NONQUALIFIED STOCK OPTION AGREEMENT

Exhibit 10.3

THIS AGREEMENT is entered into as of July 5, 2006, by and between New Horizons Worldwide, Inc., a Delaware corporation (the “Company”), and Xxxx X. Xxxxxx (the “Optionee”).

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 Optionee should be granted nonqualified stock options to acquire Shares upon the terms and conditions set forth in this Agreement.

NOW, THEREFORE, the Company and the Optionee hereby agree as follows:

1. Definitions. The following terms shall have the meanings set forth below whenever used in this instrument:

(i) The word “Act” shall mean the federal Securities Act of 1933, as amended.

(ii) The word “Affiliate” shall mean 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.

(iii) The word “Agreement” shall mean this instrument as originally executed and as it may later be amended.

(iv) The word “Board” shall mean the Board of Directors of the Company.

(v) The word “Change in Control” shall have the meaning provided to it in the Optionee’s Employment Agreement with the Company.

(vi) The word “Code” shall mean the Internal Revenue Code of 1986, as amended, and any successor statute.

(vii) The word “Committee” shall mean the Compensation Committee of the Board of Directors of the Company.

(viii) The word “Company” shall mean New Horizons Worldwide, Inc., a Delaware corporation, and any successor thereto.

(ix) The word “Consent” shall mean (i) any and all listings, registrations or qualifications in respect thereof upon any securities exchange or other self-regulatory organization or under any federal, state or local law, rule or regulation, (ii) the expiration, elimination or satisfaction of any prohibitions, restrictions or limitations under any federal, state or local law, rule or regulation or the rules of any securities exchange or other self-regulatory organization, (iii) any and all written agreements and representations by the Optionee with respect to the disposition of Shares, or with respect to any other matter, which the Committee shall deem necessary or desirable to comply with the terms of any such listing, registration or qualification or to obtain an exemption from the requirement that any such listing, qualification or registration be made, and (iv) any and all consents, clearances and approvals of any governmental or other regulatory bodies or any parties to any loan agreements or other contractual obligations of the Company or any Affiliate as necessary or desirable as a condition of, or in connection with, the granting of an Option, the acquisition, issuance or purchase of Shares or other rights hereunder or the taking of any other action hereunder,

(x) The word “Disability” or “Disabled” shall have the meaning provided to it in the Optionee’s Employment Agreement with the Company.

(xi) The word “Employee” shall mean any person who is an employee of either the Company or any Affiliate.

(xii) The term “Fair Market Value” shall mean, in respect of a Share, its fair market value as determined in the reasonable judgment of the Committee at any time.

(xiii) The term “Family Member” shall mean the spouse or lineal descendants of the Optionee, or a trust for the exclusive benefit of the Optionee and/or spouse or lineal descendants of the Optionee, or a partnership or other entity affiliated with the Optionee that may be approved by the Committee.

(xiv) The word “Option” shall mean the right and option to purchase Shares pursuant to the terms of this Agreement.

(xv) The term “Option Exercise Date” shall mean the date the Optionee exercises the Option by performing the acts described in Section 7 hereof.

(xvi) The word “Optionee” shall mean the person to whom the Option has been granted pursuant to this Agreement.

(xvii) The words “Personal Representative” shall mean, following the Optionee’s death, the person who shall have acquired, by will or by the laws of descent and distribution, the right to exercise the Option.

(xviii) The word “Spread” shall mean, as of the Option Exercise Date, an amount equal to the excess, if any, of the Fair Market Value of a Share in respect of which the Option is exercised over the Option Exercise Price.

(xix) The word “Shares” shall mean 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 8 hereof.

(xx) The word “Transferee” shall mean the person or entity to whom rights to acquire Shares pursuant to the exercise of the Option shall have been transferred pursuant to Section 11 hereof.

2. Grant of Nonqualified Option. Effective as of the date of this Agreement, the Company grants to the Optionee, upon the terms and conditions set forth hereinafter, the right and option to purchase all or any lesser whole number of an aggregate of Two Hundred Sixty Three Thousand (263,000) Shares at a price equal to $1.50 per Share (the “Option Exercise Price”). The Option shall for all purposes be a nonqualified stock option subject to the federal income tax treatment described in Section 1.83-7 of the Federal Income Tax Regulations. Both the Company and the Optionee shall, on their respective federal income tax returns, report any transaction relating to the Option in a manner consistent with the preceding sentence.

