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                       FIRST AMENDMENT TO MASTER AGREEMENT



         THIS FIRST AMENDMENT TO MASTER AGREEMENT ("Agreement") is made as of
the 21st day of November 1996, among Doubletree Corporation, a Delaware
corporation ("Tree"), RFS, Inc., a Tennessee corporation (the "Lessee"), RFS
Hotel Investors, Inc., a Tennessee corporation ("RFSI"), RFS Partnership, L.P.,
a Tennessee limited partnership (the "Lessor"), RFS Leasing, Inc., a Tennessee
corporation and a wholly-owned subsidiary of the Lessee (the "Additional
Lessee"), RFS Financing Partnership, L.P., a Tennessee limited partnership (the
"Additional Lessor") and DTR RFS Lessee, Inc., a California corporation ("DTR
Lessee").

                                    RECITALS


         A. The Lessor and the Lessee are parties to that certain Consolidated
Lease Amendment dated as of February 27, 1996 (the "Existing Lease"), which
Existing Lease represents (as of the date hereof) forty-eight (48) separate
leases (the "Existing Leases").

         B. The Lessor and DTR Lessee are parties to that certain Lease
Agreement dated as of May 30, 1996 (the "Existing DTR Lease").

         C. The Lessor currently owns forty-eight (48) hotel properties
described in Exhibit A that are leased under the Existing Lease to the Lessee
and owns the hotel property described in Exhibit B (the "Del Mar Hotel") that is
leased under the Existing DTR Lease to DTR Lessee.

         D. The Lessor is transferring to the Additional Lessor as of the date
hereof its fee interest in 15 of the hotel properties (the "Transfer Hotels"),
identified on Exhibit A and Exhibit B as Transfer Hotels, and in connection with
such transfer the Lessor desires to assign to the Additional Lessor all of its
rights under (1) the 14 leases represented by the Existing Lease


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relating to all of the Transfer Hotels other than the Del Mar Hotel (the "14
Existing Leases") and (2) the Existing DTR Lease relating to the Del Mar Hotel.

         E. In connection with the transfer of the Transfer Hotels to the
Additional Lessor, at the request of the Lessor and the Additional Lessor, (1)
the Lessee has agreed to assign to the Additional Lessee all of its rights under
the 14 Existing Leases and (2) DTR Lessee has agreed to assign to the Additional
Lessee the Existing DTR Lease relating to the Del Mar Hotel.

         F. The Additional Lessor and the Additional Lessee desire to amend
certain provisions of the 14 Existing Leases and the Existing DTR Lease.

         G. The Lessor and the Lessee desire to amend certain provisions of the
Existing Lease relating to the 34 hotel properties (the "Remaining Hotels")
identified on Exhibit A as Remaining Hotels.

         H. The parties hereto desire to amend the Master Agreement dated as of
February 1, 1996 (the "Original Master Agreement") among Tree, Seedling Merger
Subsidiary, Inc. (which was subsequently merged into the Lessee), the Lessee,
RFSI and the Lessor, to make certain amendments and other agreements with
respect to the foregoing and the Original Master Agreement.

                                  AGREEMENTS


         NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

         1. CERTAIN DEFINITIONS. Capitalized terms used but not defined herein
shall have the meanings assigned to them in the Original Master Agreement.
Unless the context otherwise

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requires, (a) references to the singular shall include the plural and vice
versa, (b) references to gender shall include all genders, (c) references to
designated "Sections" or other subdivisions are references to the designated
Sections or other subdivisions of this Amendment or the Original Master
Agreement, as applicable, (d) all accounting terms not otherwise defined herein
shall have the meanings assigned to them in accordance with GAAP and, if
applicable, the Uniform System of Accounts (as defined in the Existing Lease)
and (e) the words "herein," "hereof," and "hereunder" and other words of similar
import refer to this Amendment or the Original Master Agreement, as applicable,
as a whole and not to any particular Section or other subdivision.

         2.       ASIGNMENT AND ASSUMPTION THE 14 EXISTING LEASES AND THE

                  EXISTING

                  a.       By the Lessor and the Additional Lessor:
                           (i)  The Lessor hereby (A) assigns to the Additional

                  Lessor all of its right, title and interest in and to the 14
                  Existing Leases and the Existing DTR Lease and (B) conveys,
                  transfers and assigns to the Additional Lessor all of its
                  interest in and to any fixtures, equipment and other personal
                  property used in connection with the Transfer Hotels.

                           (ii) The Additional Lessor hereby (A) accepts the
                  assignments, conveyances and transfers in paragraph (i) above
                  and (B) assumes all of the obligations of the Lessor under the
                  14 Existing Leases and the Existing DTR Lease accruing from
                  and after the date hereof.

                           (iii) The Lessor hereby agrees to hold the Additional
                  Lessor harmless from the obligations and liabilities of the
                  "Lessor" under the 14 Existing Leases

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                  and the Existing DTR Lease arising from or relating to events
                  or circumstances occurring prior to the date hereof. The
                  Additional Lessor hereby agrees to hold the Lessor harmless
                  from the obligations and liabilities of the "Lessor" under the
                  14 Existing Leases and the Existing DTR Lease arising from or
                  relating to events or circumstances occurring on or after the
                  date hereof.

                  b.       By the Lessee, DTR Lessee and the Additional Lessee:
                           (i) The Lessee hereby (A) assigns to the Additional

                  Lessee all of its right, title and interest in and to the 14
                  Existing Leases and (B) conveys, transfers and assigns to the
                  Additional Lessee all of its interest in and to any fixtures,
                  equipment and other personal property used in connection with
                  the Transfer Hotels other than the Del Mar Hotel.

                           (ii) DTR Lessee hereby (A) assigns to the Additional
                  Lessee all of its right, title and interest in and to the
                  Existing DTR Lease and (B) conveys, transfers and assigns to
                  the Additional Lessee all of its interest in and to any
                  fixtures, equipment and other personal property used in
                  connection with the Del Mar Hotel.

