<PAGE> 1
PRELIMINARY PROXY MATERIAL
HEALTHCARE SERVICES GROUP, INC.
2643 HUNTINGDON PIKE
HUNTINGDON VALLEY, PENNSYLVANIA 19006
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 23, 1995
------------------
To the Shareholders of
HEALTHCARE SERVICES GROUP, INC.
NOTICE IS HEREBY GIVEN that an Annual Meeting of Shareholders of
Healthcare Services Group, Inc. (the "Company") will be held at the Radisson
Hotel of Bucks County, 2400 Old Lincoln Highway, Trevose, Pennsylvania 19047,
on May 23, 1995, at 10:00 A.M., for the following purposes:
1. To elect eight directors;
2. To approve and ratify the adoption of the Company's 1995 Incentive
and Non-Qualified Stock Option Plan for key employees;
3. To approve and ratify the adoption of the Company's 1995 Directors'
Stock Option Plan;
4. To approve an amendment to the Company's Articles of Incorporation
which increases the number of authorized shares of common stock, of
the Company from 10,000,000 to 15,000,000;
5. To approve and ratify the selection of Grant Thornton LLP as the
independent public accountants of the Company for its current fiscal
year ending December 31, 1995; and
6. To consider and act upon such other business as may properly come
before the meeting.
Only shareholders of record at the close of business on April 19, 1995
will be entitled to vote at the Annual Meeting.
Please sign and promptly mail the enclosed proxy, whether or not you
expect to attend the Meeting, in order that your shares may be voted for you.
A return envelope is provided for your convenience.
By Order of the Board of Directors
DANIEL P. MCCARTNEY
Chairman and
Chief Executive Officer
Dated: Huntingdon Valley, Pennsylvania
April 21, 1995
<PAGE> 2
PRELIMINARY PROXY MATERIAL
--------------------------
HEALTHCARE SERVICES GROUP, INC.
2643 Huntingdon Pike
Huntingdon Valley, Pennsylvania 19006
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PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
May 23, 1995
---------------------
This Proxy Statement is furnished to the Shareholders of Healthcare
Services Group, Inc. (the "Company") in connection with the solicitation by
the Board of Directors of the Company of proxies for the Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the Radisson Hotel of Bucks
County, 2400 Old Lincoln Highway, Trevose, Pennsylvania 19047, on May 9, 1995
at 10:00 A.M. At the Annual Meeting the shareholders will consider the
following proposals: (1) to elect eight directors; (2) to approve and ratify
the adoption of the Company's 1995 Incentive and Non-Qualified Stock Option
Plan for key employees (the "1995 Plan"); (3) to approve and ratify the
adoption of the Company's 1995 Directors' Stock Option Plan (the "Directors'
Plan"); (4) to approve an amendment to the Company's Articles of
Incorporation which increases the number of authorized shares of common
stock, $.01 par value, of the Company from 10,000,000 to 15,000,000; (5) to
ratify and approve the selection of Grant Thornton LLP as the independent
public accountants of the Company for its current fiscal year ending December
31, 1995; and (6) to consider and act upon such other business as may
properly come before the Annual Meeting.
This Proxy Statement is being mailed to shareholders on or about April 21,
1995.
PROXIES; VOTING SECURITIES
Only holders of Common Stock of the Company (the "Common Stock") of record
at the close of business of April 19, 1995 (the "Record Date") are entitled
to notice of and to vote at the Annual Meeting. On the Record Date, there
were issued and outstanding approximately 7,953,974 shares of the Common
Stock. Each share of Common Stock entitles the holder thereof to one vote.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock is required to constitute a quorum at the
meeting. Holders of Common Stock are not entitled to cumulative voting
rights.
All shares which are represented by properly executed proxies received
prior to or at the meeting, and not revoked, will be voted in accordance with
the instructions indicated in such proxies. If no instructions are indicated
with respect to any shares for which properly executed proxies are received,
such proxies will be voted FOR each of the proposals. For purposes of
determining the presence of a quorum for transacting business at the Annual
Meeting, abstentions and broker "non-votes" (i.e., proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares on a particular
matter with respect to which the brokers or nominees do not have
discretionary power) will be treated as shares that are present but which
have not been voted.
A proxy may be revoked by delivery of a written statement to the Secretary
of the Company stating that the proxy is revoked, by a subsequent proxy
executed by the person executing the prior proxy and presented to the Annual
Meeting, or by voting in person at the Annual Meeting.
All expenses in connection with this solicitation will be borne by the
Company. It is expected that solicitation will be made primarily by mail, but
regular employees or representatives of the Company may also solicit proxies
by telephone, telegraph or in person, without additional compensation, except
for reimbursement of out-of-pocket expenses.
<PAGE> 3
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Annual Meeting, eight directors of the Company are to be elected,
each to hold office for a term of one year. Unless authority is specifically
withheld, management proxies will be voted FOR the election of the nominees
named below to serve as directors until the next Annual Meeting and until
their successors have been chosen and qualify. Should any nominee not be a
candidate at the time of the Annual Meeting (a situation which is not now
anticipated), proxies will be voted in favor of the remaining nominees and
may also be voted for substitute nominees. If a quorum is present, the
candidate or candidates receiving the highest number of votes will be elected
directors. Abstentions from voting and broker nonvotes on the election of
directors will have no effect since they will not represent votes cast at the
Annual Meeting for the purpose of electing directors.
The nominees are as follows:
<TABLE>
<CAPTION>
Name, Age, Principal Occupations
for the past five years and Current Director
Public Directorships or Trusteeships Since
------------------------------------ -----
<S> <C>
Daniel P. McCartney, 43, Chief Executive Officer and Chairman of the Board since 1977 ............. 1977(1)
W. Thacher Longstreth, 73, elected to the Philadelphia City Council in 1983; Vice Chairman of
Packard Press, a printing firm since July, 1988; Director of Tasty Baking Company, Delaware
Management Company, Keystone Insurance Company and Berean Savings & Loan Association ............. 1983
Barton D. Weisman, 67, President and Chief Operating Officer of H.B.A. Corporation and H.B.A.
Management, Inc., Florida based companies which own and/or manage nursing homes, for more than
five years ....................................................................................... 1983(2)
Joseph F. McCartney, 40, Regional Vice President of the Company for more than five years .......... 1983
Robert L. Frome, Esq., 57, Member of the law firm of Olshan Grundman Frome & Rosenzweig for more
than five years; Director of VTX Electronics, Inc.; Secretary of Skybox International Corp. and
Secretary of United Capital Corp. ................................................................ 1983
Thomas A. Cook, 49, President of the Company since July, 1993; Executive Vice President and Chief
Financial Officer of the Company for more than five years ........................................ 1987
Robert J. Moss, Esq., 58, John Hancock Mutual Life Insurance Company since July, 1992; Member of
Karr-Barth Associates, Inc., a financial services firm from November 1990 to June 1992; Vice
President of Mindy Goldberg Associates, a consulting firm from January 1988 to November 1990;
Member of the law firm of Dilworth, Paxson, Kalish & Kaufman from February 1985 to December 1987 . 1992(2)
John M. Briggs, CPA, 44, Partner of the certified public accounting firm of Tait, Weller & Baker
for more than five years ......................................................................... 1993(2)
</TABLE>
- - ------
(1) Member of Stock Option Committee.
