1995 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
                              FOR KEY EMPLOYEES OF
                         HEALTHCARE SERVICES GROUP, INC.

1. Purpose of the Plan

   This 1995  Incentive  and  Nonqualified  Stock  Option  Plan (the  "Plan") is
intended as an incentive,  to retain in the employ of Healthcare Services Group,
Inc. (the  "Company") and any  Subsidiary of the Company  (within the meaning of
Section  424(f) of the Internal  Revenue Code of 1986,  as amended (the "Code"),
persons of training,  experience  and ability,  to attract new  employees  whose
services are considered  valuable,  to encourage the sense of proprietorship and
to  stimulate  the  active  interest  of such  persons  in the  development  and
financial success of the Company and its Subsidiaries.

   It is further  intended  that certain  options  granted  pursuant to the Plan
shall  constitute  incentive  stock options within the meaning of Section 422 of
the Code  ("Incentive  Options") while certain other options granted pursuant to
the Plan shall be nonqualified stock options ("Nonqualified Options"). Incentive
Options and the Nonqualified Options are hereinafter referred to collectively as
"Options".

2. Administration of the Plan

   The Board of  Directors  of the  Company  (the  "Board")  shall  appoint  and
maintain as administrator of the Plan a Committee (the  "Committee")  consisting
of one or more Directors of the Company.  The member(s) of the Committee,  shall
serve at the pleasure of the Board.

   The  Committee,  subject  to  Section 3  hereof,  shall  have full  power and
authority  to  designate  recipients  of  Options,  to  determine  the terms and
conditions of respective  Option agreements (which need not be identical) and to
interpret the provisions and supervise the  administration of the Plan.  Subject
to Section 7 hereof, the Committee shall have the authority, without limitation,
to designate which Options granted under the Plan shall be Incentive Options and
which shall be Nonqualified  Options.  To the extent any Option does not qualify
as an Incentive  Option,  it shall  constitute a separate  Nonqualified  Option.
Notwithstanding  any  provision  in the  Plan to the  contrary,  Options  may be
granted  under the Plan to any  member of the  Committee  during the term of his
membership  on the  Committee,  subject to approval of the Board of Directors or
the Audit Committee thereof.

   Subject to the provisions of the Plan, the Committee shall interpret the Plan
and all  Options  granted  under the  Plan,  shall  make such  rules as it deems
necessary  for the  proper  administration  of the  Plan,  shall  make all other
determinations  necessary or advisable  for the  administration  of the Plan and
shall correct any defects or supply any omission or reconcile any  inconsistency
in the Plan or in any  Options  granted  under the Plan in the manner and to the
extent that the Committee  deems desirable to carry the Plan or any Options into
effect.  The act or determination of a majority of the Committee shall be deemed
to be the act or  determination  of the  Committee  and any decision  reduced to
writing  and  signed  by all of the  members  of the  Committee  shall  be fully
effective as if it had been made by a majority at a meeting  duly held.  Subject
to the  provisions of the Plan,  any action taken or  determination  made by the
Committee  pursuant  to this  and the  other  paragraphs  of the  Plan  shall be
conclusive on all parties.

3. Designation of Optionees.

   The persons  eligible for  participation in the Plan as recipients of Options
("Optionees")  shall include only  full-time key employees of the Company or any
Subsidiary.  In selecting Optionees,  and in determining the number of shares to
be covered by each Option  granted to Optionees,  the Committee may consider the
office or position held by the Optionee, the Optionee's degree of responsibility
for and contribution to the growth and success of the Company or any Subsidiary,
the  Optionee's  length of service,  age,  promotions,  potential  and any other
factors  which the  Committee  may consider  relevant.  An employee who has been
granted an Option hereunder may be granted an additional  Option or Options,  if
the Committee shall so determine.

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4. Stock Reserved for the Plan.

