<PAGE>   1

                                                                    Exhibit 10.5

                                                                  EXECUTION COPY

                              EMPLOYMENT AGREEMENT

         THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement"), dated as
of August 31, 2000, made and entered into by and between Interstate Hotels
Corporation, a Maryland corporation (the "Company"), and Thomas F. Hewitt (the
"Executive"), hereby amends and restates the employment agreement between the
Company and the Executive, dated as of March 1, 1999 (the "Old Agreement"),
effective as of the Closing Date (as defined below).

                                    RECITALS

         WHEREAS, the Executive is currently serving as the Chairman and Chief
Executive Officer of the Company pursuant to the Old Agreement;

         WHEREAS, following the transactions (the "Transactions") contemplated
by the Securities Purchase Agreement by and among the Company, CGLH Partners I
LP, a Delaware limited partnership ("CGLH I") and CGLH Partners II LP, a
Delaware limited Partnership, ("CGLH II") dated as of the date hereof (the
"Purchase Agreement"), the Company and the Executive desire to continue their
employment relationship; and

         WHEREAS, the Company and the Executive desire to amend and restate the
Old Agreement, effective as of the Closing Date (as defined in the Purchase
Agreement) of the Transactions, as provided herein.

         NOW, THEREFORE, the parties agree as follows:

         1. DEFINITIONS. In addition to terms defined elsewhere herein, the
following terms have the following meanings when used in this Agreement with
initial capital letters:

            (a) "Base Pay" means the salary provided for in Section 5(a), as
such amount may be adjusted hereunder.

            (b) "Board" means the Board of Directors of the Company or an
authorized committee thereof.

            (c) "Cause" means that the Executive shall have committed:

                (i) an intentional act of fraud, embezzlement or theft in
         connection with his duties or in the course of his employment with the
         Company or any Subsidiary;

                (ii) intentional and material wrongful damage to property of the
         Company or any Subsidiary;

                (iii) intentional and material Unauthorized Disclosure, Use or
         Solicitation; or



<PAGE>   2
                (iv) intentional and material wrongful engagement in any
         Competitive Activity;

and any such act shall have been materially harmful to the Company. For purposes
of this Agreement, no act or failure to act on the part of the Executive will be
deemed "intentional" if it was due primarily to an error in judgement or
negligence, but will be deemed "intentional" only if done or omitted to be done
by the Executive not in good faith and without reasonable belief that his action
or omission was in the best interest of the Company. Notwithstanding the
foregoing, the Executive will not be deemed to have been terminated for "Cause"
hereunder unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than three
quarters of the full Board of Directors then in office at a meeting of the Board
of Directors called and held for such purpose, after reasonable notice to the
Executive and an opportunity for the Executive, together with his counsel (if
the Executive chooses to have counsel present at such meeting), to be heard
before the Board, finding that, in the good faith opinion of the Board, the
Executive had committed an act constituting "Cause" as herein defined and
specifying the particulars thereof in detail, provided, however, that nothing
herein will limit the right of the Executive or his beneficiaries to contest the
validity or propriety of any such determination and such determination, albeit a
condition to any termination for "Cause" as aforesaid, will not create any
presumption that "Cause" in fact exists.

            (d) "Competitive Activity" means any act by the Executive that is
prohibited under Section 7(a).

            (e) "Commencement Date" means the date upon which shareholder
approval of the Transactions is obtained.

            (f) "Disability" means the Executive's inability, as a result of
mental or physical illness, injury or disease, substantially to perform his
material duties and responsibilities under this Agreement for a period of 180
consecutive calendar days within any 12-month period.

            (g) "Employee Benefits" means the perquisites, benefits and service
credit for benefits as provided under any and all employee welfare benefit
policies, plans, programs or arrangements in which Executive is entitled to
participate, including without limitation any group or other life, health,
medical/hospital or other insurance (whether funded by actual insurance or
self-insured by the Company), disability, salary continuation, expense
reimbursement and other employee benefit policies, plans, programs or
arrangements that may now exist or any equivalent successor policies, plans,
programs or arrangements that may be adopted hereafter by the Company.

