EMPLOYMENT AGREEMENT, dated as of October 14, 1996 between HFS
                  INCORPORATED,  a Delaware  corporation  (the  "Company"),  and
                  MICHAEL P. MONACO (the "Executive").

         The Board of Directors of the Company (the  "Board")  desires to induce
the Executive to enter the employ of the Company,  to provide for the employment
of the Executive and to provide the Executive with employment  arrangements with
the Company  which the Board has  determined  will  encourage  the attention and
dedication  to the  Company  by  the  Executive  as a  member  of the  Company's
management,  in the best  interests  of the  Company and its  shareholders.  The
Executive  is  willing  to enter  the  employ  of the  Company  on the terms and
conditions herein provided.

         In order to effect the foregoing, the Company and the Executive wish to
enter into an employment  agreement on the terms and conditions set forth below.
Accordingly, the parties hereto agree as follows:

         1. Term of  Employment.  The employment of the Executive by the Company
pursuant to this Agreement will commence October 14, 1996 (the "Effective Date")
and  end on  December  31,  1998  (the  Expiration  Date")  (such  period  being
hereinafter referred to as the "Term"),  unless sooner terminated as hereinafter
provided.

         2. Position and Duties.  The Executive  shall serve as Chief  Financial
Officer  and Vice  Chairman  of the  Company,  and shall have such  commensurate
responsibilities,  duties and  authority as may from time to time be assigned to
the Executive by the Board or the Chief  Executive  Officer of the Company,  and
the Executive  shall report to the Chief Executive  Officer of the Company.  The
Executive  shall  devote  substantially  all his time,  energy and skill  during
reasonable business hours to the service of the Company.  Subject to approval by
the  shareholders  of the  Company,  the  Executive  shall serve on the Board of
Directors  of the  Company.  The  Executive's  office  shall be  located  at the
Company's  headquarters,  which shall be located in Parsippany,  New Jersey,  or
elsewhere  in the New York City  metropolitan  area.  Without his  consent,  the
Executive  will  not be  required  to  relocate  outside  of the New  York  City
metropolitan area.

         3. Compensation and Related Matters.  (a) Salary.  During the period of
the Executive's employment, the Company shall pay him an annual base salary at a
rate of  $500,000.00  per year,  such salary to be paid in  substantially  equal
installments no less frequently than semi-monthly. Such annual base salary shall
be  subject  to  increase  on each  anniversary  date of this  Agreement  at the
discretion of the Chief  Executive  Officer of the Company,  taking into account
the  Executive's  performance  of his duties during the preceding year and other
relevant factors,  and subject to the approval of the Board. The Executive shall
also be eligible to participate in any cash  incentive  bonus program  generally
applicable to executives at the level provided for Vice Chairman.

         Notwithstanding the foregoing  provisions of this Section,  such annual
salary  shall  be  increased  on each  anniversary  date of this  Agreement  (an
"Adjustment  Date") in an amount  calculated as follows:  if the "Consumer Price
Index" for the calendar month immediately


<PAGE>



preceding the applicable  Adjustment  Date shall exceed the Consumer Price Index
for the  corresponding  month  during  the  prior  year,  then such  salary  (as
previously  adjusted)  shall be  determined  by  multiplying  the amount of such
salary (as previously  adjusted) by a fraction,  the numerator of which shall be
the  Consumer  Price Index for the  calendar  month  immediately  preceding  the
applicable  Adjustment  Date, and the denominator of which shall be the Consumer
Price Index for the  applicable  month  during the prior year.  Each  adjustment
shall be made as promptly as practicable after publication of the Consumer Price
Index  for the month  immediately  preceding  the  applicable  Adjustment  Date.
Immediately after such publication,  the Company shall pay to the Executive such
additional  amount as shall be required to bring the  aggregate of the bi-weekly
installments of the then current annual base salary paid to the Executive on and
after the applicable  Adjustment  Date up to the total dollar amount required by
reason of such adjustment;  thereafter,  all installments of the adjusted annual
salary  for the  balance  of the 12 months  shall be made at the newly  adjusted
rate. In no event shall such annual salary (as previously adjusted) be decreased
to reflect a decline in the  Consumer  Price Index.  As used in this  Agreement,
"Consumer  Price Index" shall mean the Consumer Price Index,  Urban Wage Earners
and Clerical Workers,  U.S. City Average, All Items (1982-4 = 100), published by
the Bureau of Labor  Statistics  of the United States  Department of Labor.  The
applicable  number in such Index,  for purposes of this Agreement,  shall be the
number for "All Items" (which  number for the month of July 1991 was 134.3).  In
the event a substantial  change is made with respect to the information  used to
determine the Consumer Price Index, or in the event another  publication is used
because the Consumer Price Index is not published,  appropriate adjustment shall
be made in the  corresponding  numbers  for prior  periods  so that  after  such
adjustment  the same result will be  produced as would have  resulted  had there
been no such  change  in the  Consumer  Price  Index or had it  continued  to be
published.