   Subject  to  adjustment  as  provided  in  Section 7 hereof,  a total of five
hundred thousand (500,000) shares of common stock, $.01 par value ("Stock"),  of
the  Company  shall be subject to the Plan.  The shares of Stock  subject to the
Plan shall consist of unissued shares or previously issued shares reacquired and
held by the Company or any Subsidiary of the Company,  and such amount of shares
of Stock shall be and is hereby reserved for such purpose. Any of such shares of
Stock which may remain unsold and which are not subject to  outstanding  Options
at the termination of the Plan shall cease to be reserved for the purpose of the
Plan, but until termination of the Plan the Company shall at all times reserve a
sufficient  number  of  shares  of Stock to meet the  requirements  of the Plan.
Should any Option expire or be cancelled prior to its exercise in full or should
the number of shares of Stock to be  delivered  upon the  exercise in full of an
Option be reduced for any  reason,  the shares of Stock  theretofore  subject to
such Option may again be subject to an Option under the Plan.

5. Terms and Conditions of Options.

   Options  granted under the Plan shall be subject to the following  conditions
and shall contain such additional terms and conditions,  not  inconsistent  with
the terms of the Plan, as the Committee shall deem desirable:

   (a) Option Price. The purchase price of each share of Stock purchasable under
an Option shall be  determined  by the  Committee at the time of grant but shall
not be less than  100% of the fair  market  value of such  share of Stock on the
date the Option is granted in the case of an Incentive  Option and not less than
100% of the fair  market  value of such share of Stock on the date the Option is
granted in the case of a  Non-Qualified  Option;  provided,  however,  that with
respect to an Incentive Option, in the case of an Optionee who, at the time such
Option is granted,  owns (within the meaning of Section 424(d) of the Code) more
than 10% of the  total  combined  voting  power of all  classes  of stock of the
Company or of any  Subsidiary,  then the purchase price per share of Stock shall
be at least 110% of the Fair Market Value (as defined  below) per share of Stock
at the time of grant.  The exercise price for each incentive  stock option shall
be subject to adjustment  as provided in Section 7 below.  The fair market value
("Fair Market Value") means the closing price of publicly traded shares of Stock
on the national securities exchange on which shares of Stock are listed, (if the
shares of Stock are so  listed)  or on the NASDAQ  Stock  Market  System (if the
shares of Stock are regularly quoted on the NASDAQ Stock Market System),  or, if
not so listed or  regularly  quoted,  the mean between the closing bid and asked
prices of publicly traded shares of Stock in the over-the-counter market, or, if
such bid and asked prices shall not be available,  as reported by any nationally
recognized  quotation  service selected by the Company,  or as determined by the
Committee in a manner consistent with the provisions of the Code.

   (b) Option Term. The term of each Option shall be fixed by the Committee, but
no Option shall be exercisable more than ten years after the date such Option is
granted;  provided,  however,  that in the case of an Optionee  who, at the time
such Option is granted, owns more than 10% of the total combined voting power of
all classes of stock of the Company or any  Subsidiary,  then such Option  shall
not be  exercisable  with  respect to any of the shares  subject to such  Option
later than the date which is five years after the date of grant.

   (c) Exercisability. Subject to paragraph (j) of this Section 5, Options shall
be exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee at grant, provided, however, that except as
provided in paragraphs (f) and (g) of this Section 5, unless a shorter or longer
vesting period is otherwise  determined by the Committee at grant, Options shall
be exercisable as follows: up to one-half (1/2) of the aggregate shares of Stock
purchasable  under an Option shall be exercisable  commencing one year after the
date of grant and an additional  one-half (1/2) of the aggregate  initial shares
of Stock purchasable  under an Option shall be exercisable  commencing two years
after the date of grant.  The  Committee  may waive  such  installment  exercise
provision at any time in whole or in part based on performance and/or such other
factors  as the  Committee  may  determine  in its  sole  discretion,  provided,
however,  no Option shall be exercisable until more than six months have elapsed
from the date of grant of such Option.