            (h) "Good Reason" means that Executive has complied with the "Good
Reason Process" (hereinafter defined) following the occurrence of any of the
following events: (i) a substantial diminution or other substantive adverse
change, not consented to by Executive in advance and in writing, in the nature
or scope of Executive's responsibilities, authorities, powers, functions, duties
or reporting relationship as in effect on the Closing Date and taking into
account the occurrence of the Transactions; (ii) except in connection with a
termination of


                                     - 2 -
<PAGE>   3
Executive's employment, any removal, during the Term of Employment, of Executive
from or, any failure by management to nominate, or, if nominated, any failure by
the Board to re-elect, Executive to any of the positions indicated in Section 4
as in effect on the Closing Date; (iii) a reduction in Executive's Base Pay or
Minimum Bonus; (iv) a breach by the Company of any of its other material
obligations under this Agreement and the failure of the Company to cure such
breach within 30 days after written notice thereof by Executive; (v) the
involuntary relocation of the Company's offices at which Executive is
principally employed or the involuntary relocation of the offices of Executive's
primary workgroup to a location more than 30 miles from such offices, or the
requirement by the Company for Executive to be based anywhere other than the
Company's offices at such location on an extended basis, except for required
travel on the Company's business to an extent substantially consistent with
Executive's business travel obligations; or (vi) the Company chooses not to
extend the Term of Employment under Section 2. "Good Reason Process" shall mean
that (A) the Executive reasonably determines in good faith that a "Good Reason"
event has occurred; (B) Executive notifies the Company in writing of the
occurrence of the Good Reason event; and (C) the Company does not cure
Executive's objections within a reasonable time not to exceed 60 days.

            (i) "Subsidiary" means an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding voting stock or, if
a partnership, limited liability company or similar entity, at least 50% of the
equity capital interests thereof.

            (j) "Term of Employment" means the period specified in Section 2.

            (k) "Unauthorized Disclosure, Use or Solicitation" means any
violation or breach by the Executive of any provision of Section 9.

         2. TERM OF EMPLOYMENT. The Company hereby employs the Executive and the
Executive hereby accepts such employment pursuant to the terms and conditions
contained herein, effective as of the Closing Date and ending at the close of
business on the fourth anniversary of the Closing Date. On the second
anniversary of the Closing Date and every even-numbered anniversary date
thereafter, the Term of Employment will automatically be extended for an
additional two years unless either party gives written notice to the other, not
less than 90 calendar days prior to the second anniversary or even-numbered
anniversary thereafter, that it or he does not want the Term of Employment so to
extend. Notwithstanding any other provision hereof, this Agreement will
terminate without further action effective as of immediately prior to the
payment by the Company to the Executive of the amount specified in Section 6, if
applicable.

         3. WAIVER OF RIGHTS. As of the Closing Date, the Old Agreement shall be
of no further force or effect and shall be superseded in its entirety by this
Agreement. For the avoidance of doubt, in the event that the Closing (as defined
in the Purchase Agreement) does not occur, the Old Agreement shall remain in
full force and effect in accordance with its terms and this Agreement shall be
null and void. In consideration for the compensation, benefits and other terms
provided by this Agreement, the Executive expressly waives any rights to
payments and benefits to which he may have been entitled pursuant the terms of
the Old Agreement, including, without limitation, stock options to purchase
shares of Company Common Stock (as

                                     - 3 -
<PAGE>   4
hereinafter defined), cash severance payments, continuation of Employee
Benefits, forgiveness of outstanding loan balances and/or accelerated vesting of
outstanding options and restricted stock of the Company

         4. DUTIES AND RESPONSIBILITIES. During the Term of Employment, the
Executive shall serve as the Chairman of the Board and Chief Executive Officer
of the Company, reporting to the Board, shall have supervision and control over
and responsibility for the day-to-day business and affairs of the Company, and
shall have such other powers and duties as may from time to time be prescribed
by the Board, provided that such duties are consistent with Executive's position
or other positions that he may hold from time to time. Executive shall devote
his full working time and efforts to the business and affairs of the Company.
Notwithstanding the foregoing, (i) Executive may serve on other boards of
directors or engage in religious, charitable or other community activities as
long as such services and activities are disclosed to the Board and do not
materially interfere with Executive's performance of his duties to the Company
as provided in this Agreement; and (ii) Executive may perform services under the
Consulting Agreement by and among Wyndham International, Inc., CSMC Management
Services, Inc. and Executive dated June 30, 1998 (the "Consulting Agreement") so
long as the provision of such services pursuant to the Consulting Agreement does
not conflict with the interests of the Company (the determination of whether a
conflict of interest exists in respect of the Executive's provision of services
under the Consulting Agreement shall be determined by the Board in good faith.

         5. COMPENSATION AND BENEFITS.

            (a) BASE PAY. During the Term of Employment, the Executive will
receive Base Pay of not less than $400,000 per year; subject to review by the
Board for increase (but not decrease) at the end of each fiscal year during the
Term of Employment. Such Base Pay will be payable by the Company in accordance
with its regular compensation practices and policies applicable to senior
executives of the Company.

            (b) ANNUAL PERFORMANCE BONUS. For each fiscal year of the Company
during the Term of Employment, the Executive will be eligible for an annual
performance bonus that can vary from a minimum of 100% to a maximum of 200% of
the Executive's Base Pay. The bonus will be subject to the rules issued each
year by the Board. In no event shall the bonus (the "Minimum Bonus") for any
fiscal year payable to the Executive be less than 100% of his Base Pay for such
fiscal year; provided, however, that the Minimum Bonus shall be pro-rated for
any partial year employment.

