<PAGE>
 
                                                                    EXHIBIT 10.2
                                                                    ------------



                             ARCO CHEMICAL COMPANY
                             CHANGE OF CONTROL PLAN


To record the adoption of the ARCO Chemical Company Change of Control Plan,
effective February 19, 1998, the undersigned, being duly authorized to act on
behalf of ARCO Chemical Company has executed this plan document at Newtown
Square, Pennsylvania on the 9th day of April, 1998.



ATTEST:                            ARCO CHEMICAL COMPANY


BY: /s/ Valerie H. Perry           BY: /s/ Francis W. Welsh
    -----------------------           ------------------------------
                                      Francis W. Welsh
                                      Vice President - Human Resources
<PAGE>
 
                             ARCO CHEMICAL COMPANY
                             CHANGE OF CONTROL PLAN
                             ----------------------


     WHEREAS, the Board of Directors (the "Board") of ARCO Chemical Company, a
Delaware corporation (the "Company"), recognizes that the possibility of a
merger, takeover or other change of control of the Company may occur and can
significantly distract its executives and personnel because of the uncertainties
inherent in such a situation; and

     WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to be able to retain the services
of its executives and personnel in the event of a Change of Control of the
Company, during the pendency of a possible Change of Control, and following a
Change of Control, to ensure their continued dedication and efforts in any such
event without undue concern for their personal financial and employment
security.

     NOW, THEREFORE, in order to fulfill the above purposes, the following plan
has been developed and is adopted as of the Effective Date.
<PAGE>
 
                                   ARTICLE I

                             ESTABLISHMENT OF PLAN
                             ---------------------

     Effective February 19, 1998, the Company establishes the ARCO Chemical
Company Change of Control Plan as set forth in this document.

                                   ARTICLE II

                                  DEFINITIONS
                                  -----------

     As used herein, the following words and phrases shall have the following
respective meanings unless the context clearly indicates otherwise.

     2.1  "Accrued Compensation" means any amounts (other than amounts
           --------------------                                       
payable under this Plan) earned, accrued or otherwise payable to a Participant
as of the Participant's Termination Date but not paid as of such Termination
Date in respect of (i) base salary and (ii) bonus amounts for Plan Years prior
to the Plan Year in which the Participant's Termination Date occurs.

     2.2  "Affiliate" means with respect to any person or entity, any
           ---------                                                 
entity, directly or indirectly, controlled by, controlling or under common
control with such person or entity.

     2.3  "Base Salary" means a Participant's annualized base salary (including
           -----------                                                         
any portion that the Participant may have elected to defer), calculated at the
greater of the rate in effect (i) immediately prior to a Change of Control or
(ii) as of the Participant's Termination Date.

     2.4  "Bonus Amount" means an amount equal to the greater of (i) a
           ------------                                               
Participant's target bonus amount (including any portion that the Participant
may have elected to defer) under the Company's Annual Incentive Plan (or
successor annual incentive plan) for the Plan Year in which the Change of
Control occurs or for the Plan Year in which the Participant's Termination Date
occurs, whichever is greater or (ii) the average bonus amount paid or payable to
the Participant (including any portion that the Participant may have elected to
defer) under the Company's Annual Incentive Plan (or successor annual incentive
plan) for the three Plan Years preceding the Plan Year in which the Change of
Control occurs.

                                       2
<PAGE>
 
          2.5  "Cause" means
                -----       

          (a)  for any Participant who is in Employee Classification A, B, C, D
or E as set forth in Appendix A, (i) the willful and continued refusal by the
Participant to perform substantially his or her reasonably assigned duties with
the Company (other than any such failure resulting from his or her physical or
mental incapacity) or (ii) the willful engaging by the Participant in conduct
which is demonstrably and materially injurious to the Company, monetarily or
otherwise. For purposes of this definition, no act, or failure to act, on the
Participant's part shall be deemed "willful" unless done, or omitted to be done,
by the Participant not in good faith and without reasonable belief that his or
her action or omission was in the best interest of the Company.