(2) Member of Audit Committee.
The Directors recommend a vote FOR the nominees.
2
<PAGE> 4
BOARD OF DIRECTORS AND COMMITTEES
The business of the Company is managed under the direction of the Board of
Directors. The Board meets on a regularly scheduled basis during its fiscal
year to review significant developments affecting the Company and to act on
matters requiring Board approval. It also holds special meetings when an
important matter requires Board action between scheduled meetings. The Board
of Directors met four times during the 1994 fiscal year. During 1994, each
member of the Board participated in at least 75% of all Board and applicable
committee meetings held during the period for which he was director.
The Board of Directors has established audit and stock option committees
to devote attention to specific subjects and to assist it in the discharge of
its responsibilities. The functions of those committees, their current
members and the number of meetings held during 1994 are described below:
AUDIT COMMITTEE. The Audit Committee recommends to the Board of
Directors the appointment of the firm selected to be independent public
accountants for the Company and monitors the performance of such firm;
reviews and approves the scope of the annual audit and quarterly reviews
and evaluates problem areas having a potential financial impact on the
Company which may be brought to its attention by management, the
independent public accountants or the Board of Directors; and evaluates
all public financial reporting documents of the Company. Messrs. Robert J.
Moss, Barton D. Weisman and John M. Briggs currently are members of the
Audit Committee. The Audit Committee met two times during 1994.
STOCK OPTION COMMITTEE. A Stock Option Committee administers the
Company's Incentive Stock Option Plan and will also administer the 1995
Plan and the Directors' Plan if approved by the stockholders pursuant to
this proxy statement. The Stock Option Committee has the power to
determine from time to time the individuals to whom options shall be
granted, the number of shares to be covered by each option and the time or
times at which options shall be granted. Mr. Daniel P. McCartney currently
is the sole member of the Stock Option Committee governing the existing
Incentive Plan. The Stock Option Committee met one time during 1994.
The Company does not have a nominating, executive or compensation
committee. The functions customarily attributable to these committees are
performed by the Board of Directors as a whole.
3
<PAGE> 5
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information as of April 19, 1995, regarding
the beneficial ownership of Common Stock of the Company by each person known
by the Company to own 5% or more of the outstanding shares of the Company's
Common Stock, each director of the Company, the Company's Chief Executive
Officer and President (who comprise the Company's executive officers as
defined in Item 402(a)(3) of Regulation S-K) and the directors and executive
officers of the Company as a group. The persons named in the table have sole
voting and investment power with respect to all shares of Common Stock owned
by them, unless otherwise noted.
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Beneficial of
Name and Beneficial Owner or Group (1) Ownership Class
- - -------------------------------------- --------- -----
<S> <C> <C>
Daniel P. McCartney .................................... 943,106(2) 11.8%
State of Wisconsin Investment Board .................... 755,000(3) 9.5%
The Putnam Investments, Inc ............................ 585,547(4) 7.4%
Rockefeller & Co., Inc. ................................ 473,500(5) 6.0%
First Wisconsin Asset Management, Inc .................. 428,200(6) 5.4%
Thomas A. Cook ......................................... 152,000(7) 1.9%
Robert J. Moss ......................................... 32,000(8) (14)
Robert L. Frome ........................................ 51,037(9) (14)
Joseph F. McCartney .................................... 55,750(10) (14)
W. Thacher Longstreth .................................. 41,500(11) (14)
Barton D. Weisman ...................................... 61,500(12) (14)
John M. Briggs ......................................... 16,000(13) (14)
Directors and Executive Officers as a group (11 persons) 1,402,818(15) 16.6%
</TABLE>
- - ------
(1) The address of Daniel P. McCartney is 2643 Huntingdon Pike, Huntingdon
Valley, PA 19006. The address of State of Wisconsin Investment Board is
P.O. Box 7842, Madison, WI 53707. The address of The Putnam Investments,
Inc. is One Post Office Square, Boston, MA 02109. The address of
Rockefeller & Co., Inc. is 30 Rockefeller Plaza, New York, NY 10112. The
address of First Wisconsin Asset Management, Inc. is 1 South Pinckney
Street, Madison, WI 53703.
(2) Includes incentive stock options to purchase 75,000 shares, all
exercisable within sixty days of April 19, 1995. Mr. McCartney may be
deemed to be a "parent" of and deemed to control the Company, as such
terms are defined for purposes of the Securities Act of 1933, as
amended, by virtue of his position as founder, Director, Chief Executive
Officer and principal shareholder of the Company.
(3) According to a Schedule 13G filed by State of Wisconsin Investment
Board, dated February 13, 1995, it has sole voting power and dispositive
power with respect to the 755,000 shares.
(4) According to a Schedule 13G filed by The Putnam Investments, Inc. dated
February 7, 1995, it has sole voting and dispositive power with respect
to the 585,547 shares.
(5) According to a Schedule 13G filed by Rockefeller & Co., Inc., dated
February 8, 1995, it has sole voting and dispositive power with respect
to the 473,500 shares.
(6) According to a Schedule 13G filed by First Wisconsin Asset Management,
Inc. dated February 13, 1992, it has sole voting and dispositive power
with respect to the 428,200 shares.
(7) Represents incentive stock options to purchase 125,000 shares and
nonqualified options to purchase 27,000 shares, all exercisable within
sixty days of April 19, 1995.
(8) Represents nonqualified options to purchase 32,000 shares, all
exercisable within sixty days of April 19, 1995.
(9) Includes nonqualified options to purchase 41,500 shares, all exercisable
within sixty days of April 19, 1995.
(10) Includes incentive stock options to purchase 13,500 shares and
nonqualified options to purchase 37,000 shares, all exercisable within
sixty days of April 19, 1995.
(11) Represents nonqualified options to purchase 41,500 shares, all
exercisable within sixty days of April 19, 1995.
(12) Includes nonqualified options to purchase 53,500 shares, all exercisable
within sixty days of April 19, 1995. Excludes 5,250 shares held by Mr.
Weisman's wife, as to which shares he disclaims beneficial ownership.
4
<PAGE> 6
(13) Includes nonqualified options to purchase 12,000 shares, exercisable
within sixty days of April 19, 1995.
