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                                                                 EXHIBIT 10.27

                                 HFS GUARANTY

         GUARANTY, dated as of August 28, 1996 (as amended, modified or
supplemented from time to time, this "Guaranty"), made by HFS INCORPORATED, a
Delaware corporation (the "Guarantor"). Except as otherwise defined herein,
capitalized terms used herein and defined in the Credit Agreement (as defined
below) shall be used herein as therein defined.

                                  WITNESSETH:

         WHEREAS, Chartwell Leisure Inc. (the "Company"), Chartwell Canada
Corp. (the "Canadian Borrower" and, together with the Company, the
"Borrowers"), various lenders from time to time party thereto (the "Banks"),
The Bank of Nova Scotia, as Syndication Agent (the "Syndication Agent"), and
The Chase Manhattan Bank, as Administrative Agent (together with any successor
administrative agent, the "Administrative Agent"), have entered into the
Credit Agreement, dated as of August 28, 1996, providing for the making of
Loans and the issuance of, and participation in, Letters of Credit, as
contemplated therein (as used herein, the term "Credit Agreement" means the
Credit Agreement described above in this paragraph, as the same may be
amended, modified, extended, renewed, replaced or supplemented from time to
time, and including any agreement extending the maturity of, or restructuring
all or any portion of the Indebtedness under such agreement or any successor
agreement) (the Banks, the Syndication Agent, the Administrative Agent and the
Collateral Agent are herein called the "Creditors");

         WHEREAS, it is a condition to the making of Loans and the issuance of
Letters of Credit under the Credit Agreement that the Guarantor shall have
executed and delivered this Guaranty; and

         WHEREAS, the Guarantor will obtain benefits from the incurrence of
Loans by the Borrowers under the Credit Agreement and, accordingly, desires to
execute this Guaranty in order to satisfy the conditions described in the
preceding paragraph;

         NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to the Guarantor, the receipt and sufficiency of which are hereby
acknowledged,

         1. The Guarantor irrevocably and unconditionally guarantees to the
Creditors the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of (x) the principal of and interest
on the Notes issued by, and the Loans made to, the Company under the Credit
Agreement and all reimbursement obligations and Unpaid Drawings with respect
to Letters of Credit issued under the Credit Agreement and (y) all other
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing
by the Company to the Creditors under the Credit Agreement or any other Credit
Document (including, without limitation, obligations of the Canadian Borrower
under the Credit Agreement and the other


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Credit Documents for which the Company is jointly and severally liable,
guarantee obligations, indemnities, Fees and interest thereon), whether now
existing or hereafter incurred under, arising out of or in connection with the
Credit Agreement or any such other Credit Document and the due performance and
compliance by the Company with all of the terms, conditions and agreements
contained in the Credit Documents (all such principal, interest, liabilities
and obligations being herein collectively called the "Guaranteed
Obligations"). The Guarantor and each Creditor understands, agrees and
confirms that (i) at any time when there is any default or failure to pay when
due any Guaranteed Obligations, the Creditors may enforce this Guaranty up to
the full amount of the Guaranteed Obligations (subject to the limits on the
aggregate liability of the Guarantor hereunder, as provided below) against the
Guarantor only after a written demand for payment has been made on the Company
and delivered to the Guarantor and such demand has not been fully complied
with (and all Guaranteed Obligations have not been paid in full) within 10
days after the date such demand for payment was made; provided that no such
demand need be made (and the Guaranteed Obligations hereunder shall
immediately be paid by the Guarantor, subject to the limits on the aggregate
liability of the Guarantor hereunder, as provided below) at any time when a
Default or an Event of Default exists with respect to either Borrower pursuant
to Section 11.05 of the Credit Agreement, a Guarantor Event of Default (or an
event which, with the passage of time, would be a Guarantor Event of Default)
exists with respect to the Guarantor pursuant to Section 14(d) hereof or the
maturity of the Loans has been accelerated pursuant to Section 11 of the
Credit Agreement and (ii) except as provided in the following sentence, the
maximum liability of the Guarantor under this Guaranty at any time shall not
exceed the Maximum Guaranteed Amount as then in effect. As used herein, the
"Maximum Guaranteed Amount" shall mean (w) $75,000,000 less each of (x) the
aggregate amount of cash actually loaned by the Guarantor to the Company after
the Effective Date pursuant to Section 10.04(vii) of the Credit Agreement so
long as all such cash proceeds were actually used to repay Loans pursuant to
the requirements of Section 4.02(a) of the Credit Agreement as a result of a
reduction to the Total-Revolving Loan Commitment pursuant to Sections 3.03(e)
and/or (f) of the Credit Agreement, (y) the aggregate amount of cash actually
invested (in return for HFS Redeemable Capital Stock) by the Guarantor in the
Company after the Effective Date pursuant to Section 10.04(viii) of the Credit
Agreement so long as all such cash proceeds were actually used to repay Loans
pursuant to the requirements of Section 4.02(a) of the Credit Agreement as a
result of a reduction to the Total Revolving Loan Commitment pursuant to
Sections 3.03(e) and/or (f) of the Credit Agreement and (z) any amounts
actually demanded by the Creditors hereunder (or payable upon a Default or an
Event of Default with respect to either Borrower as described in Section 11.05
of the Credit Agreement, a Guarantor Event of Default (or an event which, with
the passage of time, would be a Guarantor Event of Default) with respect to
the Guarantor pursuant to Section 14(d) hereof or upon an acceleration of
Loans under the Credit Agreement) and paid (subject to the provisions of
Section 21 hereof) to the Creditors pursuant to the provisions of this
Guaranty (excluding amounts payable in accordance with the following
sentence). In addition, and notwithstanding anything to the contrary contained
above in this Guaranty, (x) from and after the date any demand is made by the
Creditors for the payment of any amount hereunder or, if sooner, from and
after the date of the occurrence of any Default or Event of Default under
Section 11.05 of the Credit Agreement with respect to either Borrower, a
Guarantor Event of Default (or any event which, with the passage of time,
would be a


