Exhibit 10.12

 

NEW HORIZONS WORLDWIDE, INC.

 

RESTRICTED STOCK AGREEMENT

 

THIS RESTRICTED STOCK AGREEMENT is made on August 24, 2007, between New Horizons
Worldwide, Inc., a Delaware corporation (the “Company”) and Charles J. Mallon
(the “Executive”).

 

WITNESSETH

 

WHEREAS, the Company desires to provide certain of its officers, directors and
key personnel with an equity-based incentive to maintain and enhance the
performance and profitability of the Company; and

 

WHEREAS, the Committee has determined that the Executive should be granted
restricted stock upon the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, the Company and the Executive agree as follows:

 

1.                                     Definitions. Capitalized terms shall have
the following meanings:

 

(a)                                  “Act” means the federal Securities Act of
1933, as amended.

 

(b)                                 “Adjusted EBITDA” mean, with respect to any
fiscal period, the sum of, without duplication, (i) net income for that fiscal
period, plus (ii) any extraordinary or non-operating loss reflected in such net
income, minus (iii) any extraordinary or non-operating gain reflected in such
net income, plus (iv) interest expense of the Company for that fiscal period,
plus (v) the aggregate income tax expense of the Company for that fiscal period
(whether or not payable during that fiscal period), plus (vi) depreciation and
amortization expense of the Company for that fiscal period, plus (vii) all other
non-cash, extraordinary expenses of the Company for that fiscal period, in each
case as determined in accordance with generally accepted accounting principals,
consistently applied, and in the case of items (iv), (v), (vi) and (vii), only,
to the extent reflected in the determination of net income for that fiscal
period, plus (viii) to the extent deducted in determining net income for such
fiscal period, non-cash charges of the Company during such fiscal period
relating to the Company’s compliance with Financial Accounting Standards Board
Statement No. 142, plus (ix) to the extent deducted in determining net income
for such fiscal period, non-cash charges recorded against earnings in the
Company’s financial statements for such fiscal period with respect to the
write-down of leasehold estates as a result of the sublease of such leasehold
estates, plus (x) non-cash charges associated with Options.

 

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(c)                                  “Affiliate” means any person or entity
which, at the time of reference, directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Company.

 

(d)                                 “Agreement” means this instrument, as in
effect on the date of this Agreement, and as may be amended from time to time.

 

(e)                                  “Change in Control” shall mean the
occurrence of any of the following events:  (i) an acquisition (other than
directly from Employer) of any voting securities of the Employer (the “Voting
Securities”) by any “person” or “group” (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934) other than an employee
benefit plan of Employer, immediately after which such Person or Group has
“Beneficial Ownership” (within the meaning of Rule 13d3 under the Exchange Act)
or more than fifty percent (50%) of the combined voting power of Employer’s then
outstanding Voting Securities; (ii) within any 12 month period, the individuals
who were directors of the Employer as of September 1, 2007 (the “Incumbent
Directors”) ceasing for any reason other than death, disability or retirement to
constitute at least a majority of the Board of Directors, provided that any
director who was not a director as of the date the Board of Directors approved
this Agreement shall be deemed to be an Incumbent Director if such director was
appointed or nominated for election to the Board of Directors by, or on the
recommendation or approval of, at least a majority of directors who then
qualified as Incumbent Directors, provided further that any director appointed
or nominated to the Board of Directors to avoid or settle a threatened or actual
proxy contest shall in no event be deemed an Incumbent Director; (iii)
consummation of a merger, consolidation, or reorganization involving Employer
that results in the stockholders of Employer immediately before such merger,
consolidation or reorganization owning, directly or indirectly, immediately
following such merger, consolidation or reorganization, less than fifty percent
(50%) of the combined voting power of the corporation which survives such
transaction as the ultimate parent entity; or (iv) a sale of all or
substantially all of the assets of the Company. Notwithstanding the foregoing, a
“Change of Control” shall not include any transaction or series of related
transactions pursuant to which Camden Partners Strategic Fund III, L.P., Camden
Partners Strategic Fund III-A, L.P., or any of their respective Affiliates
increases its individual or collective direct or indirect ownership of the
Company.

 

(f)                                    “Code” means the Internal Revenue Code of
1986, as amended, and any successor statute.

 

(g)                                 “Committee” means the Compensation Committee
of the Board of Directors of the Company.

 

(h)                                 “Company” means New Horizons Worldwide,
Inc., a Delaware corporation, and any successor thereto.

 

(i)                                     “Disability” or “Disabled” shall mean
any physical or mental impairment (i) because of which the Executive is unable
to perform the principal duties of his employment for a period of at least 120
consecutive days or for 180 days during any twelve (12) month period, or (ii)
which, in the judgment of the Board of Directors based on a written
certification of a physician (reasonably acceptable to Employer and Executive or
Executive’s personal representative) renders the Executive incapable of
performing the principal duties of his employment.

 

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(j)                                     “Shares” means shares of the $.01 par
value common stock of the Company, or any security into which such shares may be
converted by reason of any transaction or event of the type referred to in
Section 9 hereof.

