AMENDED AND RESTATED
AS OF OCTOBER 1, 1996
HEALTHCARE SERVICES GROUP, INC.
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ARTICLE I
PURPOSE
The purpose of the Healthcare Services Group, Inc. 1996 Non-Employee
Directors' Stock Option Plan (the "Plan") is to secure for Healthcare Services
Group, Inc. (the "Company") and its shareholders the benefits arising from stock
ownership by its non-employee Directors. The Plan will provide a means whereby
such Directors may purchase shares of the common stock, $.01 par value, of
Healthcare Services Group, Inc. pursuant to options granted in accordance with
the Plan.
ARTICLE II
DEFINITIONS
The following capitalized terms used in the Plan shall have the
respective meanings set forth in this Article:
2.1 "Annual Grant Date" shall mean, with respect to Eligible Directors
who serve on the Board of Directors December 5, 1996 and December 5 of each
calendar year after 1996 during the term of the Plan or the nearest preceding
business day if December 5 falls on a weekend or holiday.
2.2 "Committee" shall mean the Stock Option Committee of the Board of
Directors of the Company, which shall consist of at least two Non-Employee
Directors (as defined below) of the Board of Directors of the Company.
2.3 "Chairman" shall mean the duly appointed Chairman of any standing
Committee of the Board.
2.4 "Company" shall mean Healthcare Services Group, Inc. and any of its
subsidiaries.
2.5 "Director" shall mean any person who is a member of the Board of
Directors of the Company.
2.6 "Eligible Director" shall mean any director that is not an employee
of the Company.
2.7 "Exercise Price" shall mean the price per Share at which an Option
may be exercised.
2.8 "Fair Market Value" shall be determined by taking the average of
the closing sale prices of the Company's publicly traded Shares on the 10
business days up to and including the Grant Date on the national securities
exchange on which the Shares are listed (if the Shares are so listed) or on the
Nasdaq Stock Market System (if the Shares 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 in the OTC Bulletin
Board, or, if such bid and asked prices shall not be available, as reported by
any nationally recognized quotation service selected by the Company.
2.9 "Grant Date" shall mean the Initial Grant Date or the Annual Grant
Date.
2.10 "Initial Grant Date" shall mean with respect to each Eligible
Director who is first elected as a member of the Board after June 4, 1996, the
date of his or her appointment by the Board of Directors to fill a vacancy or
the date of election by the shareholders.
2.11 "Non-Employee Director" shall mean any Non-Employee Director as
defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
2.12 "Option" shall mean an Option to purchase Shares granted pursuant
to the Plan.
2.13 "Option Agreement" shall mean the written agreement described in
Article VI herein.
2.14 "Permanent Disability" shall mean the condition of an Eligible
Director who is unable to participate as a member of the Board by reason of any
medically determined physical or mental impairment which can be expected to
result in death or which can be expected to last for a continuous period of not
less than twelve (12) months.
2.15 "Purchase Price" shall be the Exercise Price multiplied by the
number of whole Shares with respect to which an Option may be exercised.
2.16 "Shares" shall mean shares of common stock, $.01 par value, of the
Company.
ARTICLE III
ADMINISTRATION
3.1 General. All grants of options hereunder shall be automatic and
non-discretionary and shall be made in strict accordance with the provisions
hereof.
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3.2 Limited Powers of the Committee. The Committee shall have authority
to adopt only such rules and regulations and to make all such other
determinations not inconsistent with the Plan, and particularly the requirements
of Rule 16b-3(c)(2) of the Exchange Act as may be necessary for the
administration of the Plan.
ARTICLE IV
SHARES SUBJECT TO PLAN
Subject to adjustment in accordance with Article IX, an aggregate of
200,000 Shares are reserved for issuance under this Plan. Shares sold under this
Plan may be either authorized, but unissued Shares or reacquired Shares. If an
Option, or any portion thereof, shall expire or terminate for any reason without
having been exercised in full, the unpurchased Shares covered by such Option
shall be available for future grants of Options.
