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                                                                   Exhibit 10.9

                          INTERSTATE HOTELS CORPORATION

                           1999 EQUITY INCENTIVE PLAN

SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS

         The name of the plan is the Interstate Hotels Corporation 1999 Equity
Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and enable
the officers, employees, Independent Directors and other key persons (including
consultants) of Interstate Hotels Corporation (the "Company") and its
Subsidiaries upon whose judgment, initiative and efforts the Company largely
depends for the successful conduct of its business to acquire a proprietary
interest in the Company. It is anticipated that providing such persons with a
direct stake in the Company's welfare will assure a closer identification of
their interests with those of the Company, thereby stimulating their efforts on
the Company's behalf and strengthening their desire to remain with the Company.

         The following terms shall be defined as set forth below:

         "Act" means the Securities Exchange Act of 1934, as amended.

         "Administrator" is defined in Section 2(a).

         "Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Deferred Stock Awards, Restricted Stock Awards and Unrestricted Stock
Awards.

         "Board" means the Board of Directors of the Company.

         "Change of Control" is defined in Section 14.

         "Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.

         "Committee" means the committee of the Board referred to in Section 2.

         "Covered Employee" means an employee who is a "covered employee" within
the meaning of Section 162(m) of the Code.

         "Deferred Stock Award" means Awards granted pursuant to Section 7.

         "Effective Date" means the date on which the Plan is approved by
stockholders as set forth in Section 16.


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         "Fair Market Value" of the Stock on any given date means the fair
market value of the Stock determined in good faith by the Administrator;
provided, however, that (i) if the Stock is admitted to quotation on the
National Association of Securities Dealers Automated Quotation System
("NASDAQ"), NASDAQ National Market System or a national securities exchange, the
determination shall be made by reference to market quotations. If there are no
market quotations for such date, the determination shall be made by reference to
the last date preceding such date for which there are market quotations.

         "Incentive Stock Option" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the Code.

         "Independent Director" means a member of the Board who is not also an
employee of the Company or any Subsidiary.

         "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.

         "Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.

         "Performance Cycle" means one or more periods of time, which may be of
varying and overlapping durations, as the Administrator may select, over which
the attainment of one or more performance criteria will be measured for the
purpose of determining a participant's right to and the payment of a Restricted
Stock Award or Deferred Stock Award.

         "Restricted Stock Award" means Awards granted pursuant to Section 6.

         "Stock" means the Common Stock, par value $.01 per share, of the
Company, subject to adjustments pursuant to Section 3.

         "Subsidiary" means any corporation or other entity (other than the
Company) in any unbroken chain of corporations or other entities beginning with
the Company if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50 percent or more of the economic interest or the total combined
voting power of all classes of stock or other interests in one of the other
corporations or entities in the chain.

         "Unrestricted Stock Award" means any Award granted pursuant to Section
8.

SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO
           SELECT PARTICIPANTS AND DETERMINE AWARDS

         (a) Committee. The Plan shall be administered by either the Board or a
committee of not less than two Independent Directors (in either case, the
"Administrator").


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         (b) Powers of Administrator. The Administrator shall have the power and
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:

                  (i) to select the individuals to whom Awards may from time to
         time be granted;

                  (ii) to determine the time or times of grant, and the extent,
         if any, of Incentive Stock Options, Non-Qualified Stock Options,
         Restricted Stock Awards, Deferred Stock Awards and Unrestricted Stock
         Awards, or any combination of the foregoing, granted to any one or more
         participants;

                  (iii) to determine the number of shares of Stock to be covered
         by any Award;

                  (iv) to determine and modify from time to time the terms and
         conditions, including restrictions, not inconsistent with the terms of
         the Plan, of any Award, which terms and conditions may differ among
         individual Awards and participants, and to approve the form of written
         instruments evidencing the Awards;

                  (v) to accelerate at any time the exercisability or vesting of
         all or any portion of any Award;

                  (vi) subject to the provisions of Section 5(a)(ii), to extend
         at any time the period in which Stock Options may be exercised;

