<PAGE>   1
                                                                   Exhibit 10.1



                      MORGAN STANLEY SENIOR FUNDING, INC.
                          1221 AVENUE OF THE AMERICAS
                           NEW YORK, NEW YORK  10020

                            THE BANK OF NOVA SCOTIA
                             580 CALIFORNIA STREET
                                   SUITE 2100
                        SAN FRANCISCO, CALIFORNIA  94104




                                                              September 12, 1996



Doubletree Corporation
410 North 44th Street, Suite 700
Phoenix, Arizona  85008

Attention:    William L. Perocchi, Executive
                 Vice President and Chief
                 Financial Officer


re       Acquisition
         Financing Letter                                         


Ladies and Gentlemen:


                 You have advised Morgan Stanley Senior Funding, Inc. ("Morgan
Stanley") and The Bank of Nova Scotia ("Scotiabank" and, together with Morgan
Stanley, the "Agents") that you intend to consummate a transaction pursuant to
which (i) Doubletree Corporation (the "Borrower") would acquire (the
"Acquisition"), through a newly created direct or indirect wholly-owned
subsidiary of the Borrower ("Merger
<PAGE>   2


Sub"), 100% of the equity of Red Lion Hotels, Inc. ("Red Lion") through a
merger of Merger Sub with and into Red Lion with Red Lion remaining as the
surviving corporation and (ii) the Borrower would refinance (the "Refinancing")
up to $210 million of existing net indebtedness of the Borrower and Red Lion.

                 We understand that the funding required to effect the
Acquisition and the Refinancing, to pay the fees and expenses incurred in
connection with the Transaction (as defined below) and to provide for the
ongoing working capital and general corporate needs of the Borrower and its
subsidiaries shall be provided solely from (i) $250 million of gross cash
proceeds received from (x) the issuance by the Borrower of its common stock
through a public and/or private offering (the "Equity Offering") and/or (y) the
issuance (either by private placement or an underwritten public sale) by the
Borrower of unsecured senior subordinated notes, including through a bridge
financing thereof (the "Senior Subordinated Notes"), it being understood that
no more than $150 millon of proceeds pursuant to this clause (i) shall be in
the form of the Senior Subordinated Notes, (ii) the issuance by the Borrower of
its common stock to the selling shareholders of Red Lion having an implied
value equal to $283 million (with such implied value subject to adjustment
based on the closing price of the shares of the Borrower as provided in the
merger agreement for the Acquisition) (the "Equity Rollover"), (iii) the
incurrence by the Borrower of the Senior Bank Financing described and defined
below and (iv) cash on hand at the Borrower and/or Red Lion.  As used herein,
the term "Transaction" shall collectively refer to the Acquisition, the
Refinancing, the Equity Offering, the Equity Rollover, the issuance of the
Senior Subordinated Notes and the incurrence of the Senior Bank Financing.

                 We further understand that the senior secured bank financing
(the "Senior Bank Financing") will be in the form of (i) a term loan facility
(the "Tranche A Term Loan Facility") in the amount of $405 million, (ii) a
second term loan facility (the "Tranche B Term Loan Facility", and together
with the Tranche A Term Loan Facility, the "Term Loan Facilities") in the
amount of $231 million and (iii) a revolving credit facility (the "Revolving
Credit Facility", and together with the Term Loan Facilities, the "Credit
Facilities") in the amount of $100 million.  A preliminary summary of terms and
conditions of the Senior Bank Financing is attached as Exhibit A to this letter
(the "Summary of Terms").

                 The Agents are pleased to confirm that they are willing to
commit to provide (on a several basis), subject to and upon the terms and
conditions set forth herein and in the Summary of Terms, 100% of the Senior
Bank Financing on the terms and conditions set forth herein and in the Summary
of Terms (with Morgan Stanley having a commitment of $441.6 million and
Scotiabank having a commitment of $294.4 million).  It is understood that
Morgan Stanley shall act as Syndication Agent and Arranger for the Senior Bank
Financing and that Scotiabank shall act as Administrative Agent for the Senior
Bank Financing.





                                      -2-
<PAGE>   3



                 The Agents reserve the right, prior to or after execution of
the definitive credit documentation for the Senior Bank Financing, to syndicate
all or part of their commitments for the Senior Bank Financing to one or more
lending institutions (the "Lenders") that will become parties to such
definitive credit documentation pursuant to a syndication to be managed by the
Agents.  The Agents shall commence syndication efforts promptly after the
execution of this letter by you and you agree actively to assist the Agents in
achieving a syndication that is satisfactory to the Agents.  Such syndication
will be accomplished by a variety of means, including direct contact during the
syndication between senior management and advisors of the Borrower, Red Lion
and the proposed syndicate members.  To assist the Agents in their syndication
efforts, you hereby agree (a) to provide and cause your advisors to provide the
Agents and the other syndicate members upon request with all information
reasonably deemed necessary by the Agents to complete syndication, including,
but not limited to, information and evaluations prepared by you and your
advisors or on your behalf relating to the transactions contemplated hereby and
(b) to assist the Agents upon request in the preparation of an Information
Memorandum to be used in connection with the syndication of the Senior Bank
Financing and (c) to make available your senior officers and representatives
and to use your reasonable efforts to make available the senior officers and
representatives of Red Lion, in each case from time to time and to attend and
make presentations regarding the business and prospects of the Borrower and Red
Lion at a meeting or meetings of lenders or prospective lenders.  You also
agree to use your best efforts to provide, at your expense, real estate
appraisals on certain fee properties to be determined by the Agents in
consultation with you.

