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                                                                    Exhibit 10.3


                      AGREEMENT OF GUARANTY AND SURETYSHIP
                                    (PAYMENT)

         In order to induce PNC BANK, NATIONAL ASSOCIATION, a national banking
association, with its principal office at One PNC Plaza, 249 Fifth Avenue,
P1-POPP-19-2, Pittsburgh, Pennsylvania 15222-2707, Attention: Real Estate
Banking (hereinafter called "Lender"), to make a mortgage loan in the principal
amount of (the "Loan") to INTERSTATE PITTSBURGH HOTEL HOLDINGS, L.L.C., a
Delaware limited liability company ("Borrower") pursuant to a certain Loan
Agreement of even date herewith between Borrower and Lender (the "Loan
Agreement"), undersigned, intending to be legally bound, and for good and
valuable consideration, receipt of which is hereby acknowledged, covenants and
agrees as follows:

         1. In this Agreement of Guaranty and Suretyship (this "Agreement"), the
following terms shall have the meanings specified in this Section 1 unless the
context otherwise requires and all other capitalized terms used and not
otherwise expressly defined herein shall have the meaning ascribed to such terms
in the Loan Agreement:

         "Loan Debt Service" shall mean the sum of all interest payments as
shall become due under the provisions of the Note (as hereinafter defined) and
Loan Agreement.

         2. Subject to the provisions of Section 3 hereof, if applicable,
undersigned unconditionally guarantees and become surety for the full and timely
payment, whether by declaration, acceleration or otherwise, by Borrower of the
principal of and interest on all the following (hereinafter collectively
referred to as the "Obligations"):

                  (i) all principal, interest and other sums due or to become
         due under that certain Mortgage Note, of even date herewith, given by
         Borrower to Lender in the principal amount of Seven Million Five
         Hundred Sixty Thousand Dollars ($7,560,000), as the same may be
         amended, supplemented, renewed or replaced from time to time (the
         "Note"), and

                  (ii) all sums now or hereafter to be paid by either or both
         Borrower under all other agreements, instruments and documents given to
         Lender to evidence, secure or otherwise support the indebtedness
         evidenced by the Note (all such agreements, instruments and documents,
         including the Note, as the same may be amended, supplemented, renewed
         or replaced from time to time being hereinafter referred to as the
         "Loan Documents").

         3. Notwithstanding any other provision contained in this Agreement to
the contrary, the Obligations of the undersigned hereunder shall be limited to
(a) the amount of $3,000,000 plus (b) all unpaid Loan Debt Service calculated at
the rate or rates set forth in Section 3.1 of the Loan Agreement. At any given
time, the Obligations of the undersigned hereunder determined pursuant to this
Paragraph 3 are referred to as the "Liability Limitation".

         The Liability Limitation shall be reduced by payments made directly by
the undersigned to the Lender after acceleration of the indebtedness evidenced
by the Note and shall not include any amounts received by the Lender from any
other party or source or realized as a result of the


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exercise of the rights in collateral furnished by any other party or source,
including, without limitation, the Borrower. In order for a payment to be
construed as having been made directly by the undersigned, the undersigned shall
cause such payment to be delivered in person or by mail, to any Vice-President
of the Lender's Real Estate Banking Department or by wire with written
confirmation to any Vice-President of the Lender's Real Estate Banking
Department and such payment shall contain a written statement by undersigned
that such payment is being made in satisfaction of its Obligations, subject to
the Liability Limitation under this Agreement.

         4. Undersigned agrees to pay the Obligations, subject to the Liability
Limitation immediately when due, irrespective of whether or not any one or more
of the following events have occurred: (i) Lender has made any demand on
Borrower; (ii) Lender has taken any action of any nature against Borrower; (iii)
Lender has pursued any rights which Lender has against any other person who may
be liable for any of the Obligations; (iv) Lender holds or has resorted to any
security for any of the Obligations; or (v) Lender has invoked any other
remedies or rights Lender has available with respect to any of the Obligations.
The liability of undersigned as surety and guarantor is unconditional.
Undersigned therefore agrees to pay the Obligations even if any of the Loan
Documents, or any part thereof, are for any reason invalid or unenforceable.
Undersigned further agrees to make full payment to Lender even if circumstances
exist which otherwise constitute a legal or equitable discharge of undersigned
as surety or guarantor.