            (c) EMPLOYEE BENEFITS. During the Term of Employment, the Executive
will be entitled to (i) participate in all employee benefit plans, programs,
policies and arrangements sponsored, maintained or contributed to by the
Company, subject to and in accordance with the terms and conditions of such
plans, programs, policies and arrangements as they relate to similarly situated
senior executives of the Company, (ii) participate in all equity and long-term
incentive plans sponsored or maintained by the Company at a level commensurate
with his position, subject to and in accordance with the terms and conditions of
such plans as they relate

                                     - 4 -

<PAGE>   5
to senior executives of the Company, and (iii) receive all other benefits and
perquisites provided or made available by the Company to its senior executives,
subject to and in accordance with the terms and conditions of such benefits and
perquisites as they relate to senior executives of the Company. Notwithstanding
the foregoing, the health and dental plans offered to Executive shall be at
least as generous as the health and dental plans made available to executives of
CHC Holdings, Inc. at March 1, 1999. Executive shall also be entitled to a car
allowance of $750 per month, plus maintenance, insurance and gas.

            (d) EXPENSES. During the Term of Employment, the Executive will be
entitled to reimbursement of all documented reasonable first class travel and
entertainment expenses incurred by him on behalf of the Company in the course of
the performance of his duties hereunder, subject to and in accordance with the
terms and conditions of the Company's expense reimbursement policies as they
relate to senior executives of the Company. In addition, the Company shall pay
all expenses associated with membership in an executive eating club selected by
Executive.

            (e) VACATION. During the Term of Employment, the Executive will be
entitled to not less than four weeks of vacation, in addition to paid public
holidays as observed by the Company from year to year, subject to and in
accordance with the terms and conditions of the Company's regular compensation
practices and policies as they relate to senior executives of the Company.

            (f) RESTRICTED STOCK. On or around June 18, 1999, the Executive
received from the Company a grant of restricted Stock ("Restricted Stock Grant")
in an amount equal to 3% of the outstanding shares of Common Stock of the
Company. Any unvested portion of the Restricted Stock Grant shall fully vest on
the Closing Date; provided, however, that the Company and the Executive may
mutually agree to defer vesting until a specified date or dates after the
Closing Date on a mutually agreeable schedule. Because the Executive filed an
election pursuant to Section 83 of the Internal Revenue Code of 1986, as amended
(the "Code"), the Company provided Executive a personal recourse loan in an
amount sufficient to enable Executive to satisfy his income and employment tax
liabilities associated with the Restricted Stock Grant. Such loan is due on June
17, 2003 or 30 days after Executive's termination of employment, whichever is
earlier, and will accrue interest at the applicable federal rate under Section
1274(d) of the Code, payable at the maturity date. (Such loan, together with
accrued interest, shall hereinafter be referred to as the "Tax Loan"). If, on
the earlier of June 17, 2003 or the date of the Executive's termination of
employment for any reason other than Cause (the "Determination Date"), the
Market Value of the Common Stock underlying the Restricted Stock Grant is less
than $1.5 million, the Company shall forgive a portion of the Tax Loan
determined by multiplying the outstanding amount of the Tax Loan by a fraction,
the numerator of which shall be the Market Value on the Determination Date and
the denominator of which shall be $1.5 million. For purposes of this Section
5(f) only, the Market Value of the Common Stock will be determined using the
average quoted closing price per share on a national securities exchange for the
20 business days ending on the Determination Date.

                                     - 5 -
<PAGE>   6

            (g) LOAN. The Company has provided to the Executive a loan of
$400,000 which shall be due on June 18, 2005 or 30 days after Executive's
termination of employment, whichever is earlier. The loan will accrue interest
at the applicable federal rate under Section 1274(d) of the Code, payable at the
maturity date. Upon termination of employment of the Executive for any reason
other than Cause, this $400,000 loan, plus accrued interest (the "Loan") shall
be forgiven.

            (h) INTEREST IN COMPANY'S JOINT VENTURE.

                (i) As of the Closing Date, and subject to the execution by the
         Executive of the "JV Agreement" (as defined below), the Executive shall
         be granted a 3.00% "Percentage Interest" (as defined in the JV
         Agreement) as a limited partner in CGLH-IHC Fund I, L.P. (the "JV
         Interest") pursuant to, and subject to the terms and conditions of, the
         JV Agreement. Subject to Section 6 hereof, the Executive's JV Interest
         shall be fully vested as of the Closing Date. For purposes of this
         Agreement the "JV Agreement" shall mean the Agreement of Limited
         Partnership of CGLH-IHC Fund I, L.P. by and between CGLH Partners III
         LP, a Delaware limited partnership, Interstate Investment Corporation,
         a Delaware corporation, CGLH Partners IV LP, a Delaware limited
         partnership, Interstate Property Partnership, L.P. a Delaware limited
         partnership, J. William Richardson, and the Executive, which is
         attached as Exhibit E to the Purchase Agreement, to be entered into at
         the Closing.

