Document:

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                                                                  EXHIBIT 10.54

                              TERMINATION AGREEMENT

                                      among

                       RFS, INC., a Tennessee corporation

                   RFS LEASING, INC., a Tennessee corporation

                  DTR RFS LESSEE, INC., an Arizona corporation

             RFS PARTNERSHIP, L.P., a Tennessee limited partnership

        RFS FINANCING PARTNERSHIP, L.P., a Tennessee limited partnership

                  PLANO INN, L.P., a Texas limited partnership

            RFS SPE 1 1998 LLC, a Virginia limited liability company

            RFS SPE 2 1998 LLC, a Virginia limited liability company

            RIDGE LAKE GENERAL PARTNER, INC., a Tennessee corporation

               RFS HOTEL INVESTORS, INC., a Tennessee corporation

                 DOUBLETREE CORPORATION, a Delaware corporation

                                       and

                HILTON HOTELS CORPORATION, a Delaware corporation

                          dated as of January 26, 2000

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                              TERMINATION AGREEMENT

          TERMINATION AGREEMENT dated as of January 26, 2000, among RFS, Inc., a
     Tennessee corporation ("RFS"); RFS Leasing, Inc., a Tennessee corporation
     ("RFSL"); DTR RFS Lessee, Inc., an Arizona corporation ("DTR"); RFS
     Partnership, L.P., a Tennessee limited partnership ("RFSOP"); RFS Financing
     Partnership, L.P., a Tennessee limited partnership ("RFSFP"); Plano Inn,
     L.P. (formerly known as Plano Hampton Inn, L.P.), a Texas limited
     partnership ("Plano"); RFS SPE 1 1998 LLC, a Virginia limited liability
     company ("RFS SPE 1"); RFS SPE 2 1998 LLC, a Virginia limited liability
     company ("RFS SPE 2"); Ridge Lake General Partner, Inc., a Tennessee
     corporation ("Ridge Lake"); RFS Hotel Investors, Inc., a Tennessee
     corporation (the "REIT"); Doubletree Corporation, a Delaware corporation;
     and Hilton Hotels Corporation, a Delaware corporation ("Hilton").

                              W I T N E S S E T H:

          WHEREAS, the Lessees and the Lessors (each as defined below) have
     entered into lease agreements with respect to the hotel properties
     described in EXHIBIT 1(a) hereto (as such agreements may have been amended
     or modified, each a "Lease Agreement" and collectively, the "Lease
     Agreements"); and

          WHEREAS, the Owners and the Manager (each as defined below) have
     entered into management agreements with respect to the hotel properties
     described in EXHIBIT 1(b) hereto (as such agreements may have been amended
     or modified, each an "Owner Management Agreement" and collectively, the
     "Owner Management Agreements"); and

          WHEREAS, certain parties hereto have entered into the agreements
     described in EXHIBIT 1(c) hereto (as such agreements may have been amended
     or modified, the "Ancillary Agreements"); and

          WHEREAS, the parties desire to provide for the termination of the
     Lease Agreements, the Ancillary Agreements and the Owner Management
     Agreements effective as of the Termination Date (as defined below) subject
     to the terms and conditions described herein; and

          WHEREAS, the parties desire to set forth other agreements and
     covenants as set forth herein;

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

     SECTION 1. DEFINITIONS.

(a)  CERTAIN DEFINITIONS. For purposes of this Termination Agreement the
     following words and phrases shall have the meanings set forth below:

          "AFFILIATE MANAGEMENT AGREEMENTS" shall mean (i) the Consolidated
     Management Agreement dated November 21, 1996, between RFS and RFSL, (ii)
     the Management Agreement dated November 21, 1996, between RFSL and DT
     Management, Inc. (Doubletree Hotel, Del

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     Mar, CA), and (iii) any and all other management agreements among the
     Lessee Parties with respect to Leased Hotels owned by the REIT Parties.

          "AGGREGATE LEASE TERMINATION PAYMENT" shall mean Fifty-Nine Million
     Five Hundred Thirty-Three Thousand Five Hundred Fifty Dollars
     ($59,533,550.00).

          "AGGREGATE MANAGEMENT TERMINATION PAYMENT" shall mean the amount
     determined pursuant to Section 3(d) hereof.

          "AGREEMENTS" shall mean this Termination Agreement, the Escrow
     Agreement and the Registration Rights Agreement.

          "COMMON STOCK" shall mean the REIT's common stock, par value $.01 per
     share.

          "CONTRACTS" shall mean, with respect to any Leased Hotel, all
     contracts to which a Lessee is a party or is otherwise obligated relating
     to the operation of such Leased Hotel other than (i) any Lease Agreement,
     Franchise Agreement, Third Party Management Agreement or License and (ii)
     any such contracts with or between a Lessee and an affiliate of any of the
     Lessee Parties, including, without limitation, the Affiliate Management
     Agreements.

          "CURRENT MARKET VALUE" shall mean, with respect to a share of Common
     Stock, an amount determined by (A) multiplying the closing price per share
     of Common Stock for each of the twenty (20) consecutive trading days ending
     on the fifth (5th) business day prior to the Purchase Date, as reported on
     the NYSE or the principal securities exchange on which the Common Stock is
     then traded by the number of shares of Common Stock traded on such date,
     (B) adding the products so obtained and (C) dividing the sum thereof by the
     total number of shares of Common Stock traded during the 20-day period.

          "DOUBLETREE/RFS MERGER" shall mean the merger consummated pursuant to
     the Agreement and Plan of Merger described on EXHIBIT 1(c) hereto.

          "EXCLUDED ASSETS" shall mean, except as otherwise provided in
     EXHIBIT 3(b)(i) hereto, with respect to any Leased Hotel, (a) all cash and
     cash equivalents on hand at such Leased Hotel as of the Termination Date,
     (b) all accounts receivable of such Leased Hotel as of the Termination
     Date, (c) all insurance policies under which the Lessee is insured and
     rights of the Lessee thereunder, and (d) all warranties, claims and causes
     of action of the Lessee relating to the period prior to the Termination
     Date.

          "EXCLUDED MATERIAL CONTRACT" shall mean (i) any Material Contract in
     existence as of the date of this Termination Agreement which is not
     disclosed on EXHIBIT 22 hereto, and (ii) any Material Contract executed
     after the date of this Termination Agreement without the prior written
     consent of the REIT Parties.

          "FRANCHISE AGREEMENT" shall mean, with respect to any Leased Hotel,
     the hotel franchise agreement under which such Leased Hotel is operated.

          "HILTON FRANCHISE AGREEMENT" shall mean a hotel franchise agreement
     with a subsidiary of Hilton, as franchisor, for the Leased Hotels or
     Managed Hotels which currently operate as a Hampton Inn, Homewood Suites,
     or Doubletree hotel.

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          "LEASED HOTEL" shall mean each hotel described in EXHIBIT 1(a)
     hereto other than (i) those hotels whose leases have been previously
     terminated as described on EXHIBIT 1(a) hereto, or (ii) if the context
     requires, a hotel with respect to which an Interim Lease Termination has
     occurred prior to the Termination Date pursuant to Section 6 hereof.

          "LESSEES" shall mean RFS, RFSL, DTR and any affiliate of Hilton that
     becomes a lessee for a hotel owned by a Lessor prior to the Termination
     Date (each a "Lessee").

          "LESSEE PARTIES" shall mean Hilton, Doubletree, the Lessees and the
     Manager, collectively.

          "LESSORS" shall mean RFSOP, RFSFP, Plano, RFS SPE 1, RFS SPE 2
     and any affiliate of the REIT that becomes an owner of a hotel leased to a
     Lessee prior to the Termination Date (each a "Lessor").

          "LICENSES" shall mean, with respect to any Leased Hotel or any Managed
     Hotel, all licenses, operating permits and other governmental
     authorizations that may be necessary for the operation of such Leased Hotel
     or Managed Hotel.

          "MANAGED HOTEL" shall mean each hotel described in EXHIBIT 1(b)
     hereto, other than a hotel with respect to which an Interim Management
     Termination has occurred prior to the Termination Date.

          "MANAGER" shall mean RFS, Inc., in its capacity as manager of the
     Managed Hotels pursuant to the Owner Management Agreements.

          "MATERIAL CONTRACT" shall mean any Contract applicable to one or more
     Leased Hotels which (i) requires annual payments by any Lessee or an
     affiliate of a Lessee of $25,000 or more or (ii) requires the delivery of
     more than 20 room nights per month in exchange for services.

          "NYSE" shall mean the New York Stock Exchange.

          "OWNERS" shall mean the owners of the Managed Hotels described in
     EXHIBIT 1(b) hereto.

          "PREFERRED STOCK" shall mean the 973,684 outstanding shares of the
     REIT's Series A preferred stock, par value $.01 per share currently owned
     by RFS.

          "REIT PARTIES" shall mean the REIT, the Owners and the Lessors
     collectively.

          "REGISTRATION RIGHTS AGREEMENT" shall mean that certain Registration
     Rights Agreement of even date herewith by and between the REIT and RFS.

          "STANDSTILL AGREEMENT" shall mean the agreement to be executed by
     Marriott, Hilton, RFS and RFSL in the form attached hereto as EXHIBIT 1(e)
     with such modifications as shall be approved by the REIT.

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          "SUBORDINATION AGREEMENT" shall mean that certain Consolidated Lease
     Estoppel, Subordination, Attornment and Non-Disturbance Agreement dated as
     of November 21, 1996 by and among LaSalle National Bank, RFSL and RFSFP,
     and any amendments thereto.

          "SUCCESSOR LESSEE" shall mean any entity designated by the REIT as the
     successor to a Lessee as the lessee or operator of a Leased Hotel or as a
     successor to the Manager as a lessee or operator of a Managed Hotel and/or
     any management company engaged by the REIT Parties or a Successor Lessee to
     operate a Leased Hotel.

          "THIRD PARTY FRANCHISE AGREEMENT" shall mean a hotel franchise
     agreement which is not a Hilton Franchise Agreement.

          "THIRD PARTY MANAGEMENT AGREEMENTS" shall mean the management
     agreements described in EXHIBIT 1(d) hereto.

          "TIER II RFS EMPLOYEE" shall mean an RFS Employee who is in Tier II of
     RFS' organizational structure as shown in EXHIBIT 22 hereto.

          "UNITS" shall mean units of limited partnership interests in RFSOP.

(b)  OTHER DEFINITIONS. For purposes of this Termination Agreement, the
     following words and phrases shall have the meanings set forth in the
     respective sections hereof or exhibits hereto set forth below:
<TABLE>

       <S>                                             <C>
         Ancillary Agreements                            Recitals
         Bill of Sale                                    4(c)(iii)
         Consolidated Lease Amendment                    Exhibit 1(a)
         DTR                                             Preamble
         ERISA                                           8(d)
         Escrow                                          5
         Escrow Agent                                    5
         Escrow Agreement                                5
         Exchange Act                                    9(b)
         Existing Shelf Registration Statement           9(b)
         FF&E                                            11(a)
         Hilton                                          Preamble
         Hilton Indemnitees                              21(c)
         Individual Lease Termination Payment            3(a)
         Individual Management Termination Payment       3(a)
         Interim Lease Termination                       6
         Interim Management Termination                  3(d)
         Interim Lease Termination Payment               6
         Landlord                                        10
         Lease Agreements                                Recitals
         Liabilities                                     21(b)
         Marriott                                        2(c)
         New Shelf Registration Statement                9(b)
         Office Lease                                    10

</TABLE>

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<TABLE>

       <S>                                             <C>
         Owner Management Agreements                     Recitals
         Partnership Interests                           12
         Plano                                           Preamble
         Purchase Date                                   9(a)
         Purchase Price                                  9(a)
         Required PIPs                                   13
         REIT                                            Preamble
         REIT Indemnitees                                21(b)
         RFS                                             Preamble
         RFS Employees                                   7(a)
         RFS SPE 1                                       Preamble
         RFS SPE 2                                       Preamble
         RFSFP                                           Preamble
         RFSL                                            Preamble
         RFSL Hotels                                     2(a)
         RFSOP                                           Preamble
         RFSOP Partnership Agreement                     9(c)
         Ridge Lake                                      Preamble
         Second Consolidated Lease Amendment             Exhibit 1(a)
         Securities Act                                  9(b)
         SEC                                             9(b)
         Severance Payments                              7(b)
         St. Louis Agreement                             8(d)
         St. Louis Hotel                                 8(d)
         St. Louis Plan                                  8(d)
         Submanaged Hotels                               2(a)
         Termination Date                                4(a)
         Third Consolidated Lease Amendment              Exhibit 1(a)

</TABLE>

     Section 2. TERMINATION OF LEASE AGREEMENTS AND RELATED MATTERS.

(a)  TERMINATION OF LEASE AGREEMENTS AND ANCILLARY AGREEMENTS. Subject to the
     terms and conditions set forth herein, the Lessors and the Lessees hereby
     agree that the Lease Agreements and Ancillary Agreements shall terminate as
     of the Termination Date. Notwithstanding anything herein to the contrary,
     (i) the REIT may elect, in the notice delivered to Hilton in accordance
     with Section 4(a) hereof, or at least ten (10) days prior to the
     Termination Date upon written notice to Hilton, (A) to purchase from Hilton
     or one of its subsidiaries all of the outstanding capital stock of RFSL
     and, in the event the REIT so elects, on the Termination Date, Hilton or
     such subsidiary shall sell, assign and convey to the REIT or its designee,
     all of the capital stock of RFSL, free and clear of any liens, claims,
     encumbrances and charges of any kind in exchange for an aggregate payment
     of Thirteen Million Four Hundred Sixty-Eight Thousand Dollars ($13,468,000)
     and/or (B) to have one or more of the Lease Agreements (as they relate to
     the Leased Hotels which are subject to Third Party Management Agreements
     (the "Submanaged Hotels")) assigned to the applicable Lessor or Successor
     Lessee and the applicable Lessees shall assign and convey to the applicable
     Lessors or Successor Lessees all of such Lessees' right, title and interest
     in and to the applicable Lease Agreements (as they relate to such
     Submanaged Hotel) and the Leased Property (as defined in the applicable
     Lease Agreement but exclusive of Excluded Assets) related to such
     Submanaged Hotels in exchange for an aggregate payment

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     equal to the sum of the Interim Lease Termination Payments applicable
     thereto, and (ii) the Aggregate Lease Termination Payment otherwise payable
     on the Termination Date shall be reduced by the amounts paid pursuant to
     clauses (A) and/or (B) above; PROVIDED, HOWEVER, that if Hilton has
     notified the REIT within thirty (30) days after the date hereof that a
     purchase of the capital stock of RFSL will cause Hilton to incur income tax
     liabilities it would not otherwise incur as a result of the termination of
     the Lease Agreements for the RFSL Hotels, the REIT shall not be entitled to
     the election described in clause (i)(A) above unless the REIT delivers to
     Hilton on the Termination Date an indemnity agreement in form satisfactory
     to Hilton covering such increased income tax liabilities. Hilton's
     notification to the REIT shall set forth a description of the computation
     of the income tax liability and the amount of the income tax liability. In
     the event the REIT or its designee purchases the capital stock of RFSL
     pursuant to clause (i)(A) above, the Lease Agreements for the Leased Hotels
     described in Section II of EXHIBIT 1(a) hereto (the "RFSL Hotels") shall
     not be terminated pursuant hereto and the provisions of Sections 2(b),
     2(d)(ii), 4(c)(ii), 4(d)(iv), 4(e)(i), 8(a) and 8(b) hereof shall not apply
     to the RFSL Hotels. In the event the REIT or its designee takes an
     assignment of the Lease Agreements as they relate to one or more Submanaged
     Hotels pursuant to clause (i)(B) above, such Lease Agreements shall not be
     terminated as to such Submanaged Hotels pursuant hereto and the provisions
     of Sections 4(c)(ii), 4(d)(iv) and 4(e)(i) hereof shall not apply to such
     Submanaged Hotels.

