Document:

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                                                                    Exhibit 10.3

                                                                  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

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                           (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

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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 third 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

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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

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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.

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                  (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

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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,

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                  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 be determined by a firm of independent
                  certified public accountants jointly selected by the Company
                  and the Executive.

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                           (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.

                  (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

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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:

                  (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

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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 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

                                      -11-
<PAGE>   12

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 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

                                      -12-
<PAGE>   13

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 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

                                      -13-
<PAGE>   14

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 (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

                                      -14-
<PAGE>   15

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/ J. William Richardson
                                   ---------------------------------
                                Title: Vice Chairman and Chief Financial Officer

                                /s/ Thomas F. Hewitt
                                ------------------------------------
                                Thomas F. Hewitt<PAGE>   1
                                                                    Exhibit 10.4

                                                                  EXECUTION COPY

                              EMPLOYMENT AGREEMENT

         THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement"), dated as
of August 31, 2000, and effective as of the Closing Date (as defined below), is
made and entered into by and between Interstate Hotels Corporation, a Maryland
corporation (the "Company"), and J. William Richardson (the "Executive") hereby
amends and restates the employment agreement between the Company and the
Executive dated as of June 18, 1999 (the "Old Agreement").

                                    RECITALS

         WHEREAS, the Executive is currently service as a senior executive 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 wrongful damage to property of the
         Company or any Subsidiary;

                           (iii) intentional Unauthorized Disclosure, Use or
         Solicitation, or

<PAGE>   2

                           (iv) intentional 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 judgment 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 commission 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.

                  (e) "COMMENCEMENT DATE" means the date upon which shareholder
approval for 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 the Executive has complied with
the "Good Reason Process " (hereinafter defined) following the occurrence of a
substantial diminution or other adverse change, not consented to by the
Executive in advance and in writing, in the nature or scope of Executive's
responsibilities, authorities, powers, functions, duties or reporting
relationships, as in effect on the Closing Date after giving effect to the
Transactions. "Good Reason Process" shall mean that (A) the Executive reasonably
determines in good faith that a

                                      -2-
<PAGE>   3

"Good Reason" event has occurred; (B) the 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 8.

         2. TERM OF EMPLOYMENT. The Company hereby employs the Executive and the
Executive hereby accepts such employment, effective as of the Closing Date and
ending at the close of business on the third anniversary of the Closing Date
(the "Term of Employment"); provided, however, that commencing on the second
anniversary of the Closing Date and each anniversary thereafter, the Term of
Employment will automatically be extended for successive one-year periods unless
either party gives written notice to the other, not less than 90 calendar days
prior to the second anniversary or subsequent anniversary thereafter, that it or
he does not want the Term of Employment so to extend.

         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 Purchase Agreement) of the Transactions does not occur, the Old Agreement
shall remain in full force and effect in accordance with the 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 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, RESPONSIBILITIES AND OFFICE LOCATION. During the Term of
Employment, the Executive will have and perform the duties and responsibilities
set forth in Exhibit A, provided, however, that the Board may from time to time
change those duties and responsibilities (in which event the parties may, but
will not be required to, substitute a new Exhibit A) and no such change will
give rise to any liability on the part of the Company so long as such change
does not result in a change in the primary reporting relationship set forth on
Exhibit A; provided, however, that such change may constitute Good Reason, as
defined in Section 1(h) hereof. The Executive will devote substantially all of
his business time to the business and affairs of the Company and its
Subsidiaries (excluding reasonable amounts of time devoted to charitable
purposes, passive investments and directorships and periods in which he is
physically or mentally ill, injured or otherwise disabled).

                                      -3-
<PAGE>   4

         5. COMPENSATION AND BENEFITS. (a) BASE PAY. During the Term of
Employment, the Executive will receive Base Pay of $325,000 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 under the Company's Management Bonus Plan ("Bonus
Plan"), that can vary from a minimum of $200,000 to a maximum of 200% of the
Executive's base salary. The Bonus will be subject to the rules issued each year
by the Board. During 1999 the Bonus will be based on Hotel Profits and Corporate
Profits and shall be calculated and paid consistent with other Executives of the
Company. In future years these categories may be revised or deleted and new
categories could be added. The Executive must be employed by the Company at the
time the Bonus is scheduled to be paid to be eligible to receive the Bonus.

                  (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 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.

                  (d) EXPENSES. During the Term of Employment, the Executive
will be entitled to reimbursement of all documented reasonable 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.

                  (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) LOANS. The Company has loaned the Executive $357,317, the
repayment of which shall be forgiven by the Company so long as the Executive's
employment is not terminated by the Company for Cause or voluntarily by the
Executive prior to September 16, 1999. At the Executive's request, the Company
will amortize such loan forgiveness on terms and conditions mutually agreed upon
between Company and Executive.

                                      -4-
<PAGE>   5

                  (g) EQUITY. On November 1, 1999, Executive received a grant of
150,000 shares of restricted stock of the Company ("Restricted Stock Grant").
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.

                  (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 2.25% "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, Thomas F. Hewitt and
         the Executive, which is attached as Exhibit E to the Purchase
         Agreement, to be entered into on the Closing Date.