3. Term of Option. Except as otherwise provided herein, the term of the Option shall be for a period of ten (10) years from the date hereof, and the Option shall expire at the close of regular business hours at the Company’s principal executive office (currently located at 0000 X. Xxxxx Xxxxxxx Xxxx., Xxxxx 000, Xxxxxxx, XX 92806) on the last day of the term of the Option, or, if earlier, on the applicable expiration date provided for in Sections 5, 6 and 7 hereof.

4. Exercise Dates. Except as otherwise provided herein, the Optionee shall be entitled to exercise the Option with respect to the number of Shares indicated below on or after the date indicated opposite such number below:


Initial and Additional	Total Shares with
Number of Shares with	Respect to Which		Date Beginning
Respect to Which the	the Option May		on Which Option
Option May be Exercised	be Exercised		May be Exercised
87,666.66 Shares		87,666.66	July 5, 2007
87,666.67 Shares		175,333.33	July 5, 2008
87,666.67 Shares		263,000	July 5, 2009

Except as provided in Sections 5 and 6 hereof, the Option may not be exercised at any time unless the Optionee shall be an Employee at such time.

5. Termination of Employment, Etc. So long as the Optionee shall continue to be an Employee, the Option shall not be affected by (a) any temporary leave of absence approved in writing by the Company or an Affiliate, or (b) any change of duties or position (including transfer to or from an Affiliate). If the Optionee ceases to be an Employee for any reason other than death or Disability, the Option may be exercised only to the extent of the purchase rights, if any, which, pursuant to Section 4 hereof, existed as of the date the Optionee ceases to be an Employee and which have not theretofore been exercised; provided, however, that the Committee may in its absolute discretion determine (but shall not be under any obligation to determine) that such purchase rights shall be deemed to include additional Shares which are subject to the Option. Except as provided in Section 6 below, upon an Optionee’s ceasing to be an Employee, such purchase rights shall in any event terminate upon the earlier of either (a) three (3) months after the date the Optionee ceased to be an Employee (one (1) year after the date the Optionee ceased to be an Employee if the Optionee dies or becomes Disabled within three (3) months after ceasing to be an Employee), or (b) the last day of the term of the Option. Notwithstanding the preceding provisions of this Section 5, unless the Committee shall otherwise determine, upon the commission by the Optionee of a material breach of his

obligations under any agreement with the Company or any Affiliate, the Optionee’s right to purchase Shares pursuant to the exercise of the Option shall terminate.

6. Optionee’s Death or Disability. If, while the Optionee is an Employee, the Optionee dies or becomes Disabled, the Optionee or the Optionee’s Personal Representative may immediately exercise the Option with respect to all of the Shares subject to the Option which have vested pursuant to Section 4 hereof and which are scheduled to vest during the twelve (12) months following such death or Disability. The Option shall in any event terminate upon the earlier of either (a) the first anniversary of the date the Optionee ceased to be an Employee as a result of death or Disability; or (b) the last day of the term of the Option.

7. Change in Control. Notwithstanding the provisions of Section 4 hereof, in connection with a Change in Control, the Optionee shall have the immediate and nonforfeitable right to exercise the Option with respect to all Shares covered by the Option. In the event the Option becomes exercisable pursuant to this Section 7, the Company shall notify the Optionee of his right to exercise the Option. Upon a Change in Control, the Option, to the extent not exercised, shall terminate.

8. Adjustment Upon Changes in Capitalization. The number of Shares which may be purchased upon exercise of an Option and the Option Exercise Price 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 8

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.

9. Exercise of Option. The Option may be exercised by delivering to the Chairman, Vice Chairman or Chief Financial Officer of the Company at the then principal office address of the recipient officer, a completed Notice of Exercise of Option (obtainable from the Chief Financial Officer of the Company) setting forth the number of Shares with respect to which the Option is being exercised. Such Notice shall be accompanied by payment in full for the Shares, unless other arrangements satisfactory to the Committee for prompt payment of such amount are made. Payment of the Option Exercise Price may be made in any manner approved by the Committee, including, by (i) delivery of previously acquired Shares owned by the Optionee for at least six (6) months (or such other period as the Committee may prescribe) having a Fair Market Value (determined as of the Exercise Date) equal to the portion of the Option Exercise Price being paid thereby, (ii) withholding Shares from the Shares otherwise issuable pursuant to the exercise of the Option, where the amount attributable to any Share so withheld shall be equal to the difference between the Fair Market Value of the Share (determined as of the Option Exercise Date) and the Option Exercise Price, or (iii) delivery to the Company of an assignment of a sufficient amount of the proceeds from the sale of Shares acquired upon exercise of the Option to pay for all or some of the Shares acquired upon exercise of the Option and an authorization to the broker or selling agent to pay that amount to the Company, which sale shall be made at the Optionee’s direction on the Option Exercise Date; provided, that with respect to clauses (i) and (iii) of this Section 9, the Committee may require the Optionee to furnish an opinion of counsel acceptable to the Committee to the effect that such

delivery would not result in the Optionee incurring any liability under Section 16 of the Act and does not require any Consent.