   (d) Method of  Exercise.  Options may be exercised in whole or in part at any
time  during  the  option  period,  by  giving  written  notice  to the  Company
specifying the number of shares to be purchased,  accompanied by payment in full
of the purchase  price,  in cash,  by check or such other  instrument  as may be
acceptable  to the  Committee.  As  determined  by the  Committee,  in its  sole
discretion, at or after grant, payment in full or in part may

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also be made in the form of Stock owned by the  Optionee for at least six months
(based on the Fair  Market  Value of the Stock on the  trading  day  before  the
Option is exercised);  provided, however, that if such Stock was issued pursuant
to the exercise of an Incentive Option under the Plan, the holding  requirements
for such Stock under the Code shall first have been satisfied. An Optionee shall
have the rights to dividends or other  rights of a  stockholder  with respect to
shares  subject to the Option after (i) the Optionee has given written notice of
exercise and has paid in full for such shares and (ii) becomes a stockholder  of
record.

   (e)  Non-transferability of Options.  Options are not transferable and may be
exercised solely by the Optionee during his lifetime,  or after his death by the
person or persons  entitled  thereto  under his will or the laws of descent  and
distribution;  provided that, with respect to options other than incentive stock
options, the Committee may grant options that are transferable,  without payment
of  consideration,  to immediate  family members of the optionee or to trusts or
partnerships for such family members. Any attempt to transfer,  assign,  pledge,
hypothecate or otherwise  dispose of, or to subject to execution,  attachment or
similar process,  any Option contrary to the provisions hereof shall be void and
ineffective and shall give no right to the purported transferee.

   (f)  Termination by Death.  Unless  otherwise  determined by the Committee at
grant,  if  any  Optionee's  employment  with  the  Company  or  any  Subsidiary
terminates  by  reason  of death,  the  Option  may  thereafter  be  immediately
exercised,  to the extent then exercisable (or on such accelerated  basis as the
Committee shall determine at or after grant), by the legal representative of the
estate or by the legatee of the Optionee  under the will of the Optionee,  for a
period of one year from the date of such  death or until the  expiration  of the
stated  term of such  Option as  provided  under the Plan,  whichever  period is
shorter.

   (g) Termination by Reason of Disability.  Unless otherwise  determined by the
Committee  at  grant,  if any  Optionee's  employment  with the  Company  or any
Subsidiary  terminates by reason of total and permanent disability as determined
under the Company's long term disability policy ("Disability"),  any Option held
by such Optionee may thereafter be exercised,  to the extent it was  exercisable
at the time of termination  due to Disability (or on such  accelerated  basis as
the Committee shall determine at or after grant), but may not be exercised after
three months from the date of such  termination  of employment or the expiration
of the stated term of such Option, whichever period is shorter.

   (h) Termination by Reason of Retirement.  Unless otherwise  determined by the
Committee  at  grant,  if any  Optionee's  employment  with the  Company  or any
Subsidiary terminates by reason of Normal or Early Retirement (as such terms are
defined below),  any Option held by such Optionee may thereafter be exercised to
the extent it was  exercisable at the time of such Retirement (as defined below)
(or on such  accelerated  basis as the  Committee  shall  determine  at or after
grant),  but may not be  exercised  after  three  months  from  the date of such
termination  of employment or the  expiration of the stated term of such Option,
whichever period is shorter.

   For purposes of this paragraph (h), Normal  Retirement  shall mean retirement
from active employment with the Company or any Subsidiary on or after the normal
retirement date specified in the applicable  Company or Subsidiary  pension plan
or if no such pension plan, age 65. Early  Retirement shall mean retirement from
active  employment  with the  Company or any  Subsidiary  pursuant  to the early
retirement provisions of the applicable Company or Subsidiary pension plan or if
no such pension plan, age 55.  Retirement shall mean Normal or Early Retirement.

   (i) Other Termination. Unless otherwise determined by the Committee at grant,
if any Optionee's  employment with the Company or any Subsidiary  terminates for
any  reason  other than  death,  Disability  or  Retirement,  the  Option  shall
thereupon terminate, except that the exercisable portion of any Option which was
exercisable  on the date of such  termination of employment may be exercised for
the lesser of three months from the date of  termination  or the balance of such
Option's term if the Optionee's employment with the Company or any Subsidiary is
involuntarily  terminated by the Optionee's  employer without Cause. Cause shall
mean a felony  conviction  or the failure of an Optionee to contest  prosecution
for a felony or an Optionee's willful misconduct or dishonesty,  any of which is
deemed by the  Committee or the Board of Directors to be harmful to the business
or reputation of the Company or any Subsidiary. The transfer of an Optionee from
the employ of the Company to a Subsidiary, or vice versa, or from one Subsidiary
to another,  shall not be deemed to constitute a termination  of employment  for
purposes of the Plan.