                           (iii) The Additional Lessee hereby (A) accepts the
                  assignments, conveyances and transfers in paragraphs (i) and
                  (ii) above and (B) assumes all of the obligations of the
                  Lessee under the 14 Existing Leases and of DTR Lessee under
                  the Existing DTR Lease, in each case accruing from and after
                  the date hereof.

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                           (iv) Each of the Lessee and DTR Lessee hereby agrees
                  to hold the Additional Lessee harmless from the obligations
                  and liabilities of the "Lessee" under the 14 Existing Leases
                  and the Existing DTR Lease, respectively, arising from or
                  relating to events or circumstances occurring prior to the
                  date hereof. The Additional Lessee hereby agrees to hold
                  harmless the Lessee and the DTR Lessee from the obligations
                  and liabilities of the "Lessee" under the 14 Existing Leases
                  and the Existing DTR Lease, respectively, arising from or
                  relating to events or circumstances occurring on or after the
                  date hereof.

                  c. The Lessor agrees to look solely to the Lessee with respect
         to the obligations of the "Lessee" under the 14 Existing Leases
         accruing, or arising from or relating to events or circumstance
         occurring, prior to the date hereof and solely to the DTR Lessee with
         respect to the obligations of the "Lessee" under the Existing DTR Leas
         accruing, or arising from or relating to events or circumstances
         occurring, prior to the date hereof; and the Additional Lessor agrees
         that it will have no rights or claims with respect thereto. The
         Additional Lessor agrees to look solely to the Additional Lessee with
         respect to the obligations of the "Lessee" under the 14 Existing Lease

         and the Existing DTR Lease accruing, or arising from or relating to
         events or circumstances occurring, from and after the date hereof; and
         the Lessor agrees that it will have no rights or claims with respect
         thereto.

                  d. The Lessee and the DTR Lessee agree to look solely to the
         Lessor with respect to the obligations of the "Lessor" under the 14
         Existing Leases and the Existing DTR Lease, respectively, accruing, or
         arising from or relating to events or circumstances

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         occurring, prior to the date hereof; and the Additional Lessee agrees
         that it will have no rights or claims with respect thereto. The
         Additional Lessee agrees to look solely to the Additional Lessor with
         respect to the obligations of the "Lessor" under the 14 Existing Leases
         and the Existing DTR Lease, respectively, accruing, or arising from or
         relating to events or circumstances occurring, from and after the date
         hereof; and the Lessee and the DTR Lessee each agrees that it will have
         no rights or claims with respect thereto.

         3.       MODIFICATION AND AMENDMENT OF THE EXISTING LEASE AND THE
EXISTING DTR LEASE.

                  a. Contemporaneously with the execution of this Agreement, the
         Additional Lessor and the Additional Lessee shall execute the Second
         Consolidated Lease Amendment pursuant to which the 14 Existing Leases
         and the Existing DTR Lease shall be restated and amended, effective as
         of the date hereof.

                  b. Contemporaneously with the execution of this Agreement,
         Agreement, the Lessor and the Lessee shall execute the Third
         Consolidated Lease Amendment pursuant to which the 34 leases
         represented by the Existing Lease relating to the Remaining Hotels
         shall be restated and amended, effective as of the date hereof.

         4.       AMENDMENTS TO THE ORIGINAL MASTER AGREEMENT.  The following
amendments to the Original Master Agreement shall be effective as of the date

hereof:

                  a.       Section 1 of the Original Master Agreement shall be
amended hereby as follows:

                           (i)     the definition of "Current Hotels" shall be
                  deleted in its entirety and the following substituted

                  therefor:

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                           CURRENT HOTELS - shall mean the hotels leased by the
                           Lessee from the Lessor as of the Closing Date, plus
                           the Del Mar Hotel. (ii) the definition of "Default by
                           the Lessee" shall

         be deleted in its entirety and the following substituted therefor:

                           DEFAULT BY THE LESSEE - shall have the meaning set
                           forth in Section 15a.

                           (iii) the definition of "Percentage Lease" shall be
         deleted in its entirety and the following substituted therefor:

                           PERCENTAGE LEASE - shall mean, (A) with respect to a
                           Current Hotel that is a Transfer Hotel, the
                           percentage lease with respect to such hotel
                           represented by the Second Consolidated Lease
                           Amendment between the Additional Lessor and the
                           Additional Lessee, (B) with respect to a Current
                           Hotel that is not a Transfer Hotel, the percentage
                           lease with respect to such hotel represented by the
                           Third Consolidated Lease Amendment between the Lessor
                           and the Lessee and (C) with respect to each
                           Additional Hotel, the percentage lease entered into
                           between the Lessor and the Lessee with respect to
                           such hotel.

                           (iv) the definition of "Percentage Rent" shall be
                  amended hereby by inserting the clause "or Additional
                  Lessee's" after the word "Lessee's."

                  b.       Section 4(b) of the Original Master Agreement shall
         be amended by inserting the following at the end of Section 4(b):

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                           Notwithstanding any provisions of this Section 4(b)
                  to the contrary, the Additional Lessor and the Additional
                  Lessee shall have the same rights and obligations as the
                  Lessor and the Lessee, respectively, under this Section 4(b),
                  provided, however, that such rights and obligations are and
                  shall remain subject to the terms of the Consolidated Lease
                  Estoppel, Subordination, Attornment and Non-Disturbance
                  Agreement dated as of November 21, 1996 (the "SND Agreement")
                  among the Additional Lessor, the Additional Lessee and LaSalle
                  National Bank for so long as the SND Agreement remains in
                  effect.

                  c.       Section 5(a) of the Original Master Agreement shall
         be deleted in its entirety and the following substituted therefor:

                           a.      NET WORTH.  At all times during the terms of
                           the Percentage Leases relating to the Remaining
                           Hotels and the Additional Hotels, Tree shall cause
                           the Lessee to maintain and the Lessee shall maintain,
                           a Net Worth in an amount at least equal to
                           $11,000,000. At all times during the terms of the
                           Percentage Leases relating to the Transfer Hotels,
                           Tree and the Lessee shall cause the Additional Lessee
                           to maintain and the Additional Lessee shall maintain,
                           a Net Worth in an amount at least equal to
                           $4,000,000.  The Lessee shall at all times maintain
                           an adequate amount of Working Capital to operate the
                           Remaining Hotels and the Additional Hotels.  The

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                Additional Lessee shall at all times maintain an

                adequate amount of Working Capital to operate the
                                Transfer Hotels.

                  d.       Section 7(a) of the Original Master Agreement shall
         be deleted in its entirety and the following substituted therefor:

                           a. Changes in Structure. Tree represents that as of
                           November 21, 1996, the Additional Lessee is a
                           wholly-owned subsidiary of the Lessee and the Lessee
                           is a wholly-owned subsidiary of Tree and Tree will
                           have the sole economic and voting interest in the
                           Lessee. Until the earlier to occur of (i) the
                           expiration of ten years following the Closing Date or
                           (ii) the date of redemption or conversion of the
                           Preferred Stock, without the prior written consent
                           following not less than 60 days prior written notice
                           to the Lessor or the Additional Lessor, as the case
                           may be, which consent shall not be unreasonably
                           withheld, Tree, the Lessee and the Additional Lessee
                           shall not permit any merger, sale of its stock or
                           sale, transfer or conveyance of all or substantially
                           all of the assets of the Lessee or the Additional
                           Lessee if, as a result thereof, the Lessee or the
                           Additional Lessee, or the surviving entity, would
                           cease to be controlled, directly or indirectly, by
                           Tree. After the date described in the preceding
                           sentence, any merger, sale of stock, transfer or
                           conveyance of all or substantially all of the assets
                           of the Lessee or the Additional Lessee which results
                           in the Lessee

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                           or the Additional Lessee ceasing to be controlled,
                           directly or indirectly, by Tree shall require the
                           prior written consent of the Lessor or the Additional
                           Lessor, as the case may be, which consent shall not
                           be unreasonably withheld and which shall be granted
                           by the Lessor or the Additional Lessor, as the case
                           may be, if the party proposed to acquire control of
                           the Lessee or the Additional Lessee or its assets
                           obtains the approval of the Franchisors to serve as
                           franchise licensee for the affected Hotels and, if
                           applicable, of liquor licensing authorities for the
                           affected Hotels, and either (x) has substantial
                           experience in the leasing and/or managing of hotels
                           of the type then owned by the Lessor or the
                           Additional Lessor, as the case may be, and in the
                           operation of hotels licensed by one or more of the
                           Franchisors, or (y) provides reasonable assurance to
                           the Lessor or the Additional Lessor, as the case may
                           be, that such party will maintain the senior
                           management organization of the Lessee or the
                           Additional Lessee, as the case may be, materially
                           intact, or (z) enters into management arrangements
                           for the operation of the affected Hotels under terms
                           satisfactory to the Lessor or the Additional Lessor,
                           as the case may be, during the remainder of the terms
                           of the Percentage Leases, by an entity that satisfies
                           either (x) or (y) above. Prior to any transaction
                           otherwise permissible under the preceding sentence,

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                           Tree, the Lessee or the Additional Lessee, as the
                           case may be, and the proposed transferee shall
                           acknowledge and agree in writing with the Lessor or
                           the Additional Lessor, as the case may be, with
                           respect to the restrictions on change in control set
                           forth herein and shall agree that no further transfer
                           of capital stock or assets may be made by such
                           transferee except pursuant to the provisions of this
                           Section.

                  e.       Section 7(c) of the Original Master Lease Agreement
         shall be amended hereby by inserting the clause "and the Additional

         Lessee" after the word "Lessee."

                  f.       Sections 8, 9 and 10 of the Original Master Agreement
         shall be deleted in their entirety and the following substituted

         therefor:

                           8.      Financial Statements; Indemnification; Due
                  Diligence; Confidentiality.

                                a.      Financial Disclosure.  During the term
                        of any Percentage Lease, Tree, the Lessee and the

                        Additional Lessee agree:

                                            (i)  to make available to RFSI, the
                                Lessor and the Additional Lessor,

                                                      (A) not more than 30 days
                                            following the end of the first three
                                            calendar quarters of each year,
                                            quarterly unaudited financial
                                            statements, including balance sheet,
                                            statement of operations, statement
                                            of

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                                            shareholders' equity, statement of
                                            cash flows and schedules for each of
                                            the Lessee and the Additional Lessee
                                            for the most recently ended calendar
                                            quarter and the comparable prior
                                            year period prepared in conformity
                                            with GAAP;

                                                     (B) not more than 60 days
                                            after the end of each calendar year,
                                            audited annual financial statements
                                            and schedules for each of the Lessee
                                            and the Additional Lessee for the
                                            most recently ended calendar year
                                            prepared in accordance with GAAP,
                                            audited by a national accounting
                                            firm reasonably acceptable to RFSI,
                                            the Lessor and the Additional
                                            Lessor;

                                                     (C) any historical
                                            financial information necessary to
                                            re-state historical financial
                                            information to conform to the
                                            presentation of each of the Lessee's
                                            and the Additional Lessee's audited
                                            and unaudited financial statements
                                            at any future time; and

                                                     (D) on a timely basis, any
                                            other information reasonably
                                            requested by RFSI, the Lessor or the
                                            Additional Lessor to permit RFSI,
                                            the

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                                            Lessor or the Additional Lessor to
                                            meet their filing and reporting
                                            requirements under the 1934 Act and
                                            to file and have declared effective
                                            registration statements under the
                                            1933 Act, including providing
                                            information necessary to complete
                                            the "Management's Discussion and
                                            Analysis of Financial Condition and
                                            Results of Operations" section of
                                            RFSI's 1934 Act reports and 1933 Act
                                            registration statements as it may
                                            relate to the Lessee, the Additional
                                            Lessee or the Hotels.