 

2.                                       Grant of Shares. The Company shall
issue to the Executive, subject to the terms and conditions set forth in this
Agreement, Sixty Thousand (60,000) Shares (the “Grant”). In consideration of the
Grant to the Executive, the Executive agrees that the Shares shall be subject to
the vesting provision set forth in Section 3 of this Agreement.

 

3.                                       Vesting Restriction.

 

(a)                                  Except as otherwise provided in Sections
3(a) and 3(b) below, in the event that the Executive continues to remain
employed by the Company or an Affiliate and the Company achieves the Adjusted
EBITDA targets set forth in this Section 3(a), the Executive will be entitled to
a nonforfeitable right to a portion of the Shares in accordance with the
following schedule. In the event that the Executive ceases to be employed by the
Company on or after the date hereof for any reason prior to achieving the
targets set forth below, the Executive will forfeit any and all rights to the
portion of the Shares that have not vested in accordance with the following
schedule.

 

Company Adjusted EBITDA Target

 

Vested Shares

 

$3,357,000 in Adjusted EBITDA for the twelve (12) consecutive month period
ending December 31, 2007

 

30,000 Shares

 

$7,565,000 in Adjusted EBITDA for the twelve (12) consecutive month period
ending December 31, 2008 as may be modified by the Company’s Board of Directors
during the budget process conducted with the Company’s management

 

30,000 Shares

 

 

(b)                                 If the Executive dies or becomes Disabled
while employed by the Company prior to achieving the targets set forth in
Section 3(a), the Shares shall nevertheless vest if such target(s) is (are)
achieved during the calendar twelve (12) month period ended during the calendar
twelve (12) month period immediately following such death or Disability.

 

(c)                                  If, while the Executive is employed by the
Company, a Change in Control occurs, all Shares granted hereunder shall
immediately vest regardless of whether such Shares would have vested pursuant to
the Schedule set forth in Section 3(a).

 

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4.                                       Escrow. The certificate or certificates
representing the Shares will remain in the possession of the Company to be held
by it in escrow until the Shares vest in accordance with Section 3 hereof.

 

5.                                       Shareholder Rights. During the period
the Shares are held in escrow and registered in the Executive’s name, and after
execution and delivery of the Irrevocable Stock Powers to the Company in
accordance with Section 7 of this Agreement, the Executive will be entitled to
vote the Shares and to receive the dividends on the Shares. Any common shares
distributed with respect to such Shares shall be deemed to be Shares subject to
the restrictions in this Agreement.

 

6.                                       Issuance of Shares; Restrictive
Legends. The Committee may provide that one or more Share certificates
representing the Shares shall be registered in the Executive’s name. All
certificates representing Shares shall have affixed thereto legends in
substantially the following form, in addition to any other legends that may be
required under federal or state securities laws:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS A REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS WITH RESPECT TO SUCH SECURITIES SHALL BE EFFECTIVE OR
UNLESS SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION UNDER THE ACT AND SUCH
LAWS IN THE OPINION OF COUNSEL TO THE HOLDER, WHICH OPINION AND COUNSEL MUST BE
REASONABLY SATISFACTORY TO THE COMPANY.”

 

7.                                       Irrevocable Stock Powers. To facilitate
the escrow of the Shares and any reconveyance of the Shares to the Company upon
forfeiture, sale of the Shares or any other event, the Executive has delivered
to the Company the Irrevocable Stock Power attached as Exhibit “A” hereto, with
respect to the Shares, executed by the Executive in blank as of the date of this
Agreement. The Executive will execute such additional Irrevocable Stock Powers
as may be required by the Company. As soon as practicable after the vesting of
any Shares, the Company shall issue or reissue to the Executive (or to the
Executive’s designated beneficiary in the event of the Executive’s death), one
or more certificates for the Shares represented by the Grant.

 

8.                                       Restriction on Transfer. No Share
issued pursuant to the Grant may be assigned, transferred, otherwise encumbered
or disposed of by the Executive until such Share has vested in accordance with
the schedule set forth in Section 3.

 

9.                                       Adjustment Upon Changes in
Capitalization. The number of Shares which may be purchased pursuant to the
Grant shall be appropriately adjusted as the Committee may determine for any
change after the date of the Agreement in the number of issued Shares resulting
from the subdivision or combination of Shares or other capital adjustments, or
the payment of a stock dividend, or other change in the Shares effected without
receipt of consideration by the Company; provided, that any fractional Shares
resulting from any such adjustment shall be eliminated. Adjustments under this
Section 9 shall be made by the Committee, whose determination as to the
adjustments to be made, and the extent thereof, shall be final, binding and
conclusive.

 

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10.                                 Investment Representations.

 

The Executive represents, warrants and covenants as follows:

 

(a)                                  The Executive is purchasing the Shares for
his own account for investment only, and not with a view to, or for sale in
connection with, any distribution of the Shares in violation of the Act, or any
rule or regulation under the Act.