         (b) Change of Control.  If any  "Change-of-Control  Transaction"  shall
occur  during the Term,  the  Executive  shall be entitled to receive,  upon the
closing of such Change-of-Control  Transaction,  a lump sum payment equal to the
annual base salary to which the Executive  would be entitled  under Section 3(a)
during the  greater of (i) one year from the  closing of such  Change-Of-Control
Transaction  or (ii) the  balance  of the  Term,  irrespective  of  whether  the
Executive  offers to continue his  employment  with the Company on the terms and
conditions set forth herein or otherwise;  provided that such lump sum shall not
be  paid  to  the   Executive  if,   following   the   completion  of  any  such
Change-of-Control  Transaction,  he shall be employed pursuant to any employment
agreement in form and substance substantially  identical to this Agreement,  but
having  a term  of at  least  the  period  from  the  execution  thereof  to the
Expiration Date,  directly or indirectly,  by the Company or by any entity which
shall, after such Change-of-Control Transaction, be in control of the Company or
the assets and business of the Company,  the transfer of which  constituted  the
Change-of-Control   Transaction.   "Change-of-Control   Transaction"  means  any
transaction  or series of  transactions  pursuant to or as a result of which (i)
during any period of not more than twenty-four  (24) months,  individuals who at
the beginning of such period  constitute the Board,  and any new director (other
than a director designated by a third party who has entered into an agreement to
effect a  transaction  described  in clause  (ii),  (iii) or (iv)  below)  whose
election by the Board or nomination  for election by the Company's  stockholders
was approved by a vote of at least a majority of the directors then still

                                                        -2-

<PAGE>



in office who either  were  directors  at the  beginning  of the period or whose
election or  nomination  for election  was  previously  so approved  (other than
approval  given in  connection  with an actual or  threatened  proxy or election
contest),  cease for any reason to constitute at least a majority of the members
of the Board,  (ii) beneficial  ownership of 50% or more of the common stock (or
other  securities  having generally the right to vote for election of the Board)
of the Company (the "Shares") shall be sold, assigned or otherwise  transferred,
directly or  indirectly,  other than pursuant to a public  offering,  to a third
party,  whether by sale or issuance of Shares or other  securities or otherwise,
(iii) the Company or any Subsidiary  shall sell,  assign or otherwise  transfer,
directly  or  indirectly,   assets  (including  stock  or  other  securities  of
Subsidiaries) having a fair market or book value or earning power of 50% or more
of the assets or earning power of the Company and its  Subsidiaries  (taken as a
whole) to any third party,  other than the Company or a wholly-owned  Subsidiary
thereof,  or (iv) control of 50% or more of the business of the Company shall be
sold,  assigned or otherwise  transferred  directly or  indirectly  to any third
party.  This Section 3(b) shall  survive any  termination  of this  Agreement or
termination of the  Executive's  employment  with the Company,  other than (x) a
termination  for Cause (as defined in Section  4(a)(iii)) or (y) the Executive's
voluntary  resignation of employment (except any such resignation arising from a
breach  of this  Agreement  by the  Company)  or (z) the  Executive's  death  or
disability (as  contemplated  by Section  4(a)(ii));  provided that any lump sum
payment to which the  Executive  is entitled  under this  Section  3(b) shall be
reduced by the amount of any payment  provided  by clause I of Section  4(a)(iv)
which has been paid to the Executive.  For purposes of this paragraph,  the term
"Subsidiary"  shall mean any  corporation in an unbroken chain of  corporations,
beginning  with the  Company,  if each of the  corporations  other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total
combined  voting power of all classes of stock in one of the other  corporations
in such chain.