(14) Less than 1% of outstanding shares.
(15) Includes 498,925 shares underlying options granted to said group of
persons. All options are exercisable within sixty days of April 19,
1995.
DIRECTORS' FEES
The Company paid each director who is not an employee of the Company $500
for each regular meeting of the Board of Directors attended. Mr. Frome bills
the Company at his customary rates for time spent on behalf of the Company
(whether as a director or in the performance of legal services for the
Company) and is, reimbursed for expenses incurred in attending Directors'
meetings. The Company also granted certain Directors options to purchase an
aggregate of 35,000 Shares of Common Stock during the year ended December 31,
1994.
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
of more than $100,000 paid during each of the Company's last three fiscal
years to the Company's Chief Executive Officer and the Company's President
who constitute the only executive officers of the Company who received more
than $100,000 in compensation for the year ended December 31, 1994.
<TABLE>
<CAPTION>
Long Term Compensation
----------------------------------------
Awards Payouts
---------------------------- ---------
Annual Compensation Securities
-------------------------------------- Restricted Underlying
Name and Principal Fiscal Other Annual Stock Options/ LTIP All Other
Position Year Salary Bonus Compensation Awards SARs (1) Payouts Compensation
- - -------------------- -------- ---------- ------- -------------- ------------ ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Daniel P. McCartney, 1994 $408,190 0 $1,668 0 15,000 0 0
Chairman of the 1993 347,070 0 1,668 0 15,000 0 0
Board and Chief 1992 119,530 0 1,668 0 15,000 0 0
Executive Officer
Thomas A. Cook, 1994 $374,500 0 $1,320 0 20,000 0 0
President, Chief 1993 268,303 0 1,320 0 15,000 0 0
Operating Officer 1992 189,967 0 1,320 0 37,000 0
and Director
</TABLE>
- - ------
(1) Options to acquire shares of Common Stock. The Company has not awarded
any SAR's (Stock Appreciation Rights).
5
<PAGE> 7
OPTION GRANTS DURING 1994 FISCAL YEAR
The following table provides information related to options to purchase
Common Stock granted to the named executive officers during fiscal 1994.
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term (1)
- - ----------------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees in Price
Name (#) (2) Fiscal Year ($/Sh) (2) Expiration Date 5% 10%
- - -------------------- ------------ -------------- ------------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Daniel P. McCartney.. 15,000 8.6 $12.5125(3) Dec. 5, 1999 $30,078 $ 87,105
Thomas A. Cook ..... 20,000 11.5 11.375 (4) Dec. 5, 1999 62,854 138,891
</TABLE>
- - ------
(1) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately
prior to the expiration of their term, assuming the specified compounded
rates of appreciation on the Company's Common Stock over the term of the
options. These numbers do not take into account provisions of certain
options providing for termination of the option following termination of
employment, nontransferability or differences in vesting periods.
Regardless of the theoretical value of an option, its ultimate value will
depend on the market value of the Common Stock at a future date, and that
value will depend on a variety of factors, including the overall
condition of the stock market and the Company's results of operations and
financial condition. There can be no assurance that the values reflected
in this table will be achieved.
(2) The option exercise price may be paid in shares of Common Stock owned by
the executive, in cash, or a combination of any of the foregoing, as
determined by the Stock Option Committee.
(3) The exercise price was 110% of the fair market value of the Common Stock
on the date of grant.
(4) The exercise price was based on the fair market value of the Common Stock
on the date of grant.
AGGREGATED OPTION EXERCISES DURING 1994 FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
The following table provides information related to aggregated options
exercised by the named executive officers during the 1994 fiscal year and the
number and value of options held at fiscal year end. (The Company does not
have any outstanding stock appreciation rights.)
<TABLE>
<CAPTION>
Shares Value of Unexercised
Acquired Number of Securities Underlying In-the-Money Options
on Exer- Value Unexercised Options at FY-End (#) at FY-End ($) (3)
cise (#) Realized -------------------------------- -------------------------------
Name (1) ($) (2) Exercisable Unexercisable Exercisable Unexercisable
- - ------------------- ---------- ---------- -------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Daniel P. McCartney 15,000 $60,250 60,000 15,000 $172,999 $14,813
Thomas A. Cook .... -- -- 132,000 20,000 345,626 42,500
</TABLE>
- - ------
(1) The options exercised by Mr. McCartney during fiscal year 1994 were held
by him for five years.
(2) Value is calculated based on the difference between the option exercise
price and the closing market price of the Common Stock on the date of
exercise multiplied by the number of shares to which the exercise
relates.
(3) The closing price for the Company's Common Stock as reported by the
Nasdaq National Market on December 31, 1994 was $13.50. Value is
calculated on the basis of the difference between the option exercise
price and $13.50 multiplied by the number of shares of Common Stock
underlying the option.
6
<PAGE> 8
STOCK PERFORMANCE GRAPH
The following graph compares the total cumulative return (assuming
dividends are reinvested) on the Company's Common Stock during the five
fiscal years ended December 31, 1994 with the cumulative total return on the
S&P 500 Index and the S&P Healthcare Industry -- Miscellaneous Services Group
Index.
Total Shareholder Returns
$300|------------------------------------------------------------------|
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| # # |
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$250|------------------------------------------------------------------|
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$200|------------------------------------------------------------------|
D | # |
O | # |
L | |
L | # |
A $150|-------------------------------------------------*-----------*----|
R | |
S | * |
| * |
| & & & |
$100|----*&#-----------------------------------------------------------|
| * & |
| & |
| |
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$50|------------------------------------------------------------------|
| |
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$0|----|----------|---------|-----------|-----------|-----------|----|
Dec89 Dec90 Dec91 Dec92 Dec93 Dec94
*=S&P 500 INDEX &=HEALTHCARE SERVICES GROUP #=HEALTH CARE (MISCELLANEOUS)
Company/Index Dec89 Dec90 Dec91 Dec92 Dec93 Dec94
==============================================================================
S&P 500 INDEX 100 96.90 126.42 136.05 149.76 151.74
- - ------------------------------------------------------------------------------
HEALTHCARE SERVICES
GROUP 100 116.04 109.86 78.47 92.20 105.93
- - ------------------------------------------------------------------------------
HEALTH CARE
(MISCELLANEOUS) 100 162.20 269.14 266.28 194.63 167.60
==============================================================================
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The compensation of the Chief Executive Officer of the Company is
determined by the Board of Directors. The Board's determinations regarding
such compensation are based on a number of factors including order of
importance:
o Consideration of the operating and financial performance of the
Company, primarily its income before income taxes during the
preceding fiscal year, as compared with prior operating periods;
o Attainment of a level of compensation designed to retain a superior
executive in a highly competitive environment; and
o Consideration of the individual's overall contribution to the
Company.