 

(b)                                 The Executive has had such opportunity as he
has deemed adequate to obtain from representatives of the Company such
information as is necessary to permit him to evaluate the merits and risks of
his investment in the Company.

 

(c)                                  The Executive has sufficient experience in
business, financial and investment matters to be able to evaluate the risks
involved in the issuance of the Shares pursuant to this Agreement and to make an
informed investment decision with respect to such issuance.

 

(d)                                 The Executive can afford a complete loss of
the value of the Shares and is able to bear the economic risk of holding such
Shares for an indefinite period.

 

(e)                                  The Executive understands that (i) the
Shares have not been registered under the Act and are “restricted securities”
within the meaning or Rule 144 under the Act, (ii) the Shares cannot be sold,
transferred or otherwise disposed of unless they are subsequently registered
under the Act or an exemption from registration is then available; (iii) in any
event, the exemption from registration under Rule 144 will not be available for
at least one year and even then will not be available unless a public market
then exists for the common shares of the Company, adequate information
concerning the Company is then available to the public, and other terms and
conditions of Rule 144 are complied with; and (iv) there is now no registration
statement on file with the Securities and Exchange Commission with respect to
any of the stock of the Company and the Company has no obligation or current
intention to register the Shares under the Act.

 

11.                                 Company Representations. The Company
represents and warrants that the issuance, sale and delivery of the Shares, upon
the terms and conditions set forth herein, have been duly authorized by all
requisite action of the Board of Directors of the Company. When issued upon the
terms and conditions of this Agreement, the Shares will be validly issued, fully
paid and nonassessable.

 

12.                                 Withholding Taxes; Section 83(b) Election.

 

(a)                                  The Executive acknowledges and agrees that
the Company has the right to deduct from payments of any kind otherwise due to
the Executive any federal, state or local taxes of any kind required by law to
be withheld with respect to the issuance of the Shares by the Company.

 

(b)                                 The Executive has reviewed with the
Executive’s own tax advisors the federal, state, local and foreign tax
consequences of this investment and the transactions contemplated by this
Agreement. The Executive is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents. The Executive
understands that the Executive (and not the Company) shall be responsible for
the Executive’s own tax liability that may arise as a result of this investment
or the transactions contemplated by this Agreement. The Executive understands
that it may be beneficial in many circumstances to elect to be taxed at the time
the Shares are granted rather than when and as the Shares vest pursuant to
Section 2 hereof by filing an election under Section 83(b) of the Code with the
IRS within 30 days from the date of the grant of the Shares.

 

THE EXECUTIVE ACKNOWLEDGES THAT IT IS THE EXECUTIVE’S SOLE RESPONSIBILITY AND
NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(B).

 

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13.                                 Miscellaneous.

 

(a)                                  No Rights to Employment. Nothing contained
in this Agreement shall be construed as giving the Executive any right to be
retained, in any position, as an employee or Director of the Company. The
Executive acknowledges and agrees that the vesting of the Shares pursuant to
Section 3 hereof is earned only by continuing service as an employee at the will
of the Company (not through the act of being hired or purchasing shares
hereunder). The Executive further acknowledges and agrees that the transactions
contemplated hereunder and the vesting schedule set forth herein do not
constitute an express or implied promise of continued engagement as an employee
for the vesting period, for any period, or at all.

 

(b)                                 Severability. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, and each
other provision of this Agreement shall be severable and enforceable to the
extent permitted by law.

 

(c)                                  Waiver. Any provision for the benefit of
the Company contained in this Agreement may be waived, either generally or in
any particular instance, by the Board of Directors of the Company.

 

(d)                                 Binding Effect. This Agreement shall be
binding upon and inure to the benefit of the Company and the Executive and their
respective heirs, executors, administrators, legal representatives, successors
and assigns.

 

(e)                                  Notice. All notices required or permitted
hereunder shall be in writing and deemed effectively given upon personal
delivery or five days after deposit in the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the other party
hereto at the address shown beneath his or its respective signature to this
Agreement, or at such other address or addresses as either party shall designate
to the other in accordance with this Section 13(e).

 

(f)                                    Pronouns. Whenever the context may
require, any pronouns used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular form of nouns and pronouns
shall include the plural, and vice versa.

 

(g)                                 Entire Agreement. This Agreement constitutes
the entire agreement between the parties and supersedes all prior agreements and
understandings, relating to the subject matter of this Agreement.

 

(h)                                 Amendment. This Agreement may be amended or
modified only by a written instrument executed by both the Company and the
Executive.

 

(i)                                     Governing Law. This Agreement shall be
construed, interpreted and enforced in accordance with the laws of the State of
Delaware, without regard to any applicable conflict of laws principles, and in
accordance with applicable federal law.

 

IN WITNESS WHEREOF, the parties hereto have executed this Restricted Stock
Agreement as of the day and year first above written.

 

NEW HORIZONS WORLDWIDE, INC.

 

 

By:

/S/ Mark A. Miller

 

Mark A. Miller

President and CEO

 

 

EXECUTIVE:

 

 

By:

/S/ Charles J. Mallon

 

Charles J. Mallon

 

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