                (ii) To the extent that any additional joint venture funds or
         arrangements (similar to the joint venture established pursuant to the
         JV Agreement) are established or entered into by the Company and the
         other parties to the JV Agreement following the Closing Date, the
         parties hereto agree to negotiate in good faith to determine whether
         the Executive will participate in such additional joint venture and the
         terms and conditions of any such participation.

            (i) PREFERRED STOCK. As of the Closing Date, and subject to the last
sentence of this Section 5(i), the Company shall grant to the Executive 100,000
shares of Series B Preferred Stock of the Company (the "Series B Shares").
Subject to Section 6 hereof, the Series B Shares shall be fully vested as of the
Closing Date. The grant of Series B Shares pursuant to this Section 5(i) shall
be subject to the stockholders agreement by and among the Executive, Kevin P.
Kilkeary, J. William Richardson, CGLH I and CGLH II to be entered into on the
date hereof which provides for certain rights and restrictions in connection
with the Executive's ownership of the Series B Shares.

         6. TERMINATION OF EMPLOYMENT.

            (a) TERMINATION UPON EXPIRATION OF THE TERM OF EMPLOYMENT. Subject
to the provisions of Sections 2 and this Section 6, the Executive's employment
hereunder will be for the Term of Employment specified in Section 2.

            (b) TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION WITHOUT GOOD
REASON. Upon notice of the Board's determination of Cause, the Company may
terminate the

                                     - 6 -
<PAGE>   7
Executive's employment hereunder for Cause. Except as otherwise provided in this
Section 6, if the Executive's employment is terminated during the Term of
Employment by the Company for Cause, or by the Executive without Good Reason,
the Executive will not be entitled to any compensation or benefits provided
herein, and nothing herein will limit the Company's rights against the Executive
or the rights and obligations of the parties under Sections 7 and 8.
Notwithstanding the foregoing, in the case of a termination by the Executive
without Good Reason, the Executive shall be entitled to receive his Minimum
Bonus for the year of termination, pro-rated for partial year employment.
Notwithstanding anything in this Agreement to the contrary, (i) if the
Executive's employment is terminated hereunder prior to the first anniversary of
the Commencement Date, the Series B Shares and the JV Interest shall immediately
be forfeited and the Executive shall have no further rights with respect to the
forfeited Series B Shares or JV Interest as of such date of termination; (ii) if
the Executive's employment is terminated hereunder on or after the first
anniversary of the Commencement Date, but prior to the second anniversary of the
Commencement Date, two-thirds (2/3) of each of the Series B Shares and the JV
Interest shall immediately be forfeited as of such date of termination and the
Executive shall have no further rights with respect to the forfeited Series B
Shares or JV Interest; and (iii) if the Executive's employment is terminated on
or after the second anniversary of the Commencement Date, but prior to the third
anniversary of the Commencement Date, one-third (1/3) of each of the Series B
Shares and the JV Interest shall immediately be forfeited as of such date of
termination and the Executive shall have no further rights with respect to the
forfeited Series B Shares or JV Interest.

            (c) TERMINATION FOR ANY REASON OTHER THAN CAUSE, DISABILITY OR
DEATH; AND VOLUNTARY TERMINATION FOR GOOD REASON. If the Executive's employment
is terminated during the Term of Employment by the Company for any reason other
than Cause, Disability or death, or by the Executive for Good Reason:

                (i) The Executive will be entitled to receive his Minimum Bonus
         for the year of termination, pro-rated for partial year employment; and

                (ii) The Executive will be entitled to receive in a lump sum in
         cash an amount equal to two times the sum of his Base Pay (at the rate
         in effect on the effective date of his termination of employment) and
         his Minimum Bonus; and

                (iii) For 24 months following the effective date of the
         Executive's termination of employment (the "Continuation Period"), the
         Company will arrange to provide the Executive and his eligible
         dependents with Employee Benefits (excluding retirement, deferred
         compensation and stock option, stock purchase, stock appreciation or
         similar compensatory benefits) that are substantially similar to those
         that the Executive and such dependents were receiving or entitled to
         receive immediately prior to the effective date of the Executive's
         termination of employment, except that the level of any such Employee
         Benefits (other than health and dental benefits) to be provided to the
         Executive and such dependents may be reduced in the event of a
         corresponding reduction generally applicable to all senior executives.
         If and to the extent that any benefit described in this Section
         6(c)(iii) is not or cannot be paid or provided under any policy,

                                     - 7 -
<PAGE>   8
         plan, program or arrangement of the Company or any Subsidiary, as the
         case may be, then the Company will itself pay or provide for the
         payment of such Employee Benefits to the Executive, his dependents and
         his beneficiaries, and

                (iv) The portion of each of the Series B Shares and/or the JV
         Interest held by the Executive, which are unvested or subject to
         restrictions as of the date of such termination of employment, shall
         vest and become immediately nonforfeitable and unrestricted as of such
         date of termination.