   (j) Limit on Value of Incentive  Option.  The  aggregate  Fair Market  Value,
determined  as of the date  the  Option  is  granted,  of the  Stock  for  which
Incentive  Options are exercisable for the first time by any Optionee during any
calendar year under the Plan (and/or any other stock option plans of the Company
or any Subsidiary) shall not exceed $100,000.

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   (k)  Transfer  of  Incentive  Option  Shares.   The  stock  option  agreement
evidencing any Incentive  Options  granted under this Plan shall provide that if
the Optionee  makes a  disposition,  within the meaning of Section 424(c) of the
Code and  regulations  promulgated  thereunder,  of any share or shares of Stock
issued to him pursuant to his exercise of an Incentive  Option granted under the
Plan  within the  two-year  period  commencing  on the day after the date of the
grant of such Incentive Option or within a one-year period commencing on the day
after  the date of  transfer  of the  share or  shares  to him  pursuant  to the
exercise  of  such  Incentive  Option,  he  shall,   within  ten  days  of  such
disposition,  notify the Company thereof and immediately  deliver to the Company
any amount of federal income tax withholding required by law.

6. Term of Plan.

   No  Option  shall be  granted  pursuant  to the Plan on or  after  the  tenth
anniversary of the date the Plan is approved by the Board,  but Options  granted
may extend beyond that date.

7. Capital Change of the Company.

   In the event of any merger, reorganization, consolidation,  recapitalization,
stock dividend,  or other change in corporate structure affecting the Stock, the
Committee shall make an appropriate  and equitable  adjustment in the number and
kind of shares reserved for issuance under the Plan and in the number and option
price of shares  subject to outstanding  Options  granted under the Plan, to the
end that  after  such  event each  Optionee's  proportionate  interest  shall be
maintained as immediately  before the occurrence of such event.  Notwithstanding
the  foregoing,  there  shall be no  adjustment  for the  issuance  of Shares on
conversion of notes, preferred stock or exercise of warrants or Shares issued by
the Board for such consideration as the Board deems appropriate.

8. Purchase for Investment.

   Unless the Options and shares covered by the Plan have been registered  under
the Securities Act of 1933, as amended,  or the Company has determined that such
registration is unnecessary, each person exercising an Option under the Plan may
be  required  by the  Company to give a  representation  in  writing  that he is
acquiring the shares for his own account for  investment and not with a view to,
or for sale in connection with, the distribution of any part thereof.

9. Taxes.

   The Company may make such provisions as it may deem  appropriate,  consistent
with  applicable law, in connection with any Options granted under the Plan with
respect to the withholding of any taxes or any other tax matters.

10. Effective Date of Plan.

   The Plan shall be effective on the date it is approved by the Board, provided
however that the Plan shall be subject to  subsequent  approval by majority vote
of a quorum of the Company's  stockholders  present and voting at a meeting held
within one (1) year from the date approved by the Board. Options may be granted,
but  not  exercised,  before  such  stockholder  approval  is  obtained.  If the
stockholders  fail to approve  the Plan within the  required  time  period,  any
Options  granted  under this Plan shall be void and no  additional  Options  may
thereafter be granted hereunder.

11. Amendment and Termination.

   The Board may amend, suspend, or terminate the Plan, except that no amendment
shall be made  which  would  impair the right of any  Optionee  under any Option
theretofore  granted without his consent,  and except that no amendment shall be
made which, without the approval of the stockholders would:


       (a) materially increase the number of shares which may be issued under
   the Plan, except as is provided in Section 7;

       (b) materially increase the benefits accruing to the Optionees under
   the Plan;

       (c) materially modify the requirements as to eligibility for
   participation in the Plan; or

       (d) decrease the Option exercise price to less than 100% of the Fair
   Market Value on the date of grant thereof.