Compensation for Company executive officers (referred to in the summary
compensation table) other than the Chief Executive Officer is determined
based upon the recommendation of the Chief Executive Officer, taking into
account the same factors considered by the Board in determining the Chief
Executive Officer's compensation as described above. The Company has not
established a policy with regard to Section 162(m) of the Internal Revenue
Code of 1986, as amended, since the Company has not and does not currently
anticipate paying compensation in excess of $1 million per annum to any
employee.
7
<PAGE> 9
The Company applies a consistent approach to compensation for all
employees, including senior management. This approach is based on the belief
that the achievements of the Company result from the coordinated efforts of
all employees working toward common objectives.
Mr. McCartney and Mr. Cook received annual base salaries of $133,680 and
$100,000, respectively, and an additional 3% of the income before income
taxes of the Company attributable to the fiscal year immediately preceding
the year for which his annual salary is computed.
The Board of Directors
Daniel P. McCartney (Chairman)
W. Thatcher Longstreth
Barton D. Weisman
Joseph F. McCartney
Robert L. Frome
Thomas A. Cook
Robert J. Moss
John M. Briggs
Mr. McCartney and Mr. Cook did not serve as a directors, executive
officers or members of the Compensation Committee of any other entity during
the fiscal year ended December 31, 1994 and currently do not serve in such
capacities.
INTERLOCKS AND INSIDER PARTICIPATION
Mr. Barton D. Weisman, a Director of the Company, has an ownership
interest in nine nursing homes which have entered into service agreements
with the Company. During the year ended December 31, 1994, these agreements
resulted in gross revenues of approximately $3,051,000 to the Company.
In 1991, the Company made arrangements with its bank to provide financing
of $1,000,000 to one of its clients for which the Company agreed to guarantee
payment. In order for the Company to negotiate maximum security for its
guarantee, the Company made the loan directly to the client and
simultaneously sold the promissory note receivable to the bank. The client
paid $50,000 in the first quarter of 1994, $75,000 in each of the second and
third quarter of 1994, and $100,000 in the fourth quarter of 1994 (or an
aggregate of $300,000) as partial payment on such note. In addition, among
the notes sold during 1991, is a promissory note in the amount of $910,000
which was issued in 1990 by an entity related to this client. Such note was
paid in full to the bank on July 15, 1992. On April 22, 1992 Mr. Weisman,
agreed to purchase these promissory notes issued by such client or its
affiliates (for the full principal amount thereof plus accrued interest)
without recourse to the Company, upon a request by the bank that the Company
post substitute collateral. Any such purchase would include the assignment of
the collateral pledged as security. The Company entered into this agreement
(which was approved by the Board of Directors) with Mr. Weisman in order to
protect its interests with respect to these promissory notes.
Mr. Daniel P. McCartney, Director and Chief Executive Officer of the
Company, has a minority ownership interest in a nursing home which has
entered into a service agreement with the Company. During the year ended
December 31, 1994, this agreement resulted in gross revenues of approximately
$152,800 to the Company.
Mr. Robert L. Frome, a Director of the Company, is a member of the law
firm of Olshan Grundman Frome & Rosenzweig, which law firm has been retained
by the Company during the last fiscal year. Fees received from the Company by
such firm during the last fiscal year did not exceed 5% of such firm's or the
Company's revenues.
The Company leases 6,600 square feet of its corporate offices at 2643
Huntingdon Pike, Huntingdon Valley, Pennsylvania from a general partnership
in which Daniel P. McCartney is a general partner. The term of the lease
commenced on April 1, 1987 and ends on March 31, 2001. Minimum annual rent is
$74,893 payable monthly.
Management believes that the terms of each of the transactions with the
nursing homes described herein are comparable to those available to
unaffiliated third parties. The remaining transactions were deemed fair and
reasonable and approved as being in the best interests of the Company, by the
disinterested directors.
8
<PAGE> 10
PROPOSAL NO. 2
RATIFICATION AND APPROVAL OF
1995 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN FOR KEY EMPLOYEES
The Board of Directors of the Company has unanimously approved for
submission to a vote of the shareholders a proposal to adopt the 1995 Plan.
The purpose of the 1995 Plan is to provide additional incentive to the
officers and key employees of the Company who are primarily responsible for
the management and growth of the Company. Each option (an "Option") granted
pursuant to the 1995 Plan shall be designated at the time of grant as either
an "incentive stock option" or as a "non-qualified stock option". A summary
of the significant provisions of the 1995 Plan is set forth below. The full
text of the 1995 Plan is set forth as Appendix A to this Proxy Statement. The
following description of the 1995 Plan is qualified in its entirety by
reference to the 1995 Plan itself.
ADMINISTRATION
The 1995 Plan is administered by a Stock Option Committee, consisting of
one or more members of the Board of Directors of the Company. The members of
the Stock Option Committee are appointed by the Board of Directors and serve
at the pleasure of the Board of Directors. The Stock Option Committee selects
the key employees who will be granted Options under the 1995 Plan and,
subject to the provisions of the 1995 Plan, determines the terms and
conditions and number of shares of Common Stock subject to each Option. The
Stock Option Committee also makes any other determinations necessary or
advisable for the administration of the 1995 Plan. Determinations by the
Stock Option Committee are final and conclusive. Grants of Options and other
decisions of the Stock Option Committee are not required to be made on a
uniform basis. It is currently anticipated that Daniel P. McCartney, the
Chief Executive Officer, will be the sole member of the Committee.
COMMON STOCK SUBJECT TO THE PLAN
The Common Stock issued or to be issued under the 1995 Plan is currently
authorized but unissued Common Stock. The number of shares of Common Stock
available under the 1995 Plan is subject to adjustment by the Stock Option
Committee to prevent dilution in the event of a stock split, combination of
shares, stock dividend or certain other events. Common Stock subject to
unexercised Options that expire or are terminated prior to the end of the
period during which Options may be granted will be restored to the number of
shares of Common Stock available for issuance under the 1995 Plan.
Currently, the Company is authorized under the 1995 Plan to issue Common
Stock pursuant to the exercise of Options with respect to a maximum of
500,000 shares of Common Stock.
ELIGIBILITY
The Stock Option Committee is authorized to grant Options under the 1995
Plan only to key employees of the Company and its subsidiaries. Members of
the Stock Option Committee are eligible for Options under the 1995 Plan.
The aggregate fair market value of shares of Common Stock (determined at
the time the incentive stock option is granted) subject to incentive stock
options granted to a key employee under all stock option plans of the
Company, and of the Company's subsidiaries (if any), and that become
exercisable for the first time by such key employee during any calendar year,
may not exceed $100,000. The term of each Option is fixed by the Stock Option
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 an incentive Option is granted, owns more than 10%
of the total 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 of Common Stock subject to such Option later than the date which
is five years after the date of grant.