10. Issuance of Share Certificates. Subject to the last sentence of this Section 10, upon receipt by the Company prior to expiration of the Option of a duly completed Notice of Exercise of Option accompanied by payment for the Shares being purchased pursuant to such Notice (and, with respect to any Option exercised pursuant to Section 11 hereof by someone other than the Optionee, accompanied in addition by proof satisfactory to the Committee of the right of such person to exercise the Option), the Company shall deliver to the Optionee, within thirty (30) days of such receipt, a certificate for the number of Shares so purchased. The Optionee shall not have any of the rights of a stockholder with respect to the Shares which are subject to the Option unless and until a certificate representing such Shares is issued to the Optionee. The Company shall not be required to issue any certificates for Shares upon the exercise of the Option prior to (i) obtaining any Consents which the Committee shall, in its sole discretion, determine to be necessary or advisable, or (ii) the determination by the Committee, in its sole discretion, that no Consents need be obtained.

11. Successors in Interest, Etc. This Agreement shall be binding upon and inure to the benefit of any successor of the Company and the heirs, estate, and Personal Representative of the Optionee. A deceased Optionee’s Personal Representative shall act in the place and stead of the deceased Optionee with respect to exercising an Option or taking any other action pursuant to this Agreement. The Option shall not be transferable other than by will or the laws of descent and distribution, and the Option may be exercised during the lifetime of the Optionee only by the Optionee; provided, that a guardian or other legal representative who has been duly appointed for such Optionee may exercise the Option on behalf of the Optionee.

Notwithstanding the preceding sentence, with the consent of the Committee in its sole discretion, the Optionee may transfer the rights under the Option in respect of some or all of the Shares which are subject to the Option to a Family Member or a trust for the exclusive benefit of the Optionee and/or Family Members, or a partnership or other entity affiliated with the Optionee that may be approved by the Committee. All terms and conditions of any Option, including provisions relating to the termination of the Optionee’s employment with the Company and its Affiliates, shall continue to apply following a transfer made in accordance with this Section 11 and the Transferee shall have no greater right to exercise the Option than the Optionee would have in the absence of the transfer. The Option may be exercised by the Transferee only in accordance with the terms of this Agreement and the Transferee’s exercise of the Option shall be subject to the Transferee and/or the Optionee satisfying all of the conditions relating to the exercise of the Option including, without limitation, provisions concerning payment of the Option Exercise Price and tax withholding.

12. No Liability Upon Distribution of Shares. The liability of the Company under this Agreement and any distribution of Shares made hereunder is limited to the obligations set forth herein with respect to such distribution and no term or provision of this Agreement shall be construed to impose any liability on the Company or the Committee in favor of any person with respect to any loss, cost or expense which the person may incur in connection with or arising out of any transaction in connection with this Agreement.

13. No Right to Be Employed, Etc. Nothing in this Agreement shall confer upon the Optionee any right to continue as an Employee, or to serve as a member of the Board, or to interfere with or limit either the right of the Company or an Affiliate to terminate his employment at any time or the right of the stockholders of the Company to remove him as a member of the Board

for any reason or with no reason.

14. Resale Limitations. The Optionee acknowledges and agrees that (a) the Shares he may acquire upon exercise of the Option may not be transferred unless they become registered under the Act or unless the holder thereof establishes to the satisfaction of the Company that an exemption from such registration is available, (b) the Company will have no obligation to provide any such registration or take such steps as are necessary to permit sale of such Shares without registration pursuant to Rule 144 under the Act or otherwise, (c) at such time as such Shares may be disposed of in routine sales without registration in reliance on Rule 144 under the Act, such disposition may be made only in limited amounts in accordance with all of the terms and conditions of Rule 144 and (d) if the Rule 144 exemption is not available, compliance with some other exemption from registration will be required.