                                            (ii) to provide to RFSI, the Lessor
                                            and the Additional Lessor operati
                                    and financial reports described on Exhibit E
                                    hereto.

                                            (iii) that the Lessee and the
                                    Additional Lessee shall bear the cost of
                                    obtaining, preparing and providing all
                                    information required to be furnished to the
                                    Lessor, the Additional Lessor and RFSI under
                                    this Section 8(a), including the cost and
                                    related expenses of the annual audit of the
                                    financial statements of the Lessee and the
                                    Additional Lessee, except as provided in
                                    Section 5 of the First Amendment to Master
                                    Agreement.

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                                    b. Indemnification. RFSI and the Lessor
                  agree, jointly and severally, to indemnify, defend (with
                  counsel acceptable to the Lessee), and hold harmless the
                  Lessee, the Additional Lessee and their respective officers,
                  directors and controlling persons from and against any losses,
                  claims, damages, expenses or liabilities (or actions in
                  respect thereof) to which the Lessee, the Additional Lessee
                  and their respective officers, directors or controlling
                  persons may become subject under the 1933 Act, the 1934 Act or
                  otherwise, insofar as such losses, claims, damages, expenses
                  or liabilities or actions in respect thereof arise out of or
                  are based upon the 1934 Act reports or 1933 Act registration
                  statements of RFSI or the Lessor, except to the extent any
                  such claims, liabilities, losses, damages, expenses, or
                  liabilities (or actions in respect thereof) result from any
                  untrue statement of a material fact or omission of any
                  material fact in the information provided by the Lessee or the
                  Additional Lessee to RFSI, the Lessor or the Additional Lessor
                  pursuant to subsections (i) and (ii) of this Section 8(a). The
                  Lessee and Tree agree, jointly and severally, to indemnify,
                  defend (with counsel acceptable to RFSI and the Lessor) and
                  hold harmless RFSI, the Lessor and the Additional Lessor, and
                  their respective officers, directors and controlling persons
                  from and against any losses, claims, damages, expenses or
                  liabilities (or actions in respect thereof) to which RFSI, the
                  Lessor or the Additional Lessor or their respective officers,
                  directors or controlling

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                  persons may become subject under the 1933 Act, the 1934 Act or
                  otherwise, insofar as such losses, claims, damages, expenses
                  or liabilities (or actions in respect thereof) arise out of or
                  are based upon any untrue statement of a material fact or
                  omissions of any material fact in any information furnished by
                  the Lessee or the Additional Lessee to RFSI, the Lessor or the
                  Additional Lessor pursuant to subsections (i)(A), (B) and (C)
                  of this Section 8(a).

                                    c.      DUE DILIGENCE.  During the term of
                           any Percentage Lease, Tree, the Lessee and the
                           Additional Lessee agree:

                                            (i) to permit the Lessor, the
                                    Additional Lessor and RFSI, together with
                                    their independent public accountants,
                                    counsel, financial advisors, underwriters,
                                    underwriters' counsel, rating agencies,
                                    lenders and others having a legitimate
                                    interest in the Lessee's, the Additional
                                    Lessee's or the Hotels' financial condition
                                    and results of operations, during regular
                                    business hours, upon reasonable notice and
                                    at the sole cost of the Lessor, the
                                    Additional Lessor and RFSI (provided there
                                    shall be no charge by the Lessee or the
                                    Additional Lessee to the Lessor, the
                                    Additional Lessor or RFSI for the time of
                                    the Lessee's or the Additional Lessee's
                                    officers or employees), to interview

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                                    officers and employees of the Lessee or the
                                    Additional Lessee and to have access to and
                                    review:

                                                     (A) the general accounting
                                            records of the Lessee or the
                                            Additional Lessee or any Hotel for
                                            purposes of performing an audit of
                                            the Lessee or the Additional Lessee
                                            or any Hotel in accordance with
                                            generally accepted auditing
                                            standards and to conduct reasonable
                                            due diligence with respect to the
                                            Lessee or the Additional Lessee and
                                            their respective business activities
                                            and the Hotels; and

                                                     (B) the Lessee's or the
                                            Additional Lessee's corporate
                                            records, minutebooks, contracts and
                                            other documents, agreements or items
                                            relating to the operation of the
                                            Hotels and the Lessee's or the
                                            Additional Lessee's financial
                                            condition.

                                    (ii) to cooperate promptly and fully with
                                    the Lessor, the Additional Lessor and RFSI,
                                    upon request and at the cost of Lessor and
                                    the Additional Lessor (except with respect
                                    to the cost of obtaining, preparing and
                                    providing the information required to be
                                    furnished to RFSI, the Lessor and the
                                    Additional Lessor under Section 8(a) above
                                    and any costs relating to the time of
                                    employees or officers

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                                    of the Lessee, the Additional Lessee or
                                    Tree, other than as provided in Section 5 of
                                    the First Amendment to Master Agreement), in
                                    making available such information with
                                    respect to the Lessee, the Additional Lessee
                                    or the Hotels as may be required by any
                                    regulatory agency, including the Commission
                                    and the National Association of Securities
                                    Dealers, Inc., the Nasdaq Stock Market or
                                    any stock exchange on which RFSI's, the
                                    Lessor's or the Additional Lessor's
                                    securities may be registered, listed or
                                    traded.