(b)  SURRENDER OF LEASED PROPERTY. Subject to the terms and conditions set forth
     herein, upon the Termination Date, each Lessee shall remise, release,
     surrender and quitclaim unto the Lessor for the respective Leased Hotels,
     and such Lessor shall accept and assume, all right, title and interest of
     such Lessee in and to the Leased Property (as defined in the applicable
     Lease Agreement) relating to such Leased Hotel; PROVIDED, HOWEVER, that the
     Leased Property relating to any Leased Hotel shall not include Excluded
     Assets relating to such Leased Hotel.

(c)  FRANCHISE AGREEMENTS. Subject to the terms and conditions set forth herein,
     and to the extent necessary with respect to the RFSL Hotels if the REIT or
     its designee purchases the capital stock of RFSL, (i) the Lessee for each
     Leased Hotel currently operating under a Hilton Franchise Agreement shall
     cause the applicable franchisor to grant a replacement Hilton Franchise
     Agreement of the same brand for the balance of the existing term in favor
     of the applicable Lessor or Successor Lessee, as specified by such Lessor
     (by written notice delivered to such Lessee on or prior to the Termination
     Date), in the same form and on the same economic terms as the existing
     Hilton Franchise Agreements and effective as of the Termination Date, and
     (ii) the Lessee for each Leased Hotel operating under a Third Party
     Franchise Agreement shall exercise its good faith reasonable commercial
     efforts to assist the applicable Lessor or Successor Lessee in obtaining a
     replacement Third Party Franchise Agreement (or commitment therefor) of the
     same brand for the balance of the existing term in favor of such Lessor or
     such Successor Lessee on terms then applicable for the issuance of such
     replacement Third Party Franchise Agreements (or commitments therefor) and
     effective as of the Termination Date. None of the Lessor Parties or any
     Successor Lessee shall be required to pay any change in ownership fee or
     other fee in connection with the issuance of a replacement Hilton Franchise
     Agreement. The Lessee Parties shall exercise their good faith reasonable
     commercial efforts to obtain an agreement from Marriott International, Inc.
     ("Marriott") to the effect that Marriott will not require payment of any
     re-licensing fee or any similar fee or increase the franchise, marketing or
     reservation fees over the amounts contemplated by the Standstill Agreement
     for the Leased Hotels operating under a franchise license from Marriott as
     a result of the transactions contemplated by this

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     Termination Agreement. The REIT Parties acknowledge that Marriott's
     execution of the Standstill Agreement will satisfy the obligation of the
     Lessee Parties in the preceding sentence.

(d)  MANAGEMENT AGREEMENTS RELATED TO LEASED HOTELS. Subject to the terms and
     conditions set forth herein, (i) the Affiliate Management Agreements shall
     terminate as of the Termination Date, and (ii) the applicable Lessor or
     Successor Lessee for each Leased Hotel operating under a Third Party
     Management Agreement shall accept and assume all liabilities under such
     Third Party Management Agreement effective as of the Termination Date and
     the Lessee Parties (exclusive of RFSL if the stock of RFSL is transferred
     to the REIT or its designee on the Termination Date pursuant to Section
     2(a) hereof) shall be released of all liabilities under such Third Party
     Management Agreement from and after the Termination Date.

(e)  CONTRACTS. Subject to the terms and conditions set forth herein, and to the
     extent necessary with respect to the RFSL Hotels if the REIT or its
     designee purchases the capital stock of RFSL, the Lessees shall use their
     good faith reasonable commercial efforts to assign and transfer to the
     Lessor for such Leased Hotel, or the applicable Successor Lessee, all
     Contracts with respect to such Leased Hotel effective as of the Termination
     Date, and such Lessor or Successor Lessee shall assume such assigned and
     transferred Contracts; PROVIDED, HOWEVER, that if (i) any such Contract is
     not permitted to be assigned or (ii) such Lessor or Successor Lessee elects
     (by written notice delivered to the Lessees no less than thirty (30) days
     prior to the Termination Date) not to accept and assume any such Contract,
     the Lessees shall use their good faith reasonable commercial efforts to
     terminate such Contract as of (or as soon as practicable after) the
     Termination Date.

(f)  OWNER MANAGEMENT AGREEMENTS. Subject to the terms and conditions set forth
     herein, unless earlier terminated in accordance with its terms, each Owner
     Management Agreement shall terminate as of the Termination Date, and
     Manager shall assign and deliver to the applicable Owner or its designee,
     and the assignee shall assume, all leases, concession agreements and
     commercial or other agreements in effect with respect to the Managed Hotels
     previously entered into by Manager pursuant to its authority under the
     Owner Management Agreements and which are then in Manager's, rather than
     the applicable Owner's, name.

     Section 3. PAYMENTS.

(a)  TERMINATION PAYMENTS. As consideration for the termination of the Lease
     Agreements, the Owner Management Agreements and the Ancillary Agreements,
     on the Termination Date, the REIT Parties shall deliver to the Lessee
     Parties (i) the Aggregate Lease Termination Payment as adjusted if required
     pursuant to Sections 2(a) and 6 hereof, if applicable, and (ii) the
     Aggregate Management Termination Payment, both as further adjusted as
     provided in subsection (b) below and net of the principal amount of the
     Escrow which shall be disbursed by the Escrow Agent to the Lessee Parties
     in accordance with the terms of the Escrow Agreement. The Aggregate Lease
     Termination Payment and Aggregate Management Termination Payment (as so
     adjusted) shall be paid by wire transfer in immediately available funds to
     such bank account(s) as the Lessee Parties shall specify (by written notice
     delivered to the REIT Parties not less than three (3) business days prior
     to the Termination Date). The Aggregate Lease Termination Payment shall be
     allocated to the Lease Agreements for the applicable Leased Hotels as
     described in EXHIBIT 1(a) hereto and the Aggregate Management Termination
     Payment shall be allocated to the applicable Owner Management Agreements as
     described in EXHIBIT 1(b) hereto (as so allocated

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<PAGE>

     to a Leased Hotel, an "Individual Lease Termination Payment", and as so
     allocated to an Owner Management Agreement an "Individual Management
     Termination Payment").

(b)  OPERATIONAL SETTLEMENT.

     (i)  All of the items described on EXHIBIT 3(b)(i) hereto shall be
          allocated and prorated as of the Termination Date with respect to the
          Leased Hotels in the manner described in said EXHIBIT 3(b)(i), and
          appropriate credits shall be given to the Lessors and Lessees as
          adjustments to the Aggregate Lease Termination Payment and the
          appropriate Individual Lease Termination Payment. In the event that an
          amount for any such item cannot be accurately determined as of the
          Termination Date, the Lessors and the Lessees shall provide a good
          faith estimate of such amount, which shall be adjusted as promptly as
          practicable after the Termination Date; and

     (ii) Funds or any other assets from each Managed Hotel remaining in
          Manager's possession or control as of the Termination Date which are
          the property of the applicable Owner shall be remitted to or on behalf
          of such Owner in the manner set forth in the applicable Owner
          Management Agreement.

(c)  ADDITIONAL PAYMENTS.

     (i)  On the Termination Date, the REIT Parties shall pay or cause to be
          paid to the appropriate Lessee Parties (A) the payments specified in
          Section 11 hereof, and (B) such costs and expenses as shall have been
          incurred by the Lessee Parties on or before the Termination Date and
          for which the REIT Parties are responsible or liable under the terms
          of Sections 7(b) or 21(a) hereof. Such payments shall be made by wire
          transfer in immediately available funds to such bank account(s) as
          such Lessee Parties shall specify (by written notice delivered to the
          REIT Parties not less than three (3) business days prior to the
          Termination Date).

     (ii) On the Termination Date, the Lessee Parties shall pay or cause to be
          paid all such costs and expenses as shall have been incurred on or
          before the Termination Date and for which the Lessee Parties are
          responsible or liable under the terms of Section 21(a) hereof.

(d)  DETERMINATION OF AGGREGATE MANAGEMENT TERMINATION. The Aggregate Management
     Termination Payment shall be One Hundred Fifteen Thousand Dollars
     ($115,000); PROVIDED, HOWEVER, that if one or more of the Owner Management
     Agreements is terminated in accordance with its terms prior to the
     Termination Date (an "Interim Management Termination") and the applicable
     Individual Management Termination Payment has been made to Manager, the
     Aggregate Management Termination Payment shall be reduced by the amount of
     the Individual Management Termination Payments so paid.

     Section 4. THE CLOSING.

(a)  NOTICE. On or before November 30, 2000, the REIT will notify Hilton, in
     writing, that either (i) the REIT Parties do not intend to terminate the
     Lease Agreements, the Owner Management Agreements, and the Ancillary
     Agreements pursuant to the terms of this Termination Agreement, or (ii) the
     REIT Parties intend to terminate the Lease Agreements, the Owner Management
     Agreements and the Ancillary Agreements pursuant to the terms of this
     Termination Agreement

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<PAGE>

     effective as of a date, designated by the REIT in the notice, not more than
     sixty (60) days and not less than thirty (30) days following the date of
     the notice (such designated date being herein referred to as the
     "Termination Date").

(b)  CLOSING. The closing of the transactions contemplated by this Agreement
     shall take place on the Termination Date at the offices of the REIT or at
     such other place or such other date as the parties shall mutually agree.

(c)  CLOSING DELIVERIES BY THE LESSEE PARTIES. On the Termination Date (or, with
     respect to subparagraph (xiv) below, on the Purchase Date if different from
     the Termination Date), the Lessee Parties shall execute and deliver or
     cause to be executed and delivered the following to the REIT Parties or the
     applicable Successor Lessees:

     (i)  counterpart to a closing statement;

     (ii) counterpart to a Memorandum of Lease Termination for each Leased Hotel
          containing provisions substantially equivalent to those set forth in
          EXHIBIT 4(c)(ii) hereto;

     (iii) to the extent necessary with respect to the RFSL Hotels if the REIT
          or its designee purchases the capital stock of RFSL, a Bill of Sale
          with respect to the food and beverage inventory at each Leased Hotel
          and the FF&E and other assets described in Section 11 hereof
          substantially in the form of EXHIBIT 4(c)(iii) hereto (the "Bill of
          Sale"), together with a list of all FF&E as of the Termination Date
          and the book values thereof as of the last day of the month
          immediately preceding the Termination Date;

     (iv) counterpart to a replacement Hilton Franchise Agreement for each
          Leased Hotel currently operating under a Hilton Franchise Agreement in
          favor of the applicable Lessor or the applicable Successor Lessee and
          otherwise in accordance with Section 2(c)(i) hereof;

     (v)  counterpart to an Assignment of Contracts and Assumption Agreement for
          each Leased Hotel substantially in the form of EXHIBIT 4(c)(v) hereto
          covering all Contracts to be assigned and assumed as of the
          Termination Date in accordance with Section 2(e) hereof;

     (vi) counterpart to an Assignment of Office Lease and Assumption Agreement
          substantially in the form of EXHIBIT 4(c)(vi) hereto covering the
          Office Lease if it is to be assigned and assumed as of the Termination
          Date in accordance with Section 10 hereof;

    (vii) the documentation necessary to effect the agreement with respect to
          Leased Hotels operating under a Third Party Management Agreement set
          forth in Section 2(d) hereof;

   (viii) legal opinion of counsel to the Lessee Parties reasonably acceptable
          to the REIT Parties with respect to the matters set forth on
          EXHIBIT 4(c)(viii) hereto;

     (ix) a certificate of the Lessee Parties that the representations and
          warranties contained in Sections 22 and 24(b) hereof (after giving
          effect to any permitted updating of EXHIBIT 22 hereto pursuant to
          Section 22(b) hereof) are true and correct in all material respects as
          of the Termination Date;

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<PAGE>

     (x)  a certificate of the Lessee Parties as to non-foreign status pursuant
          to Section 1445 of the Internal Revenue Code;

     (xi) evidence reasonably acceptable to the REIT Parties that the Affiliate
          Management Agreements have been terminated;

    (xii) counterpart to a Non-Compete Termination Agreement substantially in
          the form of EXHIBIT 4(c)(xii) hereto;

   (xiii) a release by Hilton, Doubletree and RFS of all non-competition,
          confidentiality and similar restrictive covenant obligations of each
          RFS Employee hired by the REIT Parties or a Successor Lessee pursuant
          to Section 7(d) hereof;

    (xiv) the certificate representing the Preferred Stock duly endorsed for
          transfer; and

     (xv) the documentation with respect to the Managed Hotels described in
          Section 2(f) hereof.

    (xvi) certificates representing the capital stock of RFSL if such capital
          stock is to be transferred pursuant to Section 2(a) hereof; and

   (xvii) counterpart to an Assignment of Lease Agreement and Assumption
          Agreement substantially in the form of EXHIBIT 4(c)(xvii) hereto for
          each Submanaged Hotel with respect to which the REIT has elected to
          take a lease assignment pursuant to Section 2(a) hereof.

(d)  CLOSING DELIVERIES BY THE REIT PARTIES. On the Termination Date (and/or in
     the case of subparagraphs (ix), (xi) and (xiii) below, on the Purchase Date
     if different from the Termination Date), the REIT Parties shall execute and
     deliver or cause to be executed and delivered the following to the Lessee
     Parties:

     (i)  all payments required to be made by the REIT Parties on the
          Termination Date as set forth in Section 3 hereof;

     (ii) the full principal amount of the Escrow;

    (iii) counterpart to a closing statement;

     (iv) counterpart to a Memorandum of Lease Termination for each Leased Hotel
          containing provisions substantially equivalent to those set forth in
          EXHIBIT 4(c)(ii) hereto;

     (v)  counterpart to a replacement Hilton Franchise Agreement for each
          Leased Hotel currently operating as a Hampton Inn, Homewood Suites or
          Doubletree Hotel in favor of the applicable Lessor or the applicable
          Successor Lessee and otherwise in accordance with Section 2(c)(i)
          hereof;

     (vi) counterpart to an Assignment of Contracts and Assumption Agreement for
          each Leased Hotel substantially in the form of EXHIBIT 4(c)(v) hereto
          covering all Contracts to be assigned and assumed as of the
          Termination Date in accordance with Section 2(e) hereof;

                                       10
<PAGE>

    (vii) counterpart to an Assignment of Office Lease and Assumption Agreement
          substantially in the form of EXHIBIT 4(c)(vi) hereto covering the
          Office Lease if it is to be assigned and assumed as of the Termination
          Date in accordance with Section 10 hereof;

   (viii) the documentation necessary to effect the agreement with respect to
          Leased Hotels operating under a Third Party Management Agreement set
          forth in Section 2(d) hereof;

     (ix) legal opinion of counsel to the REIT Parties reasonably acceptable to
          the Lessee Parties with respect to the matters set forth on EXHIBIT
          4(d)(ix) hereto;

     (x)  a certificate of the REIT Parties that the representations and
          warranties contained in Section 24(a) hereof are true and correct in
          all material respects as of the Termination Date;

     (xi) evidence reasonably acceptable to the Lessee Parties that the REIT has
          complied with all of the terms of the Registration Rights Agreement to
          be complied with on or before the Termination Date or the Purchase
          Date;

    (xii) counterparts to a Non-Compete Termination Agreement substantially in
          the form of EXHIBIT 4(c)(xii) hereto;

   (xiii) the payments required pursuant to Section 9 hereof;

    (xiv) the documentation with respect to the Managed Hotels described in
          Section 2(f) hereof; and

     (xv) counterpart to an Assignment of Lease Agreement and Assumption
          Agreement substantially in the form of EXHIBIT 4(c)(xvii) hereto for
          each Submanaged Hotel with respect to which the REIT has elected to
          take a lease assignment pursuant to Section 2(a) hereof.