         5. Undersigned waives and agrees not to enforce any of the rights of
undersigned against Borrower unless and until Borrower are no longer liable in
any respect to Lender, including, but not limited to: (i) any right of
undersigned to be subrogated in whole or in part to any right or claim with
respect to any of the Obligations or any portion thereof to Lender which might
otherwise arise from partial payment or performance by undersigned to Lender on
account of the Obligations or any portion thereof; and (ii) any right of
undersigned to require the marshaling of assets of Borrower which might
otherwise arise from partial payment or performance by undersigned to Lender on
account of the Obligations or any portion thereof.

         6. Undersigned waives any and all notice with respect to: (i)
acceptance by Lender of this Agreement or any of the Loan Documents; and (ii)
the provisions of any of the Loan Documents or any other instrument or agreement
relating to the Obligations; and (iii) any default in connection with the
Obligations.

         7. Undersigned waives any presentment, demand, notice of dishonor or
nonpayment, protest, notice of protest and notice of non-payment in connection
with the Obligations.

         8. Undersigned agrees that Lender may do any of the following without
notice to undersigned and without adversely affecting the validity or
enforceability of this Agreement or any other agreement, document or instrument
given by undersigned to Lender in connection with this Agreement or the
Obligations, including, without limitation, any mortgage or other security
instrument given by undersigned to secure its Obligations under this Agreement:
(i) release, surrender, exchange, compromise or settle the Obligations, or any
part thereof; (ii) change, renew or waive the terms of the Obligations, or any
part thereof; (iii) change, renew or waive the terms of any of the Loan
Documents or any other note, instrument or agreement relating to the
Obligations, such rights in Lender to include without limitation the right to
change the rate of interest charged to Borrower (in which event the Obligations
shall be deemed also to include all interest at such changed rate); (iv) grant
any extension or indulgence with respect to the payment


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or performance of the Obligations or any part thereof; (v) enter into any
agreement of forbearance with respect to the Obligations, or any part thereof;
(vi) release, surrender, exchange or compromise any security held by Lender for
any of the Obligations; (vii) release any person who is a guarantor or surety or
who has agreed to purchase the Obligations or any part thereof; and (viii)
release, surrender, exchange or compromise any security or lien held by Lender
for the liabilities of any person who is guarantor or surety for the Obligations
or any part thereof. Undersigned agrees that Lender may do any of the above as
Lender deems necessary or advisable, in Lender's sole discretion, without giving
any notice to undersigned, and that undersigned will remain liable for full
payment and performance of the Obligations, subject to the Liability Limitation.
If at any time all or any part of any payment theretofore applied by Lender to
any of the liabilities is or must be rescinded or returned by Lender for any
reason whatsoever (including, without limitation, the insolvency, bankruptcy or
reorganization of either Borrower), such liability shall, for the purposes of
this Agreement, to the extent that such payment is or must be rescinded or
returned, be deemed to have continued in existence, notwithstanding such
application by Lender, and this Agreement shall continue to be effective or be
reinstated, as the case may be, as to such liabilities, all as though such
application by Lender had not been made.

         9. Undersigned, as security for the obligations of the undersigned
hereunder, pledges to Lender, and grants to Lender a security interest in and a
right of set-off against, all moneys, deposits and other property of any kind
owned by undersigned or in which undersigned has an interest and which are or
shall be in the possession or control of Lender at any time for any reason
whatsoever.

         10. Undersigned agrees that no failure on the part of Lender to
exercise any of its rights under this Agreement shall be a waiver of such rights
or a waiver of any default by undersigned. Undersigned further agrees that no
waiver or modification of any rights of Lender under this Agreement shall be
effective unless in writing and signed by an authorized officer of Lender.
Undersigned further agrees that each written waiver shall extend only to the
specific instance actually recited in such written waiver and shall not impair
the rights of Lender in any other respect.

         11. Undersigned agrees to pay all costs and expenses, including
attorneys' fees, incurred by Lender in enforcing this Agreement against
undersigned. Undersigned further agrees to pay all costs and expenses, including
attorneys' fees, incurred by Lender in collecting or enforcing or attempting to
collect or enforce the Obligations.