          2.6  "Change of Control" means at any time after the Effective Date
                -----------------                                            
and prior to the termination of the Plan:

          (a) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any "Person" (as
the term person is used for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), immediately after which
such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty-five percent (25%) or more of the
combined voting power of the Company's then outstanding Voting Securities;
provided, however, in determining whether a Change of Control has occurred,
--------  -------                                                          
Voting Securities which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition which would cause a
Change of Control. A "Non-Control Acquisition" shall mean an acquisition (I) by
Atlantic Richfield Company, (ii) by an employee benefit plan (or a trust forming
a part thereof) maintained by (A) the Company or (B) any corporation or other
Person of which a majority of its voting power or its voting equity securities
or equity interest is owned, directly or indirectly, by the Company (for
purposes of this definition, a "Subsidiary"), (iii) the Company or its
Subsidiaries or (iv) by any Person in connection with a "Non-Control
Transaction" (as hereinafter defined);

          (b) The individuals who, as of the Effective Date, are members of the
Board (the "Incumbent Board") cease for any reason to constitute a majority of
the members of the Board; provided, however, that if the election or nomination
                          --------  -------                                    
for election by the Company's common stockholders of any new director (other
than a director designated by a person who has entered into an agreement with
the Company to effect a transaction described in clause (c) of this 

                                       3
<PAGE>
 
definition) was approved by a vote of at least a majority of the Incumbent
Board, such new director shall, for purposes of this Plan, be considered as a
member of the Incumbent Board; provided further, however, that no individual
                               -------- -------  ------- 
shall be considered a member of the Incumbent Board if such individual initially
assumed office through either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest;

          (c) A merger, consolidation or reorganization of the Company, unless
such merger, consolidation or reorganization is a "Non-Control Transaction."  A
"Non-Control Transaction" shall mean a merger, consolidation or reorganization
of the Company where:

              (i)  the stockholders of the Company immediately before such
merger, consolidation or reorganization, own directly or indirectly immediately
following such merger, consolidation or reorganization, at least sixty percent
(60%) of the combined voting power of the outstanding voting securities of the
corporation resulting from such merger or consolidation or reorganization (the
"Surviving Corporation") in substantially the same proportion as their ownership
of the Voting Securities immediately before such merger, consolidation or
reorganization, and

             (ii)  the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such merger,
consolidation or reorganization constitute at least a majority of the members of
the board of directors of the Surviving Corporation, or a corporation
beneficially directly or indirectly owning a majority of the Voting Securities
of the Surviving Corporation;

          (d)  A complete liquidation or dissolution of the Company;

          (e)  The sale or other disposition of all or substantially all of the
assets of the Company to any Person (other than a transfer to a Subsidiary); or

          (f)   a "Change of Control" of Atlantic Richfield Company. For
purposes of this Section 2.6(f) only, Change of Control shall mean Change of
Control as defined in the Trust Agreement, to be entered into by and between
Atlantic Richfield Company and State Street Bank and Trust Company.

                                       4
<PAGE>
 
     Notwithstanding the foregoing, a Change of Control shall not be deemed to
occur if the Change of Control occurs solely pursuant to Section 2.6(a) and
results from an acquisition in a secondary offering of securities to the public
by Atlantic Richfield Company.

     Notwithstanding the foregoing, a Change of Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the then outstanding Voting
Securities as a result of the acquisition of Voting Securities by the Company
which, by reducing the number of Voting Securities then outstanding, increases
the percentage of shares Beneficially Owned by the Subject Person, provided that
                                                                   --------     
if a Change of Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the Beneficial
Owner of any additional Voting Securities which increases the percentage of the
then outstanding Voting Securities Beneficially Owned by the Subject Person,
then a Change of Control shall occur.

     Notwithstanding anything to the contrary contained herein, if the
employment of an Eligible Employee is terminated (i) at the request of a third
party who has indicated an intention or taken steps reasonably calculated to
effect a Change of Control and who effectuates a Change of Control or (ii)
otherwise in connection with, or in anticipation of, a Change of Control which
actually occurs, then for purposes of this Plan the date of a Change of Control
with respect to that Eligible Employee shall be deemed to be the date
immediately prior to the Eligible Employee 's Termination Date.