                                            (iii) to use their best efforts to
                                    cause the independent public accountants
                                    preparing audits of the Lessee or the
                                    Additional Lessee to provide RFSI, the
                                    Lessor or the Additional Lessor, at the sole
                                    cost of the Lessor, the Additional Lessor
                                    and RFSI, with all consents of such
                                    accountants required for RFSI's, the
                                    Lessor's or the Additional Lessor's filings
                                    under the 1933 Act or the 1934 Act or to
                                    have RFSI's, the Lessor's or the Additional
                                    Lessor's registration statements be declared
                                    effective under the 1933 Act.

                                    d.      CONFIDENTIALITY. To the extent
                           Lessor, the Additional Lessor or RFSI on the one
                           hand, or the Lessee, the Additional Lessee or Tree on
                           the other, obtains information or

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                           becomes aware of material information concerning the
                           other that is not disclosed in a public announcement
                           or filing under the 1933 Act or the 1934 Act by Tree
                           or RFSI, each party agrees that it shall not
                           improperly disclose or unlawfully utilize such
                           information or otherwise act unlawfully with respect
                           thereto.

                           9. REIT REQUIREMENTS.

                                    a. Tree, the Lessee and the Additional
                  Lessee understand that, in order for RFSI to qualify as a
                  REIT, the following requirements (the "REIT Requirements")
                  must be satisfied:

                                            (i) The average of the adjusted tax
                                    bases of the Lessor's or the Additional
                                    Lessor's personal property that is leased to
                                    the Lessee or the Additional Lessee under a
                                    lease at the beginning and end of a calendar
                                    year cannot exceed 15% of the average of the
                                    aggregate adjusted tax bases of all of the
                                    Lessor's or the Additional Lessor's property
                                    that is leased to the Lessee or the
                                    Additional Lessee under such lease at the
                                    beginning and end of such calendar year.

                                            (ii) Neither the Lessee nor the
                                    Additional Lessee can sublet the property
                                    that is leased to it by the Lessor or the
                                    Additional Lessor, or enter into any similar
                                    arrangement, on any basis such that the
                                    rental or other

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                                    amounts paid by the sublessee thereunder
                                    would be based, in whole or in part, on
                                    either (i) the net income or profits derived
                                    by the business activities of the sublessee
                                    or (ii) any other formula such that any
                                    portion of the rent paid by the Lessee or
                                    the Additional Lessee to the Lessor or the
                                    Additional Lessor would fail to qualify as
                                    "rents from real property" within the
                                    meaning of Section 856(d) of the Code.

                                            (iii) Neither the Lessee nor the
                                    Additional Lessee can sublease the property
                                    leased to it by the Lessor or the Additional
                                    Lessor to, or enter into any similar
                                    arrangement with, any person in which RFSI
                                    owns, directly or indirectly, a 10% or more
                                    interest, within the meaning of Section
                                    856(d)(2)(B) of the Code.

                                            (iv) RFSI cannot own, directly or
                                    indirectly, a 10% or more interest in the
                                    Lessee or the Additional Lessee, within the
                                    meaning of Section 856(d)(2)(B) of the Code.

                                            (v) No person can own, directly or
                                    directly, capital stock of RFSI that exceeds
                                    the "Limit" (as defined in RFSI's Charter,
                                    as amended and restated).

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                           b. Tree, the Lessee and the Additional Lessee agree,
                  and agree to use reasonable efforts to cause their Affiliates,
                  to use their best efforts to permit the REIT Requirements to
                  be satisfied. Tree, the Lessee and the Additional Lessee
                  agree, and agree to use reasonable efforts to cause their
                  Affiliates, to cooperate in good faith with RFSI, the Lessor
                  and the Additional Lessor to ensure that the REIT Requirements
                  are satisfied, including but not limited to, providing RFSI
                  with information about the ownership of Tree, the Lessee, the
                  Additional Lessee and their Affiliates to the extent that such
                  information is reasonably available. Tree, the Lessee and the
                  Additional Lessee agree, and agree to use reasonable efforts
                  to cause their Affiliates, upon request by RFSI, and, where
                  appropriate, at RFSI's expense, to take reasonable action
                  necessary to ensure compliance with the REIT Requirements.
                  Immediately after becoming aware that the REIT Requirements
                  are not, or will not be, satisfied, Tree, the Lessee or the
                  Additional Lessee shall notify, or use reasonable efforts to
                  cause their Affiliates to notify, RFSI of such noncompliance.

                  10. TERMINATION OF REIT STATUS. Notwithstanding anything
         herein or in any Percentage Lease to the contrary, in the event RFSI
         terminates its status as a real estate investment trust for federal
         income tax purposes, the Lessor and the Additional Lessor may elect to
         terminate all then-existing Percentage Leases and terminate the Right
         of First Refusal by providing the Lessee or the Additional


                                       20

<PAGE>   21

         Lessee, as the case may be, at least 30 days prior written notice, or
         such longer notice as may be required by statute or regulation to
         comply with the WARN Act or other similar or successor federal or state
         laws, and by satisfying the following requirements:

                           (i) if such terminations occur prior to sale,
                  redemption or conversion of all of the Preferred Stock, RFSI
                  shall purchase from the Lessee within twenty (20) business
                  days after the date of such terminations, all of the
                  then-outstanding Preferred Stock then owned by the Lessee at a
                  price per share equal to the greater of (A) the Stated Value
                  plus all accrued and unpaid dividends at the date of such
                  redemption or (B) the product of (1) the weighted average of
                  the sales prices of RFSI's common stock for all transactions
                  reported on the Nasdaq Stock Market or principal exchange on
                  which RFSI's common stock is then traded during the ten (10)
                  business days preceding the second business day preceding the
                  date of purchase of the Preferred Stock or, if RFSI's common
                  stock is no longer traded on the Nasdaq Stock Market or a
                  recognized exchange, the fair market value thereof as mutually
                  agreed by RFSI and the Lessee, or if RFSI and the Lessee
                  cannot so agree, by appraisal by an independent third party
                  designated by RFSI and the Lessee or by their respective
                  designees multiplied by (2) the number of shares of Common
                  Stock into which a share of Preferred Stock then held by the