DESCRIPTION OF OPTIONS
Upon the grant of an Option to a key employee, the Stock Option Committee
will fix the number of Shares that the optionee may purchase upon exercise of
the Option and the price at which the shares may be purchased. The option
price for incentive stock options shall not be less than 100% of the "fair
market value" of the shares of Common Stock at the time the Option is
granted; provided, however, that with respect to an incentive stock
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<PAGE> 11
option in the case of an Optionee, who, at the time such option is granted,
owns more than 10% of the voting stock of the Company or its subsidiaries,
the purchase price per share shall be at least 110% of the fair market value.
The option price for non-qualified options shall not be less than 100% of the
fair market value at the time the Option is granted. "Fair Market Value" is
deemed to be the closing sales price of the Common Stock on such date on the
Nasdaq National Market or, if the Common Stock is not listed on the Nasdaq
National Market or a national securities exchange, the mean between the
closing bid and asked prices of the Common Stock, in the principal market in
which the Common Stock is traded.
Options granted under the 1995 Plan are exercisable at such time or times
and subject to such terms or conditions as determined by the Stock Option
Committee, provided, however, that unless a shorter or longer vesting period
is otherwise determined by the Stock Option Committee at grant, Options are
exercisable as follows: 50% of the aggregate shares of Common Stock
purchasable thereunder commencing one year after the date of grant and an
additional 50% exercisable commencing two years after the date of grant. The
Stock Option 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 Stock Option Committee may determine in its sole discretion, however no
Options shall be exercisable until after six months from the date of grant.
Options may be exercised in whole or in part at any time during the option
period, by 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 Stock Option
Committee. As determined by the Stock Option Committee, in its sole
discretion, at or after grant, payment in full or in part may also be made in
the form of shares of Common 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).
TRANSFERABILITY; TERMINATION OF EMPLOYMENT
All Options granted under the 1995 Plan are non-transferable and
non-assignable except by will or by the laws of descent and distribution, and
may be exercised during the lifetime of the optionee only by the optionee.
Incentive stock options expire no later than three months after the
optionee's termination of employment for any reason other than death and no
later than twelve months after the optionee's termination of employment on
account of death. Unless authorized by the Stock Option Committee, the
optionee or the personal representative of his estate, may exercise an
incentive stock option only with respect to those shares which could have
been purchased by the optionee at the date of the optionee's termination of
employment or death. In no event is any incentive stock option exercisable
after expiration of the term thereof.
Non-qualified stock options are subject to the same termination provisions
as described above for incentive stock options, unless the Stock Option
Committee specifically provides otherwise either in the option agreement
pursuant to which the non-qualified stock option is granted or by decision of
the Stock Option Committee.
TERMINATION AND AMENDMENT
The 1995 Plan will terminate on March 8, 2005, but may be terminated by
the Board of Directors at any time before such date. The 1995 Plan may be
amended at any time by the Board of Directors. However, without the approval
of the stockholders of the Company, no such amendment may (i) materially
increase the number of shares which may be issued under the 1995 Plan; (ii)
materially increase the benefits accruing to Optionees under the 1995 Plan;
(iii) materially modify the requirements as to eligibility for participation
in the 1995 Plan; or (iv) decrease the option exercise price to less than
100% of the Fair Market Value on the date of grant thereof. Any termination
or amendment of the 1995 Plan will not impair the rights of optionees under
outstanding Options without the consent of the affected optionees.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. Incentive stock options granted under the 1995
Plan are intended to be "incentive stock options" as defined by Section 422
of the Internal Revenue Code of 1986, as amended. Under present law, the
grantee of an incentive stock option will not realize taxable income upon the
grant or the exercise of the incentive stock option and the Company will not
receive an income tax deduction at either such time. If the grantee does not
sell the Common Stock acquired upon exercise of an incentive stock option
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<PAGE> 12
within either (i) two years after the grant of the incentive stock option or
(ii) one year after the date of exercise of the incentive stock option, the gain
upon a subsequent sale of the Common Stock will be taxed as long-term capital
gain. If the grantee, within either of the above periods, disposes of the Common
Stock acquired upon exercise of the incentive stock option, the grantee will
recognize as ordinary income an amount equal to the lesser of (i) the gain
realized by the grantee upon such disposition or (ii) the difference between the
exercise price and the fair market value of the shares on the date of exercise.
In such event, the Company would be entitled to a corresponding income tax
deduction equal to the amount recognized as ordinary income by the grantee. The
gain in excess of such amount recognized by the grantee as ordinary income would
be taxed as a long-term capital gain or short-term capital gain (subject to the
holding period requirements for long-term or short-term capital gain treatment).
The exercise of the incentive stock option will result in the excess of
the stock's fair market value on the date of exercise over the exercise price
being included in the optionee's alternative minimum taxable income (AMTI).
Liability for the alternative minimum tax is complex and depends upon an
individual's overall tax situation. Before exercising an incentive stock
option, a grantee should discuss the possible application of the alternative
minimum tax with his tax advisor in order to determine the tax's impact.
Non-Qualified Stock Options. Upon exercise of a non-qualified stock option
granted under the 1995 Plan, or upon the exercise of an incentive stock
option that does not qualify for the tax treatment described above under
"Incentive Stock Options," the grantee will recognize ordinary income in an
amount equal to the excess of the fair market value of the Common Stock
received over the exercise price of such Common Stock. That amount increases
the grantee's basis in the Common Stock acquired pursuant to the exercise of
the non-qualified stock option. Upon exercise of a non-qualified stock option
granted under the 1995 Plan, the Company would have a federal tax withholding
obligation. Upon a subsequent sale of the Common Stock, the grantee will
incur short-term or long-term capital gain or loss depending upon his holding
period for the Common Stock and upon the Common Stock's subsequent
appreciation or depreciation. The Company will be allowed a federal income
tax deduction for the amount recognized as ordinary income by the grantee
upon the grantee's exercise of the option.
Summary of Tax Consequences. The foregoing outline is no more than a
summary of the federal income tax provisions relating to the grant and
exercise of options and the sale of Common Stock acquired under the 1995
Plan. Individual circumstances may vary these results. The federal income tax
laws and regulations are constantly being amended, and each participant
should rely upon his own tax counsel for advice concerning the federal income
tax provisions applicable to the 1995 Plan.
REGISTRATION OF SHARES
The Company has filed a registration statement under the Securities Act of
1933 as amended ("the Securities Act") with respect to the shares of Common
Stock underlying Options granted pursuant to the 1995 Plan.