(e)  EFFECT OF TERMINATION.

     (i)  Effective on the Termination Date, each Lease Agreement (including,
          without limitation, any lease agreement which was amended or restated
          thereby, the leasehold interest thereunder, and any rights to review,
          options, or rights of first offer or first refusal, if any, created
          thereby) and each Ancillary Agreement shall terminate and shall be
          null and void and have no further force and effect, except for the
          obligation of each Lessee to pay all Rent (as defined in the
          respective Lease Agreements) with respect to Leased Hotels accrued and
          unpaid through the Termination Date. The Lessees shall pay Rent under
          the Lease Agreements accrued through the Termination Date as and when
          the same becomes due. This Agreement (including, without limitation,
          the provisions of this Section 4(e) and Section 21) shall override and
          nullify any provision of any Lease Agreement or Ancillary Agreement
          providing for the survival of any provisions set forth therein.

     (ii) Effective on the Termination Date, each Affiliate Management Agreement
          and each Owner Management Agreement then in effect shall terminate and
          shall be null and void and have no further force and effect, except
          for (i) the obligation of each Owner to pay all accrued and unpaid
          management fees and other amounts owing to Manager under the

                                       11
<PAGE>

          Owner Management Agreements through the Termination Date and (ii) and
          obligations and liabilities which, under the terms of each Owner
          Management Agreement, survive any termination of the same.

     Section 5. ESCROW.

          Upon notice from the REIT to Hilton in accordance with Section
     4(a)(ii) hereof, the parties hereto will execute and deliver an Escrow
     Agreement with Lawyers Title Insurance Corporation, Chicago Office (the
     "Escrow Agent") in the form of EXHIBIT 5 hereto (the "Escrow Agreement")
     pursuant to which the Lessors will deposit Two Million Dollars
     ($2,000,000.00) in cash (the "Escrow") with the Escrow Agent, which will be
     held and disbursed by the Escrow Agent in accordance with the terms of the
     Escrow Agreement. A notice pursuant to said Section 4(a)(ii) hereof shall
     have no effect and shall not be deemed given until the Lessors deposit the
     Escrow in accordance with this Section 5. If the Lessees become entitled to
     the Escrow pursuant to the terms of this Agreement and the Escrow
     Agreement, payment of the Escrow to the Lessees in accordance with the
     terms of the Escrow Agreement shall constitute the sole remedy of the
     Lessee Parties hereunder for failure of the REIT Parties to close the
     transactions described in Section 2 hereof, it being the intention and
     agreement of the parties that the Escrow constitute liquidated damages for
     such failure determined in advance by the parties as a reasonable forecast
     of damage likely to occur in light of the fact that actual damage would be
     difficult to ascertain. The Escrow shall not constitute liquidated damages
     for any breach by the REIT Parties of their obligations under Sections 9 or
     12 hereof.

     Section 6. INTERIM LEASE TERMINATIONS.

          From and after the date hereof, a Lessor may terminate a Lease
     Agreement with respect to a Leased Hotel upon sale of the Leased Hotel as
     set forth in the Lease Agreement for such Leased Hotel prior to the
     Termination Date (an "Interim Lease Termination"). The termination payment
     to be paid in connection with any such Interim Lease Termination (the
     "Interim Lease Termination Payment") shall be the Individual Lease
     Termination Payment for the applicable Leased Hotel as set forth on EXHIBIT
     1(a) hereto. If an Interim Lease Termination occurs prior to the
     Termination Date, the applicable Interim Lease Termination Payment shall be
     paid on the earlier to occur of (i) the Termination Date and (ii) the date
     which is one hundred twenty (120) days after the date of such Interim Lease
     Termination. All Interim Lease Termination Payments pursuant to this
     Section 6 shall be made by wire transfer in immediately available funds to
     such bank account(s) as the Lessee Parties shall specify (by written notice
     delivered to the REIT Parties not less than three (3) business days prior
     to the required payment date).

     Section 7. EMPLOYEE MATTERS.

(a)  EMPLOYEE TRANSITION. As soon as practicable prior to the Termination Date
     and after consultation with Hilton, the REIT shall use its good faith
     reasonable commercial efforts to cause the Successor Lessees to fill their
     hiring needs, if any, first from the corporate headquarters and regional
     office employees of the Lessees described on EXHIBIT 22 hereto (as updated
     pursuant to Section 22(b) hereof) (the "RFS Employees") on the terms set
     forth herein. Any offer of employment by a Successor Lessee to an RFS
     Employee shall be (i) contingent upon the closing of the transactions
     contemplated hereby, (ii) for a position with a title substantially
     equivalent to

                                       12
<PAGE>

     that described on EXHIBIT 22 hereto (as updated pursuant to Section 22(b)
     hereof) and with authorities and responsibilities substantially equivalent
     to those existing on the Termination Date with respect to such RFS
     Employee, (iii) at the annual base salary described on EXHIBIT 22 hereto
     (as updated pursuant to Section 22(b) hereof) with respect to such RFS
     Employee, (iv) with employee benefits (including, without limitation,
     retirement, insurance and other welfare benefits) substantially similar to
     those described on EXHIBIT 7(a) hereto with respect to such RFS Employee,
     (v) with credit for all actual and credited service by such RFS Employee
     with the Lessees as described on EXHIBIT 22 hereto (as updated pursuant to
     Section 22(b) hereof) for purposes of (A) eligibility and vesting under all
     employment benefit plans (including, without limitation, retirement,
     insurance and other welfare plans) of the applicable Successor Lessee, and
     (B) to the extent not duplicative, benefit accruals under any severance or
     vacation pay plans of the applicable Successor Lessee, (vi) with credit for
     all unused vacation, sick, personal or other similar days earned or accrued
     with the Lessees by such RFS Employee as described on EXHIBIT 22 hereto (as
     updated pursuant to Section 22(b) hereof) and (vii) in the case of a Tier
     II RFS Employee, contingent upon the receipt by the Lessee Parties of a
     complete release and discharge of all obligations of the Lessee Parties
     under any applicable severance agreement acceptable in form and substance
     to the Lessee Parties and the REIT Parties.

(b)  SEVERANCE. If (i) the REIT Parties or a Successor Lessee do not offer to
     hire an RFS Employee following the Termination Date on the terms specified
     in Section 7(a) hereof, and (ii) such RFS Employee is owed and paid
     severance and/or accrued vacation by any Lessee Party pursuant to the
     severance pay plan described in EXHIBIT 7(b) hereto, the severance
     agreements described in EXHIBIT 7(b) hereto (as the same may be modified in
     accordance with the terms of Section 7(e)(i) hereof) or the severance
     agreement described in Section 7(e)(ii) hereof, including any and all
     payments required by applicable state law and made by such Lessee Party in
     respect of unused vacation, sick, personal or other similar days which are
     earned or accrued by RFS Employees as of the Termination Date
     (collectively, the "Severance Payments"), then RFSOP shall reimburse such
     Lessee Party for such Severance Payments within two (2) business days after
     receiving written notice of such payment from such Lessee Party.

(c)  NOTICE. Hilton shall notify the REIT of any claim for Severance Payments
     promptly upon receiving notice of such claim and in any event at least ten
     (10) days prior to the payment of such claim.

(d)  RESTRICTIVE COVENANTS. Effective as of the Termination Date, Hilton shall
     execute, or cause the appropriate subsidiary of Hilton to execute, a
     release of all non-competition, confidentiality and similar restrictive
     covenant obligations of each RFS Employee hired by a Successor Lessee in
     form and substance reasonably acceptable to the REIT; PROVIDED, HOWEVER,
     that such release shall not be required to effectuate a release of any
     obligations with respect to confidential information pertaining to
     operations of Hilton or any of its subsidiaries other than the Lessees.

(e)  EXTENSION OF CERTAIN SEVERANCE BENEFITS. RFS shall have the right (but not
     the obligation) to (i) extend the term of the severance agreements for the
     RFS Employees identified on Exhibit 7(b) hereof through January 31, 2001
     and (ii) provide to Mr. Mark Kucera the same severance benefits as are
     currently provided to Messrs. Kidney, Williams and West as described in
     EXHIBIT 7(b) hereto and for a term extending through January 31, 2001.

                                       13
<PAGE>

     Section 8. TRANSITION OF HOTEL MANAGEMENT.

(a)  FRANCHISE AGREEMENTS; SUBORDINATION AGREEMENT. The REIT Parties shall
     exercise their good faith reasonable commercial efforts to obtain from each
     franchisor of a Leased Hotel operating under a Third Party Franchise
     Agreement a release of the applicable Lessee from all liabilities arising
     under such Third Party Franchise Agreement or any other related agreement
     from and after the Termination Date, and the Lessee Parties and the REIT
     Parties shall execute and deliver all documents reasonably required by
     third party franchisors in connection therewith (other than indemnity
     agreements). The REIT Parties shall further exercise their good faith
     reasonable commercial efforts to obtain a release of RFSL from all
     liabilities arising under the Subordination Agreement from and after the
     Termination Date.

(b)  LICENSES. The Lessee Parties shall exercise good faith reasonable
     commercial efforts (i) to assist the REIT Parties in obtaining replacement
     Licenses, and (ii) unless instructed otherwise by the REIT Parties, to
     terminate all Licenses as of the Termination Date. If a Successor Lessee or
     an Owner, as applicable, is not able to obtain replacement Licenses for one
     or more of the Leased Hotels or Managed Hotels effective as of (or as soon
     as practicable after) the Termination Date, the REIT Parties shall so
     notify the Lessee Parties in writing at least twenty (20) days prior to the
     Termination Date, and on the Termination Date, such Successor Lessee or
     Owner, as applicable, and the Lessee Parties shall execute a temporary
     operating agreement, in form and substance mutually acceptable to the REIT
     Parties and the Lessee Parties, to allow the uninterrupted operation of
     such Leased Hotels and Managed Hotels for a reasonable period of time after
     the Termination Date pending receipt of the replacement Licenses.

(c)  BOOKS AND RECORDS. All books and records (including, but not limited to,
     accounting and financial records) for the Leased Hotels and the Managed
     Hotels kept by the Lessee Parties, and all personnel files regarding RFS
     Employees hired by any Successor Lessee, shall be delivered to the REIT
     promptly after the Termination Date; PROVIDED, HOWEVER, that such books and
     records shall thereafter be available to the Lessee Parties at all
     reasonable times for inspection, audit, examination and transcription for a
     period of seven (7) years, and the Lessee Parties may retain copies or
     computer records thereof.

(d)  ST. LOUIS PLAN. It is the intent of the parties to satisfy the provisions
     of Section 4204 of the Employee Retirement Income Security Act of 1974, as
     amended ("ERISA"), with respect to the obligations of Holiday Inn St.
     Louis/Clayton Plaza (the "St. Louis Hotel") under the St. Louis Hotel and
     Restaurant Employees Pension Trust Fund (the "St. Louis Plan"). Therefore,
     the parties agree as follows:

     (i)  Notwithstanding the provisions of Section 2(e) hereof, the REIT shall
          cause the Successor Lessee with respect to the St. Louis Hotel to
          accept an assignment of, and assume all obligations under, that
          certain agreement between the Hotel Employees Restaurant Employees
          Local 74, AFL-CIO and the St. Louis Hotel effective December 15, 1997
          (the "St. Louis Agreement"). Without limitation of the foregoing, from
          and after the Termination Date, the REIT shall cause such Successor
          Lessee to continue making contributions to the St. Louis Plan in
          accordance with the terms of the St. Louis Agreement for substantially
          the same number of contribution base units for which the St. Louis
          Hotel had an obligation to contribute to the St. Louis Plan on the
          Termination Date;

                                       14
<PAGE>

     (ii) Unless exempt under Pension Benefit Guaranty Corporation Regulations
          Section 4204.11, or Section 4204.21, the REIT shall cause the
          Successor Lessee with respect to the St. Louis Hotel to post a bond or
          hold in escrow in favor of the St. Louis Plan for a period of five (5)
          plan years commencing with the first plan year beginning after the
          Termination Date in an amount and form that satisfies the requirements
          of Section 4204(a)(1)(B) of ERISA;

    (iii) In the event that the Successor Lessee with respect to the St. Louis
          Hotel withdraws in a complete or partial withdrawal under Section 4201
          of ERISA from the St. Louis Plan with respect to the St. Louis Hotel
          during the first five (5) plan years beginning after the Termination
          Date, and such Successor Lessee fails to make any withdrawal liability
          payments when due, without limitation of the provisions of Section
          21(c)(viii) hereof, RFS and Hilton shall be secondarily liable for any
          withdrawal liability that the St. Louis Hotel would have had to the
          St. Louis Plan but for the provisions of this Section 8(d) and Section
          4204 of ERISA; and

     (iv) RFS agrees to use its good faith reasonable commercial efforts to
          obtain and deliver to the REIT on or before February 28, 2000, an
          actuarial valuation for the St. Louis Plan as of the most recent
          practicable date.

     Section 9. REIT CAPITAL STOCK.

     (a)  PREFERRED STOCK PURCHASE. On the earlier to occur of (i) the tenth
          (10th) day after receipt by Hilton of a notice from the REIT pursuant
          to Section 4(a) hereof evidencing the intention to terminate the Lease
          Agreements, the Owner Management Agreements and the Ancillary
          Agreements pursuant to the terms hereof or (ii) November 30, 2000, RFS
          shall have the one time right to deliver a purchase notice to RFSOP
          stating that RFS elects to require RFSOP to purchase all (but not less
          than all) of the 973,684 shares of Preferred Stock owned by RFS in
          accordance with the terms of this Section 9. In the event RFS delivers
          to RFSOP a purchase notice pursuant to the preceding sentence, RFSOP
          will purchase the Preferred Stock from RFS in accordance with the
          terms of this Section 9; PROVIDED, HOWEVER, that the REIT shall have
          the right, but not the obligation, to assume RFSOP's obligation to
          purchase the Preferred Stock from RFS on the terms set forth in this
          Section 9(a) or to designate a different transferee for the Preferred
          Stock; and PROVIDED, FURTHER, that any such assumption by the REIT or
          designation by RFSOP shall not otherwise release or waive any
          obligation of RFSOP under this Section 9(a). The aggregate purchase
          price for the Preferred Stock (the "Purchase Price") shall be the
          greater of (A) either (i) Thirteen Million Seven Hundred Fifty
          Thousand Dollars ($13,750,000.00), in the event the REIT has not
          elected to terminate the Lease Agreements, the Owner Management
          Agreements and the Ancillary Agreements in accordance with this
          Termination Agreement, or (ii) Thirteen Million Dollars
          ($13,000,000.00) in the event the REIT has elected to terminate the
          Lease Agreements, the Owner Management Agreements and the Ancillary
          Agreements in accordance with this Termination Agreement, in either
          case plus any accrued and unpaid dividends thereon through the
          Purchase Date (defined below) or (B) the amount determined by
          multiplying the Current Market Value by the number of shares of Common
          Stock into which the Preferred Stock would then be convertible under
          the terms of the REIT's Amended and Restated Charter notwithstanding
          the fact that pursuant to the terms of the REIT's Amended and Restated
          Charter, the Preferred Stock is not then convertible. The purchase and
          sale of the Preferred Stock pursuant to this Section 9(a) shall occur
          on the earlier of (i) the Termination Date, or (ii) January

                                       15
<PAGE>

     31, 2001 (either such date, the "Purchase Date"). If, as of the Purchase
     Date (i) the Common Stock is listed for trading on the NYSE or any other
     principal securities exchange and (ii) the New Shelf Registration Statement
     (defined below) is effective under the Securities Act (covering the number
     of shares of Common Stock to be issued), the REIT or RFSOP may elect, in
     its sole discretion, to pay all or part of the Purchase Price in the form
     of shares of Common Stock, in which event a share of Common Stock shall be
     valued at its Current Market Value. The REIT or RFSOP shall notify RFS on
     the business day prior to the Purchase Date whether it will pay any part
     of the Purchase Price in the form of Common Stock. In the event RFS does
     not elect to require RFSOP to acquire the Preferred Stock at the time and
     in the manner described in the first sentence of this Section 9(a) its
     right to elect to require such purchase shall be forfeited and null and
     void and of no further force and effect.