                                       21


<PAGE>   22

                  Lessee would be convertible, if converted on the business day
                  preceding the date of the redemption; and

                                    (ii) if such terminations occur prior to the
                  tenth (10th) anniversary of the Closing Date, the Lessor shall
                  pay to the Lessee an amount equal to $5,000,000, which amount
                  shall be reduced by $41,667 for each calendar month which has
                  expired during the ten (10) year period following the Closing
                  Date; and

                                    (iii) the Lessor or the Additional Lessor
                  shall pay the Lessee or the Additional Lessee, as the case may
                  be, the fair market value of the Percentage Leases based on
                  the then-remaining terms of the Percentage Leases determined
                  in the manner set forth in Article XXXVIII of the Form
                  Percentage Lease. The Lessor and the Additional Lessor must
                  elect to terminate both the Right of First Refusal and all
                  then-existing Percentage Leases in exercising their rights
                  under this Section 10.

                  g.     The first sentence of Section 14 of the Original Master
                  Agreement shall be deleted in its entirety and the following
                  substituted therefor:

                  From and after the date of the First Amendment to Master
                  Agreement, (i) an Event of Default (as defined in the
                  Percentage Leases) by the Additional Lessee under a Percentage
                  Lease with respect to a Transfer Hotel will continue to create
                  an Event of Default under the Percentage Leases with respect
                  to all other Transfer Hotels and (ii) an Event of Default by
                  the Lessee under a Percentage Lease with respect to

                                      22


<PAGE>   23

                  a Remaining Hotel will continue to create an Event of Default
                  under the Percentage Leases with respect to all other
                  Remaining Hotels. From and after the date of the First
                  Amendment to Master Agreement, (i) a default or an Event of
                  Default under a Percentage Lease with respect to a Transfer
                  Hotel shall not constitute a default or an Event of Default
                  under a Percentage Lease with respect to any Remaining Hotel
                  and (ii) a default or an Event of Default with respect to a
                  Remaining Hotel shall not constitute a default or an Event of
                  Default under a Percentage Lease with respect to a Transfer
                  Hotel.

                  h. Section 15a of the Original Master Agreement shall be
         deleted in its entirety and the following substituted therefor:

                           DEFAULT.

                           a.       A "Default by the Lessee" shall exist under
                  this Agreement if any of the following occur:

                                    (I) MINIMUM NET WORTH. During the term of
                           any Percentage Lease, (a) the Additional Lessee fails
                           to maintain a minimum Net Worth as set forth in
                           Section 5 and does not cure any deficiency within 30
                           days following written notice thereof from the
                           Additional Lessor or (b) the Lessee fails to maintain
                           a minimum Net Worth as set forth in Section 5 and
                           does not cure any deficiency within 30 days following
                           written notice thereof from the Lessor.


                                           23


<PAGE>   24

                           (II)    DEFAULT UNDER PERCENTAGE LEASES.  An
                           Event of Default occurs under any of the Percentage
                           Leases.

                           (III) OTHER BREACHES. The Lessee or the Additional
                           Lessee fails to comply with any other
                           provision of this Agreement for a period of 30 days
                           after being notified by the Lessor or the Additional
                           Lessor in writing of the provisions of this Agreement
                           with which the Lessee or the Additional Lessee, as
                           the case may be, has failed to comply; provided that
                           if such default (other than a failure to pay any rent
                           under any Percentage Lease when due (after any
                           applicable cure period), which shall be subject to
                           the provisions set forth in the Percentage Leases,
                           and any failure to maintain the minimum Net Worth,
                           which shall be subject to the provisions of
                           subsection 15a(i) above) cannot with due diligence be
                           cured within a 30 day period, such period shall be
                           extended for such reasonable time as the Lessee or
                           the Additional Lessee, as the case may be, promptly
                           and with due diligence commences and continues the
                           cure thereof but in no event for a period of more
                           than 90 days following the date of notice from the
                           Lessor or the Additional Lessor, as the case may be.

                  i.       Section 16 of the Original Master Agreement shall be
         amended such that notices made to the Additional Lessee shall be made
         in the same manner in which notices are required to be made to the
         Lessee and notices made to the


                                       24


<PAGE>   25

         Additional Lessor shall be made in the same manner in which notices are
         required to be made to the Lessor.

         5.       Certain Expenses Associated with the Additional Lessee.

                  a. The Additional Lessor and the Lessor jointly and severally
         agree that they shall be responsible for the following costs and
         expenses related to the organization and on-going maintenance of the
         Additional Lessee.

                           (i) the costs and expenses of incorporating and
                  organizing the Additional Lessee in Tennessee and qualifying
                  the Additional Lessee to do business in each of the states in
                  which a Transfer Property is located, including all filing
                  fees, reasonable counsel fees and other fees with respect
                  thereto;

                           (ii) all costs and expenses incurred in connection
                  with transferring the 14 Existing Leases and the Existing DTR
                  Lease to the Additional Lessee, including (A) costs and
                  expenses incurred in connection with transferring the related
                  franchise licenses and any other licenses and permits from the
                  Lessee or DTR Lessee to the Additional Lessee, (B) the
                  preparation, negotiation and execution of the Second
                  Consolidated Lease Amendment and Third Consolidated Lease
                  Amendment, the First Amendment to Master Agreement, the
                  management agreements between the Additional Lessee and
                  affiliated managers, the Consolidated Lease Estoppel,
                  Subordination, Attornment and Non-Disturbance Agreement
                  relating to the Transfer Hotels and any other