VOTE REQUIRED
The approval of the 1995 Plan requires the affirmative vote of a majority
of the votes cast by all shareholders represented and entitled to vote
thereon. An abstention, withholding of authority to vote or broker non-vote,
therefore, will not have the same legal effect as an "against" vote and will
not be counted in determining whether the proposal has received the required
shareholder vote.
The Board of Directors unanimously recommends that you vote "FOR" approval
of the 1995 Plan.
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<PAGE> 13
PROPOSAL NO. 3
RATIFICATION AND APPROVAL OF 1995
STOCK OPTION PLAN FOR DIRECTORS
The Board of Directors of the Company has unanimously approved the
Directors' Plan for submission to shareholders as set forth in Appendix B to
this proxy statement. This discussion is qualified in its entirety by
reference to Appendix B. The 1995 Directors' Plan is intended to assist the
Company in securing and retaining Directors by allowing them to participate
in the ownership and growth of the Company through the grant of stock options
("Directors' Options"). The 1995 Directors' Plan provides a means whereby
such Directors may purchase Common Stock pursuant to Directors' Options
granted in accordance with such plan.
ADMINISTRATION AND GRANTS
The Directors' Plan will be administered by a committee of two or more
members of the Board of Directors (the "Committee"), in accordance with the
express provisions of the Directors' Plan. The Committee has full and
complete authority to adopt such rules and regulations and to make all such
other determinations not inconsistent with the Directors' Plan as may be
necessary for the administration of such plan. It is anticipated that the
Committee will initially be comprised of Daniel P. McCartney and W. Thacher
Longstreth.
Subject to the express provisions of the Directors' Plan, the Committee
shall have the authority, in its discretion, to determine the Directors to
whom the options shall be granted, the number of shares which shall be
subject to each option, the purchase price of each share of Common Stock
which shall be subject to each option, the period(s) during which such
options shall be exercisable (whether in whole or in part), and the other
terms and provisions thereof. In determining the Directors to whom options
shall be granted and the number of shares for which options shall be granted,
the Committee shall consider the length of service of the Director and the
amount of earnings of the Company.
SHARES SUBJECT TO THE DIRECTORS' PLAN
The Company is authorized under the Directors' Plan to issue shares of
Common Stock pursuant to the exercise of Directors' Options with respect to a
maximum of 150,000 shares of Common Stock. The shares of Common Stock issued
or to be issued under the Directors' Plan are currently authorized but
unissued shares of Common Stock. The number of shares of Common Stock
available under the Directors' Plan will be subject to adjustment to prevent
dilution in the event of a stock split, combination of shares, stock dividend
or certain other events. Shares subject to unexercised Directors' Options
that expire or are terminated prior to the end of the period during which
Directors' Options may be granted will be restored to the number of shares of
Common Stock available for issuance under the Directors' Plan.
ELIGIBILITY TERM
The Committee is authorized to grant Directors' Options under the
Directors' Plan to any or all Directors. The term of a Directors' Option may
be up to five (5) years from the grant date of each Directors' Option,
subject to earlier termination in accordance with the Directors' Plan.
EXERCISE PRICE AND PAYMENT
The exercise price for each share subject to a Directors' Option is the
fair market value thereof. The fair market value per share is the closing
sale price of a share as reported by the Nasdaq National Market on the grant
date.
Directors' Options may be exercised in whole or in part at any time during
the option period, by written notice of exercise and payment of the full
purchase price as follows: in cash or by check, bank draft or money order
payable to the Company; by delivery of Common Stock already owned by an
eligible Director for at least six months (based on the fair market value of
the Common Stock on the date of exercise); or through the written election of
the Director to have Common Stock withheld from the shares otherwise to be
received (based on the fair market value of the shares on the date of
exercise).
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<PAGE> 14
TRANSFERABILITY; TERMINATION OF TRUSTEESHIP
All Directors' Options granted under the Directors' Plan are
non-transferable and non-assignable except by will or by the laws of descent
and distribution or pursuant to a qualified domestic relations order, and may
be exercised during the lifetime of the optionee only by the optionee, his
guardian or legal representative. If a Director no longer serves on the Board
of Directors, his or her Directors' Options may be exercised up to one year
after the date of such termination.
TERMINATION AND AMENDMENT
The Directors' Plan will terminate on March 8, 2005, but may be terminated
by the Board of Directors at any time before such date. The Directors' Plan
may be amended at any time by the Board of Directors. Any termination or
amendment of the Directors' Plan will not impair the rights of optionees
under outstanding Directors' Options without the consent of the affected
optionees.
FEDERAL INCOME TAX CONSEQUENCES
Upon exercise of a Directors' Option granted under the Directors' Plan,
the grantee will recognize ordinary income in an amount equal to the excess
of the fair market value of the Common Stock received over the exercise price
of such Common Stock. That amount increases the grantee's basis in the Common
Stock acquired pursuant to the exercise of the option. Upon a subsequent sale
of the Common Stock, the grantee will incur short term or long term gain or
loss depending upon his holding period for the Common Stock and upon the
subsequent appreciation or depreciation in the market value of the Common
Stock. The Company will be allowed a federal income tax deduction for the
amount recognized as ordinary income by the grantee upon the grantee's
exercise of the option.
The foregoing outline is no more than a summary of the federal income tax
provisions relating to the grant and exercise of options under the Directors'
Plan and the sale of Common Stock acquired under the Directors' Plan.
Individual circumstances may vary these results. The federal income tax laws
and regulations are constantly being amended, and each participant should
rely upon his own tax counsel for advice concerning the federal income tax
provisions applicable to the Directors' Plan.
REGISTRATION OF SHARES
The Company has filed a registration statement under the Securities Act
with respect to the shares of Common Stock underlying Directors' Options
granted pursuant to the Directors' Plan.
VOTE REQUIRED
The approval of Directors' Plan requires the affirmative vote of a
majority of the votes cast by all shareholders represented and entitled to
vote thereon. An abstention, withholding of authority to vote or broker non-
vote, therefore, will not have the same legal effect as an "against" vote and
will not be counted in determining whether the proposal has received the
required shareholder vote.
The Board of Directors unanimously recommends that you vote "FOR" approval
of the Directors' Plan.
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<PAGE> 15
PROPOSAL 4
APPROVAL OF AN AMENDMENT TO THE COMPANY'S
ARTICLES OF INCORPORATION INCREASING THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK BY 5,000,000 SHARES
Under the Company's Articles of Incorporation, the Company is authorized
to issue up to 10,000,000 shares of Common Stock. In April 1995, the Board of
Directors approved and authorized an Amendment to the Company's Articles of
Incorporation that increases this maximum number of authorized shares of
Common Stock by 5,000,000 shares to a total of 15,000,000 shares, subject to
approval by the shareholders of the Company. If the shareholders do not
approve the Amendment, then the number of authorized shares of the Company's
Common Stock will remain at 10,000,000.