     2.7  "Compensation Committee" means the Compensation Committee of the Board
           ----------------------                                               
as such committee may be constituted from time to time.

     2.8  "Disability" means:
           ----------        

          (a) the term "Disability" as used in the Company's relevant long-term
disability plan applicable to a Participant, if any; and

          (b) in all other cases, the term "Disability" means a physical or
mental infirmity which impairs the Participant's ability to perform
substantially his or her duties for a period of one hundred eighty (180)
consecutive days.

                                       5
<PAGE>
 
     2.9  "Effective Date" means February 19, 1998.
           --------------                          

     2.10 "Eligible Employee" means each regular full-time or regular part-time
           -----------------                                                   
employee of the Company or any of its Affiliates.

     2.11 "Good Reason" means the occurrence after a Change of Control of any of
           -----------                                                          
the following events or conditions:

          (a)   for any Participant who is in Employee Classification A as set
forth in Appendix A,

                (i)   a change in the Participant's status, title, position or
responsibilities (including reporting responsibilities) which, in the
Participant's reasonable judgment, represents an adverse change from his or her
status, title, position or responsibilities as in effect immediately prior
thereto;

                (ii)  with respect to either the Participant's annual base
salary or target bonus then in effect under the Company's Annual Incentive Plan
(or successor annual incentive plan), a reduction by ten percent (10%) or more
from the greater of such base salary or target, as the case may be, in effect
(x) as of the date of the Change of Control or (y) on any date following the
Change of Control;

                (iii) the relocation of the Participant's principal place of
work, but only if the "moving expenses" incurred in connection with such
relocation would be deductible under Section 217 of the Internal Revenue Code of
1986, as amended;

          (b) for any Participant who is in Employee Classification B, C or D as
set forth in Appendix A, the events or conditions described in Sections
2.12(a)(ii) or (iii); and

          (c) for any Participant who is in Employee Classification E as set
forth in Appendix A, (i) the event described in Section 2.12(a)(iii), or (ii)
with respect to the Participant's annual base salary, a reduction by ten percent
(10%) or more from the greater of such base salary in effect (x) as of the date
of the Change of Control or (y) on any date following the Change of Control.

     2.12 "Operating Unit" means any subsidiary, division, or other business
           --------------                                                   
unit of the Company or any of its Affiliates.

                                       6
<PAGE>
 
     2.13 "Participant" means an Eligible Employee who meets the eligibility
           -----------                                                      
requirements of Article III.

     2.14 "Plan" means this ARCO Chemical Company Change of Control Plan.
           ----                                                          

     2.15 "Plan Benefit" means the benefit payable in accordance with Article V
           ------------                                                        
of the Plan.

     2.16 "Plan Year" means January 1 through December 31.
           ---------                                      

     2.17 "Salary Separation Payment" has the meaning ascribed to it in Section
           -------------------------                                           
5.2(b).

     2.18 "Termination Date" means the date of termination of a Participant's
           ----------------                                                  
employment as set forth in Article VI.

                                  ARTICLE III

                                  ELIGIBILITY
                                  -----------

     3.1  Participation.  For purposes of this Plan each individual who is an
          -------------                                                      
Eligible Employee as of the date of a Change of Control shall automatically be a
Participant under this Plan.

     3.2  Duration of Participation.  Any individual who is a Participant shall
          -------------------------                                            
continue as a Participant until he or she has received the entire amount of the
Plan Benefit, if any, which such individual is entitled to under the Plan.

                                   ARTICLE IV

                           CHANGE OF CONTROL BENEFITS
                           --------------------------

     4.1  1990 ARCO Chemical Company Long-Term Incentive Plan (the "1990 LTIP").
          --------------------------------------------------------------------
Notwithstanding the terms of the 1990 LTIP, the following shall occur under the
1990 LTIP upon the occurrence of a Change of Control:  (a) all outstanding stock
options granted thereunder shall 

                                       7
<PAGE>
 
become immediately and fully vested and exercisable; (b) all dividend share
credits accrued thereunder shall become immediately vested; and (c) all dividend
share credits that would have been earned through the remainder of the term of
the option granted thereunder (as determined in accordance with the formula set
forth in Appendix B) shall be credited no later than the date of the Change of
Control and be immediately vested.