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Guarantor Event of Default) with respect to the Guarantor pursuant to Section
14(d) hereof or any acceleration of Loans pursuant to Section 11 of the Credit
Agreement, the Guarantor shall owe to the Creditors, in addition to the
Maximum Guaranteed Amount, interest on any amounts not immediately paid
hereunder at a rate per annum equal to the rate per annum applicable to past
due amounts owing pursuant to the Credit Agreement (as in effect on the date
hereof) and (y) any amounts owing pursuant to Section 15 of this Guaranty
shall be independently owing by the Guarantor, with any amounts paid pursuant
to clauses (x) and (y) of this sentence not to be counted in determining (and
same shall not reduce) the Maximum Guaranteed Amount. The Guarantor
understands, agrees and confirms that the Creditors may, subject to the two
preceding sentences, enforce this Guaranty up to the full amount of the
Guaranteed Obligations against the Guarantor without proceeding against either
Borrower, against any security for the Guaranteed Obligations, or against any
other guarantor under any other guaranty covering the Guaranteed Obligations.
This Guaranty shall constitute a guaranty of payment and performance, and not
of collection.

         2. Additionally, but subject to the limitations on the aggregate
amount guaranteed as provided in preceding Section 1, the Guarantor
unconditionally and irrevocably guarantees the payment of any and all
Guaranteed Obligations to the Creditors, whether or not due or payable by the
Borrowers, upon the occurrence in respect of either Borrower of a Default or
an Event of Default specified in Section 11.05 of the Credit Agreement or the
occurrence in respect of the Guarantor of any of the events specified in
Section 14(d) of this Guaranty which constitute a Guarantor Event of Default
(or would, with the passage of time, constitute a Guarantor Event of Default),
and unconditionally and irrevocably promises to pay such Guaranteed
Obligations to the Creditors, or order, on demand, in lawful money of the
United States.

         3. (a) The liability of the Guarantor hereunder is exclusive and
independent of any security for or other guaranty of the Guaranteed
Obligations whether executed by the Guarantor, any other guarantor or by any
other party, and the liability of the Guarantor hereunder shall not be
affected or impaired by any circumstance or occurrence whatsoever, including,
without limitation: (i) any direction as to application of payment by either
Borrower or by any other party, (ii) any other continuing or other guaranty,
undertaking or maximum liability of a guarantor or of any other party as to
the indebtedness of either Borrower, (iii) any payment on or in reduction of
any such other guaranty or undertaking except to the extent that any such
payment or reduction results in the actual permanent reduction of the
Guaranteed Obligations, (iv) any dissolution, termination or increase,
decrease or change in personnel by either Borrower, (v) any payment made to
the Administrative Agent or the other Creditors on the indebtedness which the
Administrative Agent or such other Creditor repays either Borrower pursuant to
court order in any bankruptcy, reorganization, arrangement, moratorium or
other debtor relief proceeding, and the Guarantor waives any right to the
deferral or modification of its obligations hereunder by reason of any such
proceeding, (vi) any action or inaction by the Creditors as contemplated in
Section 6 hereof, or (vii) any invalidity, irregularity or unenforceability of
all or part of the Guaranteed Obligations or of any security therefor.