         12. Undersigned acknowledges that Lender may, in its sole discretion,
elect to enforce this Agreement for the total Obligations, subject to the
Liability Limitation or any part thereof, against undersigned without any duty
or responsibility to pursue any other person or entity and that such an election
by Lender shall not be a defense to any action Lender may elect to take against
undersigned.

         13. Undersigned agrees that this Agreement shall be binding upon
undersigned, and undersigned's respective heirs, executors, administrators,
successors or assigns, and that the death or disability of any person shall in
no way impair or affect this Agreement or the power of attorney to confess
judgment as hereinafter provided, either with respect to the estate of the


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person so dying, which shall continue to be bound, or otherwise. Undersigned
further agrees that this Agreement shall inure to the benefit of Lender, its
successors and assigns.

         14. Undersigned agree that this Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.
Undersigned agrees that the Courts of Common Pleas of Allegheny County,
Pennsylvania and the United States District Court for the Western District of
Pennsylvania shall have exclusive jurisdiction and venue with respect to all
actions by or against undersigned under or pursuant to this Agreement and hereby
consents to the jurisdiction of such courts and to service of process, effective
upon receipt by personal service, overnight express delivery or registered or
certified mail to undersigned at the address given below undersigned's signature
hereto. Undersigned shall promptly notify Lender in writing of any change in
undersigned's address.

         15. Undersigned recognizes that this agreement when executed
constitutes a sealed instrument and as a result the instrument will be
enforceable as such without regard to any statute of limitations which might
otherwise be applicable and without any consideration.

         16. Until payment in full of all Bank Debt, satisfaction of all of
Borrower's other obligations under the Loan Documents, the undersigned shall
comply at all times with the following covenants (as reflected on the financial
statements of the undersigned prepared and delivered to the Lender in accordance
with Exhibit C Section (c) of the Loan Agreement):

                  (i) Cash and Cash Equivalents. The amount of the undersigned's
Cash and Cash Equivalents shall not be less than $8,000,000 at any given time;

                  (ii) Debt Multiple Ratio. The Debt Multiple Ratio with respect
to undersigned shall not exceed 3.00 to 1.00;

                  (iii) Current Ratio. The undersigned shall maintain a Current
Ratio of at least 1.25 to 1.00; and

                  (iv) Net Worth. The Net Worth of undersigned shall not be less
than $50,000,000 excluding minority interest.


         17. This Agreement may be executed in several counterparts, each of
which shall be an original and all of which together shall constitute but one
and the same instrument.

         18. CONFESSION OF JUDGMENT. UNDERSIGNED ACKNOWLEDGES THAT (A) IT HAS
READ AND UNDERSTAND, AFTER CONSULTATION WITH ITS COUNSEL, THAT THE PROVISIONS OF
THE FOLLOWING PARAGRAPH COULD ENABLE LENDER TO OBTAIN A JUDGMENT AGAINST
UNDERSIGNED AND COMMENCE EXECUTION PROCEEDINGS THAT COULD RESULT IN THE SEIZURE
OF ASSETS OF UNDERSIGNED, IN EITHER CASE, WITHOUT UNDERSIGNED HAVING THE BENEFIT
OF PRIOR NOTICE OF A HEARING; AND (B) UNDERSIGNED NEVERTHELESS KNOWINGLY AND
VOLUNTARILY AGREES TO SUCH POSSIBLE CONSEQUENCES AND THE PROVISIONS OF THE
FOLLOWING PARAGRAPH.