                  (vii) to determine at any time whether, to what extent, and
         under what circumstances distribution or the receipt of Stock and other
         amounts payable with respect to an Award shall be deferred either
         automatically or at the election of the participant and whether and to
         what extent the Company shall pay or credit amounts constituting
         interest (at rates determined by the Administrator) or dividends or
         deemed dividends on such deferrals; and

                  (viii) at any time to adopt, alter and repeal such rules,
         guidelines and practices for administration of the Plan and for its own
         acts and proceedings as it shall deem advisable; to interpret the terms
         and provisions of the Plan and any Award (including related written
         instruments); to make all determinations it deems advisable for the
         administration of the Plan; to decide all disputes arising in
         connection with the Plan; and to otherwise supervise the administration
         of the Plan.

         All decisions and interpretations of the Administrator shall be binding
on all persons, including the Company and Plan participants.

         (c) Delegation of Authority to Grant Awards. The Administrator, in its
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Administrator's authority and duties with respect to the granting of
Awards at Fair Market Value, to


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individuals who are not subject to the reporting and other provisions of Section
16 of the Act or "covered employees" within the meaning of Section 162(m) of the
Code. Any such delegation by the Administrator shall include a limitation as to
the amount of Awards that may be granted during the period of the delegation and
shall contain guidelines as to the determination of the exercise price of any
Stock Option, the conversion ratio or price of other Awards and the vesting
criteria. The Administrator may revoke or amend the terms of a delegation at any
time but such action shall not invalidate any prior actions of the
Administrator's delegate or delegates that were consistent with the terms of the
Plan.

SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION

         (a) Stock Issuable. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be such aggregate number of shares
of Stock as does not exceed the sum of (i) 2,300,000 shares; plus (ii) as of
each June 30 and December 31 after June 30, 1999, an additional positive number
equal to twenty percent (20%) of the shares of Stock issued by the Company
during that six month period; provided, however, that the maximum number of
shares of Stock for which Incentive Stock Options may be granted under the Plan
shall not exceed 2,300,000 shares. For purposes of the foregoing limitations,
the shares of Stock underlying any Awards which are forfeited, cancelled,
reacquired by the Company, satisfied without the issuance of Stock or otherwise
terminated (other than by exercise) shall be added back to the shares of Stock
available for issuance under the Plan. Subject to such overall limitations,
shares of Stock may be issued up to such maximum number pursuant to any type or
types of Award; provided, however, that from and after the date the Plan is
subject to Section 162(m) of the Code, Stock Options with respect to no more
than 400,000 shares of Stock may be granted to any one individual participant
during any one calendar year period. The shares available for issuance under the
Plan may be authorized but unissued shares of Stock or shares of Stock
reacquired by the Company and held in its treasury.

         (b) Changes in Stock. If, as a result of any reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar change in the Company's capital stock, the outstanding
shares of Stock are increased or decreased or are exchanged for a different
number or kind of shares or other securities of the Company, or additional
shares or new or different shares or other securities of the Company or other
non-cash assets are distributed with respect to such shares of Stock or other
securities, the Administrator shall make an appropriate or proportionate
adjustment in (i) the maximum number of shares reserved for issuance under the
Plan, (ii) the number of Stock Options that can be granted to any one individual
participant, (iii) the number and kind of shares or other securities subject to
any then outstanding Awards under the Plan, and (iv) the price for each share
subject to any then outstanding Stock Options under the Plan, without changing
the aggregate exercise price (i.e., the exercise price multiplied by the number
of shares underlying outstanding Stock Options) as to which such Stock Options
remain exercisable and the repurchase price for shares subject to repurchase.
The adjustment by the Administrator shall be final, binding and conclusive. No
fractional shares of Stock shall be issued under the Plan


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resulting from any such adjustment, but the Administrator in its discretion may
make a cash payment in lieu of fractional shares.

