
material detrimental effect on the Company, or (vii) any voluntary resignation
or other termination of employment under circumstances in which the Company
could effect such termination pursuant to the foregoing. "Good reason" is
defined to mean (i) a significant reduction in position, duties,
responsibilities, authority or power, (ii) a reduction of base salary, or (iii)
a material reduction or discontinuance of benefits (taken as a whole), unless
such reduction or discontinuance similarly affects other senior executives of
the Company.
ROBERT S. MCMILLAN. By letter agreement dated January 4, 2000, Mr. McMillan
was provided certain severance pay benefits made available to certain key
executives of the Company. By its terms, Mr. McMillan is entitled to receive a
salary continuation benefit equal to the sum of his then base salary and the
cost of purchasing health insurance under COBRA for a period of six months
should Mr. McMillan's employment be terminated by the Company without good
cause, by Mr. McMillan for good reason, or as a result of Mr. McMillan's death
or disability. In addition, Mr. McMillan is entitled to receive a lump sum
benefit of $300,000 (less applicable withholding taxes) not more than one day
after a change of control of the Company, if such change of control should occur
on or before December 31, 2001 and Mr. McMillan remains employed by the Company
or a subsidiary of the Company through the date of the change of control. He is
also entitled to receive an excise tax gross up payment should Section 280G of
the Internal Revenue Code, as amended, be applicable to any amounts received in
connection with such change of control. These benefits are in addition to any
other benefits payable by the Company to Mr. McMillan. By the terms of the
letter agreement, Mr. McMillan confirmed the confidentiality, non-competition,
non-solicitation and non-interference covenants that apply to him. For purposes
of the letter agreement, "change of control" has the same meaning as given such
term in the Omnibus Equity Plan. "Good cause" is defined to mean (i) any fraud,
misappropriation or embezzlement in connection with the business of the Company
or any subsidiary, (ii) any act of gross negligence, gross corporate waste or
disloyalty with respect to the Company, (iii) any conviction of or nolo
contendere plea to a felony or a first degree misdemeanor that has a material
detrimental effect on the Company, (iv) repeated absenteeism, illegal drug use
or excessive alcohol consumption, (v) gross neglect in the performance of duties
in the event such gross neglect has not been cured within specified time limits,
(vi) any public conduct that has a material detrimental effect on the Company,
or (vii) any voluntary resignation or other termination of employment under
circumstances in which the Company could effect such termination pursuant to the
foregoing. "Good reason" is defined to mean (i) a significant reduction in
position, duties, responsibilities, authority or power, (ii) a reduction of base
salary, or (iii) a material reduction or discontinuance of benefits (taken as a
whole), unless such reduction or discontinuance similarly affects other senior
executives of the Company.
10
<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 with those provided to 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. Option awards to peer group executives vary widely from company to
company and from year to year and in part appear to be based or the level of
salaries and bonuses paid.
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 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.
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. The Compensation Committee of the Company satisfies
such requirements.
11
<PAGE>
1999 Compensation Decisions
- ---------------------------
BASE SALARY AND BENEFITS. The base salaries and benefits provided to
executive officers for 1999 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 1999, the executive officers of the Company, other than the
individuals serving as the Chief Executive Officer, participated in individual
bonus arrangements tied to various measures of the Company's performance. No
bonuses were awarded under those arrangements in 1999.
STOCK OPTIONS. During the 1999 fiscal year, the Company awarded 186,308
stock options to employees of the Company.
SEVERANCE AGREEMENTS. During the 1999 fiscal year, the Company entered into
or determined to enter into severance agreements with Messrs. Hagerstrom,
McMillan and Bresnan. These agreements, which are more fully described elsewhere
in this Proxy Statement, are consistent with those offered to other key
executives of the Company and the Committee's understanding of arrangements with
comparable executives at other companies.
Chief Executive Officer Compensation
- ------------------------------------
The Chief Executive Officer's compensation is determined on the basis of
the Committee's subjective assessment of the Chief Executive Officer's
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 the Chief Executive Officer's
position and the level of compensation provided to Chief Executive Officers of
other companies in the industry.
Although the Committee reviewed Mr. Smith's compensation on an annual
basis, no adjustments were made to Mr. Smith's salary during 1999. The Committee
determined not to pay Mr. Smith a bonus during 1999, nor did Mr. Smith did
receive any option awards.
Effective September 1, 1999, Mr. Bresnan replaced Mr. Smith as the
Company's Chief Executive Officer. Mr. Bresnan's base salary is currently
$300,000. Mr. Bresnan is the beneficial owner of approximately 5.7% of the
Company's issued and outstanding Common Stock. Mr. Bresnan received options to
purchase 12,500 shares of Common Stock in 1999.
THE 1999 COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Richard L. Osborne
David A. Goldfinger
William H. Heller
12
<PAGE>
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
Richard L. Osborne and William H. Heller, members of the Compensation
Committee of the Board of Directors, provide certain consulting services to the
Company. Mr. Osborne received $30,000 in consulting fees from the Company during
1999. Mr. Heller received $24,000 in consulting fees from the Company during
1999. 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
Nasdaq. 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 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, 1999.
13
<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, 1995 and
ended December 31, 1999. 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. The graph assumes that the
value of the investment in the Common Stock and each index was $100 at January
1, 1995 and that all dividends, if any, were reinvested.
14
Comparison of 5 Year Cumulative Total Return *
Among New Horizons Worldwide Inc.,
The NASDAQ Stock market (U.S.) Index and a Peer Group
Cumulative Total Return
---------------------------------------------
12/94 12/95 12/96 12/97 12/98 12/99
----- ----- ----- ----- ----- -----
NEW HORIZONS WORLDWIDE, INC .... 100.0 61.2 167.2 171.6 276.1 177.2
PEER GROUP ..................... 100.0 89.5 219.5 216.3 83.4 183.0
NASDAQ STOCK MARKET (U.S.) ..... 100.0 141.3 173.9 213.1 300.3 542.4
* $100 INVESTED ON 12/31/99 IN STOCK OR INDEX
INCLUDING REINVESTMENT OF ALL DIVIDENDS
FISCAL YEAR ENDING DECEMBER 31
<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, 2000. 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 Annual 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 Annual
Meeting other than those identified in the Notice of Annual Meeting of
Stockholders. If other matters, however, properly come before the Annual
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 2001 must do so no later than December 10, 2000.
To be eligible for inclusion in the 2001 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.
1231 East Dyer Road, Suite 110
Santa Ana, CA 92705-5605
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 Annual Meeting.
By Order of the Board of Directors,
/S/ STUART O. SMITH
Stuart O. Smith
Secretary