ARTICLE V
GRANTS
5.1 Initial Grant. On the Initial Grant Date, each Eligible Director
shall receive the grant of an option to purchase 5,000 Shares.
5.2 Annual Grants. On each Annual Grant Date, each Eligible Director
shall receive the grant of an option to purchase 5,000 Shares.
5.3 Compliance With Rule 16b-3. The terms for the grant of Options to
an Eligible Director may only be changed if permitted under Rule 16b-3 of the
Exchange Act, and accordingly the formula for the grant of Options may not be
changed or otherwise modified more than once in any six month period, other than
to comport with changes in the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), the Employee Retirement Income Security Act of 1974,
as amended (the "Employee Retirement Income Security Act"), or the rules
thereunder.
ARTICLE VI
TERMS OF OPTION
Each Option shall be evidenced by a written Option Agreement executed
by the Company and the Eligible Director which shall specify the Grant Date, the
number of Shares subject to the Option, the Exercise Price and shall also
include or incorporate by reference the substance of all of the following
provisions and such other provisions consistent with this Plan as the Board may
determine.
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6.1 Term. The term of the Option shall be five (5) years from the Grant
Date of each Option, subject to earlier termination in accordance with Articles
VI and X.
6.2 Restriction on Exercise. Options shall be exercisable as follows:
all Shares purchasable under an Option shall be exercisable commencing six
months and one day after the Grant Date. No Option shall be exercisable until
more than six months have elapsed from the Grant Date. In the case the Eligible
Director's status as Director terminates as a result of the Eligible Director's
death or Permanent Disability, the Eligible Director or his or her estate or a
person who acquired the right to exercise the Option by bequest or inheritance
may exercise the Option, but only within twelve months following the date of
death or termination due to Permanent Disability, and only to the extent that
the Eligible Director was entitled to exercise the Option on the date of death
or termination due to Permanent Disability (but in no event later than the
expiration of its five year term).
6.3 Exercise Price. The Exercise Price for each Share subject to an
Option shall be the Fair Market Value of the Share as determined in Section 2.8
herein.
6.4 Manner of Exercise. An Option shall be exercised in accordance with
its terms, by delivery of a written notice of exercise to the Company and
payment of the full purchase price of the Shares being purchased. An Eligible
Director may exercise an Option with respect to all or less than all of the
Shares for which the Option may then be exercised, but an Eligible Director must
exercise the Option in full Shares.
6.5 Payment. The Purchase Price of Shares purchased pursuant to an
Option or portion thereof, may be paid:
(a) in United States dollars, in cash or by check, bank draft or money
order payable to the Company,
(b) by delivery of Shares already owned by an Eligible Director with an
aggregate Fair Market Value on the date of exercise equal to the Purchase Price,
subject to the provisions of Section 16(b) of the Exchange Act.
6.6 Options shall be transferable (other than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined by the Internal Revenue Code or Title I of the Employee Retirement
Income Security Act of 1986, as amended, or the rules and regulations
promulgated thereunder) to the extent authorized by the Committee in respect of
a particular grant.
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6.7 Termination of Membership on the Board. If an Eligible Director's
membership on the Board terminates for any reason, an Option vested on the date
of termination may be exercised in whole or in part at any time within one (1)
year after the date of such termination (but in no event after the term of the
Option expires) and shall thereafter terminate.
ARTICLE VII
GOVERNMENT AND OTHER REGULATIONS
7.1 Delivery of Shares. The obligation of the Company to issue or
transfer and deliver Shares for exercised Options under the Plan shall be
subject to all applicable laws, regulations, rules, orders and approvals which
shall then be in effect.
7.2 Holding of Stock After Exercise of Option. The Option Agreement
shall provide that the Eligible Director, by accepting such Option, represents
and agrees, for the Eligible Director and his permitted transferees hereunder
that none of the Shares purchased upon exercise of the Option shall be acquired
with a view to any sale, transfer or distribution of the Shares in violation of
the Securities Act of 1933, as amended (the "Act"), and the person exercising an
Option shall furnish evidence satisfactory to that Company to that effect,
including an indemnification of the Company in the event of any violation of the
Act by such person. Notwithstanding the foregoing, the Company in its sole
discretion may register under the Act the Shares issuable upon exercise of the
Options under the Plan.