(b)  SHELF REGISTRATION STATEMENT. In accordance with the terms of the
     Registration Rights Agreement, the REIT shall prepare and file with the
     Securities and Exchange Commission (the "SEC"), as expeditiously as
     reasonably possible and at the REIT's sole cost and expense, one or more
     shelf Registration Statements on Form S-3 (collectively, the "New Shelf
     Registration Statement") pursuant to Rule 415 under the Securities Act of
     1933, as amended (the "Securities Act"), covering the resale by RFS of not
     less than 973,684 shares of Common Stock issuable to RFS in accordance with
     Section 9(a) hereof. In addition, the REIT, at its sole cost and expense,
     agrees to maintain the effectiveness of Registration Statement No.
     333-28849 (the "Existing Shelf Registration Statement") covering the resale
     by RFS of the shares of Common Stock issuable to RFS upon the redemption of
     its Units. The REIT agrees to maintain the effectiveness of the New Shelf
     Registration Statement and the Existing Shelf Registration Statement,
     respectively, or any successor registration statement under the Securities
     Act which covers shares of Common Stock issuable to RFS to the same extent
     as the New Shelf Registration Statement and the Existing Shelf Registration
     Statement, until the earlier to occur of (i) the date on which RFS can sell
     all of the shares of Common Stock covered by such Registration Statement
     freely without restriction pursuant to Rule 144(k) under the Securities Act
     or any successor provision, (ii) the date on which RFS has sold all of the
     shares of Common Stock covered by such Registration Statement, or (iii),
     with respect to the New Shelf Registration Statement, until the day
     following the Purchase Date, if the REIT or RFSOP do not issue any shares
     of Common Stock to RFS in connection with the purchase of the Preferred
     Stock pursuant to Section 9(a) hereof. The REIT shall file all required
     reports under the Securities Exchange Act of 1934, as amended (the
     "Exchange Act") on or prior to the due date therefor.

(c)  REDEMPTION OF UNITS. The REIT shall cause to be maintained in effect the
     provisions of the Fourth Amended and Restated Agreement of Limited
     Partnership of RFSOP dated January 3, 1997 (the "RFSOP Partnership
     Agreement") allowing RFS to tender its Units to RFSOP for redemption, with
     the redemption price being payable in cash or shares of Common Stock at the
     option of the REIT.

(d)  SURRENDER OF CERTIFICATES. On or prior to the Purchase Date, RFS shall
     deliver to the REIT or RFSOP, as applicable, certificates representing the
     Preferred Stock, duly endorsed for transfer, free and clear of any liens,
     claims, encumbrances or charges of any kind.

(e)  LIMITATIONS ON RESALES. Hilton and RFS agree that, in the event RFS
     receives shares of Common Stock pursuant to Section 9(a) hereof, RFS will
     not sell such shares of Common Stock on any trading day in an amount which
     exceeds 20% of the average daily trading volume for the

                                       16

<PAGE>

     Common Stock for the 30-trading-day period preceding the date of the sale.
     The REIT Parties agree to work in good faith to assist RFS in the orderly
     liquidation of any shares of Common Stock delivered pursuant to Section
     9(a) hereof.

     Section 10. OFFICE LEASE.

          The REIT and RFS shall use their respective good faith reasonable
     commercial efforts to effect either (a) the assignment to any REIT Party or
     Successor Lessee as of the Termination Date of the Lease Agreement dated
     December 1, 1994 by and between the predecessor in interest to Boyle
     Investment Company, a Tennessee corporation (the "Landlord") and RFS, as
     amended by the First Modification of Lease Agreement by and between
     Landlord and RFS dated September ___, 1999 (the "Office Lease"), the
     assumption of the Office Lease by such REIT Party or Successor Lessee, and
     the release of RFS from all liabilities arising under or from the Office
     Lease from and after the Termination Date, or (b) the termination of the
     Office Lease as of the Termination Date and execution of a new lease for
     the space demised under the Office Lease on substantially the same terms as
     the Office Lease and for the remaining term thereof. Any such assignment of
     the Office Lease shall be subject to the subleases described on EXHIBIT 22
     hereto.

     Section 11. FURNITURE AND EQUIPMENT.

(a)  FF&E. On the Termination Date, the REIT shall cause a REIT Party or
     Successor Lessee to purchase from RFS all corporate office furniture and
     equipment then owned by RFS (the "FF&E") at the book value thereof as of
     the Termination Date. EXHIBIT 11(a) hereof sets forth all FF&E as of
     December 31, 1999, and the book values thereof as of such date. The Lessees
     shall cause the FF&E to be transferred to the REIT Party or Successor
     Lessee free and clear of all liens, claims, encumbrances and charges of any
     kind pursuant to the Bill of Sale. Except as set forth in Section 11(b)
     below, the REIT Parties and Successor Lessees shall have no obligation to
     purchase from RFS any furniture, fixture or equipment, other than that
     described in EXHIBIT 11(a) hereto, unless the REIT agrees in writing prior
     to the Termination Date to make such purchase.

(b)  CORPORATE OFFICE CAPITAL EXPENDITURES. On the Termination Date, the REIT
     shall cause a REIT Party or Successor Lessee to reimburse RFS for the
     actual costs of the capital expenditures made or irrevocably committed by
     or on behalf of the Lessees with respect to their corporate office and
     related systems during the period from and including the date hereof
     through and including the Termination Date; PROVIDED, HOWEVER, that the
     REIT shall have no obligation to cause any REIT Party or Successor Lessee
     to reimburse RFS for (i) any such capital expenditure in excess of $25,000
     unless the REIT has given its prior written consent to such capital
     expenditure, or (ii) the amount by which the aggregate of any such capital
     expenditures of less than $25,000 made without the REIT'S prior written
     consent exceeds $100,000. All assets represented by such capital
     expenditures for which RFS is reimbursed shall be conveyed to a REIT Party
     or Successor Lessee on the Termination Date pursuant to the Bill of Sale.

     Section 12. PARTNERSHIP INTERESTS.

          The REIT and RFS shall use their respective good faith reasonable
     commercial efforts to effect, as soon as practicable after the date hereof,
     and pursuant to an Assignment of Partnership Interests and Assumption
     Agreement substantially in the form of EXHIBIT 12, hereto

                                       17
<PAGE>

     (a) the assignment to the REIT or its designee of all of the right, title,
     and interest of RFS in Highland Plaza Partners, L.P., Devonshire
     Associates, L.P., SF Partners, L. P., DDP Partners, L.P., and Shelby
     Distribution Partners, L.P., each a Tennessee limited partnership
     (collectively, the "Partnership Interests"), (b) the assumption of the
     Partnership Interests and all liabilities related thereto by the REIT or
     its designee, and (c) the release of RFS from all liabilities related to
     the Partnership Interests. Such assignment of Partnership Interests (i)
     shall be free and clear of any liens, claims, encumbrances and charges of
     any kind on or against the Partnership Interests that have been created by
     RFS since the effective date of the Doubletree/RFS Merger, except as
     provided in the applicable partnership agreements, and (ii) shall be in
     exchange for a cash payment to RFS of $160,000. In the event the
     Partnership Interests have not been assigned to the REIT or its designee on
     or before the earlier of the Termination Date and January 31, 2001, RFS
     shall assign to the REIT or its designee the economic benefits of the
     Partnership Interests (to the extent permitted by the applicable
     partnership agreements and related agreements) and effective on such date
     receive the indemnification of the REIT Parties with respect to Liabilities
     suffered or incurred with respect to the Partnership Interests set forth in
     Section 21(c)(vi) hereof.

     Section 13. PRODUCT IMPROVEMENT PLANS.

          As soon as practicable, but in no event later than March 31, 2000,
     Hilton will notify the Lessors of any product improvement plans which will
     be required at any of the Leased Hotels which will be operated pursuant to
     a Hilton Franchise Agreement as a result of the transactions contemplated
     by this Termination Agreement (the "Required PIPs") and the capital
     improvements comprising such Required PIPs. The Lessee Parties agree that
     no Lessor or Successor Lessee shall be required, as a result of the
     transactions contemplated by this Agreement, to undertake a product
     improvement plan or capital expenditures which are not consistent with
     those generally required of licensees pursuant to standard Hilton Franchise
     Agreements.

     Section 14. FINANCIAL INFORMATION.

(a)  FINANCIAL DISCLOSURE. The Lessee Parties agree to (i) provide such
     financial information with respect to the Lessees and the Manager and the
     Leased Hotels and Managed Hotels as may be reasonably requested by the REIT
     Parties and their respective permitted successors and assigns, and (ii)
     exercise their good faith reasonable commercial efforts to obtain from
     their independent public accountants such consents, "comfort letters" and
     similar documents relating to the financial information described in clause
     (i) above as may reasonably be requested by the REIT Parties and their
     respective permitted successors and assigns for compliance with their
     respective SEC disclosure obligations.

(b)  COSTS AND EXPENSES. The REIT Parties shall pay all reasonable costs and
     expenses arising from the compliance by the Lessee Parties with the
     provisions of Section 14(a) hereof, including, without limitation, all
     salary and wage expenses attributable to time spent by employees of Hilton
     or any of its subsidiaries in complying with such provisions. Hilton shall
     provide the REIT Parties with satisfactory evidence of such costs and
     expenses.

                                       18
<PAGE>

     Section 15. CONDITIONS TO CLOSING.

(a)  CONDITIONS PRECEDENT TO CLOSING BY THE REIT PARTIES. The obligations of any
     of the REIT Parties under Sections 2, 3, 4, 7, 10, 11, 18(g) and 18(h) of
     this Termination Agreement are subject to the satisfaction or waiver of the
     following conditions on or before the Termination Date:

     (i)  PERFORMANCE OF COVENANTS. The Lessee Parties shall have performed,
          satisfied and complied in all material respects with all covenants and
          agreements required by this Termination Agreement to be performed,
          satisfied or complied with by the Lessee Parties on or before the
          Termination Date;

     (ii) ACTIONS, SUITS, PROCEEDINGS. No action, suit or proceeding by any
          governmental authority or other third party seeking to prevent or
          enjoin the transactions contemplated by this Termination Agreement
          shall have been instituted or threatened on or before the Termination
          Date; and

     (iii) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
          the Lessee Parties in Sections 22 and 24(b) hereof (after giving
          effect to any permitted updating of EXHIBIT 22 hereto pursuant to
          Section 22(b) hereof) shall continue to be true and correct in all
          material respects as of the Termination Date.

(b)  CONDITIONS PRECEDENT TO CLOSING BY THE LESSEE PARTIES. The obligations of
     any of the Lessee Parties under Sections 2, 3, 4, and 11 of this
     Termination Agreement are subject to the satisfaction or waiver of the
     following conditions on or before the Termination Date:

     (i)  PERFORMANCE OF COVENANTS. The REIT Parties shall have (i) performed,
          satisfied and complied in all material respects with all covenants and
          agreements required by this Termination Agreement to be performed,
          satisfied or complied with by any of the REIT Parties on or before the
          Termination Date and (ii) obtained the consents described as Items 3
          and 4 on EXHIBIT 24(a)(ii) hereto;

     (ii) ACTIONS, SUITS, PROCEEDINGS. No action, suit or proceeding by any
          governmental authority or other third party seeking to prevent or
          enjoin the transactions contemplated by this Termination Agreement
          shall have been instituted or threatened on or before the Termination
          Date; and

    (iii) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
          the REIT Parties in Section 24(a) hereof shall continue to be true and
          correct in all material respects as of the Termination Date.

     Section 16. TERMINATION.

(a)  TERMINATION DUE TO OTHER CIRCUMSTANCES. This Termination Agreement may be
     terminated at any time on or prior to January 31, 2001:

     (i)  by mutual written agreement of all parties hereto;

     (ii) by (A) the REIT pursuant to a notice delivered pursuant to Section
          4(a)(i) hereof, or (B) by Hilton if (1) the REIT has not notified
          Hilton in writing on or before November

                                       19
<PAGE>

          30, 2000 that the REIT Parties intend to terminate the Lease
          Agreements, the Owner Management Agreements and the Ancillary
          Agreements pursuant to the terms of this Termination Agreement or (2)
          the Lessors have not executed the Escrow Agreement and deposited the
          Escrow pursuant to Section 5 hereof on or before November 30, 2000;
          PROVIDED HOWEVER, that in either such event the provisions of Sections
          9, 12 and 18(g) hereof shall survive such termination.

    (iii) by any party hereto if the Termination Date shall not have occurred
          on or before January 31, 2001; PROVIDED, HOWEVER, that this provision
          shall not be available to the Lessee Parties if the REIT Parties have
          the right to terminate this Termination Agreement under clause (iv)
          below, and this provision shall not be available to the REIT Parties
          if the Lessee Parties have the right to terminate this Termination
          Agreement under clause (v) below;

     (iv) by the REIT Parties if there is (A) a breach of any material covenant
          or material agreement to be complied with or performed by the Lessee
          Parties pursuant to the terms of this Termination Agreement and such
          breach has not been cured by the Termination Date or (B) a failure of
          any condition set forth in Section 15(a) hereof to be satisfied on or
          prior to the Termination Date; or

     (v)  by the Lessee Parties if there is (A) a breach of any material
          covenant or material agreement to be complied with or performed by the
          REIT Parties pursuant to the terms of this Termination Agreement and
          such breach has not been cured by the Termination Date, or (B) a
          failure of any condition set forth in Section 15(b) hereof to be
          satisfied on or prior to the Termination Date.

(b)  EFFECT OF TERMINATION. The termination of this Termination Agreement
     pursuant to Section 16(a) above shall not affect the right of any party to
     bring any action for breach of this Termination Agreement, and the
     obligations of the parties under Sections 9, 12, 18(g) and 21 of this
     Termination Agreement shall survive any such termination. Each of the
     Lessee Parties (other than RFSL) shall be jointly and severally liable for
     any breach of this Termination Agreement by any of the Lessee Parties, and
     each of the REIT Parties shall be jointly and severally liable for any
     breach of this Termination Agreement by any of the REIT Parties.

     Section 17. PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY.

(a)  PUBLIC ANNOUNCEMENTS. None of the REIT Parties shall issue or make, or
     permit any Successor Lessee to issue or make, any reports, statements or
     releases to the public or generally to its employees, customers, suppliers
     or other persons with respect to this Termination Agreement or the
     transactions contemplated hereby without giving Hilton twenty-four (24)
     hours (occurring during a business day) to comment on such report,
     statement or release. None of the Lessee Parties shall issue or make any
     reports, statements or releases to the public or generally to its
     employees, customers, suppliers or other persons with respect to this
     Termination Agreement or the transactions contemplated hereby without
     giving the REIT twenty-four (24) hours (occurring during a business day) to
     comment on such report, statement or release. If any Lessee Party is unable
     to obtain the comments of the REIT, or any REIT Party or Successor Lessee
     is unable to obtain the comments of Hilton, on any such report, statement
     or release after such time, then

                                       20
<PAGE>

     such party may make or issue such report, statement or release and promptly
     furnish the REIT or Hilton, as applicable, with a copy thereof.