         (b) Without limiting the generality of the foregoing, the Guarantor
hereby, agrees that


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notwithstanding anything to the contrary contained in the Financing Agreement
or any other HFS Agreement or any other agreement, no occurrence of events
(including a breach by the Company of its obligations under the Financing
Agreement or respect to any loan made by the Guarantor to either Borrower)
shall have any effect whatsoever on this Guaranty, and so long as the Bank
Termination Date has not occurred in no event shall either Borrower be
required to deliver to the Guarantor (and the Guarantor shall not accept) any
cash that either Borrower might otherwise be required to deliver to the
Guarantor pursuant to Section 2.1(b) of the Financing Agreement.

         4. The obligations of the Guarantor hereunder are independent of the
obligations of any other guarantor or the Borrowers, and a separate action or
actions may be brought and prosecuted against the Guarantor whether or not
action is brought against any other guarantor or either Borrower and whether
or not any other guarantor or either Borrower be joined in any such action or
actions. The Guarantor waives, to the fullest extent permitted by law, the
benefit of any statute of limitations affecting its liability hereunder or the
enforcement thereof. Any payment by either Borrower or other circumstance
which operates to toll any statute of limitations as to either Borrower shall
operate to toll the statute of limitations as to the Guarantor.

         5. The Guarantor waives all presentments, demands for performance
protests and notices, including, without limitation, notices of
nonperformance, notices of protest, notices of dishonor, notices of acceptance
of this Guaranty, and notices of the existence, creation or incurring of new
or additional Guaranteed Obligations. The Guarantor assumes all responsibility
for being and keeping itself informed of either Borrower's financial condition
and assets, and of all other circumstances bearing upon the risk of nonpayment
of the Guaranteed Obligations and the nature, scope and extent of the risks
which the Guarantor assumes and incurs hereunder, and agrees that the
Creditors shall have no duty to advise the Guarantor of information known to
them regarding such circumstances or risks.

         6. Any Creditor may at any time and from time to time without the
consent of, or notice to the Guarantor, without incurring responsibility to
the Guarantor, without impairing or releasing the obligations of the Guarantor
hereunder, upon or without any terms or conditions and in whole or in part:

         (a) change the manner, place or terms of payment of, and/or change or
extend the time of payment of, renew or alter, any of the Guaranteed
Obligations (including any increase or decrease in the rate of interest
thereon), any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the guaranty herein made shall apply to the
Guaranteed Obligations as so changed, extended, renewed or altered;

         (b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order any property by whomsoever at any
time pledged or mortgaged to secure, or howsoever securing, the Guaranteed
Obligations or any liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or any offset there
against;


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         (c) exercise or refrain from exercising any rights against the
Borrowers, any other Credit Party or any other Person or otherwise act or
refrain from acting;

         (d) release or substitute any one or more endorsers, guarantors,
either Borrower or other obligors;

         (e) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and may subordinate the
payment of all or any part thereof to the payment of any liability (whether
due or not) of either Borrower to creditors of such Borrower other than the
Creditors;
         (f) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of either Borrower to the Creditors regardless of
what liabilities of such Borrower remain unpaid;

         (g) consent to or waive any breach of, or any act, omission or
default under, any of the Credit Documents or any of the instruments or
agreements referred to therein, or otherwise amend, modify or supplement the
Credit Documents or any of such other instruments or agreements;

         (h) act or fail to act in any manner referred to in this Guaranty
which may deprive the Guarantor of its right to subrogation against either
Borrower to recover full indemnity for any payments made pursuant to this
Guaranty; and/or

         (i) take any other action which would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of the
Guarantor from its liabilities under this Guaranty.

         7. No invalidity, irregularity or unenforceability of all or any part
of the Guaranteed Obligations or of any security therefor shall affect, impair
or be a defense to this Guaranty, and this Guaranty shall be primary, absolute
and unconditional notwithstanding the occurrence of any event or the existence
of any other circumstances which might constitute a legal or equitable
discharge of a surety or guarantor except payment in full of the Guaranteed
Obligations.

         8. This Guaranty is a continuing one and all liabilities to which it
applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. No failure or delay on the part of any
Creditor in exercising any right, power or privilege hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies
herein expressly specified are cumulative and not exclusive of any rights or
remedies which any Creditor would otherwise have. No notice to or demand on
the Guarantor in any case shall entitle the Guarantor to any other further
notice or demand in similar or other circumstances or constitute a waiver of
the rights of any Creditor to any other or further action in any circumstances
without notice or demand. It is not necessary for any Creditor to inquire into


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the capacity or powers of the Borrower or the officers, directors, partners or
agents acting or purporting to act on its behalf, and any indebtedness made or
created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.