         (c) Stock Option  Grant.  Subject to the  approval of the  Compensation
Committee  of the Board of  Directors of the  Company,  the  Executive  shall be
granted an option to purchase  600,000 shares of the common stock of the Company
priced at market value as of the date of grant,  and  otherwise  having terms as
set forth in the Company's Amended and Restated 1993 Stock Option Plan.

         (c) Expenses.  During the term of the Executive's employment hereunder,
the  Executive  shall  be  entitled  to  receive  prompt  reimbursement  for all
reasonable  and  customary  expenses  incurred  by  him in  performing  services
hereunder,  including all expense of travel and living  expenses while away from
home  on  business  or at the  request  of and in the  service  of the  Company;
provided,  that such expenses are incurred and accounted for in accordance  with
the  policies  and  procedures  established  by the Company and  approved by the
Board.  In addition,  the  Executive  will be provided  24-hour  access to a car
service of the  Company's  choice for  business-related  ground  transportation,
which shall include daily commutation to the Company's offices. The cost of this
service will be reimbursed to the Executive  through the ordinary travel expense
reimbursement  process and governed by the  Company's  policies  with respect to
such expenses.


                                                        -3-

<PAGE>



         (d) Other  Benefits.  The Executive shall be entitled to participate in
or receive benefits under any employee  benefit plan,  arrangement or perquisite
made  available  by the Company now or in the future to its  executives  and key
management  employees,  subject  to and on a basis  consistent  with the  terms,
conditions  and  overall   administration   of  such  plans,   arrangements  and
perquisites.  Nothing  paid to the  Executive  under  any plan,  arrangement  or
perquisite  presently in effect or made  available in the future shall be deemed
to be in lieu of the salary  and other  compensation  payable  to the  Executive
pursuant to this  Section 3. Any payments or benefits  payable to the  Executive
hereunder in respect of any year during  which the  Executive is employed by the
Company for less than the entire such year shall,  unless otherwise  provided in
the applicable plan or arrangement or approved by the Chief Executive Officer of
the  Company,  be  prorated in  accordance  with the number of days in such year
during which he is so employed.  Notwithstanding any provision in any such plan,
arrangement  or perquisite  to the contrary,  the  Executive's  eligibility  for
participation in such plan, arrangement or perquisite shall commence immediately
upon his employment with the Company.

         (e) Indemnification. In addition to any indemnification provided by the
By-Laws of the Company or  otherwise,  the Company  shall  indemnify and provide
reasonable  advances  for  expenses  to the  Executive,  to the  fullest  extent
permitted  by the laws of the  State of  Delaware,  if the  Executive  is made a
party, or threatened to be made a party, to any threatened, pending or completed
action,  suit  or  proceeding,   whether  civil,  criminal,   administrative  or
investigative,  by reason of the fact that the  Executive  is or was an officer,
director or employee of the Company or any subsidiary or affiliate  thereof,  in
which capacity the Executive is or was serving at the Company's request, against
expenses (including reasonable attorneys' fees and expenses),  judgments,  fines
and amounts paid in settlement  incurred by him in connection  with such action,
suit or proceeding.

         4.   Termination.  (a) The Executive's employment may be terminated by 
the Company only under the following circumstances:

                  (i)   Death.  The Executive's employment shall terminate upon 
his death.

                  (ii)  Disability.  If, in the  written  opinion of a qualified
         physician  selected  by the  Company  and  reasonably  approved  by the
         Executive,  the  Executive  shall  become  unable to perform his duties
         hereunder due to physical or mental illness, and has failed, because of
         such  illness,  to  render,  for 90 days  out of any  180  day  period,
         services of the character  contemplated by this Agreement,  the Company
         may terminate the Executive's employment.