The purpose of the proposed Amendment is to provide sufficient shares for
future acquisitions, benefit plans, recapitalizations and other corporate
purposes, although no such use currently is planned. Once authorized, the
additional shares of Common Stock may be issued by the Board of Directors
without further action by the shareholders, unless such action is required by
law or applicable stock exchange requirements. Accordingly, this solicitation
may be the only opportunity for the shareholders to take action in connection
with such acquisitions, benefit plans, recapitalizations and other corporate
actions. As of April 19, 1995, 7,953,974 shares of Common Stock were issued
and outstanding, and approximately 893,000 shares were reserved for issuance
under the Company's stock option plans or pursuant to shares issuable upon
the exercise of certain non-qualified options. If the shareholders approve
the 1995 Plan and the Directors' Plan, then an additional 500,000 and 150,000
shares respectively will be issued or reserved for issuance under such plans.
Thus, of the 10,000,000 shares of Common Stock currently authorized,
approximately only 503,026 shares will be unissued and unreserved.
The resolution to be considered by the shareholders at the meeting reads
as follows;
"RESOLVED, that Article 4 of the Articles of Incorporation of Healthcare
Services Group, Inc. should be amended and restated to read in full as
follows:
4. The aggregate number of shares of capital stock which the Corporation
shall have authority to issue is 15,000,000 shares of common stock with a par
value of $.01 per share.
FURTHER RESOLVED, that the proper officers of Healthcare Services Group,
Inc. are hereby authorized and directed, after shareholder approval of the
proposed amendment, to execute, under its corporate seal, Articles of
Amendment to the Articles of Incorporation and to file such Articles of
Amendment with the Pennsylvania Department of State.
FURTHER RESOLVED, that the Board of Directors of Healthcare Services
Group, Inc. may, notwithstanding approval by the shareholders of Healthcare
Services Group, Inc., at any time prior to the filing of the Articles of
Amendment with the Pennsylvania Department of State, terminate the proposed
amendment and all transactions contemplated by or incident thereto."
Shareholder approval of this proposal is required under Pennsylvania law.
Unless authority has been withheld the proxy agents intend to vote FOR
approval of the amendment. Approval of the amendment to the Company's
Articles of Incorporation increasing the number of authorized shares of
Common Stock by 5,000,000 shares requires the affirmative vote of the holders
of a majority of the votes cast by all shareholders entitled to vote thereon.
An abstention, withholding of authority to vote or broker non-vote,
therefore, will not have the same legal effect as an "against" vote and will
not be counted in determining whether the proposal has received the required
shareholder vote.
The Board of Directors unanimously recommends that you vote "FOR" approval
of the amendment to the Company's Articles of Incorporation.
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PROPOSAL NO. 5
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Grant Thornton LLP was selected by the Audit
Committee of the Board of Directors as the independent public accountants of
the Company for the year ending December 31, 1994. Said firm has no other
relationship to the Company. The Board of Directors recommends the
ratification of the selection of the firm of Grant Thornton to serve as the
independent public accountants of the Company for the current year ending
December 31, 1995. A representative of Grant Thornton LLP which has served as
the Company's independent public accountants since December 1992, will be
present at the forthcoming shareholders' meeting with the opportunity to make
a statement if he so desires and such representative will be available to
respond to appropriate questions. The approval of the proposal to ratify the
appointment of Grant Thornton LLP requires the affirmative vote of a majority
of the votes cast by all shareholders represented and entitled to vote
thereon. An abstention, withholding of authority to vote or broker non-vote,
therefore, will not have the same legal effect as an "against" vote and will
not be counted in determining whether the proposal has received the required
shareholder vote.
OTHER MATTERS
So far as is now known, there is no business other than that described
above to be presented for action by the shareholders at the meeting, but it
is intended that the proxies will be exercised upon any other matters and
proposals that may legally come before the meeting, or any adjournment
thereof, in accordance with the discretion of the persons named therein.
DEADLINE FOR SHAREHOLDER PROPOSALS
To the extent permitted by law, any shareholder proposal intended for
presentation at next year's annual shareholders' meeting must be received in
proper form at the Company's principal office no later than December 30,
1995.
ANNUAL REPORT
The 1994 Annual Report to Shareholders, including financial statements, is
being mailed herewith. If you do not receive your copy please advise the
Company and another will be sent to you.
By Order of the Board of Directors,
DANIEL P. MCCARTNEY
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
Dated: Huntingdon Valley, Pennsylvania
April 21, 1995
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as filed with the Securities and Exchange
Commission, may be obtained without charge by any shareholder of record on
the Record Date upon written request addressed to: Secretary, Healthcare
Services Group, Inc., 2643 Huntingdon Pike, Huntingdon Valley, Pennsylvania
19006.
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APPENDIX A
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
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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) 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. 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 the Company's stockholders 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;
(d) decrease the Option exercise price to less than 100% of the Fair
Market Value on the date of grant thereof; or
(e) extend the Option term provided for in Section 5(b).
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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 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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APPENDIX B
HEALTHCARE SERVICES GROUP, INC.
1995 DIRECTORS' STOCK OPTION PLAN
ARTICLE I
PURPOSE
The purpose of the Healthcare Services Group, Inc. 1995 Directors' Stock
Option Plan (the "Plan") is to secure for Healthcare Services Group, Inc. and
its stockholders the benefits arising from stock ownership by its 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 "Committee" shall mean the Stock Option Committee of the Board of
Directors of the Corporation, Healthcare Services Group, Inc., which shall
consist of one or more members of the Board of Directors of the Board of
Directors of the Corporation.
2.2 "Chairman" shall mean the duly appointed Chairman of any standing
Committee of the Board.
2.3 "Company" shall mean Healthcare Services Group, Inc. and any of its
subsidiaries.
2.4 "Director" shall mean any person who is a member of the Board of
Directors of the Company.
2.5 "Eligible Director" shall be any Director of the Company.
2.6 "Exercise Price" shall mean the price per Share at which an Option may
be exercised.
2.7 "Fair Market Value" shall mean the closing price of publicly traded
Shares on the national securities exchange on which 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 over-the-counter market Electronic 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.
2.8 "Option" shall mean an Option to purchase Shares granted pursuant to
the Plan.
2.9 "Option Agreement" shall mean the written agreement described in
Article VI herein.
2.10 "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.
2.11 "Purchase Price" shall be the Exercise Price multiplied by the number
of whole Shares with respect to which an Option may be exercised.
2.12 "Shares" shall mean shares of common stock, $.01 par value, of the
Company.
ARTICLE III
ADMINISTRATION
3.1 General. This Plan shall be administered by the Committee in
accordance with the express provisions of this Plan.