            (d) DEATH OR DISABILITY. If the Executive's employment is terminated
effective during the Term of Employment as a result of his death or by the
Company as a result of his Disability, the Executive (or, in the event of his
death, his designated beneficiary) will be entitled to receive his Minimum Bonus
for the year of termination, pro-rated for partial year employment. The
Executive (or, in the event of his death, his designated beneficiary) will be
entitled to receive his Base Pay (at the rate in effect on the effective date of
his termination of employment) and Minimum Bonus for a period of 12 months
following such effective date, payable in accordance with the Company's regular
compensation practices and policies applicable to senior executives but less any
amounts paid to the Executive under any long-term disability plan, program,
policy or arrangement of the Company or any Subsidiary. The portion of each of
the Series B Shares and the JV Interest held by the Executive which are unvested
or subject to restrictions as of the date of such termination shall vest and
become immediately nonforfeitable and unrestricted as of the date of such
termination.

                (e) EXCISE TAXES. (i) If Executive incurs the tax (the "Excise
         Tax") imposed by Section 4999 of the Internal Revenue Code of 1986 (the
         "Code") on "excess parachute payments" within the meaning of Section
         280G(b)(1) of the Code, the Company will pay to Executive an amount
         (the "Gross Up Payment") such that the net amount retained by
         Executive, after deduction of any Excise Tax on the excess parachute
         payment and any federal, state and local taxes (together with penalties
         and interest) and Excise Tax upon the payment provided for by this
         Section 6(e)(i), and any federal, state and local taxes (together with
         penalties and interest thereon) will be equal to the payments made to
         the Executive that constitute a parachute payment pursuant to Prop.
         Treas. Reg. Section 1.280G-1 (including any such payments made pursuant
         to this Section 6(e)(i)) minus the Gross Up Payment.

                (ii) For purposes of determining the amount of the Gross Up
         Payment, Executive will be deemed to pay federal income taxes at the
         highest marginal rate of federal taxation in the calendar year in which
         the Gross Up Payment is to be made and state and local income taxes at
         the highest marginal rates of taxation in the state and locality of
         Executive's residence on the date of Executive's termination, net of
         the maximum reduction in federal income taxes that could be obtained
         from deduction of such state and local taxes. The determination of
         whether the Excise Tax is payable and the amount thereof will

                                     - 8 -
<PAGE>   9
         be determined by a firm of independent certified public accountants
         jointly selected by the Company and the Executive.

                (iii) The Company will pay the estimated amount of the Gross Up
         Payment to the Federal tax authorities as withholding taxes. The
         Executive and the Company agree to reasonably cooperate in the
         determination of the actual amount of the Gross Up Payment. Further,
         Executive and the Company agree to make such adjustments to the
         estimated amount of the Gross Up Payment as may be necessary to equal
         the actual amount of the Gross Up Payment, which in the case of
         Executive will refer to refunds of prior overpayments and in the case
         of the Company will refer to makeup of prior underpayments.

            (f) COMPENSATION AND BENEFITS ON TERMINATION. Except as otherwise
provided in Section 6(b), (c) or (d);

                (i) All compensation and benefits payable to the Executive
         pursuant to Section 5 (other than compensation and benefits previously
         earned and, if applicable, vested under the terms of this Agreement or
         any other applicable employee benefit plan, program, policy,
         arrangement or agreement) will terminate as of the effective date of
         the Executive's termination of employment; and

                (ii) The Executive will not be entitled to, and hereby waives,
         any claims for compensation or benefits (other than compensation and
         benefits previously earned and, if applicable, vested under the terms
         of this Agreement or any other applicable employee benefit plan,
         program, policy, arrangement or agreement) payable after such effective
         date and for damages arising in connection with his termination of
         employment pursuant to this Agreement.

                (iii) The portion of each of the Series B Shares and/or the JV
         Interest held by the Executive on the date of such termination which
         are unvested or subject to restrictions as of such date, shall vest and
         become nonforfeitable and unrestricted as of such termination.