         9. The Guarantor hereby agrees with the Creditors that it will not
exercise any right of subrogation (whether contractual, under Section 509 of
the Bankruptcy Code, or otherwise) which it may at any time otherwise have
either as a result of payments made by it under this Guaranty or otherwise,
until all Guaranteed Obligations (for purposes of this Section 9, determined
without regard to any limitations on the aggregate amount guaranteed as
provided in Section 1 hereof) have been paid in full in cash.

         10. The Guarantor waives any right to require the Creditors to: (i)
proceed against the Borrowers, any other guarantor, or any other party; or
(ii) proceed against or exhaust any security held from the Borrowers, any
other guarantor or any other party; or (iii) pursue any other remedy in the
Creditors' power whatsoever. The Guarantor waives any defense based on or
arising out of any defense of either Borrower, any other guarantor or any
other party other than payment in full of the Guaranteed Obligations,
including, without limitation, any defense based on or arising out of the
disability of either Borrower, any other guarantor or any other party, or the
unenforceability of the Guaranteed Obligations or any part thereof from any
cause, or the cessation from any cause of the liability of either Borrower
other than payment in full of the Guaranteed Obligations. The Creditors may,
at their election, foreclose on any security held by the Administrative Agent,
the Collateral Agent, the Syndication Agent or the other Creditors by one or
more judicial or nonjudicial sales, or exercise any other right or remedy the
Creditors may have against either Borrower or any other party, or any
security, without affecting or impairing in any way the liability of the
Guarantor hereunder except to the extent the Guaranteed Obligations have been
paid. The Guarantor waives any defense arising out of any such election by the
Creditors, even though such election operates to impair or extinguish any
right of reimbursement or subrogation or other right or remedy of the
Guarantor against either Borrower or any other party or any security.

         11. The Creditors agree that this Guaranty may be enforced only by
the action of the Administrative Agent or the Collateral Agent, in each case
acting upon the instructions of the Required Banks and that no other Creditors
shall have any right individually to seek to enforce or to enforce this
Guaranty, it being understood and agreed that such rights and remedies may be
exercised by the Administrative Agent or the Collateral Agent for the benefit
of the Creditors upon the terms of this Guaranty.

         12. In order to induce the Creditors to enter into the Credit
Agreement and to make the Loans and issue or participate in Letters of Credit
pursuant to the Credit Agreement, the Guarantor makes the following
representations, warranties and agreements:

         (a) Corporate Existence and Power. The Guarantor and its Subsidiaries
have been duly organized and are validly existing in good standing under the
laws of their respective jurisdictions of incorporation and are in good
standing or have applied for authority to operate as a foreign corporation in
all jurisdictions where the nature of their properties or business so requires
it and where a failure to be in good standing as a foreign corporation


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would have a material adverse effect on the business, assets or condition,
financial or otherwise, of the Guarantor and its Subsidiaries taken as a
whole. The Guarantor and each of its Subsidiaries have the corporate power to
own their respective properties and carry on their respective businesses as
now being conducted, and in the case of the Guarantor, to execute, deliver and
perform its obligations under this Guaranty and the other Credit Documents to
which the Guarantor is a party.

         (b) Corporate Authority and No Violation. The execution, delivery and
performance by the Guarantor of this Guaranty and the other Credit Documents
to which it is a party (a) have been duly authorized by all necessary
corporate action on the part of the Guarantor, (b) will not violate any
provision of any Applicable Law (as defined in the HFS Credit Agreement (as
hereinafter defined) as in effect on the Effective Date) (including any laws
related to franchising) applicable to the Guarantor or any of its Subsidiaries
or any of their respective properties or assets, (c) will not violate any
provision of the Certificate of Incorporation or By-Laws of the Guarantor or
any of its Subsidiaries, or any indenture, any agreement for borrowed money,
any bond, note or other similar instrument or any other material agreement to
which the Guarantor or any of its Subsidiaries is a party or by which the
Guarantor or any of its Subsidiaries or any of their respective properties or
assets are bound, (d) will not be in conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under, any
material indenture, agreement, bond, note or instrument and (e) will not
result in the creation or imposition of any Lien upon any property or assets
of the Guarantor or any of its Subsidiaries other than pursuant to this
Guaranty and the other Credit Documents to which the Guarantor is a party.

         (c) Governmental and Other Approval and Consents. No action, consent
or approval of, or registration or filing with, or any other action by, any
governmental agency, bureau, commission or court is required in connection
with the execution, delivery and performance by the Guarantor of this Guaranty
and the other Credit Documents to which the Guarantor is a party.