(b)  CONFIDENTIALITY. Each party hereto shall keep confidential, and shall cause
     its directors, officers, employees, agents, representatives and advisors to
     keep confidential, any information from time to time received by it from
     any other party regarding such other party or its business affairs;
     PROVIDED, HOWEVER, that nothing herein shall restrict the disclosure of any
     such information to the extent required by statute, rule, regulation or
     judicial process, or the disclosure of any such information which is
     generally available to the public.

     Section 18. FURTHER COVENANTS AND AGREEMENTS.

(a)  EMPLOYEE MATTERS. The REIT shall have no obligation under Section 7(b)
     hereof with respect to any increase in Severance Payments resulting from
     any of the following actions taken by any Lessee Party prior to the
     Termination Date without the prior written consent of the REIT: (i) except
     as provided in Section 7(e) hereof, the increase of severance benefits or
     the extension of the term of any severance plan or individual severance
     agreement with respect to the RFS Employees described in EXHIBIT 7(b)
     hereto, (ii) the promotion of any RFS Employee to a level which entitles
     such RFS Employee to greater severance benefits, (iii) the increase in the
     compensation of any RFS Employee, except in the ordinary course of
     business, or (iv) the release of any RFS Employee from any non-compete
     provisions or other restrictive covenants applicable to such RFS Employee,
     except as required by Section 7(d) hereof.

(b)  AFFAIRS OF RFS. RFS hereby agrees to maintain its legal existence and to
     use good faith reasonable commercial efforts to (i) maintain its current
     management structure at its corporate headquarters and regional offices and
     (ii) retain the RFS Employees for the period prior to the Termination Date,
     subject to such changes as may occur in the ordinary course of business. It
     is the intention of the parties that prior to the Termination Date the
     Leased Hotels and the Managed Hotels continue to be managed in a manner
     consistent with current operations, and to the extent possible, by the same
     individuals who currently manage the Leased Hotels and the Managed Hotels.
     After the Termination Date, no Lessee Party shall make, or permit any of
     its subsidiaries to make, offers of employment to any RFS Employee or any
     manager of a Leased Hotel or Managed Hotel prior to the date which is six
     (6) months after the Termination Date.

(c)  THE RFS NAME. No later than fifteen (15) business days after the
     Termination Date, the Lessee Parties shall take all necessary steps to
     change their respective corporate names so as to no longer contain the
     designation RFS. The Lessee Parties hereby agree not to utilize the trade
     name or mark of RFS (or any logo or other mark containing the designation
     RFS) in connection with any of their businesses from and after the
     Termination Date except as may be reasonably necessary to wind up the
     affairs of the Lessees.

(d)  FINAL RENT PAYMENT AND MANAGEMENT FEES. The Lessees shall pay all accrued
     and unpaid Percentage Rent and Additional Charges (as such terms are
     defined in the applicable Lease Agreements) and the Owners shall pay all
     management fees and other amounts due and owing pursuant to the Owner
     Management Agreements through the Termination Date on or before the date
     which is fifteen (15) days after the Termination Date.

                                       21
<PAGE>

(e)  ST. LOUIS PLAN. The Lessee Parties shall provide any information or give
     notice, or use good faith commercially reasonable efforts to cause the
     trustee of the St. Louis Plan to provide any information or give notice,
     reasonably requested by the REIT Parties or the applicable Successor Lessee
     in connection with their application of the Pension Benefit Guaranty
     Corporation Regulations exemptions referred to in Section 8(d)(ii) hereof.

(f)  RFSL. In the event the REIT or its designee purchases the capital stock of
     RFSL pursuant to Section 2(a) hereof, the assets and liabilities of RFSL
     shall be prorated and settled as of the Termination Date in the same manner
     as if the Lease Agreements applicable to the RFSL Hotels were being
     terminated in accordance with the provisions of this Agreement, it being
     the intention of the parties that at the Termination Date RFSL will have no
     more assets or liabilities than would the applicable Lessor or a Successor
     Lessee had the Lease Agreements for the RFSL Hotels been terminated in
     accordance with the provisions of this Termination Agreement and
     liabilities settled or indemnified in accordance with Sections 3(b), 4(e),
     18(d) and 21 hereof. The parties acknowledge and agree that, in the event
     the REIT or its designee elects to purchase the capital stock of RFSL
     pursuant to Section 2(a) hereof, all assets of RFSL other than the Lease
     Agreements and the Leased Property (as such term is defined in the Lease
     Agreements but exclusive of Excluded Assets) will be transferred by RFSL to
     Hilton or its designee in advance of such purchase.

(g)  STANDSTILL AGREEMENT. The REIT Parties hereby (i) consent to the execution
     by the Lessees of the "New Amendments" described in the Standstill
     Agreement, (ii) agree to execute the owner agreement amendments and new
     owner agreements described in the Standstill Agreement and (iii) agree to
     evidence their agreement set forth in this Section 18(g) to Marriott, if
     requested, in a form satisfactory to the REIT Parties.

(h)  NON-INTERFERENCE. The parties hereby acknowledge and agree that, prior to
     the Termination Date, except as expressly set forth herein or in the Lease
     Agreements or the Ancillary Agreements, the REIT Parties shall have no
     rights hereunder with respect to the operations or business of the Lessees.

     Section 19. [INTENTIONALLY LEFT BLANK].

     Section 20. FURTHER ASSURANCES.

          Each party hereby agrees to cooperate in good faith with the other
     parties and to execute and deliver such other agreements, documents or
     instruments as may be necessary or desirable in connection with the
     transactions contemplated by this Termination Agreement (including the
     termination of the Lease Agreements, the Owner Management Agreements and
     the Ancillary Agreements and execution and delivery of memoranda of lease
     termination that comply with applicable local law) or in effecting the
     transfer of the operational control of the Leased Hotels and the Managed
     Hotels resulting therefrom. Each party hereby further agrees to use its
     good faith reasonable commercial efforts to obtain consents and waivers
     from third parties, including franchisors, suppliers, vendors, employees,
     lessors, lessees, lenders, trustees, rating agencies and other third
     parties necessary to effect the transactions contemplated by this
     Termination Agreement, including, without limitation, all requisite
     consents and waivers

                                       22
<PAGE>

     identified on EXHIBIT 24(a)(ii) hereto and EXHIBIT 24(b)(ii) hereto. If any
     affiliate of a REIT Party becomes a lessor for a Leased Hotel prior to the
     Termination Date, the REIT shall cause such affiliate to become a party to
     and be bound by this Termination Agreement as if it were an original party
     hereto. If any affiliate of a Lessee Party becomes a lessee for a Leased
     Hotel prior to the Termination Date, Hilton shall cause such affiliate to
     become a party to and be bound by this Termination Agreement as if it were
     an original party hereto.

     Section 21. COSTS AND EXPENSES; INDEMNITIES.

(a)  COSTS AND EXPENSES.

     (i)  COSTS AND EXPENSES PAYABLE BY THE LESSEE PARTIES. The Lessee Parties
          shall pay all fees, costs and expenses associated with (A) the
          termination of the Affiliate Management Agreements in accordance with
          Section 2(d)(i) hereof, including, without limitation, termination
          fees, liquidated damages and other payments owing to the managers
          thereunder, and (B) obtaining the consents, waivers and other actions
          described on EXHIBIT 24(b)(ii) hereto.

     (ii) COSTS AND EXPENSES PAYABLE BY THE REIT PARTIES. Except as otherwise
          set forth herein and in the Standstill Agreement, the REIT Parties
          shall pay all fees, costs and expenses associated with (A) the
          replacement of the Third Party Franchise Agreements applicable to the
          Leased Hotels in accordance with Section 2(c) hereof, including,
          without limitation, new license application fees, change of ownership
          fees, liquidated damages and other payments owing to the franchisors
          thereunder, whether as a result of the termination of the applicable
          Lease Agreement, Third Party Franchise Agreement or any other related
          agreement, the change of ownership of the franchise, the execution of
          a replacement Third Party Franchise Agreement with the applicable
          Lessor or Successor Lessee, or otherwise, (B) the replacement and
          termination of the Licenses applicable to the Leased Hotels and the
          Managed Hotels in accordance with Section 8(b) hereof, (C) the
          assignment or termination of the Contracts applicable to the Leased
          Hotels (other than Excluded Material Contracts) in accordance with
          Section 2(e) hereof, (D) the termination and replacement or the
          assignment of the Office Lease in accordance with Section 10 hereof
          and any subleases thereof, (E) the assignment of the Partnership
          Interests, (F) the acceptance and assumption of the Third Party
          Management Agreements and the release of the Lessee Parties with
          respect to the same, all in accordance with Section 2(d) hereof, and
          (G) obtaining the consents, waivers and other actions described on
          EXHIBIT 24(a)(ii) hereto; PROVIDED, HOWEVER, that the REIT Parties
          shall not be responsible for (x) amounts owing by the Lessees or any
          of their affiliates under the Franchise Agreements, Third Party
          Management Agreements, Contracts, Licenses or the Office Lease for the
          period prior to the Termination Date, or (y) any fees, costs or
          expenses described in this subsection (ii) (exclusive of clause (E)
          above) that are incurred by any Lessee Party prior to the date that is
          thirty (30) days in advance of the Termination Date.

    (iii) OTHER COSTS AND EXPENSES. Except as otherwise provided herein, each
          of the parties shall pay all costs and expenses incurred or to be
          incurred by it in negotiating and preparing this Termination Agreement
          and the other documents and instruments contemplated herein and in
          performing their respective obligations hereunder and thereunder.

                                       23
<PAGE>

(b)  INDEMNITY BY THE LESSEE PARTIES. The Lessee Parties (other than RFSL)
     agree, jointly and severally, to indemnify, defend and hold harmless the
     REIT Parties and their respective affiliates, officers, directors,
     shareholders, employees and agents and each Successor Lessee (collectively,
     the "REIT Indemnitees") from and against any and all claims, demands,
     obligations, losses, liabilities, damages, recoveries and deficiencies,
     including interest, penalties and reasonable attorneys' fees, costs and
     expenses, and any and all actions, suits and proceedings in respect thereof
     (collectively, "Liabilities"), suffered or incurred by any REIT Indemnitee
     as a result of (i) the termination of, or failure to terminate, the
     Affiliate Management Agreements for the Leased Hotels, (ii) the breach of
     any covenant of the Lessee Parties set forth herein or in any document or
     instrument delivered in connection herewith, (iii) the failure of any
     representation and warranty made by the Lessee Parties in Sections 22 or
     24(b) hereof or pursuant to Section 4(c)(ix) hereof to be true and correct
     in all material respects, (iv) the operation of the Leased Hotels by the
     Lessee Parties prior to the Termination Date, including, without
     limitation, claims or causes of action relating in any way to any employees
     of RFS based upon events occurring prior to the Termination Date, including
     but not limited to any alleged or actual unfair labor practices, employment
     discrimination charges and lawsuits, violations of collective bargaining
     contracts or trust agreements, any failure to make contributions to the St.
     Louis Plan contrary to the requirements of Section 515 of ERISA, and any
     other claims regarding employment, severance, safety, compensation,
     benefits or other matters, (v) any untrue statement of a material fact or
     omission of any material fact included in written information provided by
     any Lessee Party to any of the REIT Parties or their respective permitted
     successors and assigns or any Successor Lessee expressly for inclusion in
     any Exchange Act report or Securities Act registration statement, or (vi)
     in the event the REIT or its designee elects to purchase the capital stock
     of RFSL pursuant to Section 2(a) hereof, liabilities of RFSL arising prior
     to the Termination Date but not from the operation of the Leased Hotels.
     The Lessee Parties shall pay any and all amounts owing under this indemnity
     within two (2) business days after demand by the applicable REIT Indemnitee
     together with reasonable supporting documentation therefor. This indemnity
     shall survive the Termination Date for a period of three (3) years plus,
     with respect only to any claim for indemnification made hereunder before
     the expiration of such three (3)-year period, any period during which such
     claim is pending and unresolved hereunder. Payment of a Liability by a REIT
     Indemnitee shall not be a condition precedent to the obligations of the
     Lessee Parties under this indemnity. The limitation on the indemnification
     obligation set forth in clause (vi) above shall not in any way limit the
     indemnification obligation set forth in clause (iv) above.

(c)  INDEMNITY BY THE REIT PARTIES. The REIT Parties agree, jointly and
     severally, to indemnify, defend and hold harmless the Lessee Parties and
     their respective affiliates, officers, directors, shareholders, employees
     and agents (collectively, the "Hilton Indemnitees") from and against any
     and all Liabilities suffered or incurred by any Hilton Indemnitee as a
     result of (i) the breach of any covenant of any REIT Party or Successor
     Lessee or any other designee of the REIT Parties set forth herein or in any
     document or instrument delivered in connection herewith, including, without
     limitation, the breach of any obligation under a Contract, Third Party
     Franchise Agreement, Third Party Management Agreement or License assumed by
     any REIT Party or Successor Lessee occurring after the Termination Date,
     (ii) the failure of any representation and warranty made by the REIT
     Parties in Section 24(a) hereof or pursuant to Section 4(d)(x) hereof to be
     true and correct in all material respects, (iii) the operation of the
     Leased Hotels by the Lessors or any Successor Lessee after the Termination
     Date, including, without limitation, (A) costs of complying with all
     product improvement plans and satisfying

                                       24
<PAGE>

     other requirements for the issuance or continuance of a replacement
     Franchise Agreement and (B) claims or causes of action relating in any way
     to any employee based upon events occurring after the Termination Date,
     including but not limited to any alleged or actual unfair labor practices,
     employment discrimination charges and lawsuits, violations of collective
     bargaining contracts or trust agreements, any failure to make contributions
     to the St. Louis Plan contrary to the requirements of Section 515 of ERISA
     or Section 8(d)(i) hereof, and any other claims regarding employment,
     severance, safety, compensation, benefits or other matters, (iv) the
     continuation beyond the Termination Date of any Contract (other than an
     Excluded Material Contract), License or Franchise Agreement which is not
     assumed by a REIT Party or Successor Lessee, (v) the continuation beyond
     the Termination Date of any obligations of the Lessee Parties under the
     Subordination Agreements, (vi) the Partnership Interests (exclusive of
     Liabilities arising with respect thereto from the gross negligence or
     willful misconduct of RFS after the effective date of the Doubletree/RFS
     Merger), (vii) any withdrawal liability incurred as a result of the
     transactions contemplated hereby with respect to the St. Louis Plan, (viii)
     any information with respect to the Lessee Parties set forth in any reports
     of any of the REIT Parties or their respective permitted successors and
     assigns or any Successor Lessee under the Exchange Act or any registration
     statement under the Securities Act, except, to the extent that any
     Liabilities in respect thereof result from any untrue statement of a
     material fact or omission of any material fact included in written
     information provided by any Lessee Party to such REIT Party, permitted
     successor or assign or Successor Lessee expressly for inclusion in any such
     Exchange Act report or Securities Act registration statement, and (ix) any
     transfer taxes incurred as a result of any lease assignment with respect to
     Submanaged Hotels pursuant to Section 2(a) hereof or as a result of the
     transfer of the stock of RFSL pursuant to Section 2(a) hereof. The REIT
     Parties shall pay any and all amounts owing under this indemnity within two
     (2) business days after demand by the applicable Hilton Indemnitee together
     with reasonable supporting documentation therefor. This indemnity shall
     survive the Termination Date for a period of three (3) years plus, with
     respect only to any claim for indemnification made hereunder before the
     expiration of such three (3)-year period, any period during which such
     claim is pending and unresolved hereunder; PROVIDED, HOWEVER, that (i) the
     indemnity obligation described in clause (vii) above shall survive the
     Termination Date for a period of six (6)-years plus, with respect only to
     any claim for such indemnification made hereunder before the expiration of
     such six (6) year period, any period during which such claim is pending and
     unresolved hereunder, and (ii) the indemnity obligations described in
     clause (vi) above with respect to the Partnership Interests and all
     liabilities related thereto shall survive the Termination Date for the
     applicable statute of limitations period. Payment of a Liability by a
     Hilton Indemnitee shall not be a condition precedent to the obligations of
     the REIT Parties under this indemnity.