            (g) NO MITIGATION OBLIGATION. The Company hereby acknowledges that
it will be difficult and may be impossible for the Executive to find reasonably
comparable employment following the Termination Date. Accordingly, the payment
of the compensation by the Company to the Executive in accordance with the terms
of this Agreement is hereby acknowledged by the Company to be reasonable, and
the Executive will not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
will any profits, income, earnings or other benefits from any source whatsoever
create any mitigation, offset, reduction or any other obligation on the part of
the Executive hereunder or otherwise.

                                     - 9 -
<PAGE>   10

            (h) PURCHASE OF SERIES B SHARES UPON TERMINATION OF EMPLOYMENT. (i)
At any time after the termination of the Executive's employment with the
Company, the Company shall have the right (but not the obligation) to acquire
all of the Executive's Series B Shares (the "Purchase Interest"), for an amount
equal to the fair market value of such Purchase Interest as of the Purchase
Interest Closing Date (as defined below). The following procedure shall apply to
such proposed acquisition:

                (ii) The Company shall give notice (the "Purchase Notice") to
         the Executive specifying the fair market value for the Executive's
         Purchase Interest as of the date of such Purchase Notice, determined by
         the Company in good faith. For a period of 10 days after the Purchase
         Notice has been given, the Company and the Executive shall negotiate in
         good faith to mutually agree on such fair market value (the "Purchase
         Price").

                (iii) On a date mutually agreed by the Company and the
         Executive, but in no event later than 20 days after the Purchase Notice
         has been given (such date, the "Purchase Closing Date"), the Company
         shall pay to the Executive the Purchase Price against the delivery of
         certificates or other instruments evidencing such Series B Shares duly
         endorsed for transfer.

                (iv) Any dispute as to the fair market value of the Purchase
         Interest shall be submitted for final determination to a mutually
         acceptable investment banking firm of national reputation familiar with
         the valuation of companies in the hospitality and lodging industry (an
         "Investment Banking Firm"). In the event that the Company and the
         Executive cannot agree on a mutually acceptable Investment Banking Firm
         within 10 business days, the Company, on the one hand, and the
         Executive, on the other hand, shall each select one Investment Banking
         Firm, which two Investment Banking Firms shall jointly make such
         determination within 20 business days after the date of the Purchase
         Notice, or, if such two Investment Banking Firms are unable to agree on
         such determination, the two Investment Banking Firms shall, by the end
         of the 20th business day after the date of the Purchase Notice, select
         a third Investment Banking Firm and notify such third Investment
         Banking Firm in writing (with a copy to the Company and the Executive)
         of their respective determinations of the fair market value of the
         Purchase Interest following which such third Investment Banking Firm
         shall, within 15 business days after the date of its selection, notify
         the Company and the Executive in writing of its selection of one or the
         other of the two original determinations of the fair market value of
         the Purchase Interest, which determination shall be final and binding
         on the Company and the Executive.

                (v) The costs of the Investment Banking Firms shall be borne by
         the Company.

         7. COMPETITIVE ACTIVITY. During the Term of Employment and the period
ending one year following the effective date of the Executive's termination of
employment, the Executive will not:

                                     - 10 -
<PAGE>   11

            (a) enter into or engage in any business which competes with the
Company's business or promote or assist, financially or otherwise, any firm,
person, association, partnership, corporation or other entity engaged in any
business which competes with the Company's business; provided that this clause
(a) shall cease to apply after the Executive's termination of employment, or

            (b) solicit or endeavor to cause any employee of the Company or any
Subsidiary to leave his employment or induce or attempt to induce any such
employee to breach any employment agreement with the Company or any Subsidiary
or otherwise interfere with the employment of any such employee; or

            (c) solicit, endeavor to cause, induce or attempt to induce any
agent who engages in the business of marketing the services of the Company or
any Subsidiary to terminate, reduce or modify its agency relationship with the
Company or any Subsidiary.

         Notwithstanding the foregoing, the Executive's activities under the
Consulting Agreement will not be deemed to be a violation of this Section 7.

         8. UNAUTHORIZED DISCLOSURE, USE OR SOLICITATION.

            (a) Executive will keep in strict confidence, and will not, directly
or indirectly, at any time during or after his employment with the Company,
disclose, furnish, disseminate, make available or, except in the course of
performing his duties of employment hereunder, use any trade secrets or
confidential business and technical information of the Company or its customers,
vendors or property owners or managers, without limitation as to when or how
Executive may have acquired such information. Such confidential information will
include, without limitation, the Company's unique selling methods and trade
techniques, management, training, marketing and selling manuals, promotional
materials, training courses and other training and instructional materials,
vendor, owner, manager and product information, customer lists, other customer
information and other trade information. Executive specifically acknowledges
that all such confidential information including, without limitation, customer
lists, other customer information and other trade information, whether reduced
to writing, maintained on any form of electronic media, or maintained in the
mind or memory of Executive and whether compiled by the Company, and/or
Executive, derives independent economic value from not being readily known to or
ascertainable by proper means by others who can obtain economic value from its
disclosure or use, that reasonable efforts have been made by the Company to
maintain the secrecy of such information, that such information is the sole
property of the Company and that any retention and use of such information by
Executive during his employment with the Company (except in the course of
performing his duties and obligations hereunder) or after the termination of his
employment will constitute a misappropriation of the Company's trade secrets.