         (d) Litigation. There are no lawsuits or other proceedings pending
(including, but not limited to, matters relating to environmental liability),
or, to the knowledge of the Guarantor, threatened, against or affecting the
Guarantor or any of its Subsidiaries or any of their respective properties, by
or before any Governmental Authority (as defined in the ~S Credit Agreement as
in effect on the Effective Date) or arbitrator, which could reasonably be
expected to have a material adverse effect on the financial condition or the
business of the Guarantor and its Subsidiaries taken as a whole. Neither the
Guarantor nor any of its Subsidiaries is in default with respect to any order,
writ, injunction, decree, rule or regulation of any Governmental Authority,
which default would have a material adverse effect upon the financial
condition or the business of the Guarantor and its Subsidiaries taken as a
whole.

         (e) Financial Statements; Financial Condition; Undisclosed
Liabilities.

                  (i) The consolidated statements of financial condition of
the Guarantor and its consolidated Subsidiaries at December 31, 1994 and
December 31, 1995 and the related


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consolidated statements of income, cash flow and shareholders' equity of the
Guarantor and its consolidated Subsidiaries for the fiscal year ended on such
date, as the case may be, and set forth in the Guarantor's Forms 10-K for such
periods and furnished to the Creditors prior to the Effective Date, present
fairly the consolidated financial condition of the Guarantor and its
consolidated Subsidiaries at the date of such consolidated statements of
financial condition and the consolidated results of the operations of the
Guarantor and its consolidated Subsidiaries for the respective fiscal year.
The unaudited consolidated statement of financial condition of the Guarantor
and its consolidated Subsidiaries at June 30, 1996 and the related unaudited
consolidated statements of income, cash flow and shareholders' equity of the
Guarantor and its consolidated Subsidiaries for the six-month period ended on
such date, and set forth in the Guarantor's Form 10-Q for such period and
furnished to the Creditors prior to the Effective Date present fairly the
consolidated financial condition of the Guarantor and its consolidated
Subsidiaries at the date of such consolidated statement of financial condition
and the consolidated results of the operations of the Guarantor and its
consolidated Subsidiaries for such six-month period. All such consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied, subject, in the case of the
consolidated financial statements at June 30, 1996, to normal year end audit
adjustments. Since December 31, 1995, there has been no material adverse
change in the business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of the Guarantor or of the Guarantor and
its Subsidiaries taken as a whole.

                  (ii) On and as of the Initial Borrowing Date, after giving
effect to all Indebtedness (including the Revolving Loans) being incurred or
assumed and Liens created in connection therewith, (x) the sum of the assets,
at a fair valuation, of the Guarantor will exceed its debts, (y) the Guarantor
has not incurred and does not intend to incur, and does not believe that it
will incur, debts beyond its ability to pay such debts as such debts mature
and (z) the Guarantor has sufficient capital with which to conduct its
business. For purposes of this clause (e)(ii) "debt" means any liability on a
claim, and "claim" means (i) right to payment whether or not such a right is
reduced to judgment, liquidated, unliquidated. fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or
(ii) right to an equitable remedy for breach of performance if such breach
gives rise to a payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured.

         (f) Taxes. The Guarantor and each of its Subsidiaries have filed or
caused to be filed all federal, state and local tax returns which are required
to be filed, and have paid or have caused to be paid all taxes as shown on
said returns or on any assessment received by them in writing, to the extent
that such taxes have become due.

         (g) Investment Company Act. The Guarantor is not an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.

         (h) Public Utility Holding Company Act. Neither the Guarantor nor any
of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company"


<PAGE>



within the meaning of the Public Utility Holding Company Act of 1935, as
amended.

         (i) HFS Credit Agreement. The Guarantor has delivered to the
Administrative Agent and the other Creditors, true and correct copies of the
HFS Credit Agreement as in effect on the Effective Date.

         (j) Incorporation by Reference. The Guarantor hereby makes each of
the representations and warranties contained in Sections 3.06 through 3.09,
inclusive, 3.15, 3.16, 3.19 and 3.20 of the HFS Credit Agreement, which
Sections, together with all definitions in the HFS Credit Agreement applicable
to such Sections, are hereby incorporated by reference as if set forth herein
in their entirety, provided that, all references to "Borrower" therein shall
mean and be a reference to "the Guarantor" herein. No amendment, modification
or supplement to such representations or warranties or definitions made to the
HFS Credit Agreement shall be effective to amend such representations and
warranties or definitions as incorporated by reference herein except as
otherwise provided in Section 13(b) of this Guaranty.