     4.2  1998 ARCO Chemical Company Long-Term Incentive Plan (the "1998 LTIP").
          ---------------------------------------------------------------------
The following shall occur pursuant to the 1998 LTIP upon the occurrence of a
Change of Control:

          (a)  each Participant shall receive a conversion of the Participant's
Contingent Restricted Stock for the next Performance Objective level into
Performance-Based Restricted Stock based on a proration of the Company's
progress to the next Performance Objective level as of the date of the Change of
Control.  Participants will be entitled to receive a conversion of Contingent
Restricted Stock for the next Performance Objective level, based on a
calculation of the percentage of RCM achieved to the effective date of the
Change of Control as compared to the total amount of RCM required to achieve the
next Performance Objective.  The remaining shares of Contingent Restricted
Stock, if any, shall be forfeited;

          (b)  the Performance Supplement will be calculated and applied as of
the effective date of the Change of Control, using the stock price on the
effective date of the Change of Control, assuming a Change of Control occurs
during the basic Performance Period (and not during an extended period as
described in Section 2(a) of Article III of the 1998 LTIP);

          (c)  all Performance-Based Restricted Stock and Stock Options will
become immediately vested;

          (d)  where the Company is not the surviving corporation (or survives
only as a subsidiary of another corporation), unless the Long-Term Incentive
Plan Administration Subcommittee of the Compensation Committee determines
otherwise, all outstanding Stock Options that are not exercised shall be assumed
by, or replaced with comparable options by, the surviving corporation; and

          (e)  no actions shall be taken under the 1998 LTIP that would make the
Change of Control ineligible for pooling of interests accounting treatment if,
in the absence of such actions, the Change of Control would qualify for such
treatment and the Company intends to use such treatment with respect to the
Change of Control.

                                       8
<PAGE>
 
          Each capitalized term used in this Section 4.2 that is not a defined
term under this Plan shall have the meaning ascribed to it under the 1998 LTIP.

     4.3  ARCO Chemical Company Value Incentive Plan (the "VIP").
          ------------------------------------------------------ 
Notwithstanding the terms of the VIP, the following shall occur under the VIP
upon the occurrence of a Change of Control:  (a) all outstanding phantom stock
units granted thereunder shall become immediately and fully vested; (b) all
dividend share credits granted thereunder related to outstanding phantom stock
units shall become immediately and fully vested; and (c) all dividend share
credits that would have been earned through the expiration date of the phantom
stock units granted thereunder (as determined in accordance with the formula set
forth in Appendix B) shall be credited no later than the date of the Change of
Control and be immediately vested.

     4.4  Incorporation.  The plans referred to in this Article IV are hereby
          -------------                                                      
amended to incorporate, or upon their adoption will be deemed to incorporate,
the relevant provisions of this Article IV.

                                   ARTICLE V

                                 PLAN BENEFITS
                                 -------------

     5.1  Right to Plan Benefit.
          --------------------- 

          (a) A Participant shall be entitled to receive from the Company a Plan
Benefit in the amount provided in Section 5.2 if (i) a Change of Control has
occurred and (ii) within the two (2) year period commencing on the date of the
Change of Control, the Participant's employment with the Company and its
Affiliates terminates for any reason (including the sale, divestiture or other
disposition of an Operating Unit employing the Participant), other than (A) a
termination by the Company or any of its Affiliates for Cause, (B) a termination
resulting from the Participant's Disability, (C) the Participant's death, or (D)
a termination, voluntary resignation or retirement by the Participant without
Good Reason.