            (b) Executive agrees that upon termination of Executive's employment
with the Company, for any reason, Executive will return to the Company, in good
condition, all property of the Company, including without limitation, the
originals and all copies of all management, training, marketing and selling
manuals, promotional materials, other training and


                                     - 11 -
<PAGE>   12
instructional materials, vendor, owner, manager and product information,
customer lists, other customer information and all other selling, service and
trade information and equipment. In the event that such items are not so
returned, the Company will have the right to charge Executive for all reasonable
damages, costs, attorneys' fees and other expenses incurred in searching for,
taking, removing and/or recovering such property.

            (c) Executive acknowledges that to the extent permitted by law, all
work papers, reports, documentation, drawing, photographs, negatives, tapes and
masters therefor, prototypes and other materials (hereinafter, "items"),
including, without limitation, any and all such, items generated and maintained
on any form of electronic media, generated by Executive during his employment
with the Company will be considered a "work made for hire" and that ownership of
any and all copyrights in any and all such items will belong to the Company. The
item will recognize the Company as the copyright owner, will contain all proper
copyright notices, e.g., "(year of creation" Interstate Hotels Management, Inc
All rights reserved" and will be in condition to be registered or otherwise
placed in compliance with registration or other statutory requirements
throughout the world.

            (d) Executive may use the Company's trade names, trademarks and/or
service marks in connection with the sale of the Company's products and
services, but only in such manner and for such purposes as may be authorized by
the Company. Upon any termination of this Agreement, Executive immediately will
cease the use of such trade names, trademarks and/or service marks and eliminate
them wherever they have been used or incorporated by Executive.

         9. SUCCESSORS AND BINDING AGREEMENT.

            (a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business or assets of the Company, by agreement
in form and substance reasonably satisfactory to the Executive, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent the Company would be required to perform if no such succession had taken
place. This Agreement will be binding upon and inure to the benefit of the
Company and any successor to the Company, including without limitation any
persons acquiring directly or indirectly all or substantially all of the
business or assets of the Company whether by purchase, merger, consolidation,
reorganization or otherwise (and such successor will thereafter be deemed the
"Company" for the purposes of this Agreement), but will not otherwise be
assignable, transferable or delegable by the Company.

            (b) This Agreement will inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.

            (c) This Agreement is personal in nature and neither of the parties
hereto will, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided in
Sections 9(a) and (b). Without limiting the generality or effect of the
foregoing, the Executive's right to receive payments hereunder will not

                                     - 12-
<PAGE>   13
be assignable, transferable or delegable, whether by pledge, creation of a
security interest, or otherwise, other than by a transfer by Executive's will or
by the laws of descent and distribution and, in the event of any attempted
assignment or transfer contrary to this Section 9(c), the Company will have no
liability to pay any amount so attempted to be assigned, transferred or
delegated.

         10. LEGAL FEES AND EXPENSES. It is the intent of the Company that the
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's rights
under this Agreement by litigation or otherwise because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Executive hereunder. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under the Agreement
or in the event that the Company or any other person takes or threatens to take
any action to declare this Agreement void or unenforceable, or institutes any
litigation, arbitration or other action or proceeding designed to deny, or to
recover from, the Executive the benefits provided or intended to be provided to
the Executive hereunder, the Company irrevocably authorizes the Executive from
time to time to retain counsel of Executive's choice, at the expense of the
Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation, arbitration or
other legal action, whether by or against the Company or any Director, officer,
stockholder or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a confidential relationship
shall exist between the Executive and such counsel. Without respect to whether
the Executive prevails, in whole or in part' in connection with any of the
foregoing, the Company will pay and be solely financially responsible for any
and all attorneys' and related fees and expenses incurred by the Executive in
connection with any of the foregoing.

         11. ADDITIONAL REMEDIES.

            (a) Notwithstanding any other remedy herein provided for or
available, if the Executive should be in breach of any of the provisions of
Section 7 or 8, the Executive expressly acknowledges and agrees that the Company
will be entitled to injunctive relief or specific performance, without the
necessity of proving damages, in addition to any other remedies it may have.