                                       25


<PAGE>   26

                  documents entered into by the Additional Lessee in connection
                  with the transfer of the Transfer Properties and (C)
                  reasonable fees and costs of counsel relating to the
                  foregoing;

                           (iii) the ongoing fees, annual business taxes and
                  similar amounts required to be paid to governmental
                  authorities by the Additional Lessee in order to maintain its
                  corporate existence and be qualified to do business and remain
                  in good standing in each of the states in which the Transfer
                  Properties are located (net of such amounts, if any, by which
                  Lessee's or DTR Lessee's obligations have been reduced as a
                  result of the assignment of the 14 Existing Leases and the DTR
                  Lease to the Additional Lessee, taking into account the fact
                  that the Lessee will be required to maintain its qualification
                  to do business in all of the states in which the Transfer
                  Hotels covered by the 14 Existing Leases are located because,
                  incident to the assignment of the 14 Existing Leases by the
                  Lessor to the Additional Lessor and by the Lessee to the
                  Additional Lessee, at the request of the Additional Lessor,
                  the Lessee has been engaged to manage such Hotels); and

                           (iv) The incremental cost with respect to the ongoing
                  administration and accounting of the Additional Lessee to the
                  extent such cost, together with the related costs of the
                  Lessee, exceed the costs that the Lessee and DTR Lessee would
                  otherwise have incurred (A) if the 14 Existing Leases and the
                  Existing DTR Lease had not been transferred to


                                               26


<PAGE>   27

                  the Additional Lessee and the Additional Lessee had not been
                  formed, and
                  (B) if the Lessee had not been engaged to manage the Transfer
                  Hotels covered by the 14 Existing Leases.

                  (b) In the event the Lessee or the Additional Lessee pays any
         of the costs or fees for which the Additional Lessor and the Lessor are
         responsible pursuant to paragraph (a) above, the Lessor and/or the
         Additional Lessor shall reimburse the Lessee or the Additional Lessee,
         as applicable, for such costs or fees no later than 30 days following
         receipt of satisfactory evidence that such amounts were paid.

                  (c) The Lessee and the Additional Lessee agree to cooperate
         with the Additional Lessor in determining what amounts are payable by
         the Lessor and the Additional Lessor to the Lessee or the Additional
         Lessee pursuant to paragraph (a) above and agree that neither the
         Lessor nor the Additional Lessor shall be responsible for any costs or
         expenses with respect to the items listed in paragraph (a) above to the
         extent the Lessee or DTR Lessee would otherwise have been responsible
         for such costs and expenses (A) if the 14 Existing Leases and the
         Existing DTR Lease had not been transferred to the Additional Lessee
         and the Additional Lessee had not been formed, and (B) if the Lessee
         had not been engaged to manage the Transfer Hotels covered by the 14
         Existing Leases.

         6. TRANSFER OF LICENSES AND PERMITS. The parties acknowledge that in
order to meet the timing requirements of the Lessor and the Additional Lessor
in connection with the transfer of the Transfer Hotels by the Lessor to the
Additional Lessor and, incident thereto, the transfer


                                       27


<PAGE>   28

to the Additional Lessee of the interest of the Lessee and the DTR Lessee in the
14 Existing Leases and the Existing DTR Lease, respectively, there has not been
sufficient time in which to also effect the transfer of certain licenses and
other governmental authorizations (including, in the case of certain of the
Transfer Hotels, liquor licenses) with respect to the operation of the Transfer
Hotels from the Lessee and the DTR Lessee to the Additional Lessee and to obtain
all requisite governmental approvals with respect thereto (collectively, the
"Governmental Transfer Approvals"). Accordingly, the parties agree that (a)
notwithstanding anything to the contrary contained in the Second Consolidated
Lease Amendment (including, without limitation, Sections 8.1 and 8.2 thereof),
the absence of the Governmental Transfer Approvals until such time that such
Governmental Transfer Approvals initially are obtained shall not constitute a
default or an Event of Default under the Second Consolidated Lease Amendment or
a "Default by the Lessee" under the Original Master Agreement, as amended
hereby, except to the extent the Additional Lessee is in breach of its
obligations under paragraph (c) below which breach continues uncured beyond the
expiration of the notice and grace periods provided for in Section 16.1(d) of
the Second Consolidated Lease Amendment and in Section 15a of the Original
Master Agreement, as amended hereby; (b) the Lessor and the Additional Lessor
agree, jointly and severally, to indemnify, defend (with counsel reasonably
acceptable to the Additional Lessee), and hold harmless the Additional Lessee
and its officers, directors and controlling persons from and against any losses,
claims, damages, expenses or liabilities (or actions in respect thereof) to
which the Additional Lessee or its officers, directors or controlling persons
may become subject by reason of the absence of the Governmental Transfer
Approvals; and (c) at the expense of the Lessor and the Additional Lessor as set
forth in Section 5 above, the Additional Lessee shall


                                       28


<PAGE>   29

promptly apply for and diligently seek the Governmental Transfer Approvals and
the Lessor, the Additional Lessor, the Lessee, the DTR Lessee and the Additional
Lessee shall cooperate with each other in order to expeditiously obtain the
Governmental Transfer Approvals.

         7. RECORDING THE SND AGREEMENT. The parties acknowledge that the form
in which the SND Agreement has been executed was not appropriate to permit the
recording of the SND Agreement in all jurisdictions in which the Transfer Hotels
are located. Accordingly, contemporaneously with the execution of this
Amendment, counterparts of the SND Agreement are being recorded in some but not
all of the jurisdictions in which the Transfer Hotels are located. The Lessor
and the Additional Lessor agree that, promptly following the execution of this
Amendment, they will have counterparts of the SND Agreement re-executed by all
parties thereto in form sufficient to permit, and shall promptly thereafter
effect, the recording of the SND Agreement in each jurisdiction in which a
Transfer Hotel is located in which the SND Agreement has not previously been
recorded.