     5.2  Amount of Plan Benefit.  If a Participant's employment is terminated
          ----------------------                                              
under circumstances entitling him or her to a Plan Benefit, such Participant
shall be entitled to the following:

                                       9
<PAGE>
 
          (a) the Company shall pay to the Participant all Accrued Compensation
within thirty (30) days after the Participant's Termination Date;

          (b) the Company shall pay to the Participant, as severance pay and in
lieu of any further salary or bonus for periods subsequent to the Participant's
Termination Date, in a single payment (without any discount for accelerated
payment, but subject to applicable withholding taxes) within thirty (30) days
after the Participant's Termination Date, an amount in cash equal to the amount
determined in accordance with Appendix A (the "Salary Separation Payment");
provided, however, that if a Participant's employment is governed by laws,
--------  -------                                                         
statutes, or regulations outside of the United States that mandate the payment
of separation benefits, the Participant shall be paid the greater of the Salary
Separation Payment or the statutorily required separation payment. Under no
circumstances shall a Participant be entitled to payment of both the Salary
Separation Payment and a statutorily required separation payment;

          (c) the Company shall pay to a Participant who participates in the
ARCO Chemical Company Annual Incentive Plan (the "AIP") an amount in cash equal
to his or her bonus award as determined by the Compensation Committee under the
AIP for the Plan Year in which the Change of Control occurs, pro rated for the
number of full months of plan participation during such Plan Year; and

          (d) for the period commencing on the Participant's Termination Date
and continuing for the Participant's Salary Separation Payment Period (as
determined in accordance with Appendix A) (the "Continuation Period"), the
Company shall continue on behalf of the Participant and his or her dependents
and beneficiaries (i) medical and dental benefits, (ii) long-term disability
coverage and (iii) life insurance and other death benefits coverage.  The
coverages and benefits (including deductibles, if any) provided under this
Section 5.2(d) during the Continuation Period shall be no less favorable to the
Participant and his or her dependents and beneficiaries than the most favorable
of such coverages and benefits provided the Participant and his or her
dependents and beneficiaries immediately preceding the Change of Control.  Any
period during which benefits are continued pursuant to this Section 5.2(d) shall
be considered to be in satisfaction of the Company's obligation to provide
"continuation coverage" pursuant to Section 4980B of the Internal Revenue Code
of 1986, as amended, and the period of coverage required under said Section
4980B shall be reduced by the period during which benefits were provided
pursuant to this Section 5.2(d).

     5.3  Mitigation.  The Participant shall not be required to mitigate the
          ----------                                                        

                                      10
<PAGE>
 
amount of any payment or benefit provided for in this Plan by seeking other
employment or otherwise and no such payment or benefit shall be offset or
reduced by the amount of any compensation or benefits provided to the
Participant in any subsequent employment.

     5.4  Other Benefits; Non-Exclusivity of Rights.  Nothing in this Plan shall
          -----------------------------------------                             
prevent or limit the Participant's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by the Company or
any of its Affiliates and for which the Participant may qualify, nor shall
anything herein limit or reduce such rights as any Participant may have under
any other agreements with the Company or any of its Affiliates.  Nothing herein
shall be deemed to limit, supersede or restrict any rights that any Participant
may have to accelerated vesting of any right or benefit under change of control
provisions of any plan, program, agreement or otherwise.

     5.5  Incorporation.  Each employee benefit plan pursuant to which a Plan
          -------------                                                      
Benefit shall be provided to a Participant pursuant to this Article V is hereby
amended to incorporate, or upon its adoption will be deemed to incorporate, the
relevant provisions of this Article V.

                                   ARTICLE VI

                             EXCISE TAX PROVISIONS
                             ---------------------

     6.1 Excise Tax Limitation.  This Section 6.1 shall apply only to
         ---------------------                                       
Participants with an Employee Classification of B, C, D or E as set forth in
Appendix A.