         13. The Guarantor covenants and agrees that on and after the Initial
Borrowing Date and until the Total Revolving Loan Commitment has terminated
and the Loans and Notes, together with interest, Fees and all Guaranteed
Obligations are paid in full:

         (a) Preservation of Existence: Compliance with Statutes. etc. The
Guarantor will preserve and maintain its corporate existence and its material
rights, licenses, permits, franchises and privileges and comply, and cause
each of its Subsidiaries to comply, with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property (including applicable statutes, regulations, orders
and restrictions relating to environmental standards and controls), except
such noncompliances as could not, individually or in the aggregate, reasonably
be expected to have a material adverse effect on the business, operations,
property, assets, condition (financial or otherwise) or prospects of the
Guarantor or of the Guarantor and its Subsidiaries taken as a whole.

         (b) Incorporation by Reference. The Guarantor will comply with each
of the covenants contained in Sections 5 and 6 of the HFS Credit Agreement,
which Sections, together with all definitions in the HFS Credit Agreement
applicable to such Sections, are hereby incorporated by reference as if set
forth herein in their entirety, provided that:

         (i) all references to "Borrower" therein shall mean and be a
         reference to the Guarantor" herein;

         (ii) all references to "Lender" therein shall mean and be a reference
         to "Creditors" herein;

         (iii) all references to the "Agent" or "Administrative Agent" therein
         shall mean and be a reference to "Administrative Agent" herein;



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         (iv) all references to the "Required Lenders" therein shall mean and
         be a reference to "Required Banks" herein;

         (v) all references to "this Agreement", "herein", "hereunder" and
         words of similar import therein shall mean and be a reference to this
         Guaranty;

         (vi) all references to "Exhibit D hereto" therein shall mean and be a
         reference to "Exhibit D to the HFS Credit Agreement" herein;

         (vii) all references to "Schedule 3.17 hereto" therein shall mean and
         be a reference to "Schedule 3.17 to the HFS Credit Agreement" herein;

         (viii) all references to "Schedule 6.05 hereto" therein shall mean
         and be a reference to "Schedule 6.05 to the HFS Credit Agreement"
         herein;

         (ix) Section 6.01 of the HFS Credit Agreement as incorporated herein
         by reference shall include Indebtedness created under the HFS Credit
         Agreement or any refinancing thereof as permitted Indebtedness
         hereunder, so long as the aggregate amount thereof is not increased
         above the aggregate commitments under the ~S Credit Agreement as in
         effect on the Effective Date;

         (x) Section 6.05 of the HFS Credit Agreement as incorporated herein
         by reference shall (a) be deemed to have the phrase "unless all
         obligations of HFS under this Guaranty shall be secured equally and
         ratably with the other obligations secured by any such Lien on terms
         satisfactory to the Agent and the Required Banks," inserted in the
         first line thereof immediately after the phrase "Lien on its
         property," appearing therein and (b) not pursuant to clause (e)
         thereof, permit any Liens securing the HFS Credit Agreement;

         (xi) Section 6.12 of the HFS Credit Agreement as incorporated herein
         by reference shall include the HFS Credit Agreement and any
         refinancing thereof (provided that any such refinancing shall not
         prohibit a negative pledge pursuant to this Guaranty);

         (xii) all references to "Fundamental Documents" therein shall mean
         and be a reference to "Credit Documents" herein; and

         (xiii) Paragraph (a) of Section 6.12 of the HFS Credit Agreement
         shall be deemed modified by inserting at the end thereof "provided,
         that the obligations of HFS under this Guaranty and the other Credit
         Documents shall be secured equally and ratably with the obligations
         of HFS under the HFS Credit Agreement".

No amendment, modification or supplement to such covenants or definitions made
to the HFS Credit Agreement shall be effective to amend such covenants or
definitions as incorporated by reference herein without the prior consent of
the Administrative Agent and the Syndication Agent; provided, however, that
the Administrative Agent and the Syndication Agent will consider in good faith
suggested amendments, modifications or supplements to


<PAGE>



such covenants or definitions to the extent that such amendment, modification
or supplement is the result of a refinancing of the HFS Credit Agreement;
provided further, that if at the time of any such amendment, modification or
supplement in connection with a refinancing of the HFS Credit Agreement HFS'
long-term senior unsecured debt credit rating is at least BBB by S&P, then the
provisions of Section 12(i) hereof and this Section 13(b) will be deemed
modified (without the consent of any Person) to the extent necessary to
incorporate by reference the respective amendment, modification or supplement
to the HFS Credit Agreement. In connection with any amendment, modification or
supplement to the HFS Credit Agreement which will be incorporated herein by
reference, the Banks hereby authorize the Administrative Agent and the
Syndication Agent to enter into an appropriate amendment to this Guaranty to
reflect such amendment, modification or supplement.