(d)  DEFENSE OF CLAIMS. If a claim for Liabilities is to be made by a party
     entitled to indemnification under this Section 21, the party entitled to
     such indemnification shall give written notice to the indemnifying party as
     soon as practicable after the party entitled to indemnification becomes
     aware of any fact, condition or event which may give rise to Liabilities
     for which indemnification may be sought under this Section 21. If any
     action, suit or proceeding alleging a claim for Liabilities is filed
     against any party entitled to the benefit of indemnity hereunder, written
     notice thereof shall be given to the indemnifying party as promptly as
     practicable. After such notice, the indemnifying party shall be entitled,
     if it so elects, (i) to take control of the defense and investigation of
     such action, suit or proceeding, (ii) to employ and engage attorneys and
     experts of its own choice to handle and defend the same, and (iii) with the
     indemnified party's consent, to settle such action, suit or proceeding, all
     at the indemnifying party's sole risk and expense,

                                       25
<PAGE>

     provided, in each instance, that the indemnifying party and its counsel
     shall proceed with diligence and in good faith with respect thereto;
     PROVIDED, HOWEVER, that any such settlement shall include, among other
     things, an absolute and unconditional release of the indemnified party from
     all Liabilities. The indemnified party shall cooperate in all reasonable
     respects with the indemnifying party and such attorneys in the
     investigation, trial and defense of such action, suit or proceeding and any
     appeal arising therefrom; PROVIDED, HOWEVER, that the indemnified party
     may, at its own cost, participate in the investigation, trial and defense
     of such action, suit or proceeding and any appeal arising therefrom. This
     Section 21(d) shall have no application to the reimbursement obligation of
     the RFSOP set forth in Section 7(b) hereof.

(e)  APPLICABILITY OF INDEMNITY PROVISIONS. Except with respect to the indemnity
     provided by the Lessee Parties (other than RFSL) pursuant to Section
     21(b)(v) hereof and the indemnity provided by the REIT Parties pursuant to
     Section 21(c)(vi) and Section 21(c)(viii) hereof, the provisions of
     subsections (b), (c) and (d) of this Section 21 shall not become applicable
     until the consummation of the transactions contemplated by Section 2 hereof
     on the Termination Date. The indemnity provided by the REIT Parties
     pursuant to Section 21(c)(vi) shall not become applicable until the
     earliest of (i) the consummation of the transactions contemplated by
     Section 12 hereof, (ii) the consummation of the transactions contemplated
     by Section 2 hereof on the Termination Date and (iii) January 31, 2001.

     Section 22. DISCLOSURE.

(a)  REPRESENTATIONS AND WARRANTIES. The Lessee Parties hereby make the
     following representations and warranties:

     (i)  LITIGATION. To the actual knowledge of Lawrence A. Russell, Jr.,
          Section (a) of EXHIBIT 22 hereto (to be completed by RFS within ten
          (10) days after the date hereof) will set forth a true and correct
          list of all pending and threatened actions, suits and proceedings
          against the Lessees as of the date hereof.

     (ii) MATERIAL CONTRACTS. To the actual knowledge of Lawrence A. Russell,
          Jr., Section (b) of EXHIBIT 22 hereto sets forth a true and correct
          list of all Material Contracts as of the date hereof.

    (iii) EMPLOYEE MATTERS. Section (c) of EXHIBIT 22 hereto sets forth a true
          and correct statement of the current information with respect to the
          RFS Employees set forth therein.

     (iv) SUBLEASES. Section (d) of EXHIBIT 22 hereto sets forth a true and
          correct list of all subleases executed by any of the Lessee Parties
          with respect to the space demised under the Office Lease.

     (v)  MANAGEMENT AGREEMENTS. EXHIBIT 1(d) hereto sets forth all of the Third
          Party Management Agreements with respect to the Leased Hotels.

     (vi) RFS LEASING, INC. RFSL is duly incorporated, validly existing and in
          good standing under the laws of the State of Tennessee and is in good
          standing in each state in which it leases a hotel property from RFSFP.
          Other than its obligations pursuant to the Lease Agreements, Franchise
          Agreements, Licenses, Third Party Management Agreements, Affiliate
          Management Agreements, and Contracts relating to the RFSL Hotels, the

                                       26
<PAGE>

          Standstill Agreement, this Termination Agreement, the Escrow
          Agreement, the Subordination Agreement and the Ancillary Agreements,
          RFSL has no material contractual obligations of any kind, and RFSL has
          no business operations of any kind which are unrelated to the RFSL
          Hotels. Hilton (either directly or indirectly) owns all of the
          outstanding capital stock of RFSL free and clear of any liens, claims,
          encumbrances and charges of any kind.

    (vii) REPLACEMENT HILTON FRANCHISE AGREEMENTS. Hilton, or a wholly owned
          subsidiary of Hilton, has full legal right and authority to grant to
          the REIT Parties or a Successor Lessee a replacement Hilton Franchise
          Agreement for the same franchise brand for each Leased Hotel currently
          operating under a Hilton Franchise Agreement.

(b)  UPDATING OF DISCLOSURES. The Lessee Parties shall promptly update any of
     the information set forth in EXHIBIT 22 hereto to include developments
     after the date hereof by delivering written notice of such new developments
     to the REIT Parties.

     Section 23. COUNTERPARTS.

          This Termination Agreement may be executed in multiple counterparts,
     each of which shall be deemed an original.

     Section 24. AUTHORIZATION; NO CONSENTS.

(a)  THE REIT PARTIES. The REIT Parties hereby represent and warrant to the
     Lessee Parties as follows:

     (i)  The execution, delivery and performance of the Agreements and the
          consummation of the transactions contemplated therein by each of the
          REIT Parties have been duly authorized by all necessary corporate or
          partnership action, as the case may be. Each Agreement constitutes a
          valid and binding agreement of each of the REIT Parties, enforceable
          in accordance with its terms.

     (ii) Except as set forth on EXHIBIT 24(a)(ii) and EXHIBIT 24(b)(ii) hereto,
          and except for required consents to the assignment, replacement and/or
          termination of the Franchise Agreements (and related agreements), the
          Licenses, the Contracts, the Third Party Management Agreements, the
          Office Lease and the Partnership Interests, no consents, waivers or
          other actions by any third party are required in connection with the
          execution, delivery and performance of any Agreement by any of the
          REIT Parties.

(b)  THE LESSEE PARTIES. The Lessee Parties hereby represent and warrant to the
     REIT Parties as follows:

     (i)  The execution, delivery and performance of the Agreements and the
          consummation of the transactions contemplated therein by each of the
          Lessee Parties (including, without limitation, the execution and
          delivery of the agreement described in Section 4(c)(xii) hereof) have
          been duly authorized by all necessary corporate or partnership action,
          as the case may be. Each Agreement constitutes a valid and binding
          agreement of each of the Lessee Parties, enforceable in accordance
          with its terms.

                                       27
<PAGE>

     (ii) Except as set forth on EXHIBIT 24(a)(ii) and EXHIBIT 24(b)(ii) hereto
          and except for required consents to the assignment, replacement and/or
          termination of the Franchise Agreements (and related agreements), the
          Licenses, the Contracts, the Third Party Management Agreements, the
          Office Lease and the Partnership Interests, no consents, waivers or
          other actions by any third party are required in connection with the
          execution, delivery and performance of any Agreement by any of the
          Lessee Parties.

     Section 25. NOTICES.

          Any notice required or permitted to be given under this Termination
     Agreement shall be in writing and shall be sent by facsimile transmission
     (confirmed by any of the following methods: overnight delivery (with proof
     of delivery), courier service (with proof of delivery), hand delivery, or
     certified or registered mail (return receipt requested and first class
     postage prepaid)) and addressed as follows:

          If to any Lessee Party:

                  c/o Hilton Hotels Corporation
                  755 Crossover Lane
                  Memphis, TN 38117-4900
                  Attention:  Rick Schultz and Kevin Kern
                  Facsimile:  (901) 374-5521

     with a copy to:

                  Hilton Hotels Corporation
                  9336 Civic Center Drive
                  Beverly Hills, CA 90210
                  Attention:  Kevin Luebbers
                  Facsimile:  (310) 205-4611

     with a copy (which shall not constitute notice) to:

                  Latham & Watkins
                  5800 Sears Tower
                  Chicago, IL 60606
                  Attention:  Linda S. Schurman
                  Facsimile:  (312) 993-9767

                                       28
<PAGE>

          If to any REIT Party:

                  c/o RFS Hotel Investors, Inc.
                  850 Ridge Lake Boulevard
                  Suite 220
                  Memphis, TN 38120
                  Attention:  Robert M. Solmson, Chairman of the Board
                  Facsimile:  (901) 818-5260

with a copy (which shall not constitute notice) to:

                  Hunton & Williams
                  Riverfront Plaza, East Tower
                  951 East Byrd Street
                  Richmond, VA 23219
                  Attention: David C. Wright
                  Facsimile: (804) 788-8218

or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date the notice
is received or receipt is rejected.

Section 26. SUCCESSORS AND ASSIGNS.

     This Termination Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
PROVIDED, HOWEVER, that no party may make any assignment of this Termination
Agreement or any rights or obligations hereunder without the prior written
consent of the other parties. Notwithstanding the foregoing, RFS shall have
the right to assign its rights under Section 9 hereof to Hilton or any
subsidiary of Hilton which is a successive holder of any Preferred Stock,
Common Stock or Units; PROVIDED, HOWEVER, that RFS shall notify the REIT in
writing of any such assignment prior to the filing of the New Shelf
Registration Statement.

Section 27. ENTIRE AGREEMENT; AMENDMENTS.

     The Agreements and the exhibits and schedules thereto constitute the
entire agreement among the parties thereto with respect to the subject
matters thereof and supersede all prior agreements and understandings among
the parties with respect to the matters set forth therein, including, without
limitation, any termination or survival provisions in the Lease Agreements.
No addition to or amendment or modification of any provision of this
Termination Agreement shall be binding upon any party hereto unless made in
writing and signed by each party hereto.

Section 28. HEADINGS.

     Headings of the sections of this Termination Agreement are for the
convenience of the parties only and shall be given no substantive or
interpretive effect whatsoever.

                                       29
<PAGE>

Section 29. INCORPORATION.

     The exhibits hereto are hereby incorporated herein and made a part
hereof for all purposes as if fully set forth herein.

Section 30. ENFORCEMENT OF AGREEMENT.

     The  parties agree that irreparable damage will occur in the event that
any of the provisions of this Termination Agreement is not performed in
accordance with the specific terms hereof or are otherwise breached. It is
accordingly agreed that, except as otherwise provided in Section 5 hereof, in
addition to any other remedy to which the parties are entitled at law or in
equity, the parties shall be entitled to injunctive relief to prevent
breaches of this Termination Agreement and to enforce specifically the terms
and provisions hereof in any court in the State of Tennessee.

Section 31. GOVERNING LAW.

     This Termination Agreement shall be governed by and construed in
accordance with the laws of the State of Tennessee without regard to its
rules of conflicts of laws.

Section 32. SEVERABILITY.

     Any term or provision of this Termination Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Termination Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Termination Agreement in any other
jurisdiction. If any provision of this Termination Agreement is so broad as
to be unenforceable, the provision shall be interpreted to be only so broad
as is enforceable.

Section 33. ATTORNEYS FEES.

     If any party brings an action against another party to enforce any
condition or covenant of this Termination Agreement or any other Agreement,
the prevailing party in such action shall be entitled to recover its court
costs, attorneys' fees and expenses in the judgment rendered through such
action.

Section 34. TIME OF THE ESSENCE.

     Time is of the essence of this Termination Agreement.

Section 35. RISK OF LOSS.

     In the event of a casualty or condemnation affecting any Leased Hotel,
no party shall have the right to terminate any Agreement and the applicable
Lessee shall hold and assign to the applicable Lessor or Successor Lessee any
and all proceeds of insurance or any condemnation award relating to such
casualty or condemnation in such Lessee's possession as of the Termination
Date.

                                       30
<PAGE>

Section 36. SURVIVAL.

     Except as limited by Section 21 hereof, all agreements and obligations
of the parties to this Termination Agreement shall survive the Termination
Date.

Section 37. CONSENTS.

     Whenever the consent or approval of a party is required under this
Termination Agreement, such consent shall not be unreasonably withheld or
delayed.

Section 38. GOOD FAITH REASONABLE COMMERCIAL EFFORTS.

     Whenever a party is obligated under this Termination Agreement to use
its good faith reasonable commercial efforts, such obligation shall not
require such party to expend funds or incur liability not contemplated by
this Termination Agreement.

                            [SIGNATURE PAGES FOLLOW]

                                       31

<PAGE>

     IN WITNESS WHEREOF, each party has caused this Termination Agreement to be
duly executed on its behalf as of the day and year first above written.

                              RFS, INC.

                              By:   /s/ Kevin M. Luebbers
                                 --------------------------------
                              Name:     Kevin M. Luebbers
                                  -------------------------------
                              Title:    Senior Vice President
                                   ------------------------------

                              RIDGE LAKE GENERAL PARTNER, INC.

                              By:   /s/ Randall Churchey
                                 --------------------------------
                              Name:     Randall Churchey
                                  -------------------------------
                              Title:    President and COO
                                   ------------------------------

                              RFS LEASING, INC.

                              By:   /s/ Kevin M. Luebbers
                                 --------------------------------
                              Name:     Kevin M. Luebbers
                                  -------------------------------
                              Title:    Senior Vice President
                                   ------------------------------

                              DTR RFS LESSEE, INC.

                              By:   /s/ Kevin M. Luebbers
                                 --------------------------------
                              Name:     Kevin M. Luebbers
                                  -------------------------------
                              Title:    Senior Vice President
                                   ------------------------------

                              RFS PARTNERSHIP, L.P.

                              By:  RFS Hotel Investors, Inc., general partner

                                   By:   /s/ Randall Churchey
                                      --------------------------------
                                   Name:     Randall Churchey
                                       -------------------------------
                                   Title:    President and COO
                                        ------------------------------

                                      S-1
<PAGE>

                              RFS FINANCING PARTNERSHIP, L.P.

                              By:  RFS Financing, Inc., general partner

                                           By:    /s/ Randall Churchey
                                              --------------------------------
                                           Name:      Randall Churchey
                                               -------------------------------
                                           Title:     President and COO
                                                ------------------------------

                              PLANO INN, L.P.

                              By:   RFS Partnership, L.P., general partner

                                    By:  RFS Hotel Investors, Inc., general
                                         partner

                                           By:    /s/ Randall Churchey
                                              --------------------------------
                                           Name:      Randall Churchey
                                               -------------------------------
                                           Title:     President and COO
                                                ------------------------------

                              RFS HOTEL INVESTORS, INC.