ARTICLE VIII
CONDITIONS UPON ISSUANCE
Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Act, as amended, the rules
and regulations promulgated thereunder, state securities laws, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
ARTICLE IX
ADJUSTMENTS
9.1 Proportionate Adjustments. If the outstanding Shares are increased,
decreased, changed into or exchanged into a different number or kind of Shares
or securities of the Company
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through reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or other similar transaction, an appropriate
and proportionate adjustment shall be made by the Committee or the Board of
Directors to the maximum number and kind of Shares as to which Options may be
granted under this Plan. A corresponding adjustment changing the number or kind
of Shares allocated to unexercised Options or portions thereof, which shall have
been granted prior to any such change, shall likewise be made. Any such
adjustment in the outstanding Options shall be made without change in the
Purchase Price applicable to the unexercised portion of the Option with a
corresponding adjustment in the Exercise Price of the Shares covered by the
Option. 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 of Directors for such consideration as
the Board of Directors deems appropriate.
9.2 Reorganization, etc. Notwithstanding any other provision in Article
VI 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 the Company to another corporation, the Company shall give
to each Eligible Director at the time of adoption of the plan 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 as to an equivalent number of Shares of stock of the corporation
succeeding the Company or acquiring its business by reason of such liquidation,
dissolution, merger, consolidation or reorganization.
ARTICLE X
AMENDMENT OR TERMINATION OF PLAN
10.1 Amendments. Subject to Section 5.3 hereof, the Board of Directors
may at any time amend or revise the terms of the Plan, provided also no such
amendment or revision shall, unless appropriate shareholder approval of such
amendment or revision is obtained:
(a) increase the maximum number of Shares which may be sold pursuant to
Options granted under the Plan, except as permitted under the provisions of
Article IX;
(b) change the minimum Exercise Price set forth in Article VI;
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(c) increase the maximum term of Options provided for in Article VI; or
(d) permit the granting of Options to any one other than as provided in
Article V.
10.2 Termination. The Board of Directors at any time may suspend or
terminate this Plan. This Plan, unless sooner terminated, shall terminate on
December 31, 2000. No Option may be granted under this Plan while this Plan is
suspended or after it is terminated.
10.3 Consent of Holder. No amendment, suspension or termination of the
Plan shall, without the consent of the holder of Options, alter or impair any
rights or obligations under any Option theretofore granted under the Plan.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Privilege of Stock Ownership. No Eligible Director entitled to
exercise any Option granted under the Plan shall have any of the rights or
privileges of a shareholder of the Company with respect to any Shares issuable
upon exercise of an Option until certificates representing the Shares shall have
been issued and delivered.
11.2 Plan Expenses. Any expenses incurred in the administration of the
Plan shall be borne by the Company.
11.3 Use of Proceeds. Payments received from an Eligible Director upon
the exercise of Options shall be used for general corporate purposes of the
Company.
11.4 Governing Law. The Plan has been adopted under the laws of the
Commonwealth of Pennsylvania. The Plan and all Options which may be granted
hereunder and all matters related thereto, shall be governed by and construed
and enforceable in accordance with the laws of the Commonwealth of Pennsylvania
as it then exists.
ARTICLE XII
SHAREHOLDER APPROVAL
This Plan is subject to approval, at a duly held shareholders' meeting
within twelve (12) months after the date the Board approves this Plan, by the
affirmative vote of holders of a majority of the voting Shares of the Company
represented in person or by proxy and entitled to vote at the meeting. Options
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may be granted, but not exercised, before such shareholder approval is obtained,
and no Options granted hereunder shall be effective unless and until the
shareholders of the Company approve the Plan. If the shareholders 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.
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