                  (iii)  Cause.   The  Company  may  terminate  the  Executive's
         employment for Cause. As used in this Agreement, "Cause" shall mean (I)
         the willful and  continued  failure by the Executive  substantially  to
         perform his duties hereunder or to perform such other reasonable duties
         assigned  to him by the Chief  Executive  Officer  (other than any such
         failure  resulting from the  Executive's  incapacity due to physical or
         mental illness); (II) any act of fraud,  misappropriation,  dishonesty,
         embezzlement or similar conduct against

                                                        -4-

<PAGE>



         the Company as finally determined through arbitration or final judgment
         of a court of competent  jurisdiction  (which  arbitration or judgment,
         due to the  passage  of time or  otherwise,  is not  subject to further
         appeal);  or (III)  conviction of a felony or any crime involving moral
         turpitude (which  conviction,  due to the passage of time or otherwise,
         is not subject to further appeal). The Executive's employment shall not
         be deemed to have been  terminated  for Cause unless the Company  shall
         have given or delivered to the Executive (A) reasonable  notice setting
         forth  the  reasons  for  the  Company's  intention  to  terminate  the
         Executive's  employment for Cause, (B) an opportunity for the Executive
         to cure any such  breach  during the thirty  (30) day period  after the
         Executive's  receipt of such notice, (C) a reasonable  opportunity,  at
         any time  during  the  thirty  (30) day  period  after the  Executive's
         receipt of such notice,  for the Executive,  together with his counsel,
         to be heard  before  the  Board,  and (D) a Notice of  Termination  (as
         defined below) stating that, in the good faith opinion of not less than
         a majority of the entire  membership  of the Board,  the  Executive was
         guilty of the  conduct set forth in clauses  (I),  (II) or (III) of the
         preceding  sentence.  For  purposes  of this  Agreement,  a "Notice  of
         Termination"  means a written  notice which (X)  indicates the specific
         termination  provision of this Agreement relied upon, (Y) sets forth in
         reasonable  detail  the facts and  circumstances  claimed  to provide a
         basis  for  termination  of  the  Executive's   employment   under  the
         provisions so indicated and (Z) specifies the  termination  date (which
         date shall not be less than 15 days  after the giving of such  notice).
         On the  termination  date  specified  in a Notice of  Termination  duly
         delivered pursuant to this paragraph,  the Executive's compensation and
         other  benefits set forth in this  Agreement  (other than under Section
         3(e) and other than any compensation or benefit that shall have accrued
         but not been paid as of such date) shall terminate.

                  (iv) Other. If the Executive's employment is terminated by the
         Company for any reason other than as set forth in paragraphs  (i), (ii)
         or (iii) of this Section  4(a),  or if the  Executive  terminates  this
         Agreement for Good Reason (as defined in paragraph (v) below), then the
         Company  shall (I) pay to the  Executive,  in a lump sum on the date of
         such termination,  an amount equal to 100% of the annual base salary in
         effect for the Executive  under Section 3(a)  immediately  prior to the
         date of such  termination,  and (II) continue to make  available to the
         Executive the other  benefits set forth in this  Agreement (but only to
         the extent that the Executive is not receiving  substantially  the same
         benefits  from  another  employer)  until the  earlier of (A) the first
         anniversary of the date of such termination or (B) the Expiration Date,
         unless the Executive shall theretofore  deliver a written notice to the
         Company to the effect that he elects not to accept such other benefits.
         In addition, if (x) this Agreement expires without extension or renewal
         or (y) the Executive's  employment is terminated by the Company without
         cause or for any  reason  other  than a reason  set forth in  paragraph
         (iii) of this Section 4(a) or in  connection  with a  Change-of-Control
         Transaction as contemplated by Section 3(b) hereof or (z) the Executive
         terminates his employment for Good Reason as set forth below,  then the
         Company shall pay to the Executive, at the time bonuses are distributed
         to  participants  in the bonus plan in which the  Executive  would have
         participated  had the  Executive's  employment  not so  terminated,  an
         amount equal to the bonus percentage for which the

                                                        -5-

<PAGE>



         Executive would have been eligible had the  Executive's  employment not
         so terminated  multiplied by the Executive's  base salary earned in the
         preceding  calendar  through the Executive's  date of termination,  not
         including any other  payments  made pursuant to this Section  4(a)(iv).
         The Executive  acknowledges  that there is no guarantee that any amount
         may be payable under any such bonus plan.