         The Administrator may also adjust the number of shares subject to
outstanding Awards and the exercise price and the terms of outstanding Awards to
take into consideration material changes in accounting practices or principles,
extraordinary dividends, acquisitions or dispositions of stock or property or
any other event if it is determined by the Administrator that such adjustment is
appropriate to avoid distortion in the operation of the Plan, provided that no
such adjustment shall be made in the case of an Incentive Stock Option, without
the consent of the participant, if it would constitute a modification, extension
or renewal of the Option within the meaning of Section 424(h) of the Code.

         (c) Mergers and Other Transactions. In the case of and subject to the
consummation of (i) the dissolution or liquidation of the Company, (ii) the sale
of all or substantially all of the assets of the Company on a consolidated basis
to an unrelated person or entity, (iii) a merger, reorganization or
consolidation in which the holders of the Company's outstanding voting power
immediately prior to such transaction do not own a majority of the outstanding
voting power of the surviving or resulting entity immediately upon completion of
such transaction, (iv) the sale of all of the Stock of the Company to an
unrelated person or entity or (v) any other transaction in which the owners of
the Company's outstanding voting power prior to such transaction do not own at
least a majority of the outstanding voting power of the relevant entity after
the transaction (in each case, a "Covered Transaction"), all Options that are
not exercisable shall become fully exercisable and all other Awards with
conditions and restrictions relating solely to the passage of time and continued
employment shall become fully vested, except as the Administrator may otherwise
specify with respect to particular Awards. Upon the consummation of the Covered
Transaction, the Plan and all outstanding Awards granted hereunder shall
terminate, unless provision is made in connection with the Covered Transaction
for the assumption of Awards heretofore granted, or the substitution of such
Awards with new Awards of the successor entity or parent thereof, with
appropriate adjustment as to the number and kind of shares and, if appropriate,
the per share exercise prices, as provided in Section 3(b) above. In the event
of such termination, each optionee shall be permitted, within a specified period
of time determined by the Administrator prior to consummation of the Covered
Transaction, to exercise all outstanding Options held by such optionee,
including those that are not then exercisable, subject to the consummation of
the Covered Transaction.

         (d) Substitute Awards. The Administrator may grant Awards under the
Plan in substitution for stock and stock based awards held by employees of
another corporation who become employees of the Company or a Subsidiary as the
result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by the Company or a Subsidiary of
property or stock of the employing corporation. The Administrator may direct
that the substitute awards be granted on such terms and conditions as the
Administrator considers appropriate in the circumstances. Any substitute Awards
granted under the Plan shall not count against the share limitation set forth in
Section 3(a).


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SECTION 4. ELIGIBILITY

         Participants in the Plan will be such full or part-time officers and
other employees, Independent Directors and key persons (including consultants
and prospective employees) of the Company and its Subsidiaries as are selected
from time to time by the Administrator in its sole discretion.

SECTION 5. STOCK OPTIONS

         Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve. Option agreements need not be
identical.

         Stock Options granted under the Plan may be either Incentive Stock
Options or NonQualified Stock Options. Incentive Stock Options may be granted
only to employees of the Company or any Subsidiary that is a "subsidiary
corporation" within the meaning of Section 424(f) of the Code. To the extent
that any Option does not qualify as an Incentive Stock Option, it shall be
deemed a Non-Qualified Stock Option.

         No Incentive Stock Option shall be granted under the Plan after June 9,
2009.

         (a) Stock Options. The Administrator in its discretion may grant Stock
Options to eligible employees, Independent Directors and key persons of the
Company or any Subsidiary. Stock Options granted pursuant to this Section 5(a)
shall be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Administrator shall deem desirable. If the Administrator so determines,
Stock Options may be granted in lieu of cash compensation at the participant's
election, subject to such terms and conditions as the Administrator may
establish.

                  (i) Exercise Price. The exercise price per share for the Stock
         covered by a Stock Option granted pursuant to this Section 5(a) shall
         be determined by the Administrator at the time of grant but shall not
         be less than 100 percent of the Fair Market Value on the date of grant
         in the case of Incentive Stock Options, or 85 percent of the Fair
         Market Value on the date of grant, in the case of Non-Qualified Stock
         Options (other than options granted in lieu of cash compensation). If
         an employee owns or is deemed to own (by reason of the attribution
         rules of Section 424(d) of the Code) more than 10 percent of the
         combined voting power of all classes of stock of the Company or any
         parent or subsidiary corporation and an Incentive Stock Option is
         granted to such employee, the option price of such Incentive Stock
         Option shall be not less than 110 percent of the Fair Market Value on
         the grant date.

