AMENDED AND RESTATED
AS OF OCTOBER 1, 1996
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 at least two "non-employee directors" within the meaning of Rule 16b-3 of the
Securities and Exchange Commission ("Rule 16b-3") promulgated under the
Securities Exchange Act of 1934, as amended (the "Act"), as from time to time in
effect and shall qualify as "outside directors" within the meaning of Section
162(m) of the Internal Revenue Code. The members 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. Notwithstanding the preceding sentence or
anything contained in the Plan to the contrary, no recipient of options may be
granted options to purchase in excess of 125,000 shares of common stock
authorized to be issued under the Plan.
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
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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
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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 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) Transferability. An Incentive Option granted hereunder shall not be
transferable otherwise than by will, the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code, or
Title I of the Employee Retirement Income Security Act of 1986, as amended, or
the rules and regulations promulgated thereunder. Any Incentive Option granted
hereunder shall be exercisable, during the lifetime of the holder, only by such
holder or by such holder's guardian or legal representative. Nonqualified
Options
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may be transferable only to the extent authorized by the Committee in respect of
a particular grant.
(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,
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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.
(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
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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;
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(c) materially modify the requirements as to eligibility for
participation in the Plan;
(d) decrease the Option exercise price to less than 100% of the Fair
Market Value on the date of grant thereof.
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
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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.
15. Withholding.
To enable optionees to satisfy tax withholding obligations relating to
non-qualified stock options, in lieu of cash payment the Committee may provide
that optionees may elect to have the Company withhold from an option exercise,
or separately surrender, shares of Common Stock.
16. Rule 16b-3 Compliance.
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The Company intends that the Plan meet the requirements of Rule 16b-3
and that transactions of the type specified in subparagraphs (c) and (f) of Rule
16b-3 by officers of the Company (whether or not they are directors) pursuant to
the Plan will be exempt from the operation of Section 16(b) of the Act. In all
cases, the terms, provisions, conditions and limitations of the Plan shall be
construed and interpreted consistent with the Company's intent as stated in this
Section 16.
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