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   The  Committee  may  amend  the  terms  of any  Option  theretofore  granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any Optionee without his consent.  The Committee may also substitute new Options
for previously  granted  Options,  including  options  granted under other plans
applicable to the  participant  and  previously  granted  Options  having higher
option prices, upon such terms as the Committee may deem appropriate.

12. Reorganization etc.

   Notwithstanding   any  other  provisions  in  Section  5  hereof,   upon  the
dissolution or liquidation of the Company,  or upon a reorganization,  merger or
consolidation of the Company with one or more  corporations as a result of which
the Company is not the surviving  corporation,  or upon a sale of  substantially
all of the  property or more than 80% of the then  outstanding  shares of Common
Stock of the  Company to another  corporation,  the  Company  shall give to each
Optionee  at the time of  adoption  of the plan or  agreement  for  liquidation,
dissolution, merger or sale either (1) a reasonable time thereafter within which
to  exercise  the Option in its  entirety  prior to the  effective  date of such
liquidation  or  dissolution,  merger or sale,  or (2) the right to exercise the
Option in its entirety as to an  equivalent  number of shares of Common Stock of
the  corporation  succeeding  the Company or acquiring its business by reason of
such liquidation, dissolution, merger, consolidation or reorganization.

13. Government Regulations.

   The Plan,  and the  granting  and  exercise  of  Options  hereunder,  and the
obligation of the Company to sell and deliver  shares under such Options,  shall
be subject to all applicable laws, rules and regulations,  and to such approvals
by  any  governmental  agencies  or  national  securities  exchanges  as  may be
required.

14. General Provisions.

   (a)  Certificates.  All  certificates for shares of Stock delivered under the
Plan shall be subject to such stock transfer  orders and other  restrictions  as
the  Committee  may deem  advisable  under  the  rules,  regulations,  and other
requirements  of the Securities and Exchange  Commission,  any stock exchange or
trading system upon which the Stock is then listed,  and any applicable  Federal
or state  securities  law, and the Committee may cause a legend or legends to be
placed  on  any  such  certificates  to  make  appropriate   reference  to  such
restrictions.

   (b)  Employment  Matters.  The adoption of the Plan shall not confer upon any
Optionee of the Company or any  Subsidiary,  any right to  continued  employment
(or, in case the Optionee is also a director, continued retention as a director)
with the Company or a Subsidiary,  as the case may be, nor shall it interfere in
any way with  the  right of the  Company  or any  Subsidiary  to  terminate  the
employment of any of its employees at any time.

   (c) Limitation of Liability.  No member of the Board or the Committee, or any
officer  or  employee  of the  Company  acting  on  behalf  of the  Board or the
Committee,  shall  be  personally  liable  for  any  action,  determination,  or
interpretation  taken or made in good  faith with  respect to the Plan,  and all
members of the Board or the  Committee  and each and any  officer or employee of
the Company  acting on their behalf  shall,  to the extent  permitted by law, be
fully  indemnified  and  protected by the Company in respect of any such action,
determination or interpretation.

   (d) Registration of Options. Notwithstanding any other provision in the Plan,
no Option  may be  exercised  unless  and until the Stock to be issued  upon the
exercise  thereof  has been  registered  under  the  Securities  Act of 1933 and
applicable  state  securities  laws,  or are,  in the  opinion of counsel to the
Company,  exempt  from such  registration.  The  Company  shall not be under any
obligation to register under  applicable  federal or state  securities  laws any
Stock to be issued  upon the  exercise  of an Option  granted  hereunder,  or to
comply with an appropriate  exemption from registration under such laws in order
to permit  the  exercise  of an Option  and the  issuance  and sale of the Stock
subject to such Option; however, the Company may in its sole discretion register
such Stock at such time as the Company shall  determine.  If the Company chooses
to comply with such an exemption from  registration,  the Stock issued under the
Plan may, at the direction of the  Committee,  bear an  appropriate  restrictive
legend restricting the transfer or pledge of the Stock represented  thereby, and
the  Committee  may also  give  appropriate  stop-transfer  instructions  to the
transfer agent to the Company.

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