                  (ii) Option Term. The term of each Stock Option shall be fixed
         by the Administrator, but no Stock Option shall be exercisable more
         than ten years after the date the option is granted. If an employee
         owns or is deemed to own (by reason of the attribution rules of Section
         424(d) of the Code) more than 10 percent of the combined


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         voting power of all classes of stock of the Company or any parent or
         subsidiary corporation and an Incentive Stock Option is granted to such
         employee, the term of such option shall be no more than five years from
         the date of grant.

                  (iii) Exercisability; Rights of a Stockholder. Stock Options
         shall become exercisable at such time or times, whether or not in
         installments, as shall be determined by the Administrator at or after
         the grant date; provided, however, that Stock Options granted in lieu
         of cash compensation shall be exercisable in full as of the grant date.
         The Administrator may at any time accelerate the exercisability of all
         or any portion of any Stock Option. An optionee shall have the rights
         of a stockholder only as to shares acquired upon the exercise of a
         Stock Option and not as to unexercised Stock Options.

                  (iv) Method of Exercise. Stock Options may be exercised in
         whole or in part, by giving written notice of exercise to the Company,
         specifying the number of shares to be purchased. Payment of the
         purchase price may be made by one or more of the following methods to
         the extent provided in the Option agreement:

                           (A) In cash, by certified or bank check or other
                  instrument acceptable to the Administrator;

                           (B) Through the delivery (or attestation to the
                  ownership) of shares of Stock that have been purchased by the
                  optionee on the open market or that have been beneficially
                  owned by the optionee for at least six months and are not then
                  subject to restrictions under any Company plan. Such
                  surrendered shares shall be valued at Fair Market Value on the
                  exercise date;

                           (C) By the optionee delivering to the Company a
                  properly executed exercise notice together with irrevocable
                  instructions to a broker to promptly deliver to the Company
                  cash or a check payable and acceptable to the Company for the
                  purchase price; provided that in the event the optionee
                  chooses to pay the purchase price as so provided, the optionee
                  and the broker shall comply with such procedures and enter
                  into such agreements of indemnity and other agreements as the
                  Administrator shall prescribe as a condition of such payment
                  procedure; or

                           (D) By the optionee delivering to the Company a
                  promissory note if the Board has expressly authorized the loan
                  of funds to the optionee for the purpose of enabling or
                  assisting the optionee to effect the exercise of his Stock
                  Option; provided that at least so much of the exercise price
                  as represents the par value of the Stock shall be paid other
                  than with a promissory note.

         Payment instruments will be received subject to collection. The
         delivery of certificates representing the shares of Stock to be
         purchased pursuant to the exercise of a Stock Option will be contingent
         upon receipt from the optionee (or a purchaser acting in his


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         stead in accordance with the provisions of the Stock Option) by the
         Company of the full purchase price for such shares and the fulfillment
         of any other requirements contained in the Stock Option or applicable
         provisions of laws. In the event an optionee chooses to pay the
         purchase price by previously-owned shares of Stock through the
         attestation method, the number of shares of Stock transferred to the
         optionee upon the exercise of the Stock Option shall be net of the
         number of shares attested to.

                  (v) Annual Limit on Incentive Stock Options. To the extent
         required for "incentive stock option" treatment under Section 422 of
         the Code, the aggregate Fair Market Value (determined as of the time of
         grant) of the shares of Stock with respect to which Incentive Stock
         Options granted under this Plan and any other plan of the Company or
         its parent and subsidiary corporations become exercisable for the first
         time by an optionee during any calendar year shall not exceed $100,000.
         To the extent that any Stock Option exceeds this limit, it shall
         constitute a Non-Qualified Stock Option.