         (a) In the event it shall be determined that any payment or
distribution of any type to or for the benefit of a Participant, by the Company,
any of its Affiliates, any Person (as defined in Section 2.6(a)) who acquires
ownership or effective control of the Company or ownership of a substantial
portion of the Company's assets (within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder (the
"Code")) or any Affiliate of such Person, whether paid or payable or distributed
or distributable pursuant to the terms of this Plan or otherwise (the
"Payments"), would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties with respect to such excise tax (such excise
tax, together with any such interest and penalties, are collectively referred to
as the "Excise Tax"), then the Payments shall be reduced (but not below zero) if
and to the extent that a 

                                      11
<PAGE>
 
reduction in the Payments would result in the Participant retaining a larger
amount, on an after-tax basis (taking into account federal, state and local
income taxes and the Excise Tax), than if the Participant received the entire
amount of such Payments. Unless the Participant shall have given prior written
notice specifying a different order to the Company to effectuate the foregoing,
the Company shall reduce or eliminate the Payments, by first reducing or
eliminating the portion of the Payments which are not payable in cash and then
by reducing or eliminating cash payments, in each case in reverse order
beginning with payments or benefits which are to be paid or provided latest in
time. Any notice given by the Participant pursuant to the preceding sentence
shall take precedence over the provisions of any other plan, arrangement or
agreement governing the Participant's rights and entitlements to any benefits or
compensation.

              (b) The determination of whether the Payments shall be reduced
pursuant to Section 6.1(a) and the amount of such reduction shall be made, at
the Company's expense, by an independent accounting firm selected by the Company
and reasonably acceptable to the Participant  which is one of the four largest
accounting firms in the United States (the "Accounting Firm").  The Accounting
Firm shall provide its determination, together with detailed supporting
calculations and documentation to the Company and the Participant within ten
(10) days of the date of the Change of Control or Termination Date, as the case
may be.  If the Accounting Firm determines that no Excise Tax is payable by the
Participant with respect to the Payments, it or the Company shall furnish the
Participant with an opinion that no Excise Tax will be imposed with respect to
any such Payments.

         6.2  Excise Tax Gross-Up.  This Section 6.2 shall apply only to
              -------------------                                       
Participants with an Employee Classification of A as set forth in Appendix A.

              (a) In the event it shall be determined that any Payments (as
defined in Section 6.1(a)), other than the payment provided for in this Section
6.2(a), would be subject to the Excise Tax (as defined in Section 6.1(a)), then
the Participant shall be entitled to receive from the Company an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Participant of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax, imposed upon the Gross-Up
Payment, the Participant retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.

                                      12
<PAGE>
 
          (b) All determinations as to whether any of the Payments are
"parachute payments" (within the meaning of Section 280G of the Code), including
whether a Gross-Up Payment is required, the amount of such Gross-Up Payment and
amounts relevant to the last sentence of this Subsection 6.2(b), shall be made
by the Accounting Firm (as defined in Section 6.1(b)), which shall provide its
determination (the "Determination"), together with detailed supporting
calculations regarding the amount of any Gross-Up Payment and any other relevant
matter, both to the Company and the Participant within ten (10) days of the date
of the Change of Control or Termination Date, as the case may be, or such
earlier time as is requested by the Company or the Participant (if the
Participant reasonably believes that any of the Payments may be subject to the
Excise Tax).  If the Accounting Firm determines that no Excise Tax is payable by
the Participant, it shall furnish the Participant with a written statement that
such Accounting Firm has concluded that no Excise Tax is payable (including the
reasons therefor) and that he or she has substantial authority not to report any
Excise Tax on his or her federal income tax return.  If a Gross-Up Payment is
determined to be payable, it shall be paid to the Participant within five (5)
days after the Determination is delivered to the Company or the Participant.
Any determination by the Accounting Firm shall be binding upon the Company and
the Participant, absent manifest error.  As a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made
by the Company should have been made ("Underpayment"), or that Gross-Up Payments
will have been made by the Company which should not have been made
("Overpayments").  In either such event, the Accounting Firm shall determine the
amount of the Underpayment or Overpayment that has occurred.  In the case of an
Underpayment, the amount of such Underpayment shall be promptly paid by the
Company to or for the benefit of the Participant.  In the case of an
Overpayment, the Participant shall, at the direction and expense of the Company,
take such steps as are reasonably necessary (including the filing of returns and
claims for refund), follow reasonable instructions from, and procedures
established by, the Company, and otherwise reasonably cooperate with the Company
to correct such Overpayment; provided, however, that (i) the Participant shall
                             --------  -------                                
not in any event be obligated to return to the Company an amount greater than
the net after-tax portion of the Overpayment that he has retained or has
recovered as a refund from the applicable taxing authorities and (ii) this
provision shall be interpreted in a manner consistent with the intent of
Subsection 6.2(a), which is to make the Participant whole, on an after-tax
basis, from the application of the Excise Tax, it being understood that the
correction of an Overpayment may result in the Participant repaying to the
Company an amount which is less than the Overpayment.