                              By:    /s/ Randall Churchey
                                 --------------------------------
                              Name:      Randall Churchey
                                  -------------------------------
                              Title:     President and COO
                                   ------------------------------

                              RFS SPE 1 1998 LLC, A VIRGINIA LIMITED LIABILITY
                              COMPANY

                              By:  RFS MM 1 1998 CORPORATION, a Virginia
                                   corporation, its managing partner

                                    By:   /s/ Randall Churchey
                                       --------------------------------
                                    Name:     Randall Churchey
                                        -------------------------------
                                    Title:    President and COO
                                         ------------------------------

                              RFS SPE 2 1998 LLC

                              By:  RFS MM 2 1998 CORPORATION, a Virginia
                                   corporation, its managing partner

                                    By:   /s/ Randall Churchey
                                       --------------------------------

                                      S-2

<PAGE>

                                    Name:     Randall Churchey
                                        -------------------------------
                                    Title:    President and COO
                                         ------------------------------

                                    DOUBLETREE CORPORATION

                                    By:    /s/ Kevin M. Luebbers
                                       --------------------------------
                                    Name:      Kevin M. Luebbers
                                        -------------------------------
                                    Title:     Senior Vice President
                                         ------------------------------

                                    HILTON HOTELS CORPORATION

                                    By:    /s/ Kevin M. Luebbers
                                       --------------------------------
                                    Name:      Kevin M. Luebbers
                                        -------------------------------
                                    Title:     Senior Vice President
                                         ------------------------------

                                      S-3<PAGE>

                  ---------------------------------------------

                           CERTIFICATE OF DESIGNATION
                                       OF
                               RTS WIRELESS, INC.

                     Pursuant to Section 151 of the General
                    Corporation Law of the State of Delaware

                  ---------------------------------------------

                            SERIES A PREFERRED STOCK

           RTS Wireless, Inc., a Delaware corporation (the "Company"), hereby
certifies that the following resolution has been duly adopted by the Board of
Directors of the Company:

           RESOLVED, that pursuant to the authority expressly granted to and
vested in the board of directors of the Company (the "Board") by the provisions
of the certificate of incorporation of the Company (as amended, the "Certificate
of Incorporation"), there hereby is created, out of the 1,000,000 shares of
preferred stock, par value $.01 per share, of the Company authorized by Article
5 of the Certificate of Incorporation (the "Preferred Stock"), a series of the
Preferred Stock consisting of 5,000 shares, which series shall have the
following powers, designations, preferences and relative, participating,
optional and other special rights, and the following qualifications, limitations
and restrictions:

           1.    DESIGNATION AND AMOUNT. The shares of such series shall have a
par value of $0.01 per share and shall be designated as "Series A Preferred
Stock" (the "Series A Preferred Stock") and the number of shares constituting
the Series A Preferred Stock shall be 5,000.

           2.    RANK. The Series A Preferred Stock shall, with respect to
redemption rights and rights on liquidation, winding up, corporate
reorganization and dissolution, rank senior to (i) the common stock, par value
$0.01 per share, of the Company (the "Common Stock"), and (ii) each other class
and series of stock of the Company now authorized, issued or outstanding and
(iii) each other class and series of

                                      -1-
<PAGE>

equity securities that may be authorized, issued or outstanding in the future
and that by its terms does not rank senior to the Series A Preferred Stock
(together with the Common Stock, the "Junior Securities").

           3.    DIVIDENDS. Except as set forth in the following sentence, no
dividends shall be payable on the Series A Preferred Stock. In the event the
Company pays, on shares of the Company's Common Stock, any dividend with
respect to which no adjustment in the Conversion Price is made pursuant to
the provisions of section 5(h) or 5(i)(i), other than a dividend solely to
reimburse common stockholders of the Company of record as of the Closing Date
(as defined in section 5(g)(i) below) for tax liability incurred by virtue
of the Company's status as an "S corporation" for federal, state or local
income tax purposes (a "Triggering Dividend"), the Company shall also pay,
concurrently with the Triggering Dividend, a dividend on each outstanding
share of Series A Preferred Stock in the same currency in which the
Triggering Dividend is paid in an amount equal to the amount that would have
been payable pursuant to the Triggering Dividend in respect of the number of
shares of Common Stock then issuable upon conversion of such shares of Series
A Preferred Stock.

           4.    LIQUIDATION.

                 (a)    In the event of any liquidation, dissolution or
winding up of the Company, including any such event deemed to occur pursuant
to section 4(c) as a result of an Exit Acquisition (as defined in section
4(c) below), either voluntary or involuntary, holders of the Series A
Preferred Stock shall first be entitled to receive, prior and in preference
to any distribution of any of the assets of the Company to the holders of
Junior Securities, out of the assets of the Company, for each share of Series
A Preferred Stock, cash in the amount of $1,000.00 (the "Liquidation
Value") plus any accrued but unpaid dividends thereon, but after payment
of all outstanding indebtedness and all amounts due on liquidation,
dissolution or winding-up in respect of all preferred stock of the
Company which by its terms is senior to the Series A Preferred Stock.

           If the assets of the Company available for distribution to the
holders of the Series A Preferred Stock as provided above are not sufficient
to allow the foregoing distribution, the said assets, if any, shall be
distributed solely to the holders of Series A Preferred Stock, pro rata in
proportion to their respective holdings of Series A Preferred Stock.

                 (b)    After distribution of the Liquidation Value per share
with respect to each share of Series A Preferred Stock outstanding plus any
accrued but unpaid dividends thereon in accordance with section 4(a), holders
of Series A Preferred Stock shall not participate in the distribution of any
additional assets or other consideration paid and shall have no rights to
convert their shares of Series A Preferred Stock into shares of Common Stock
or any other securities of the Company, and such shares of Series A Preferred
Stock shall be deemed cancelled regardless of whether such shares have been
tendered by the holder thereof to the Company for cancellation.

                 (c)    For purposes of this section 4, an Exit Acquisition (as
hereinafter defined) shall be included within the meaning of, and shall be
deemed to be, a

                                      -2-
<PAGE>

dissolution, liquidation or winding up of the Company, unless the holders of
at least a majority of the Series A Preferred Stock outstanding on the record
date, or if none, the effective date for such Exit Acquisition, agree in
writing that such event shall not be deemed to be a dissolution, liquidation
or winding up of the Company (a "Non-Liquidation Election"). For purposes
hereof, the term "Exit Acquisition" shall mean (i) subject to the proviso
below, a consolidation or merger of the Company with or into any other
corporation; (ii) a sale of all or a significant portion of the properties
and assets of the Company as an entirety to any other person; or (iii) the
acquisition of "beneficial ownership" by any "person" or "group" of voting
stock of the Company representing more than 50% of the voting power of all
outstanding shares of such voting stock, whether by way of merger or
consolidation or otherwise, PROVIDED, HOWEVER, that the term "Exit
Acquisition" shall not include any reorganization, merger or consolidation
involving:

          (x) only a change in the state of incorporation of the Company;

          (y) a merger of the Company with or into a wholly owned subsidiary
of the Company that is incorporated in the United States of America; or

          (z) an acquisition whether by merger, reorganization, consolidation
or other form of business combination, of which the Company is substantively
the surviving corporation and does not involve (in a single transaction or
series of interrelated transactions) a transfer of more than 50% of the
voting power of the Company.

Anything to the contrary herein notwithstanding, each holder of Series A
Preferred Stock shall have the right to convert his shares of Series A
Preferred Stock prior to any Exit Acquisition.

                 (d)    The Company shall give each holder of Series A Preferred
Stock written notice of any dissolution, liquidation or winding up not later
than ten days prior to any meeting of stockholders to approve such dissolution,
liquidation or winding up or, if no meeting is to be held, not later than 15
days prior to the date of such dissolution, liquidation or winding up.

           5.    CONVERSION.

                 (a)    OPTIONAL AND MANDATORY CONVERSION. Prior to the closing
of a Qualified Initial Public Offering (as hereinafter defined), each share of
Series A Preferred Stock outstanding shall be convertible, at the option of the
holder thereof and without the payment of additional consideration by the holder
thereof, at any time, into the number of shares of Common Stock determined by
dividing the Liquidation Value by the Conversion Price (as hereinafter defined)
in effect on the Optional Conversion Date (as hereinafter defined). Promptly
after any such conversion, the Company shall pay the holders of the shares of
Series A Preferred Stock so converted all accrued but unpaid dividends as of
the Optional Conversion Date. Until the initial Conversion Price is adjusted
in accordance with the terms of section 5(g) below, the number of shares of
Common Stock issuable upon conversion of the 5,000 shares of Series A
Preferred Stock is 425,775 shares.

                                      -3-
<PAGE>

                 (b)    MANDATORY CONVERSION. Upon the closing of a Qualified
Initial Public Offering or on such date on which a Qualified Initial Public
Offering shall be deemed to have occurred in accordance with the definition
thereof (the date of such closing or such deemed occurrence, the "Mandatory
Conversion Date"), each share of Series A Preferred Stock outstanding shall
be automatically converted, without any action on the part of any person or
entity, and without the payment of additional consideration by the holder
thereof, into the number of shares of Common Stock determined by dividing the
Liquidation Value by the Conversion Price in effect on the date of such
closing or deemed occurence. Promptly after any such conversion, the Company
shall pay the holders of the shares of Series A Preferred Stock so converted
all accrued but unpaid dividends as of the Mandatory Conversion Date. Until
the initial Conversion Price is adjusted in accordance with the terms of
section 5(g) below, the number of shares of Common Stock issuable upon
conversion of the 5,000 shares of Series A Preferred Stock is 425,775 shares.

                 (c)    MECHANICS OF OPTIONAL CONVERSION. Holders of Series A
Preferred Stock may exercise their optional conversion right in accordance
with section 6(a) by telecopying an executed and completed notice of
conversion in the form annexed hereto as EXHIBIT A (the "Notice of
Conversion") to the Company and delivering the original Notice of Conversion
and the certificate representing the Series A Preferred Stock by express
courier. Each business day on which a Notice of Conversion is telecopied to
and received by the Company along with a copy of the originally executed
Series A Preferred Stock certificates in accordance with the provisions
hereof shall be deemed an "Optional Conversion Date". The Company will
transmit, or instruct its transfer agent to transmit, the certificates
representing shares of Common Stock issuable upon conversion of any shares of
Series A Preferred Stock outstanding (together with the certificates
representing the Series A Preferred Stock not so converted) to the holder
thereof via express courier, by electronic transfer or otherwise, within
three (3) business days after the Optional Conversion Date PROVIDED the
Company has received the original Notice of Conversion and Series A Preferred
Stock certificate being so converted on the Conversion Date. In addition to
any other remedies which may be available to the holders of shares of Series
A Preferred Stock, in the event that the Company fails to deliver, or has
failed to contact its transfer agent within two (2) business days to deliver,
such shares of Common Stock within such three (3) business day period, then,
at any time prior to the delivery of such shares of Common Stock by or on
behalf of the Company the holder will be entitled to revoke the relevant
Notice of Conversion by delivering a notice to such effect to the Company
whereupon the Company and the holder shall each be restored to their
respective positions immediately prior to delivery of such Notice of
Conversion. The Notice of Conversion and Series A Preferred Stock
certificates representing the portion of the Series A Preferred Stock
converted shall be delivered as follows:

     To the Company:    RTS Wireless, Inc.
                        51 East Bethpage Road
                        Plainview, New York 11803
                        Attn:  Mr. Alvin L. Ring, Chief Executive Officer
                        Facsimile:  516-939-6189

           (d)    NO FRACTIONAL SHARES. No fractional shares of Common Stock or
scrip shall be issued upon conversion of Series A Preferred Stock. In lieu of
any fractional share to which the holder would be entitled but for the
provisions of this section 5(d), based on the full number of Series A Preferred
Stock held by such holder,

                                      -4-
<PAGE>

the Company shall pay cash in an amount equal to the same fraction of the
Conversion Price of one share of Common Stock.

           (e)    RESERVATION OF STOCK. The Company shall, at all times when any
Series A Preferred Stock shall be outstanding, reserve and keep available out of
its authorized but unissued stock, such number of shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all shares of
Series A Preferred Stock outstanding.

           (f)    RIGHTS. All shares of Series A Preferred Stock outstanding to
be converted pursuant to the Notice of Conversion or pursuant to a mandatory
conversion shall, on the Optional Conversion Date or the Mandatory Conversion
Date, as applicable, be converted into Common Stock for all purposes,
notwithstanding the failure of the holder thereof to surrender any certificate
representing such shares on or prior to such date. On and after the Optional
Conversion Date or Mandatory Conversion Date, as applicable, (i) no such shares
of Series A Preferred Stock shall be deemed to be outstanding or be transferable
on the books of the Company or the stock transfer agent, if any, for the Series
A Preferred Stock, and (ii) the holder of such shares, as such, shall not be
entitled to receive notices or to vote such shares or to exercise or to enjoy
any other powers, preferences or rights thereof, other than the right, upon
surrender of the certificate or certificates representing such shares, to
receive a certificate or certificates for the number of shares of Common Stock
into which such shares have been converted. On the Optional Conversion Date or
the Mandatory Conversion Date, as applicable, all such shares shall be retired
and canceled and shall not be reissued.

           (g)    CONVERSION PRICE; ADJUSTMENTS. The Conversion Price shall be
$12.46, provided that (subject to section 5(g)(ii) below) such amount shall be
subject to adjustment in the manner hereinafter set forth in section 5(g)(i).

                  (i)    SALE OF SECURITIES BELOW CONVERSION PRICE. If at any
time after March ___, 2000 (the "Closing Date") the Company shall issue any
shares of Common Stock, Convertible Securities (as hereinafter defined), Rights
(as hereinafter defined) or Related Rights (as hereinafter defined) (for
purposes hereof, collectively, "Securities") without consideration or for a
consideration per share or unit less than the Conversion Price in effect
immediately prior to the issuance of such Securities, then the Conversion Price
in effect immediately prior to each such issuance shall (subject to
section 5(g)(ii) below) forthwith be reduced to the quotient obtained by
dividing:

                         (A)   an amount equal to the sum of (1) the number of
fully diluted outstanding shares of Common Stock (as defined hereinafter)
immediately prior to such issuance of Securities (without giving effect to such
issuance) multiplied by the Conversion Price in effect immediately prior to such
issuance, and (2) the amount of consideration, if any, received by the Company
upon such issuance, by

                                      -5-
<PAGE>

                         (B)   the total number of fully diluted outstanding
shares of Common Stock immediately after such issuance of Securities, including
the number of shares of Common Stock (1) into or for which any such newly issued
Convertible Securities are then convertible or exchangeable and (2) issuable
upon the exercise of any such Rights or Convertible Securities underlying the
Related Rights.

Upon issuance of shares of Common Stock upon conversion of Series A Preferred
Stock, no further adjustments shall be made.

                 (ii)    CERTAIN TRANSACTIONS FOR WHICH NO ADJUSTMENT WILL BE
MADE TO CONVERSION PRICE. Anything herein to the contrary notwithstanding, the
Company shall not be required to make any adjustment with respect to the
Conversion Price or otherwise relating to the number of shares of Common Stock
into which shares of Series A Preferred Stock are convertible as a result of (a)
the issuance of shares of Common Stock upon the exercise of options to
employees, officers, directors and consultants pursuant to any stock options
outstanding on March 8, 2000 (the "Existing Options") or upon the grant or
exercise any additional stock options granted to employees, officers, directors
and consultants of the Company after March 8, 2000 granting such optionees
rights to purchase additional shares of Common Stock (the "Additional Options")
in amounts, together with the Exisiting Options, not exceeding 1,500,000 shares
of Common Stock; or (b) the issuance of shares of Common Stock in connection
with bona fide equipment lease financings, licensing agreements, research and
development transactions, acquisitions of businesses or technology, or similar
transactions.