         (b) Reload Options. At the discretion of the Administrator, Options
granted under the Plan may include a "reload" feature pursuant to which an
optionee exercising an option by the delivery of a number of shares of Stock in
accordance with Section 5(a)(iv)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with such other terms as
the Administrator may provide) to purchase that number of shares of Stock equal
to the sum of (i) the number delivered to exercise the original Option and (ii)
the number withheld to satisfy tax liabilities, with an Option term equal to the
remainder of the original Option term unless the Administrator otherwise
determines in the Award agreement for the original Option grant.

         (c) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee, or by the optionee's legal
representative or guardian in the event of the optionee's incapacity.
Notwithstanding the foregoing, the Administrator, in its sole discretion, may
provide in the Award agreement regarding a given Option that the optionee may
transfer his Non-Qualified Stock Options to members of his immediate family, to
trusts for the benefit of such family members, or to partnerships in which such
family members are the only partners, provided that the transferee agrees in
writing with the Company to be bound by all of the terms and conditions of this
Plan and the applicable Option.

SECTION 6. RESTRICTED STOCK AWARDS

         (a) Nature of Restricted Stock Awards. A Restricted Stock Award is an
Award entitling the recipient to acquire, at par value or such other higher
purchase price determined by the Administrator, shares of Stock subject to such
restrictions and conditions as the Administrator may determine at the time of
grant ("Restricted Stock"). Conditions may be based on continuing employment (or
other business relationship) and/or achievement of


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pre-established performance goals and objectives. The grant of a Restricted
Stock Award is contingent on the participant executing a Restricted Stock Award
agreement. The terms and conditions of each such agreement shall be determined
by the Administrator, and such terms and conditions may differ among individual
Awards and participants.

         (b) Rights as a Stockholder. Upon execution of a written instrument
setting forth the Restricted Stock Award and payment of any applicable purchase
price, a participant shall have the rights of a stockholder with respect to the
voting of the Restricted Stock, subject to such conditions contained in the
written instrument evidencing the Restricted Stock Award. Unless the
Administrator shall otherwise determine, certificates evidencing the Restricted
Stock shall remain in the possession of the Company until such Restricted Stock
is vested as provided in Section 6(d) below, and the participant shall be
required, as a condition of the grant, to deliver to the Company a stock power
endorsed in blank.

         (c) Restrictions. Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the Restricted Stock Award agreement. If a
participant's employment (or other business relationship) with the Company and
its Subsidiaries terminates for any reason, the Company shall have the right to
repurchase Restricted Stock that has not vested at the time of termination at
its original purchase price, from the participant or the participant's legal
representative.

         (d) Vesting of Restricted Stock. The Administrator at the time of grant
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the
non-transferability of the Restricted Stock and the Company's right of
repurchase or forfeiture shall lapse. Subsequent to such date or dates and/or
the attainment of such pre-established performance goals, objectives and other
conditions, the shares on which all restrictions have lapsed shall no longer be
Restricted Stock and shall be deemed "vested." Except as may otherwise be
provided by the Administrator either in the Award agreement or, subject to
Section 12 below, in writing after the Award agreement is issued, a
participant's rights in any shares of Restricted Stock that have not vested
shall automatically terminate upon the participant's termination of employment
(or other business relationship) with the Company and its Subsidiaries and such
shares shall be subject to the Company's right of repurchase as provided in
Section 6(c) above.

         (e) Waiver, Deferral and Reinvestment of Dividends. The Restricted
Stock Award agreement will require the immediate payment or investment of
dividends paid on the Restricted Stock.

SECTION 7. DEFERRED STOCK AWARDS

         (a) Nature of Deferred Stock Awards. A Deferred Stock Award is an Award
of phantom stock units to a participant, subject to restrictions and conditions
as the Administrator may determine at the time of grant. Conditions may be based
on continuing employment (or other business relationship) and/or achievement of
pre-established performance goals and


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objectives. The grant of a Deferred Stock Award is contingent on the participant
executing a Deferred Stock Award agreement. The terms and conditions of each
such agreement shall be determined by the Administrator, and such terms and
conditions may differ among individual Awards and participants. At the end of
the deferral period, the Deferred Stock Award, to the extent vested, shall be
paid to the participant in the form of shares of Stock.