15. Withholding Taxes.

(a) Whenever Shares are to be delivered pursuant to the exercise of the Option, the Committee may require as a condition of delivery that the Optionee remit an amount sufficient to satisfy all federal, state and other governmental withholding tax requirements related thereto. The Company may, as a condition of the exercise of the Option, deduct from any salary or other payments due to the Optionee, an amount sufficient to satisfy all federal, state and other governmental withholding tax requirements related thereto or to the delivery of any Shares pursuant hereto.

(b) With the consent of the Committee in its sole discretion, (i) the Optionee may satisfy all or part of any withholding requirements by delivery of unrestricted Shares owned by the Optionee for at least one year (or such other period as the Committee may determine) having a Fair Market Value (determined as of the date of such delivery) equal to all or part of the

amount to be withheld; provided, that the Committee may require the Optionee to furnish an opinion of counsel or other evidence acceptable to the Committee to the effect that such delivery would not result in the Optionee incurring any liability under Section 16 of the Act and does not require any Consent and/or (ii) the Optionee may direct that Shares to be issued pursuant to the exercise of the Option be used to satisfy any withholding obligation; provided, that for purposes of satisfying any such obligation the value of a Share shall be equal to the Spread if the Option Exercise Price has not been paid to the Company by the Optionee.

16. Internal Revenue Code Section 409A. Notwithstanding anything contained in this Agreement to the contrary, the Option is intended to meet the requirements for exclusion from coverage under Section 409A of the Code for nonstatutory stock options not providing for the deferral of compensation and this Agreement shall be construed and administered accordingly. Without limiting the foregoing: (1) in the event that the Option Exercise Price is determined not to reflect the “fair market value” of each Share underlying this Agreement, then the Option Exercise Price shall be the fair market value of each Share underlying this Agreement as determined by the Company and in a manner consistent with applicable requirements for exclusion of this Agreement from coverage under Section 409A of the Code; and (2) in no event shall the Optionee be permitted to defer compensation relating to the Option (except for the inherent deferral of recognition of income until the exercise of the Option) pursuant to the terms hereof or otherwise. Furthermore, in the event that the requirements for exclusion from coverage under Section 409A of the Code are liberalized, clarified or different features are made available contingent upon compliance with certain requirements, the Board may, in its sole and absolute discretion, amend this Agreement in a

manner consistent with those liberalized or clarified requirements or to permit the Company, the Optionee or both to take advantage of those different features.

17. Construction. The captions and section numbers appearing in this Agreement are inserted only as a matter of convenience. They do not define, limit, construe or describe the scope or intent of the provisions of this Agreement. The use of the singular or plural herein shall not be restrictive as to number and shall be interpreted in all cases as the context shall require. The use of the feminine, masculine or neuter pronoun shall not be restrictive as to gender and shall be interpreted in all cases as the context may require.

18. Time Periods, Etc. Any action required to be taken under this Agreement within a certain number of days shall be taken within that number of calendar days; provided, however, that if the last day for taking such action falls on a weekend or a holiday, the period during such action may be taken shall be automatically extended to the next business day. If the day for taking any action, or on which any action may be taken, under this Agreement falls on a weekend or a holiday, such action may be taken on the next business day.

19. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware and any applicable federal law.

20. Notices. Except as otherwise expressly provided herein, all notices hereunder shall be in writing and delivered or mailed by registered or certified mail, return receipt requested, or by private, overnight delivery services (such as Federal Express) as follows:

If to the Company:

New Horizons Worldwide, Inc.
0000 X. Xxxxx Xxxxxxx Xxxx.
Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer

If to the Optionee:

Last address set forth on the records
of the Company or its Affiliates

or at such other address as either party may hereafter designate by giving notice to the other party as set forth above.

21. Further Assurances. From time to time after the exercise of an Option, either party, upon request of the other and without further consideration, shall execute and deliver to the requesting party any document or instrument, and shall take any other action as may be reasonably requested, to give effect to the exercise of the Option and the terms of this Agreement.

(Signature Page Follows)

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officer, and the Optionee has hereunto set his hand, all as of the day and year first above written.


	NEW HORIZONS WORLDWIDE, INC. (the “Company”)
	By:	/s/ Xxxxxx Xxx Xxxxx, Xx.
	Its: Chairman


	/s/ Xxxx X. Xxxxxx
	(the “Optionee”)

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NONQUALIFIED STOCK OPTION AGREEMENT

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