                  (v) Good Reason. For purposes of this Agreement, the Executive
        has terminated this Agreement for "Good Reason" if  any of the following
        have occurred:

                           (A)  The Executive no longer  reports  to  the  Chief
                  Executive Officer of the Company;

                           (b)  The   Executive's   job  title  or  position  of
                  responsibility or the nature of the Executive's  duties or the
                  scope of his  responsibilities  is materially  reduced without
                  the  Executive's  written  consent,  and that reduction is not
                  corrected by the Company within thirty (30) days after written
                  notice from the Executive; or

                           (C) The  material  breach by the Company of any other
                  provision of this  Agreement,  if the Company  fails to remedy
                  such breach within thirty (30) days after written  notice from
                  the Executive.

         (b) If the  Executive  voluntarily  resigns his  employment  under this
Agreement  (other than due to a breach of this  Agreement by the  Company),  the
Executive's  compensation  and other benefits  (other than any  compensation  or
benefit  that  shall  have  accrued  but not  been  paid as of the  date of such
resignation) set forth in this Agreement shall thereupon terminate.

         (c) If any of the payments  received or to be received by the Executive
in  connection   with  a   Change-of-Control   Transaction  or  the  Executive's
termination  of  employment  as provided  in this  Agreement  (such  payments or
benefits,  excluding the Gross-up Payment,  being hereinafter referred to as the
"Total  Payments")  will be subject to any excise tax (the "Excise Tax") imposed
under  Section  4999 of the  Internal  Revenue  Code of 1986,  as  amended  (the
"Code"),  the Company shall pay to the Executive an additional  amount such that
the net amount  retained by the Executive,  after deduction of any Excise Tax on
the Total Payments and any federal,  state and local income and employment taxes
and Excise Tax upon the Gross-up Payment, shall be equal to the Total Payments.

         For purposes of  determining  whether any of the Total Payments will be
subject  to the Excise Tax and the  amount of such  Excise  Tax,  (i) all of the
Total Payments shall be treated as "parachute  payments"  (within the meaning of
Section  280G(b) (2) of the Code)  unless,  in the opinion of tax counsel  ("Tax
Counsel") reasonably  acceptable to the Executive and selected by the accounting
firm  which  was,  immediately  prior to the Change in  Control,  the  Company's
independent  auditor (the "Auditor"),  such payments or benefits (in whole or in
part) do not  constitute  parachute  payments,  including  by reason of  Section
280G(b)(4)(A)  of the Code,  (ii) all  "excess  parachute  payments"  within the
meaning of Section 280G(b)(1) of the Code shall be

                                                        -6-

<PAGE>



treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such
excess   parachute   payments  (in  whole  or  in  part)  represent   reasonable
compensation  for  services  actually  rendered  (within  the meaning of Section
280G(b)(4)(B)  of the  Code) in  excess  of the base  amount  allocable  to such
reasonable  compensation,  or are  otherwise  not subject to the Excise Tax, and
(iii) the value of any noncash benefits or any deferred payment or benefit shall
be  determined  by the Auditor in  accordance  with the  principles  of Sections
280G(d)(3) and (4) of the Code.  For purposes of  determining  the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the
highest  marginal rate of federal income  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 rate of taxation in the state and locality of the  Executive's
residence  on the date of  termination  (or if there is no date of  termination,
then the date on which the Gross-Up  Payment is calculated  for purposes of this
Section 4(c)), net of the maximum  reduction in federal income taxes which could
be obtained from deduction of such state and local taxes.

                  In the event that the Excise Tax is finally  determined  to be
less than the amount taken into account  hereunder in  calculating  the Gross-Up
Payment,  the Executive shall repay to the Company,  at the time that the amount
of such  reduction  in Excise  Tax is  finally  determined,  the  portion of the
Gross-Up  Payment  attributable  to such  reduction  (plus  that  portion of the
Gross-Up  Payment  attributable  to the Excise Tax and federal,  state and local
income and employment  taxes imposed on the Gross-Up Payment being repaid by the
Executive to the extent that such repayment results in a reduction in Excise Tax
and/or a  federal,  state or local  income or  employment  tax  deduction)  plus
interest on the amount of such repayment at 120% of the rate provided in section
1274(b)(2)(B)  of the Code.  In the event that the Excise Tax is  determined  to
exceed the amount  taken into  account  hereunder  in  calculating  the Gross-Up
Payment  (including  by reason of any payment the  existence  or amount of which
cannot be  determined  at the time of the Gross-Up  Payment),  the Company shall
make an  additional  Gross-Up  Payment  in  respect  of such  excess  (plus  any
interest,  penalties or additions  payable by the Executive with respect to such
excess) at the time that the amount of such  excess is finally  determined.  The
Executive  and the Company  shall each  reasonably  cooperate  with the other in
connection  with any  administrative  or  judicial  proceedings  concerning  the
existence  or amount of  liability  for  Excise  Tax with  respect  to the Total
Payments.