         (b) Election to Receive Deferred Stock Awards in Lieu of Compensation.
The Administrator may, in its sole discretion, permit a participant to elect to
receive a portion of the cash compensation or Restricted Stock Award otherwise
due to such participant in the form of a Deferred Stock Award. Any such election
shall be made in writing and shall be delivered to the Company no later than the
date specified by the Administrator and in accordance with rules and procedures
established by the Administrator. The Administrator shall have the sole right to
determine whether and under what circumstances to permit such elections and to
impose such limitations and other terms and conditions thereon as the
Administrator deems appropriate.

         (c) Rights as a Stockholder. During the deferral period, a participant
shall have no rights as a stockholder; provided, however, that the participant
may be entitled to receive dividends paid on the Deferred Stock in accordance
with Section 7(e) below.

         (d) Restrictions. A Deferred Stock Award may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of during the deferral
period.

         (e) Waiver, Deferral and Reinvestment of Dividends. The Deferred Stock
Award Agreement may require or permit the immediate payment, waiver, deferral or
investment of dividends paid on the Deferred Stock.

         (f) Termination. Except as may otherwise be provided by the
Administrator either in the Award agreement or, subject to Section 12 below, in
writing after the Award agreement is issued, a participant's right in all
Deferred Stock Awards that have not vested shall automatically terminate upon
the participant's termination of employment (or cessation of business
relationship) with the Company and its Subsidiaries for any reason.

SECTION 8. UNRESTRICTED STOCK AWARDS

         Grant or Sale of Unrestricted Stock. The Administrator may, in its sole
discretion, grant (or sell at par value or such higher purchase price determined
by the Administrator) an Unrestricted Stock Award to any participant pursuant to
which such participant may receive shares of Stock free of any restrictions
("Unrestricted Stock") under the Plan. Unrestricted Stock Awards may be granted
or sold as described in the preceding sentence in respect of past services or
other valid consideration, or in lieu of cash compensation due to such
participant.


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SECTION 9. PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES

         Notwithstanding anything to the contrary contained herein, if any
Restricted Stock Award or Deferred Stock Award granted to a Covered Employee is
intended to qualify as "Performance-based Compensation" under Section 162(m) of
the Code and the regulations promulgated thereunder (a "Performance-based
Award"), such Award shall comply with the provisions set forth below:

         (a) Performance Criteria. The performance criteria used in performance
goals governing Performance-based Awards granted to Covered Employees may
include any or all of the following: (i) the Company's return on equity, assets,
capital or investment, (ii) pre-tax or after-tax profit levels of the Company or
any Subsidiary, a division, an operating unit or a business segment of the
Company, or any combination of the foregoing; (iii) cash flow, funds from
operations or similar measure; (iv) total shareholder return; (v) changes in the
market price of the Stock; (vi) sales or market share; or (vii) earnings per
share.

         (b) Grant of Performance-based Awards. With respect to each
Performance-based Award granted to a Covered Employee, the Administrator shall
select, within the first 90 days of a Performance Cycle (or, if shorter, within
the maximum period allowed under Section 162(m) of the Code) the performance
criteria for such grant, and the achievement targets with respect to each
performance criterion (including a threshold level of performance below which no
amount will become payable with respect to such Award). Each Performance-based
Award will specify the amount payable, or the formula for determining the amount
payable, upon achievement of the various applicable performance targets. The
performance criteria established by the Administrator may be (but need not be)
different for each Performance Cycle and different goals may be applicable to
Performance-based Awards to different Covered Employees.

         (c) Payment of Performance-based Awards. Following the completion of a
Performance Cycle, the Administrator shall meet to review and certify in writing
whether, and to what extent, the performance criteria for the Performance Cycle
have been achieved and, if so, to also calculate and certify in writing the
amount of the Performance-based Awards earned for the Performance Cycle. The
Administrator shall then determine the actual size of each Covered Employee's
Performance-based Award, and, in doing so, may reduce or eliminate the amount of
the Performance-based Award for a Covered Employee if, in its sole judgment,
such reduction or elimination is appropriate.