                                      13
<PAGE>
 
                                   ARTICLE VII

                                SUCCESSORS TO COMPANY
                                ---------------------

     7.1  Successors.
          ---------- 

          (a) This Plan shall be binding upon the Company, its successors and
assigns and the Company shall require any successor or assign to expressly
assume and agree to perform this Plan in the same manner and to the same extent
that the Company would be required to perform it if no such succession or
assignment had taken place.  The term "Company" as used herein shall include
such successors and assigns.  The term "successors and assigns" as used herein
shall mean a corporation or other entity acquiring all or substantially all the
assets and business of the Company whether by operation of law or otherwise.

          (b) Neither this Plan nor any right or interest hereunder shall be
assignable or transferable by a Participant or his or her beneficiaries or legal
representatives, except by will or by the laws of descent and distribution.
This Plan shall inure to the benefit of and be enforceable by a Participant's
legal personal representative.

                                  ARTICLE VIII

                    DURATION, AMENDMENT AND PLAN TERMINATION
                    ----------------------------------------

     8.1  Duration.  This Plan shall continue in effect until terminated in
          --------                                                         
accordance with Section 8.2.

     8.2  Amendment and Termination.  Prior to a Change of Control, the Plan may
          -------------------------                                             
be amended or modified in any respect, and may be terminated, by resolution
adopted by the Board.  From and after the occurrence of a Change of Control, the
Plan (i) may not be amended or modified in any manner that would in any way
adversely affect the benefits or protections provided to any individual
hereunder and (ii) may not be terminated until the later of (a) the third
anniversary of the Change of Control or (b) the date that all Participants who
have become entitled to Plan Benefits hereunder shall have received such
payments in full.

                                      14
<PAGE>
 
     8.3  Form of Amendment.  Any amendment or termination of the Plan shall be
          -----------------                                                    
effected by a written instrument signed by a duly authorized officer or officers
of the Company, certifying that the amendment or termination has been approved
by the Board.

                                   ARTICLE IX

                                 MISCELLANEOUS
                                 -------------

     9.1  Administration.  This Plan shall be administered by the Compensation
          --------------                                                      
Committee.

     9.2  Employment Status.  This Plan does not constitute a contract of
          -----------------                                              
employment or impose on the Company any obligation to retain any Participant as
an employee or to change any employment policies of the Company.

     9.3  Validity and Severability.  The invalidity or unenforceability of any
          -------------------------                                            
provision of the Plan shall not affect the validity or enforceability of any
other provision of the Plan, which shall remain in full force and effect, and
any prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

     9.4  Settlement of Claims.  The Company's obligation to make the payments
          --------------------                                                
provided for in this Plan and otherwise to perform its obligations hereunder
shall not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, defense, recoupment, or other right which the Company may
have against a Participant or others.

     9.5  Governing Law.  The validity, interpretation, construction and
          -------------                                                 
performance of the Plan shall in all respects be governed by the laws of the
Commonwealth of Pennsylvania, without giving effect to the conflict of law
principles thereof.

                                      15
<PAGE>
 
                                   APPENDIX A
                                   ----------

                Employee
                ----------
             Classification                     Members
             --------------                     -------

                   A                      CEO and Direct Reports

                   B                      C3 and C4 Executives

                   C                      C5 Executives

                   D                      Key Managers (Grades A, B, C)

                   E                      Grade D and below

                   A Participant's Employee Classification shall be determined
as set forth in the official records of the Company, and shall be based on his
or her status as of the date immediately preceding the Participant's termination
date, or, if it would entitle the Participant to a greater Salary Separation
Payment or longer Salary Separation Period, as of the date immediately preceding
the date on which the Change of Control occurs.