         As used in this Guaranty, the term "HFS Credit Agreement" shall mean
the Competitive Advance and Revolving Credit Agreement, dated as of December
16, 1993 among HFS, the lenders named therein and The Chase Manhattan Bank (as
successor to Chemical Bank), as Administrative Agent, as in effect on the
Effective Date and as amended, modified, supplemented or refinanced from time
to time in accordance with the provisions of this Guaranty.

         14. The occurrence of any of the following specified events shall
constitute a "Guarantor Event of Default" hereunder:

         (a) Payments. The Guarantor shall fail to pay when due any amounts
owing by it hereunder, or

         (b) Representations, etc. Any representation, warranty or statement
made by the Guarantor herein or in any certificate delivered pursuant hereto
shall prove to be untrue or inaccurate in any material respect on the date as
of which made or' deemed made; or

         (c) Covenant. Default shall be made by the Guarantor in the due
observance or performance of any other covenant, condition or agreement to be
observed or performed pursuant to the terms of this Guaranty, the HFS Credit
Agreement or any other Fundamental Document (as defined in the HFS Credit
Agreement) and such default shall continue unremedied for thirty (30) days
after the Guarantor obtains knowledge of such occurrence; or

         (d) Bankruptcy, etc. The Guarantor or any of its Subsidiaries shall
commence a voluntary case concerning itself under the "Bankruptcy Code"; or an
involuntary case is commenced against the Guarantor or any of its Subsidiaries
and the petition is not controverted within 10 days, or is not dismissed
within 60 days, after commencement of the case; or a custodian (as defined in
the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of the Guarantor or any of its Subsidiaries,
or the Guarantor or any of its Subsidiaries commences any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Guarantor or any of its
Subsidiaries, or there is commenced against the Guarantor or any of its
Subsidiaries any such proceeding which remains undismissed for a period of 60
days,


<PAGE>



or the Guarantor or any of its Subsidiaries is adjudicated insolvent or
bankrupt; or any order or relief or other order approving any such case or
proceeding is entered; or the Guarantor or any of its Subsidiaries suffers any
appointment of any custodian or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of 60 days; or the
Guarantor or any of its Subsidiaries makes a general assignment for the
benefit of creditors; or any partnership and/or corporate action is taken by
the Guarantor or any of its Subsidiaries for the purpose of effecting any of
the foregoing; or

         (e) Judgments. One or more judgments or decrees shall be entered
against the Guarantor or any of its Subsidiaries involving in the aggregate
for the Guarantor and its Subsidiaries a liability (not paid or fully covered
by a reputable and solvent insurance company) and such judgments and decrees
either shall be final and non-appealable or shall not be vacated, discharged
or stayed or bonded pending appeal for any period of 30 consecutive days, and
the aggregate amount of all such judgments exceeds $1,000,000; or

         (f) [INTENTIONALLY OMITTED]

         15. The Guarantor hereby agrees to pay all out-of-pocket costs and
expenses of the Administrative Agent and the Syndication Agent in connection
with any amendment, waiver or consent relating hereto, and of each Creditor in
connection with the enforcement of this Guaranty (including in each case,
without limitation, the fees and disbursements of counsel employed by any
Agent or any of the other Creditors).

         16. This Guaranty shall be binding upon the Guarantor and its
successors and assigns and shall inure to the benefit of the Creditors and
their successors and assigns.

         17. Neither this Guaranty nor any provision hereof may be changed,
waived, discharged or terminated except with the written consent of the
Guarantor and with the written consent of the Required Banks (or to the extent
required by Section 14.12 of the Credit Agreement, with the written consent of
each Bank).

         18. The Guarantor acknowledges that an executed (or conformed) copy
of each of the Credit Documents in existence on the date hereof has been made
available to the Guarantor and the Guarantor is familiar with the contents
thereof.

         19. In addition to any rights now or hereafter granted under
applicable law (including, without limitation, Section 151 of the New York
Debtor and Creditor Law) and not by way of limitation of any such rights, upon
the occurrence and during the continuance of any Event of Default, each
Creditor is hereby authorized at any time or from time to time, without notice
to the Guarantor or to any other Person (provided that at least 10 days' prior
written notice shall have been given to the Company and the Guarantor of the
respective non-payment of Guaranteed Obligations, unless a Default or an Event
of Default exists with respect to either Borrower pursuant to Section 11.05 of
the Credit Agreement or a Guarantor Event of Default (or an event which, with
the passage of time, would be a Guarantor Event of Default) exists with
respect to the Guarantor pursuant to Section 14(d) hereof or the maturity of
the Loans has been accelerated pursuant to Section 11 of the Credit
Agreement),


<PAGE>



any such notice (except to the extent required pursuant to the immediately
preceding parenthetical) being expressly waived, to set off and to appropriate
and apply any and all deposits (general or special) and any other indebtedness
at any time held or owing by such Creditor to or for the credit or the account
of the Guarantor, against and on account of the obligations and liabilities of
the Guarantor to such Creditor under this Guaranty, irrespective of whether or
not such Creditor shall have made any demand hereunder and although said
obligations, liabilities, deposits or claims, or any of them, shall be
contingent or unmatured.