         (d) Maximum Award Payable. The maximum Performance-based Award payable
to any one Covered Employee under the Plan for a Performance Cycle is 300,000
shares (subject to adjustment as provided in Section 3(b) hereof).


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SECTION 10. TAX WITHHOLDING

         (a) Payment by Participant. Each participant shall, no later than the
date as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Administrator regarding payment of, any Federal, state, or
local taxes of any kind required by law to be withheld with respect to such
income. The Company and its Subsidiaries shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of any kind otherwise
due to the participant. The Company's obligation to deliver stock certificates
to any participant is subject to and conditioned on tax obligations being
satisfied by the participant.

         (b) Payment in Stock. Subject to approval by the Administrator, a
participant may elect to have such tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from shares of
Stock to be issued pursuant to any Award a number of shares with an aggregate
Fair Market Value (as of the date the withholding is effected) that would
satisfy the withholding amount due, or (ii) transferring to the Company shares
of Stock owned by the participant with an aggregate Fair Market Value (as of the
date the withholding is effected) that would satisfy the withholding amount due.

SECTION 11. TRANSFER, LEAVE OF ABSENCE, ETC.

         For purposes of the Plan, the following events shall not be deemed a
termination of employment:

         (a) a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another; or

         (b) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the
Administrator otherwise so provides in writing.

SECTION 12. AMENDMENTS AND TERMINATION

         The Board may, at any time, amend or discontinue the Plan and the
Administrator may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no
such action shall adversely affect rights under any outstanding Award without
the holder's consent. If and to the extent determined by the Administrator to be
required by the Code to ensure that Incentive Stock Options granted under the
Plan are qualified under Section 422 of the Code or to ensure that compensation
earned under Awards qualifies as performance-based compensation under Section
162(m) of the Code, if and to the extent intended to so qualify, Plan amendments
shall be subject to approval by the


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Company stockholders entitled to vote at a meeting of stockholders. Nothing in
this Section 12 shall limit the Administrator's authority to take any action
permitted pursuant to Section 3(c).

SECTION 13. STATUS OF PLAN

         With respect to the portion of any Award that has not been exercised
and any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Administrator shall otherwise expressly
determine in connection with any Award or Awards. In its sole discretion, the
Administrator may authorize the creation of trusts or other arrangements to meet
the Company's obligations to deliver Stock or make payments with respect to
Awards hereunder, provided that the existence of such trusts or other
arrangements is consistent with the foregoing sentence.

SECTION 14. CHANGE OF CONTROL PROVISIONS

         Upon the occurrence of a Change of Control as defined in this Section
14:

         (a) Except as otherwise provided in the applicable Award agreement,
each outstanding Stock Option shall automatically become fully exercisable.

         (b) Except as otherwise provided in the applicable Award Agreement,
conditions and restrictions on each outstanding Restricted Stock Award and
Deferred Stock Award which relate solely to the passage of time and continued
employment will be removed. Performance or other conditions (other than
conditions and restrictions relating solely to the passage of time and continued
employment) will continue to apply unless otherwise provided in the applicable
Award Agreement.

         (c) Except as otherwise provided in the applicable Award agreement,
"Change of Control" shall mean the occurrence of any one of the following
events:

                  (i) any "Person," as such term is used in Sections 13(d) and
         14(d) of the Act (other than the Company, any of its Subsidiaries, or
         any trustee, fiduciary or other person or entity holding securities
         under any employee benefit plan or trust of the Company or any of its
         Subsidiaries), together with all "affiliates" and "associates" (as such
         terms are defined in Rule 12b-2 under the Act) of such person, shall
         become the "beneficial owner" (as such term is defined in Rule 13d-3
         under the Act), directly or indirectly, of securities of the Company
         representing fifty percent (50%) or more of the combined voting power
         of the Company's then outstanding securities having the right to vote
         in an election of the Company's Board of Directors ("Voting
         Securities") (in such case other than as a result of an acquisition of
         securities directly from the Company); or