Salary Separation Payment
-------------------------

            The Salary Separation Payment to which a Participant is entitled
shall be based on the Participant's Employee Classification as of the date
immediately preceding the Participant's Termination Date, or, if it would
entitle the Participant to a greater Salary Separation Payment, immediately
preceding the date on which the Change of Control occurs, and shall equal the
amount described in the table below. 

                                      16
<PAGE>
 
<TABLE> 
<CAPTION> 

    Employee
 Classification                      Salary Separation Payment
 --------------                      -------------------------
<S>                 <C>
      A             Three times the sum of the Participant's (a) Base Salary plus (b) Bonus Amount.
      B             Two times the sum of the Participant's (a) Base Salary plus (b) Bonus Amount.
      C             One and one-half times the sum of the Participant's (a) Base Salary plus (b) Bonus
                    Amount.
      D             One times the sum of the Participant's (a) Base Salary plus (b) Bonus Amount.
      E             Subject to a minimum of twelve weeks pay (one weeks pay to equal, as the case
                    may be, one fifty-second of the Participant's annual base salary or forty times the
                    Participant's hourly rate) and a maximum of fifty-two weeks pay, two weeks pay
                    per year of service prorated for completed months of service.
</TABLE>

<TABLE>
<CAPTION>
    Employee                            Salary Separation
 Classification                          Payment Period
---------------                         ----------------- 
<S>                                    <C>
     A                                     36 months
     B                                     24 months
     C                                     18 months
     D                                     12 months
     E                 The number of weeks in respect of which the amount of the
                       Salary Separation Payment is determined.
</TABLE> 
                                      17
<PAGE>
 
                                   APPENDIX B
                                   ----------

            1990 LTIP.  For purposes of Section 4.1(c) of the Plan, the number
            ---------                                                         
of dividend share credits to be issued under the 1990 LTIP shall be determined
by compounding the number of dividend share credits issuable through the
remainder of the term of the option granted thereunder based on the latest
dividend declared by the Company prior to the date of the Change of Control and
the fair market value of the Company's common stock as of the dividend record
date of the quarterly dividend immediately preceding the Change of Control.
 
          Value Incentive Plan.  For purposes of Section 4.3(c) of the Plan, the
          --------------------                                                  
number of dividend share credits to be issued under the VIP shall be determined
by compounding the number of dividend share credits issuable through the
expiration date of the phantom stock units granted thereunder based on the
latest dividend declared by the Company prior to the date of the Change of
Control and the fair market value of the Company's common stock as of the
dividend record date of the quarterly dividend immediately preceding the Change
of Control.

EXAMPLE:  Assume Change of Control occurs five years after grant, with five
--------                                                                   
years, or twenty quarterly dividends, remaining to expiration.  Assume further a
$.70 per share per quarter dividend rate and a $50.00 stock price as of the
dividend record date of the quarterly dividend immediately preceding the Change
of Control. Assume further that Employee A's account balance at Change of
Control is 5000 options originally granted at $42.00 per share with 1000 accrued
DSC units.  DSCs will be projected as if earned to expiration of the grant based
upon the dividend rate and stock price in effect on the record date of the
quarterly dividend immediately preceding the Change of Control.  The computation
of projected DSC units is as follows:

PROJECTED DSC UNITS:

1000 DSC units (multiplied by) $.70 = $700.00 (divided by) $50.00 per share = 14
DSC units (14 + 1000 = 1014 DSC units upon first quarter projection)

(1014 DSC units (multiplied by) $.70 = $709.80 (divided by) $50.00 per share =
14.196 DSC units (14.196 + 1014 = 1028.196 DSC units upon second quarter
projection)

Repeat the above analysis for 18 additional quarterly payments to expiration.

                                      18