                           (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
75,000 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 Commencement 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, Thomas F. Hewitt, 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 BY NOTICE. Subject to the
provisions of Section 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. The Company may, with or without notice, terminate the Executive's
employment hereunder for Cause. If the Executive's employment is terminated
during the Term of Employment by the Company for Cause, or by the Executive
other than for Good Reason, the Executive will not be entitled to any
compensation or benefits provided herein, and nothing

                                      -5-
<PAGE>   6

herein will limit the Company's rights against the Executive or the rights and
obligations of the parties under Sections 7 and 8. Notwithstanding anything in
this Agreement to the contrary, (i) if the Executive's employment is terminated
by the Company for Cause (A) 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; (B) 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 (C) 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 and (ii) if the Executive's employment is terminated by the Executive
other than for Good Reason during the nine (9) month period immediately
following the Commencement Date, the Series B Shares and 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.

                  (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 the
         greater of (A) the sum of his Base Pay and annual performance bonus for
         one (1) year immediately preceding the effective date of his
         termination of employment and (B) his Base Pay (at the rate in effect
         on the effective date of his termination of employment) and annual
         performance bonus based upon the highest annual performance bonus
         received by the Executive during the Term of this Agreement for the
         remainder of the Term of Employment, in either case payable in
         accordance with the Company's regular compensation practices and
         policies applicable to senior executives; and

                           (ii) For one (1) year following the effective date of
         the Executive's termination of employment or, if longer, the remainder
         of the Term 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 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)(ii) is not or cannot be paid or provided under any policy,
         plan, program or arrangement of the Company or any

                                      -6-
<PAGE>   7

         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. Employee Benefits otherwise
         receivable by the Executive pursuant to this Section 6(c)(ii) will be
         reduced to the extent comparable welfare benefits are actually received
         by the Executive from another employer during the Continuation Period
         following the effective date of the Executive's termination of
         employment, and any such benefits actually received by the Executive
         must be reported by the Executive to the Company.

                  (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.

                  (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 Base Pay
(at the rate in effect on the effective date of his termination of employment)
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/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.

                  (e) EXCISE TAX.

                           (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)(l) 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

                                      -7-
<PAGE>   8

         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 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 4 (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
         daze 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 and that the
non-competition covenant contained in Section 7 will further limit the
employment opportunities for the Executive. 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, except as expressly provided in the last
sentence of Section 6(c)(ii).

                                      -8-
<PAGE>   9

                  (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:

                                      -9-
<PAGE>   10

                  (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; and
provided further that the Executive shall be permitted to (a) enter into
agreements with Milton Fine and/or his immediate family members or trusts for
their benefit and affiliates (the "Fine Group") and (b) pursuant to such
agreements with the Fine Group invest in entities that engage in activities in
the lodging industry, so long as, at the time the Executive enters into such
agreement or investment, hotels owned by such entities are managed by the
Company; provided, further, that if hotels owned by such entities are not
managed by the Company, the Executive shall obtain the approval of the Board
prior to entering into any such agreement or making any such investment, or

                  (b) solicit or endeavor, directly or indirectly (including
through third parties), 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.

         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.

                                      -10-
<PAGE>   11

                  (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 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 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 Corporation. 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 hereby assigns and agrees to assign to the
Company, its successors, assigns or nominees, all of his rights to any
discoveries, inventions and improvements, whether patentable or note, made,
conceived or suggested, either solely or jointly with others, by Executive while
in the Company's employ, whether in the course of his employment with the use of
the Company's time, materials or facilities or in any way within or related to
the existing or contemplated scope of the Company's business. Any discovery,
invention or improvement relating to any subject matter with which the Company
was concerned during Executive's employment and made, conceived or suggested by
Executive, either solely or jointly with others, within one year following
termination of Executive's employment under this Agreement or any successor
agreements will be irrebuttably presumed to have been so made, conceived or
suggested in the course of such employment with the use of the Company's time,
materials or facilities. Upon request by the Company with respect to any such
discoveries, inventions or improvements, Executive will execute and deliver to
the Company, at any time during or after his employment, all appropriate
documents for use in applying for, obtaining and maintaining such domestic and
foreign patents as the Company may desire, and all proper assignments therefor,
when so requested, at the expense of the Company, but without further or
additional consideration.

                  (e) 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.

                                      -11-
<PAGE>   12

                  (f) The Executive will not directly or indirectly (i) 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 (ii) 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.

         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 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 8(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 this
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

                                      -12-
<PAGE>   13

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 Pittsburgh, Pennsylvania (or in any other location mutually
agreed upon by the parties) in accordance with the rules of the 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 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

                                      -13-
<PAGE>   14

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" fees
and costs.

         15. INDEMNIFICATION. The Executive shall receive 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 (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 any counsel designated by the Executive), 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. DISCLOSURE. During the Term of Employment and for one year
thereafter, Executive will communicate the contents of this Agreement to any
person, firm, association, partnership, corporation or other entity which he or
she intends to be employed by, associated I with, or represent and which is
engaged in a business that is competitive to the business of the Company.

         18. 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.

                                      -14-
<PAGE>   15

         19. 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.

         20. 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.

         21. 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

         22. 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: Attorney-in-fact for Thomas F. Hewitt

                                   /s/ J. William Richardson
                                   -----------------------------
                                   J. William Richardson

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