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                  (ii) persons who, as of the Effective Date, constitute the
         Company's Board of Directors (the "Incumbent Directors") cease for any
         reason, including, without limitation, as a result of a tender offer,
         proxy contest, merger or similar transaction, to constitute at least a
         majority of the Board, provided that any person becoming a director of
         the Company subsequent to the Effective Date shall be considered an
         Incumbent Director if such person's election was approved by or such
         person was nominated for election by either (A) a vote of at least a
         majority of the Incumbent Directors or (B) a vote of at least a
         majority of the Incumbent Directors who are members of a nominating
         committee comprised, in the majority, of Incumbent Directors; but
         provided further, that any such person whose initial assumption of
         office is in connection with an actual or threatened election contest
         relating to the election of members of the Board of Directors or other
         actual or threatened solicitation of proxies or consents by or on
         behalf of a Person other than the Board, including by reason of
         agreement intended to avoid or settle any such actual or threatened
         contest or solicitation, shall not be considered an Incumbent Director;
         or

                  (iii) the stockholders of the Company shall approve (A) any
         consolidation or merger of the Company where the stockholders of the
         Company, immediately prior to the consolidation or merger, would not,
         immediately after the consolidation or merger, beneficially own (as
         such term is defined in Rule 13d-3 under the Act), directly or
         indirectly, shares representing in the aggregate more than 50 percent
         of the voting shares of the corporation issuing cash or securities in
         the consolidation or merger (or of its ultimate parent corporation, if
         any), (B) any sale, lease, exchange or other transfer (in one
         transaction or a series of transactions contemplated or arranged by any
         party as a single plan) of all or substantially all of the assets of
         the Company or (C) any plan or proposal for the liquidation or
         dissolution of the Company.

         Notwithstanding the foregoing, a "Change of Control" shall not be
deemed to have occurred for purposes of the foregoing clause (i) solely as the
result of an acquisition of securities by the Company which, by reducing the
number of shares of Voting Securities outstanding, increases the proportionate
number of shares of Voting Securities beneficially owned by any person to 25
percent or more of the combined voting power of all then outstanding Voting
Securities; provided, however, that if any person referred to in this sentence
shall thereafter become the beneficial owner of any additional shares of Voting
Securities (other than pursuant to a stock split, stock dividend, or similar
transaction or as a result of an acquisition of securities directly from the
Company), then a "Change of Control" shall be deemed to have occurred for
purposes of the foregoing clause (i).

SECTION 15. GENERAL PROVISIONS

         (a) No Distribution; Compliance with Legal Requirements. The
Administrator may require each person acquiring Stock pursuant to an Award to
represent to and agree with the Company in writing that such person is acquiring
the shares without a view to distribution thereof.


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<PAGE>   15


         No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Administrator may require the placing of
such stop-orders and restrictive legends on certificates for Stock and Awards as
it deems appropriate.

         (b) Delivery of Stock Certificates. Stock certificates to participants
under this Plan shall be deemed delivered for all purposes when the Company or a
stock transfer agent of the Company shall have mailed such certificates in the
United States mail, addressed to the participant, at the participant's last
known address on file with the Company.

         (c) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to
continued employment with the Company or any Subsidiary.

         (d) Trading Policy Restrictions. Option exercises and other Awards
under the Plan shall be subject to such Company's insider trading policy, as in
effect from time to time.

SECTION 16. EFFECTIVE DATE OF PLAN

         This Plan shall become effective upon approval by the holders of a
majority of the votes cast at a meeting of stockholders at which a quorum is
present. Subject to such approval by the stockholders and to the requirement
that no Stock may be issued hereunder prior to such approval, Stock Options and
other Awards may be granted hereunder on and after adoption of this Plan by the
Board.

SECTION 17. GOVERNING LAW

         This Plan and all Awards and actions taken thereunder shall be governed
by, and construed in accordance with, the laws of the State of Pennsylvania,
applied without regard to conflict of law principles.


DATE APPROVED BY BOARD OF DIRECTORS: June 9, 1999

DATE APPROVED BY STOCKHOLDERS:  June 9, 1999



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