         20. All notices, requests, demands or other communications pursuant
hereto shall be deemed to have been duly given or made when delivered to the
Person to which such notice, request, demand or other communication is
required or permitted to be given or made under this Guaranty, addressed to
such party at (i) in the case of any Creditor, as provided in the Credit
Agreement and (ii) in the case of the Guarantor, at its address set forth
opposite its signature below.

         21. If claim is ever made upon any Creditor for repayment or recovery
of any amount or amounts received in payment or on account of any of the
Guaranteed Obligations and any of the aforesaid payees repays all or part of
said amount by reason of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its property
or (ii) any settlement or compromise of any such claim effected by such payee
with any such claimant (including either Borrower), then and in such event the
Guarantor agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon the Guarantor, notwithstanding any revocation
hereof or other instrument evidencing any liability of either Borrower, and
the Guarantor shall be and remain liable to the aforesaid payees hereunder for
the amount so repaid or recovered to the same extent as if such amount had
never originally been received by any such payee.

         22. (A) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE CREDITORS
AND THE GUARANTOR SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF NEW YORK. Any legal action or proceeding with respect to
this Guaranty or any other Credit Document to which the Guarantor is a party
may be brought in the courts of the State of New York or of the United States
of America for the Southern District of New York, and, by execution and
delivery of this Guaranty, the Guarantor hereby irrevocably accepts for itself
and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The Guarantor hereby further irrevocably
waives any claim that any such courts lack jurisdiction over the Guarantor,
and agrees not to plead or claim, in any legal action or proceeding with
respect to this Guaranty or any other Credit Document to which the Guarantor
is a party brought in any of the aforesaid courts, that any such court lacks
jurisdiction over the Guarantor. The Guarantor further irrevocably consents to
the service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to the Guarantor at its address set forth
opposite its signature below, such service to become effective 30 days after
such mailing. The Guarantor hereby irrevocably waives any objection to such
service of process and further irrevocably waives and agrees not to plead or
claim in any action or proceeding commenced hereunder that service of process
was in any way invalid or ineffective. Nothing


<PAGE>



herein shall affect the right of any of the Creditors to serve process in any
other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Guarantor in any other jurisdiction.

         (B) The Guarantor hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Guaranty
brought in the courts referred to in clause (a) above and hereby further
irrevocably waives and agrees not to plead or claim in any such court that
such action or proceeding brought in any such court has been brought in an
inconvenient form

         (C) THE GUARANTOR AND EACH CREDITOR (BY ITS ACCEPTANCE OF THE
BENEFITS OF THIS GUARANTY) HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS GUARANTY, THE OTHER CREDIT DOCUMENTS TO WHICH SUCH GUARANTOR IS A PARTY
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

         23. This Guaranty may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when
so executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Guarantor and the
Administrative Agent.

         24. All payments made by the Guarantor hereunder will be made without
setoff, counterclaim, deduction or other defense.

         25. Notwithstanding anything to the contrary contained above in this
Guaranty, it is understood and agreed by the parties hereto that, to the
extent (and only to the extent) expressly provided in Section 2.06 of the HFS
Subordination Agreement, certain amendments to the Credit Agreement shall, to
the extent provided in said Section 2.06, require the consent of the
Guarantor.

         26. Payments by the Guarantor under this Guaranty shall be made in
Dollars, notwithstanding the Currency in which the Guaranteed Obligations are
denominated. To the extent that any such payment in Dollars is to be applied
to the payment of a Guaranteed Obligation denominated in Canadian Dollars,
Dollars paid under this Guaranty shall be converted by the Administrative
Agent into Canadian Dollars in accordance with the Credit Agreement.



<PAGE>



         IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed and delivered as of the date first above written.

         Address:                              HFS INCORPORATED
         339 Jefferson Road
         Parsippany, NJ 07054
         Telephone No.: (201) 428-9700         By:  /s/ James E. Buckman
         Facsimile No.: (201) 428-5269              ---------------------------
         Attention: James E. Buckman           Name: James E. Buckman
                                               Title: Executive Vice President
                                                         and General Counsel
         Accepted and Agreed to:

         THE CHASE MANHATTAN BANK,
         as Administrative Agent and as
         Collateral Agent

         By: /s/ William J. Caggiano
             -------------------------------
         Name:  William J. Caggiano
         Title: Managing Director