         5. Other Covenants by the Executive.  (a) During the Term,  neither the
Executive nor any "Controlled Affiliate" will, without the prior written consent
of the  Board,  solicit  for  employment,  employ in any  capacity  or advise or
recommend  to any other  person  that it employ or solicit  for  employment  any
person  who  is on the  date  hereof  or who  hereafter  becomes,  prior  to the
termination  of the  Executive's  employment  with the  Company,  an  officer or
executive or professional  employee of the Company or any of its subsidiaries or
affiliates  and who was employed by the Company within 12 months before the time
of such solicitation,  employment,  advice or recommendation  (any such officer,
executive or professional employee being a "Company  Professional").  During the
Term,  the  Executive  shall not initiate or  facilitate  the  employment of any
Company  Professional by any other person,  it being  understood that this means
that the Executive  shall have no contact  regarding  such  employment  with any
Company Professional so employed prior to such employment and that the Executive
shall not suggest or

                                                        -7-

<PAGE>



otherwise  indicate  to any other  person that such  person  should  approach or
otherwise  contact  such  Company  Professional.  As  used  in  this  Agreement,
"Controlled Affiliate" means any company,  partnership,  firm or other entity as
to which the Executive possesses, directly or indirectly, the power to direct or
cause the  direction of the  management  and  policies of such  entity,  whether
through the ownership of voting securities, by contract or otherwise.

         (b) The  Executive  acknowledges  that,  through  his  status  as Chief
Financial  Officer and Vice  Chairman  of the  Company,  he has,  and will have,
possession  of  important,  confidential  information  and  knowledge  as to the
Company's  business,  including,  but not limited to, knowledge of marketing and
operating strategies,  franchise agreements,  financial results and projections,
future plans, the provisions of important  contracts entered into by the Company
and  possible  acquisitions.  The  Executive  agrees  that  such  knowledge  and
information  constitute  a vital part of the  business of the Company and are by
their  nature  trade  secrets  and   confidential   information   (collectively,
"Confidential Information").  The Executive agrees that he shall not, so long as
the  Company  remains  in  existence,  divulge,  communicate,  furnish  or  make
accessible  (whether  orally or in  writing or in books,  articles  or any other
medium) to any  individual,  firm,  partnership or corporation any knowledge and
information  with respect to  Confidential  Information  directly or  indirectly
useful in any aspect of the  business of the Company.  As used in the  preceding
sentences,  "Confidential  Information"  shall  not  include  any  knowledge  or
information which (i) is or becomes available to others,  other than as a result
of breach by the  Executive  of this  Section  5(b),  (ii) was  available to the
Executive on a  nonconfidential  basis prior to its  disclosure to the Executive
through his status as an officer of the Company or (iii)  becomes  available  to
the  Executive  on a  nonconfidential  basis from a third party  (other than the
Company  or  its  representatives)  who  is not  bound  by  any  confidentiality
obligation to the Company.

         (c) During the Term,  neither the Executive  nor any of his  Controlled
Affiliates  will render any services,  directly or  indirectly,  as an employee,
officer,  consultant  or  in  any  other  capacity,  to  any  individual,  firm,
corporation  or  partnership  engaged in the  franchising of hotels or motels or
similar  activities  competitive with any activities in which the Company or its
subsidiaries  or affiliates  are engaged at the time of such  termination  (such
businesses  being herein called the "Company  Business").  During the Term,  the
Executive shall not,  without the prior written consent of the Company,  hold an
equity interest in any firm,  partnership or corporation which competes with the
Company Business,  except that beneficial  ownership by the Executive  (together
with any one or more  members  of his  immediate  family and  together  with any
entity under his direct or indirect  control) of less than 1% of the outstanding
shares of capital  stock of any  corporation  which may be engaged in any of the
same  lines of  business  as the  Company  Business  which  stock is listed on a
national securities exchange or publicly traded in the  over-the-counter  market
shall not constitute a breach of the covenants in this Section 5(c).