                 (iii)   CERTAIN DEFINITIONS AND PROCEDURES. For the purpose of
this section 6, the following definitions and procedures shall be applicable:

                         (A)   RIGHTS. In the case of the issuance of options,
warrants or other rights to purchase or otherwise acquire Common Stock, whether
or not at the time exercisable (for purposes hereof, collectively, "Rights"),
the total number of shares of Common Stock issuable upon exercise of such Rights
shall be deemed to have been issued at the time such Rights are issued, for a
consideration equal to the sum of the consideration, if any, received by the
Company upon the issuance of such Rights and the minimum purchase or exercise
price payable upon the exercise of such Rights for the Common Stock to be issued
upon the exercise thereof, which minimum purchase or exercise price shall be the
price payable as of the date of the adjustment pursuant to this section 6.

                         (B)   CONVERTIBLE SECURITIES AND RELATED RIGHTS. In the
case of the issuance of any class or series of stock or any bonds, debentures,
notes or other securities or obligations convertible into or exchangeable for
Common Stock,

                                      -6-
<PAGE>

whether or not then convertible or exchangeable (for purposes hereof,
collectively, "Convertible Securities"), or options, warrants or other rights to
purchase or otherwise acquire Convertible Securities (for purposes hereof,
collectively, "Related Rights"), the total number of shares of Common Stock
issuable upon the conversion or exchange of such Convertible Securities or of
Convertible Securities underlying such Related Rights shall be deemed to have
been issued at the time such Convertible Securities or Related Rights are
issued, for a consideration equal to the sum of (I) the consideration, if any,
received by the Company upon issuance of such Convertible Securities or Related
Rights (excluding any cash received on account of accrued interest or dividends)
and (II) (1) in the case of Convertible Securities, the minimum additional
consideration, if any, to be received by the Company upon the conversion or
exchange of such Convertible Securities or (2) in the case of Related Rights,
the sum of (x) the minimum purchase or exercise price payable upon the exercise
of such Related Rights for Convertible Securities and (y) the minimum additional
consideration, if any, to be received by the Company upon the conversion or
exchange of the Convertible Securities issuable upon the exercise of such
Related Rights.

                         (C)   CHANGES. On any change in the number of shares of
Common Stock issuable upon the exercise of Rights or Convertible Securities
underlying the Related Rights or upon the conversion or exchange of Convertible
Securities or on any change in the minimum purchase or exercise price of Rights,
Related Rights or Convertible Securities, including, but not limited to, a
change resulting from the anti-dilution provisions of such Rights, Related
Rights or Convertible Securities, the Conversion Price to the extent in any way
affected by such Rights, Related Rights or Convertible Securities shall
forthwith be readjusted to be thereafter the Conversion Price that would have
been obtained had the adjustment, if any, which was made upon the issuance of
such Rights, Related Rights or Convertible Securities been made after giving
effect to such change. No further adjustment shall be made in respect of such
change upon the actual issuance of Common Stock or any payment of consideration
upon the exercise of any such Rights or Convertible Securities underlying the
Related Rights or the conversion or exchange of such Convertible Securities.

                         (D)   EXPIRATION OR CANCELLATION. On the expiration or
cancellation of any such Rights, Related Rights or Convertible Securities, if
the Conversion Price shall have been adjusted upon the issuance thereof, the
Conversion Price shall forthwith be readjusted to such Conversion Price as would
have been obtained had the adjustment made upon the issuance of such Rights,
Related Rights or Convertible Securities been made upon the basis of the
issuance of only the number of shares of Common Stock actually issued upon the
exercise of such Rights or Related Rights or the conversion or exchange of such
Convertible Securities.

                         (E)   CASH. In the case of the issuance of such
Securities for cash, the amount of consideration received by the Company shall
be

                                      -7-
<PAGE>

deemed to be the amount of cash paid therefor before deducting any reasonable
discounts, commissions or other expenses paid or incurred by the Company for any
underwriting or otherwise in connection with the issuance and sale thereof.

                         (F)   QUALIFIED INITIAL PUBLIC OFFERING. "Qualified
Initial Public Offering" means a public offering of Common Stock pursuant to
an effective registration statement under the Securities Act of 1933, as
amended, that (a) has (X) a public offering price that, (Y) when mulitplied
by the sum of the number of shares of Common Stock outstanding after such
offering and the number of shares of Common Stock issuable pursuant to all
outstanding options, warrants or other securities then outstanding (including
shares issuable pursuant to any underwriter's over-allotment option and any
options outstanding under any stock option plan or program of the Company);
(Z) results in a product of not less than $350,000,000 and (b) is
underwritten by one or more nationally recognized investment banking firms or
a syndicate managed or co-managed by one or more nationally recognized
investment banking firms that results in (i) the Company receiving at least
$25 million in gross proceeds and (ii) the Common Stock being traded on the
New York Stock Exchange or the Nasdaq National Market; PROVIDED, HOWEVER,
that, if the Company's initial public offering does not qualify as a
Qualified Initial Public Offering then a Qualified Initial Public Offering
shall be deemed to have occurred on the last day of the first period of 20
consecutive trading days on which the Common Stock is traded on the New York
Stock Exchange or the Nasdaq National Market that occurs after the Company's
initial public offering on which the last trade in the Common Stock occurred
at (I) a price that, (II) when multiplied by the sum of the number of shares
of Common Stock outstanding on such day and the number of shares of Common
Stock issuable pursuant to all outstanding options, warrants or other
securities then outstanding (including shares issuable pursuant to any
underwriter's over-allotment option and any options outstanding under any stock
option plan or program of the Company), (III) results in a product of not less
than $450,000,000.

                         (G)   FULLY DILUTED. The "fully diluted outstanding
shares of Common Stock" shall mean, at any time, the sum of the number of shares
of Common Stock then outstanding and the number of shares of Common Stock
issuable pursuant to any outstanding options, warrants or other securities but
only to the extent such options, warrants or other securities are then, or will
by their terms within 180 days become, exercisable, convertible or exchangeable
for shares of Common Stock.

                 (h)    REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER,
SALE, ETC. In case the Company shall effect a capital reorganization or
reclassification of its capital stock or any consolidation or merger of the
Company with another corporation, or the sale of all or substantially all of its
assets to another corporation in such a way (including, without limitation, by
way of consolidation or merger) that holders of Common Stock shall be entitled
to receive stock, securities or assets with respect to or in exchange for Common
Stock (collectively for purposes of this section 5(h), a "Covered Event"), then
as a condition of such Covered Event, lawful and adequate provision shall be
made whereby each share of Series A Preferred Stock outstanding shall, after
such Covered Event (but subject to the applicable provisions of section 4
hereof), be convertible into the kind and number of shares of stock or other
securities or property of the Company or of the corporation resulting from such
Covered Event, or to which assets shall have been sold in such Covered Event, to
which the holders of Series A Preferred Stock would have been entitled if they
had held the Common Stock issuable upon the conversion of such Series A
Preferred Stock on the record date, or, if none, immediately prior to such
Covered Event, at the Conversion Price in effect on such date. The provisions of
this section 5(h) shall similarly apply to successive Covered Events.

                 (i)    STOCK DIVIDENDS, SPLITS, COMBINATIONS AND
RECLASSIFICATIONS. If the Company shall (i) declare a dividend or other
distribution

                                      -8-
<PAGE>

payable in securities, (ii) split its outstanding shares of Common Stock into a
larger number, (iii) combine its outstanding shares of Common Stock into a
smaller number, or (iv) increase or decrease the number of shares of its capital
stock in a reclassification of the Common Stock (including any such
reclassification in connection with a merger, consolidation or other business
combination in which the Company is the continuing entity), then the Conversion
Price in effect immediately prior to such dividend or other distribution, split,
combination or reclassification, as the case may be, shall forthwith be
proportionally adjusted so that each holder of Series A Preferred Stock shall be
entitled to receive the number of shares of Common Stock which such holder would
have owned or been entitled to receive had such Series A Preferred Stock been
converted immediately prior to the record date for such dividend or other
distribution, split, combination or reclassification. Successive adjustments to
the Conversion Price shall be made upon each such dividend or other
distribution, split, combination or reclassification. Appropriate adjustment of
each other per share number stated herein shall aslo be made in the case of any
such dividend or other distribution, split, combination or reclassification.

                 (j)    CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of
each adjustment or readjustment of the Conversion Price pursuant to section
5(g), the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and cause its principal
financial officer to verify such computation and prepare and furnish to each
holder of Series A Preferred Stock a certificate setting forth such adjustment
or readjustment and setting forth in reasonable detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon the written request
at any time of any holder of Series A Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth: (i) such adjustments
and readjustments; (ii) the Conversion Price in effect at such time for the
shares of Series A Preferred Stock outstanding; and (iii) the number of shares
of Common Stock and the amount, if any, of other property that at such time
would be received upon the conversion of the shares of Series A Preferred Stock
outstanding.

                 (k)    NOTICES OF RECORD DATE. In the event (i) any record date
is fixed for the purpose of determining the holders of any class or series of
stock or other securities who are entitled to receive any distribution or (ii)
of any recapitalization or reorganization of the capital stock of the Company,
any merger or consolidation of the Company, or any sale, exchange or other
disposition of all or substantially all the assets of the Company or any
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the Company shall mail to each holder of Series A Preferred Stock at least
thirty (30) days prior to the record date set forth therein a notice setting
forth: (i) such record date and a description of such distribution; (ii) the
date on which any such recapitalization, reorganization, merger, consolidation,
disposition, dissolution, liquidation or winding up is expected to become
effective; and (iii) the time, if any is to be fixed, as to when the holders of
record of Common Stock (or other securities) shall be entitled to exchange their
shares of Common Stock (or other securities) for securities or

                                      -9-
<PAGE>

other property deliverable upon such recapitalization, reorganization, merger,
consolidation, disposition, dissolution, liquidation or winding up.

                 (l)    ISSUE TAXES. The Company shall pay any and all issue and
other non-income taxes that may be payable in respect of any issue or delivery
of shares of Common Stock on conversion of any shares of Series A Preferred
Stock.

                 (m)    MINIMUM ADJUSTMENT; NO INCREASE. No adjustment of the
Conversion Price shall be made in an amount less than one cent, provided that
any adjustment which is not made by reason of this section 5(m) shall be carried
forward and shall be taken into account in any subsequent adjustment. Except to
the limited extent provided for in sections 5(g)(ii)(C), 5(g)(ii)(D), 5(h) or
5(i), no adjustments of the Conversion Price in accordance with section 5 shall
have the effect of increasing the Conversion Price above the Conversion Price in
effect immediately prior to such adjustment.

                 (n)    CERTAIN ADJUSTMENTS. Notwithstanding the foregoing, if
the shares of Series A Preferred Stock have not been converted in accordance
with sections 5(a) or 5(b) prior to January 1, 2001 and the Company does not
earn revenues of at least $20 million in the calendar year 2000, then the
Conversion Price shall be adjusted to $9.79.

           6.    VOTING; PROTECTIVE PROVISIONS.

                 (a)    Except as otherwise provided herein or as required by
applicable law, the holders of Series A Preferred Stock shall be entitled to
vote on all matters on which the holders of Common Stock shall be entitled to
vote, in the same manner and with the same effect as the holders of Common
Stock, voting together with the holders of Common Stock as a single class. For
this purpose, the holders of Series A Preferred Stock shall be given notice of
any meeting of stockholders as to which the holders of Common Stock are given
notice in accordance with the bylaws of the Company. As to any matter on which
the holders of Series A Preferred Stock shall be entitled to vote, each holder
of Series A Preferred Stock shall have a number of votes per share of Series A
Preferred Stock held of record by such holder on the record date for the meeting
of stockholders, if such matter is subject to a vote at a meeting of
stockholders, or on the effective date of any written consent, if such matter is
subject to a written consent of the stockholders without a meeting of
stockholders, equal to the number of shares of Common Stock into which such
share of Series A Preferred Stock is convertible on such record date or
effective date, as the case may be, in accordance with section 5.

                 (b)    The consent of the holders of at least a majority (or
such greater number as may then be required by law) of all the shares of
Series A Preferred Stock at the time outstanding, given in person or by proxy,
by a vote at a meeting called

                                      -10-
<PAGE>

for the purpose at which the holders of shares of Series A Preferred Stock shall
vote together as a separate class, or by written consent in lieu thereof, shall
be necessary for authorizing, effecting or validating:

                         (i)    any action that alters in any manner the
designations, powers, rights, preferences or privileges of, or the
qualifications, limitations or restrictions of, the Series A Preferred Stock;

                         (ii)   any amendment to or waiver of any provisions of
the Certificate of Incorporation or By-laws of the Company relating to, or that
would adversely affect the Series A Preferred Stock;

                         (iii)  the authorization or issuance of any class or
series of stock ranking senior to or on a parity with the Series A Preferred
Stock;

                         (iv)   any transaction between the Company and any
person (the "Subject Person") that controls, is controlled by or is under
common control with the Subject Person (and for this purpose, "control" means
the power to control the management and policies of the Controlled person
whether by ownership of voting securities, contract or otherwise), other than
(I) any transaction disclosed in writing to the initial holder of the Series
A Preferred Stock in the Company Disclosure Schedule to the Securities
Purchase Agreement pursuant to which such initial investor purchased its
shares of Series A Preferred Stock, (II) any transaction between the Company
and its stockholders generally, (III) transactions relating to the employment
of executives of the Company (including employment and indemnification
agreements for executives reflecting terms and conditions customary for
executives of similarly situated companies), (IV) indemnification agreements
for directors and (V) compensation of independent directors and reimbursement
of expenses of directors incurred in attending board meetings and (VI) any
transaction with or involving the initial holder of Series A Preferred Stock
or any of its affiliates;

                         (v)    the payment of dividends or other distributions
on, or redemptions of, any equity securities of the Company;

                         (vi)   any transaction that will result in the
holders of the securities of the Company entitled to vote in the election of
directors immediately prior to such transaction having the right to elect
fewer than one-half of the directors of the Company or other resulting entity
immediately after the transaction; or

                         (vii)  any material change in the nature of the
Company's business.

           7.    CANCELLATION OF DESIGNATED SHARES. Upon payment of the
liquidation preference with respect to any oustanding share of Series A
Preferred Stock pursuant to section 4 or upon conversion of any outstanding
share of Series A Preferred Stock pursuant to section 5, as applicable, such
share shall be automatically cancelled and shall no longer be designated as a
share of Series A Preferred Stock and shall thereafter be available for
issuance as an undesignated share of the Company's Preferred Stock until
designated in accordance with the Certificate of Incorporation and applicable
law.

           IN WITNESS WHEREOF, the Company has caused this certificate of
designation to be signed by its President this 29 day of March 2000.

                                      RTS WIRELESS, INC.

                                      By: /s/ Alvin L. Ring
                                          -------------------------------
                                          Name:  Alvin L. Ring
                                          Title: President

                                      -11-
<PAGE>

                                                                       EXHIBIT A
                                                 [To Certificate of Designation]

                              NOTICE OF CONVERSION

                    (To Be Executed By The Registered Holder
            In Order To Convert Shares Of Series A Preferred Stock)

         The undersigned hereby irrevocably elects to convert ______ shares of
the Series A Preferred Stock (the "Series A Preferred Stock") of RTS Wireless,
Inc., a Delaware corporation (the "Company"), into shares of the common stock of
the Company in accordance with the terms and conditions set forth in the
Certificate of Designation relating to the Series A Preferred Stock.

                                              ----------------------------------
                                              Signature

                                              ----------------------------------

                                              ----------------------------------
                                              Address

Date:_____________ __, _______.

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