                                 *    *    *

         As amended hereby, the Original Master Agreement is ratified, confirmed
and approved.


                                       29


<PAGE>   30

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

                                       RFS HOTEL INVESTORS, INC.

                                       By:
                                           ---------------------------------
                                       Name:
                                             -------------------------------
                                       Title:
                                              ------------------------------

                                       RFS PARTNERSHIP, L.P.

                                       By: RFS Hotel Investors,
                                             Inc., general partner


                                       By:
                                           ---------------------------------
                                       Name:
                                             -------------------------------
                                       Title:
                                              ------------------------------

                                       RFS FINANCING PARTNERSHIP

                                       By: RFS Financing Corporation,
                                            general partner


                                       By:
                                           ---------------------------------
                                       Name:
                                             -------------------------------
                                       Title:
                                              ------------------------------


                                       DOUBLETREE CORPORATION


                                       By:
                                           ---------------------------------
                                       Name:
                                             -------------------------------
                                       Title:
                                              ------------------------------

<PAGE>   31

                                      RFS, INC.

                                      By:
                                          ---------------------------------
                                      Name:
                                            -------------------------------
                                      Title:
                                             ------------------------------

                                      DTR RFS LESSEE, INC.

                                      By:
                                          ---------------------------------
                                      Name:
                                            -------------------------------
                                      Title:
                                             ------------------------------


                                      RFS LEASING, INC.

                                      By:
                                          ---------------------------------
                                      Name:
                                            -------------------------------
                                      Title:
                                             ------------------------------

<PAGE>   32

                                                                       EXHIBIT A

                                 EXISTING LEASE
                                 CURRENT HOTELS
<TABLE>
<CAPTION>

                                                    Number
Franchise and City/                                   of               Transfer                  Remaining
    State Location                                  Rooms               Hotel?                     Hotel?
------------------                                  -------              --------                    --------
<S>                                                  <C>                <C>                         <C>

HAMPTON INN HOTELS

     Denver, CO (Airport)                            138                No                          Yes
     Denver, CO (Lakewood)                           148                Yes                         No
     Ft. Lauderdale, FL                              123                No                          Yes
     Indianapolis, IN (Airport)                      131                No                          Yes
     Lansing, MI                                     108                No                          Yes
     Warren, MI                                      124                No                          Yes
     Bloomington, MN (Airport)                       135                No                          Yes
     Minnetonka, MN                                  127                No                          Yes
     Hattiesburg, MS                                 116                Yes                         No
     Lincoln, NE                                     111                No                          Yes
     Omaha, NE (Westroads Mall)                      129                Yes                         No
     Oklahoma City, OK (Airport)                     133                Yes                         No
     Tulsa, OK                                       148                No                          Yes
     Memphis, TN (Walnut Grove)                      120                No                          Yes
     Laredo, TX                                      120                No                          Yes

RESIDENCE INN HOTELS

     Sacramento, CA (Cal Expo)                       176                Yes                         No
     Torrance, CA                                    247                No                          Yes
     Wilmington, DE                                  120                No                          Yes
     Orlando, FL                                     176                Yes                         No
     Atlanta, GA (Perimeter-West)                    128                No                          Yes
     Ann Arbor, MI                                    72                Yes                         No
     Kansas City, MO                                  96                No                          Yes
     Fishkill, NY                                    136                No                          Yes
     Charlotte, NC                                    80                Yes                         No
     Providence, RI                                   96                Yes                         No
     Ft. Worth, TX (River Plaza)                     120                Yes                         No
     Tyler, TX                                       128                No                          Yes
</TABLE>




<PAGE>   33
<TABLE>
<CAPTION>

                                                    Number
Franchise and City/                                   of               Transfer                  Remaining
   State Location                                   Rooms               Hotel?                     Hotel?
------------------                                  -------            --------                  ---------

<S>                                                  <C>                <C>                         <C>
HOLIDAY INN EXPRESS HOTELS

     Arlington Heights, IL                           125                No                          Yes
     Downers Grove, IL                               123                No                          Yes
     Bloomington, MN                                 142                No                          Yes
     Tupelo, MS                                      115                No                          Yes
     Franklin, TN                                    120                No                          Yes
     Austin, TX (I-35 Airport)                       125                Yes                         No
     Milwaukee, WI (Mayfair Mall)                    122                No                          Yes

HOLIDAY INN HOTELS

     Crystal Lake, IL                                197                Yes                         No
     Louisville, KY (So. West)                       169                No                          Yes
     Lafayette, LA (Central)                         242                No                          Yes
     Flint, MI (Gateway Center)                      173                No                          Yes
     Clayton, MO (Clayton Plaza)                     253                No                          Yes
     Columbia, SC (Coliseum)                         175                No                          Yes

COMFORT INN HOTELS

     Atlanta, GA (Conyers)                            83                No                          Yes
     Atlanta, GA (Marietta)                          186                Yes                         No
     Farmington Hills, MI                            135                No                          Yes
     Grand Rapids, MI                                109                No                          Yes
     Clemson, SC                                     122                No                          Yes
     Ft. Mill, SC (Carowinds)                        155                Yes                         No

HAWTHORNE SUITES HOTEL

     Atlanta, GA (NW)                                200                No                          Yes

EXECUTIVE INN HOTEL

     Tupelo, MS                                      115                No                          Yes
</TABLE>


<PAGE>   34

                                                                       EXHIBIT B

                                                EXISTING DTR LEASE
                                                   CURRENT HOTEL
<TABLE>
<CAPTION>

                                                   Number
Franchise and City/                                  of                Transfer                  Remaining
   State Location                                   Rooms               Hotel?                     Hotel?
------------------                                 -------             --------                  ---------

<S>                                                  <C>                <C>                         <C>
DOUBLETREE HOTEL

     Del Mar, CA                                     220                Yes                         No
</TABLE>