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          UNDERSIGNED HEREBY EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD WITHIN
THE COMMONWEALTH OF PENNSYLVANIA TO APPEAR FOR UNDERSIGNED AND, WITH OR WITHOUT
A COMPLAINT OR DECLARATION FILED, CONFESS A JUDGMENT OR JUDGMENTS AGAINST
UNDERSIGNED IN ANY COURT OF RECORD WITHIN THE COMMONWEALTH OF PENNSYLVANIA, AT
ANY TIME AFTER THE OCCURRENCE OF AN EVENT OF DEFAULT UNDER THE LOAN DOCUMENTS,
IN FAVOR OF LENDER OR ITS SUCCESSORS OR ASSIGNS FOR THE UNPAID PRINCIPAL BALANCE
OF THE NOTE, AND ALL INTEREST THEREON, TOGETHER WITH COSTS OF SUIT AND AN
ATTORNEY'S COMMISSION OF 10% FOR COLLECTION. THE AUTHORITY AND POWER TO APPEAR
FOR AND ENTER JUDGMENT AGAINST UNDERSIGNED SHALL NOT BE EXHAUSTED BY ONE OR MORE
EXERCISES THEREOF, AND MAY BE EXERCISED FROM TIME TO TIME AND AS OFTEN AS LENDER
OR ITS SUCCESSORS OR ASSIGNS SHALL DEEM NECESSARY OR DESIRABLE. THE VALIDITY OF
ANY JUDGMENT ENTERED UNDER THE AUTHORITY OF THIS WARRANT SHALL NOT BE ADVERSELY
AFFECTED BY THE OCCURRENCE OF ANY OF THE EVENTS DESCRIBED IN PARAGRAPH 8 OF THIS
AGREEMENT AND ANY SUCH JUDGMENT SHALL BE FULLY ENFORCEABLE UP TO THE AMOUNT OF
THE OBLIGATIONS AT THE TIME ENFORCEMENT OF THE JUDGMENT IS SOUGHT, PLUS AN
ATTORNEY'S COMMISSION OF 10% FOR COLLECTION, EVEN THOUGH ANY OF THE EVENTS
DESCRIBED IN PARAGRAPH 8 HAVE OCCURRED. UNDERSIGNED HEREBY FOREVER WAIVES AND
RELEASES ANY AND ALL ERRORS IN SAID PROCEEDINGS, WAIVES STAY OF EXECUTION, STAY,
CONTINUANCE OR ADJOURNMENT OF SALE ON EXECUTION, THE RIGHT TO PETITION TO SET
ASIDE OR ORDER A RESALE, THE RIGHT TO EXCEPT TO THE SHERIFF'S SCHEDULE OF
PROPOSED DISTRIBUTION, THE RIGHT OF INQUISITION AND EXTENSION OF TIME OF
PAYMENT, AND AGREES TO CONDEMNATION OF ANY PROPERTY LEVIED UPON BY VIRTUE OF ANY
EXECUTION ISSUED ON ANY SUCH JUDGMENT, AND UNDERSIGNED SPECIFICALLY WAIVES ALL
EXEMPTIONS FROM LEVY AND SALE OF ANY PROPERTY THAT NOW IS OR MAY HEREAFTER BE
EXEMPT UNDER ANY EXISTING OR FUTURE LAWS OF THE UNITED STATES OF AMERICA OR THE
COMMONWEALTH OF PENNSYLVANIA OR OF ANY OTHER JURISDICTION.

         19. In the event that any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, and this Agreement shall
be construed as if such invalid, illegal or unenforceable provision had never
been contained herein.

         20. UNDERSIGNED WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON OR RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS RELATED TO ANY OF THE
LOAN DOCUMENTS. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY
UNDERSIGNED AND UNDERSIGNED ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON
ACTING ON BEHALF OF LENDER HAS OR HAVE MADE ANY REPRESENTATIONS OF FACT TO
INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY


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OR NULLIFY ITS EFFECT. UNDERSIGNED FURTHER ACKNOWLEDGES THAT UNDERSIGNED HAVE
BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING
OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL,
SELECTED OF ITS OWN FREE WILL, AND THAT UNDERSIGNED HAS HAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL. UNDERSIGNED AGREES THAT THE OBLIGATIONS
EVIDENCED BY THIS AGREEMENT ARE EXEMPTED TRANSACTIONS UNDER THE TRUTH-IN-LENDING
ACT, 15 U.S.C. SECTION 1601, ET SEQ.


                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]



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         IN WITNESS WHEREOF, undersigned, intending to be legally bound, has
executed this Agreement as of the 14th day of February, 2000.

WITNESS:


                                            INTERSTATE HOTELS CORPORATION,
                                            a Maryland corporation

                                            By: /s/ J. WILLIAM RICHARDSON
                                               ---------------------------------
                                            Title: Vice Chairman and CFO
------------------------------                    ------------------------------