            (b) Notwithstanding any of the foregoing, in the event of any
disputes regarding the interpretation or application of any provision of this
Agreement, either the Executive or the Company, or both parties, may request in
writing that such dispute be resolved through final and binding arbitration. The
parties will jointly select the arbitrator who will hear such dispute. If the
parties cannot agree on the selection of an arbitrator, the parties will request
that one be appointed by the American Arbitration Association. The arbitration
will be conducted in the city in which the Executive's principal office is
located (or in any other location mutually agreed upon by the parties) in
accordance with the Employment Dispute Resolution Rules of the

                                     - 13 -
<PAGE>   14
American Arbitration Association. The parties acknowledge and agree that time
will be of the essence throughout such procedure. The decision of the arbitrator
may be entered in any court having subject matter and personal jurisdiction over
the dispute and the Executive. The Company will pay any costs and expenses in
connection with any such dispute or procedure.

         12. REPRESENTATION. Each party represents and warrants that it is fully
authorized and empowered to enter into this Agreement, including Board approval
in the case of the Company, and that the performance of its obligations under
this Agreement will not violate any agreement between it and any other person or
entity.

         13. SEVERABILITY. In the event that any provision or portion of this
Agreement is determined to be invalid or unenforceable for any reason, in whole
or in part, the remaining provisions of this Agreement will be unaffected
thereby and will remain in full force and effect to the fullest extent permitted
by law.

         14. LITIGATION AND REGULATORY COOPERATION. During and after Executive's
employment, Executive shall reasonably cooperate with the Company in the defense
or prosecution of any claims or actions now in existence or which may be brought
in the future against or on behalf of the Company which relate to events or
occurrences that transpired while Executive was employed by the Company;
provided, however, that such cooperation shall not materially and adversely
affect Executive or expose Executive to an increased probability of civil or
criminal litigation. Executive's cooperation in connection with such claims or
actions shall include, but not be limited to, being available to meet with
counsel to prepare for discovery or trial and to act as a witness on behalf of
the Company at mutually convenient times. During and after Executive's
employment, Executive also shall cooperate fully with the Company in connection
with any investigation or review of any federal, state or local regulatory
authority as any such investigation or review relates to events or occurrences
that transpired while Executive was employed by the Company. The Company shall
also provide Executive with compensation on an hourly basis calculated as his
final Base Pay for requested litigation and regulatory cooperation that occurs
after his termination of employment, and reimburse Executive for all costs and
expenses incurred in connection with his performance under this Section 14;
including, but not limited to, reasonable attorney's fees and costs.

         15. INDEMNIFICATION. The Executive shall receive the maximum
indemnification from the Company as permitted by the Company's by-laws in effect
at any time during the Term of this Agreement and applicable law. This Section
shall survive the termination of this Agreement.

         16. NOTICES. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five business days
after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been
sent by a nationally recognized overnight courier service such as Federal
Express or UPS, addressed to the Company

                                     - 14 -
<PAGE>   15
(to the attention of the Secretary of the Company) at its principal executive
office and to the Executive at his principal residence (with a copy to [David
Kenin, Greenberg Traurig, P.A.. 1221 Brickell Avenue, Miami, FL 33131]), or to
such other address as any party may have furnished to the other in writing and
in accordance herewith, except that notices of changes of address will be
effective only upon receipt.

         17. MODIFICATIONS AND WAIVERS. No provision of this Agreement may be
modified or discharged unless such modification or discharge is authorized by
the Board and is agreed to in writing, signed by the Executive and by an officer
of the Company duly authorized by the Board. No waiver by either party hereto of
any breach by the other party hereto of any condition or provision of this
Agreement to be performed by such other party will be deemed a waiver of similar
or dissimilar provisions or conditions at the time or at any prior or subsequent
time.

         18. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding of the parties hereto with respect to its subject matter, except
as such parties may otherwise agree in a writing which specifies that it is an
exception to the foregoing. Without limiting the generality of the foregoing
sentence, as of the Commencement Date, the Old Agreement shall cease to be of
any force or effect. This Agreement supersedes all prior agreements between the
parties hereto with respect to its subject matter and, notwithstanding any other
provision hereof, will become effective upon the execution of this Agreement by
the parties.

         19. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the Commonwealth of Pennsylvania, without giving
effect to the principles of conflict of laws of such Commonwealth.

         20. COUNTERPARTS. This Agreement may be executed simultaneously in one
or more counterparts, each of which will be deemed to be an original but all of
which together will constitute one and the same instrument.

         21. HEADINGS, ETC. The section headings contained in this Agreement are
for convenience of reference only and will not be deemed to control or affect
the meaning or construction of any provision of this Agreement. References to
Sections are to Sections in this Agreement.


                                     - 15 -
<PAGE>   16


         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.



                               INTERSTATE HOTELS CORPORATION.



                               By:     /s/ Timothy Q. Hudak
                                   -----------------------------------------
                                   Title: Senior Vice President



                                      /s/  Thomas F. Hewitt
                                   -----------------------------------------
                                   Thomas F. Hewitt