         (d) The Executive  agrees that the provisions of Sections 5(a), (b) and
(c) may not be  adequately  enforced by an action for  damages and that,  in the
event of a breach  thereof by the  Executive,  the Company  shall be entitled to
apply for and obtain injunctive relief in any court of competent jurisdiction to
restrain  the breach or  threatened  breach of such  violation  or  otherwise to
enforce specifically such provisions against such violation.

                                                        -8-

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         6.  Successors;  Binding  Agreement.  (a) The Company  will require any
successor  (whether direct or indirect,  by purchase,  merger,  consolidation or
otherwise)  to all or  substantially  all  the  business  and/or  assets  of the
Company,  by  agreement in form and  substance  satisfactory  to the  Executive,
expressly to assume and agree to perform  this  Agreement in the same manner and
to the same extent  that the Company  would be required to perform it if no such
succession had taken place.

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

         7. Notice. For the purposes of this Agreement, notices, demands and all
other  communications  provided  for in this  Agreement  shall be in writing and
shall be deemed to have been duly given  when  delivered  or  (unless  otherwise
specified)  mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:

     If to the Executive:

                                Michael P. Monaco
                                            350 East 79th Street, Apt. 33A
                                            New York, New York 10021

     If to the Company:

                                HFS Incorporated
                                  6 Sylvan Way
                                            Parsippany, New Jersey   07054-0299
                                            Attention:  Chief Executive Officer

or to such  other  address  as any party  may have  furnished  to the  others in
writing in accordance herewith,  except that notices of changes of address shall
be effective only upon receipt.

         8.  Miscellaneous.  No  provision  of this  Agreement  may be  amended,
supplemented,   modified,   cancelled  or  discharged   unless  such  amendment,
supplement,  modification,  cancellation  or  discharge  is agreed to in writing
signed by the Executive and a duly authorized officer of the Company (other than
the  Executive);  and no  provisions  hereof may be waived  except in writing so
signed by or on behalf of the party  granting  such waiver.  No waiver by either
party  hereto  at any time of any  breach  by the  other  party  hereto  of,  or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent  time. This Agreement shall
be governed by and  interpreted in accordance  with the laws of the State of New
York  applicable to  agreements  made and to be performed  entirely  within such
State.


                                                        -9-

<PAGE>


         9.       Validity.  The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity  or enforceability
of any other provision of this Agreement, which shall  remain in  full force and
effect.

         10.  Arbitration.  Any  dispute  or  controversy  arising  under  or in
connection  with this Agreement  shall be settled  exclusively  by  arbitration,
conducted  before  a panel  of three  arbitrators  in New  York,  New  York,  in
accordance  with  the  rules of the  American  Arbitration  Association  then in
effect.  Judgment may be entered on the  arbitrators'  award in any court having
jurisdiction;  provided,  however,  that the Company shall be entitled to seek a
restraining  order or  injunction  in any  court of  competent  jurisdiction  to
prevent any continuation of any violation of the provisions of Section 5 and the
Executive  hereby  consents that such  restraining  order or  injunction  may be
granted without the necessity of the Company's  posting any bond. The expense of
such arbitration shall be borne by the Company.

         11. Entire Agreement. This Agreement sets forth the entire agreement of
the  parties  hereto in  respect  of the  subject  matter  contained  herein and
supersedes   all   prior   agreements,   promises,   covenants,    arrangements,
communications,  representations  or warranties,  whether oral or written by any
officer, employee or representative of any party hereto, and any prior agreement
of the parties hereto in respect of the subject matter contained herein.

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

                                HFS INCORPORATED



                                            BY:
                                                     Chairman of the Board and
                                                     Chief Executive Officer

AGREED:

MICHAEL P. MONACO





                                                       -10-

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