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3.2 Powers of the Board. The Committee shall have full and complete
authority to adopt such rules and regulations and to make all such other
determinations not inconsistent with the Plan 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
150,000 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 Grants of Options. Subject to the express provisions of the Plan, the
Committee shall have the authority, in its discretion, to determine the
Eligible Directors to whom the Options shall be granted, the number of Shares
which shall be subject to each Option, the purchase price of each Share which
shall be subject to each Option, the period(s) during which such Options
shall be exercisable (whether in whole or in part), and the other terms and
provisions thereof. In determining the Eligible Directors to whom Options
shall be granted and the number of Shares for which Options shall be granted,
the Committee shall consider the length of service of the Eligible Director
and the amount of earnings of the Company.
5.2 Determination Final. The determination of the Committee on matters
referred to this Article V shall be final.
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.
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 at such time or
times and subject to such terms and conditions as shall be determined by the
Board at grant, provided, however, that except in the case of the Eligible
Director's death or Permanent Disability, upon which events the Option will
become immediately exercisable, unless a longer vesting period is otherwise
determined by the Committee at grant, Options shall be exercisable as
follows: one-half of the aggregate Shares purchasable under an Option shall
be exercisable commencing one year after the Grant Date and an additional
one-half of the Shares purchasable under an Option shall be exercisable
commencing two years after the Grant Date. The Board may waive such
installment exercise provision at any time in whole or in part based on
performance and/or such other factors as the Board may determine in its sole
discretion, provided, however, that no Option shall be exercisable until more
than six months have elapsed from the Grant Date.
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 2.7
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.
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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; or
(b) by delivery of Shares already owned by an Eligible Director (for a
period of at least six months) with an aggregate Fair Market Value on the
date of exercise equal to the Purchase Price.
6.6 Transferability. No Option shall be transferable, otherwise than by
will or the laws of descent and distribution, and an Option shall be
exercisable during the Eligible Director's lifetime only by the Eligible
Director, his guardian or legal representative or to immediate family members
of the Eligible Director or pursuant to a qualified domestic relations order.
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
WITHHOLDING TAX
The Company may in its discretion, require an Eligible Director to pay to
the Company, at the time of exercise of an Option an amount that the Company
deems necessary to satisfy its obligations to withhold federal, state or
local income or other taxes (which for purposes of this Article includes an
Eligible Director's FICA obligation) incurred by reason of such exercise.
When the exercise of an Option does not give rise to the obligation to
withhold federal income taxes on the date of exercise, the Company may, in
its discretion, require an Eligible Director to place Shares purchased under
the Option in escrow for the benefit of the Company until such time as
federal income tax withholding is required on amounts included in the
Eligible Director's gross income as a result of the exercise of an Option. At
such time, the Company, in its discretion, may require an Eligible Director
to pay to the Company an amount that the Company deems necessary to satisfy
its obligation to withhold federal, state or local taxes incurred by reason
of the exercise of the Option, in which case the Shares will be released from
escrow upon such payment by an Eligible Director.
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 through reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
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<PAGE> 25
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 for such consideration as
the Board 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 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 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. The Board may at any time amend or revise the terms of
the Plan, provided no such amendment or revision shall, unless appropriate
stockholder 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; or
(c) permit the granting of Options to any one other than as provided in
Article V.
10.2 Termination. The Board at any time may suspend or terminate this
Plan. This Plan, unless sooner terminated, shall terminate on the tenth
anniversary of its adoption by the Board. 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 stockholder 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.
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<PAGE> 26
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
STOCKHOLDER APPROVAL
This Plan is subject to approval, at a duly held stockholders' 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 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.
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<PAGE> 27
/X/ Please mark your
votes as in this
example.
FOR WITHHELD Nominees: Daniel P. McCartney; W.
1. Election of Thacher Longstreth; Barton D.
Directors / / / / Weisman; Joseph F. McCartney; Robert
L. Frome Thomas A. Cook; Robert J.
FOR all nominees listed on the Moss; and John M. Briggs; and in
right (except as marked to the accordance with proxy Statement
contrary on the right) (Instruction: To withhold authority to vote
for any individual nominee, print that
nominee's name on the space provided at left.)
- - ------------------------------ at left.)
FOR AGAINST ABSTAIN
2. To approve and ratify the adoption of
the Company's 1995 Incentive and non-
qualified Stock Option Plan for key
employees. / / / / / /
3. To approve and ratify the adoption of the
Company's 1995 Directors' Stock Option
Plan. / / / / / /
4. To approve an amendment to the
Company's Articles of Incorporation which
increases the number of authorized
shares of common stock of the
Company from 10,000,000 to
15,000,000. / / / / / /
5. To approve and ratify the selection of
Grant Thornton LLP as independent
Accountants of the Company as
described in Proxy Statement. / / / / / /
SIGNATURE(S) DATE
------------------------------- ---------------------------
NOTE: Please sign exactly as your name or names appear hereon. When signing
as Executor, Administrator, Trustee, Corporate Officer Attorney, Agent
or Guardian, etc; please add your full title to your signature. No
postage is required if this proxy is returned in the enclosed envelope
and mailed in the United States. Please date, sign and return this
proxy in the enclosed envelope.
<PAGE> 28
HEALTHCARE SERVICES GROUP, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Shareholders to be held at The Radisson Hotel of Bucks
County, 2400 Old Lincoln Highway, Trevose, PA 19047 on May 23, 1995 at 10:00
A.M.
The undersigned, revoking all previous proxies, hereby appoints Daniel P.
McCartney and Thomas A. Cook, or either of them, attorneys and proxies with
full power of substitution and with all the powers the undersigned would
possess if personally present, to vote all shares of Common Stock of
HEALTHCARE SERVICES GROUP, INC. owned by the undersigned at the Annual
Meeting of Shareholders of said Corporation to be held at the time and place
set forth above, and at any adjournment thereof, in the transaction of such
business as may properly come before the meeting or any adjournment thereof,
all as more fully described in the Proxy Statement, and particularly to vote
as designated below.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS DIRECTED BY THIS PROXY, BUT
IF NO DIRECTION IS MADE THEY WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS,
THE APPROVAL OF THE 1995 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN FOR
KEY EMPLOYEES, THE 1995 DIRECTORS' STOCK OPTION PLAN AND THE AMENDMENT TO THE
COMPANY'S ARTICLES OF INCORPORATION AND THE INDEPENDENT PUBLIC ACCOUNTANTS,
AS RECOMMENDED IN THE PROXY STATEMENT, FOR THE RATIFICATION (AS SET OUT ON
THE REVERSE SIDE OF THIS PROXY CARD) AND IN ACCORDANCE WITH THE DISCRETION OF
THE PROXIES OR PROXY OR ANY OTHER BUSINESS TRANSACTED AT THE ANNUAL MEETING.
(To be Signed on Reverse Side)