                 As you are aware, the Agents have completed their due
diligence analysis and review with respect to the Transaction, the Borrower,
Red Lion and their subsidiaries and are satisfied with the results thereof.
Neither Agent shall be responsible or liable for any consequential damages
which may be alleged as a result of its failure to provide the Senior Bank
Financing.

                 To induce the Agents to issue this letter, you hereby agree
that all reasonable out-of-pocket fees and expenses (including the reasonable
fees and expenses of counsel and consultants) of the Agents and their
affiliates arising in connection with this letter (and their due diligence and
syndication efforts in connection herewith) and in connection with the
transactions described herein shall be for your account, whether or not the
Transaction is consummated, the Senior Bank Financing is made available or
definitive credit documents are executed.  You further agree to indemnify and
hold harmless each Agent and each director, officer, employee and affiliate
thereof (each an "indemnified person") from and against any and all actions,
suits, proceedings (including any investigations or inquiries), claims, losses,
damages, liabilities or expenses of any kind or nature whatsoever which may be
incurred by or asserted against or involve any Agent or any such other
indemnified person as a result of or arising out of or in any way related to or
resulting from this letter and, upon demand,





                                      -3-
<PAGE>   4


to pay and reimburse each Agent and each other indemnified person for any
reasonable legal or other out-of-pocket expenses incurred in connection with
investigating, defending or preparing to defend any such action, suit,
proceeding (including any inquiry or investigation) or claim (whether or not
any Agent or any such other indemnified person is a party to any action or
proceeding out of which any such expenses arise, and whether any such action,
suit or proceeding is between you and any Agent or any other indemnified person
or between any Agent or any other indemnified person and a third party or
otherwise); provided, however, that you shall not have to indemnify any
indemnified person against any loss, claim, damage, expense or liability which
resulted primarily from the gross negligence or willful misconduct of such
indemnified person.  This letter is issued for your benefit only and no other
person or entity may rely hereon.

                 Each Agent reserves the right to employ the services of its
affiliates in providing services contemplated by this letter and to allocate,
in whole or in part, to such affiliates certain fees payable to such Agent in
such manner as such Agent and such affiliates may agree in their sole
discretion.  You acknowledge that each Agent may share with any of its
affiliates, and such affiliates may share with each Agent, any information
related to the Transaction, the Borrower, Red Lion, any of their respective
subsidiaries or any of the matters contemplated hereby.

                 The provisions of the immediately preceding two paragraphs
shall survive any termination of this letter.

                 The Agents' willingness to provide the Senior Bank Financing
as set forth above will terminate on January 31, 1997, if a definitive credit
agreement evidencing the Senior Bank Financing, satisfactory in form and
substance to the Agents (the "Credit Agreement"), shall not have been entered
into prior to such date.

                 Except as otherwise required by law or unless each Agent has
otherwise consented, you are not authorized to show or circulate this letter to
any other person or entity (other than your legal or financial advisors in
connection with your evaluation hereof).  If this letter is not accepted by you
as provided in the immediately succeeding paragraph, you are to immediately
return this letter (and any copies hereof) to the Agents.

                 If you are in agreement with the foregoing, please sign and
return to the Agents (including by way of facsimile transmission), c/o Morgan
Stanley, the enclosed copy of this letter, together with the related fee
letter, no later than 6:00 p.m., New York time, on September 12, 1996.  This
letter may be executed in any number of counterparts, and by the different
parties hereto on separate counterparts, each of which when executed and
delivered, shall be an original, but all of which shall together constitute one
and the same instrument.





                                      -4-
<PAGE>   5




                 THIS LETTER AND THE RELATED FEE LETTER SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AND ANY
RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM, ACTION, SUIT OR PROCEEDING
ARISING OUT OF OR CONTEMPLATED BY THIS LETTER AND/OR THE RELATED FEE LETTER IS
HEREBY WAIVED.  YOU HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE
FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION
WITH ANY DISPUTE RELATED TO THIS LETTER AND/OR THE RELATED FEE LETTER OR ANY
MATTERS CONTEMPLATED HEREBY OR THEREBY.


                                                   Very truly yours,

                                                   MORGAN STANLEY SENIOR
                                                     FUNDING, INC.



                                                   By__________________________
                                                     Title:


                                                   THE BANK OF NOVA SCOTIA



                                                   By__________________________
                                                     Title:


Agreed to and Accepted this
___ day of September, 1996:


DOUBLETREE CORPORATION


By__________________________
  Title:






                                      -5-
<PAGE>   6

                                                                       EXHIBIT A



             PRELIMINARY SUMMARY OF CERTAIN TERMS AND CONDITIONS*/



I.       Description of Credit Facilities Comprising the Senior Bank Financing

A.       Term Loan Facilities

Tranche A Term
Loan Facility:              $405,000,000 Tranche A Term Loan Facility.

Maturity:                   The final maturity of the Tranche A Term Loan
                            Facility shall be the sixth anniversary of the date
                            of initial borrowing under the Senior Bank
                            Financing (the "Closing Date").  The loans under
                            the Tranche A Term Loan Facility (the "Tranche A
                            Term Loans") shall amortize in equal quarterly
                            installments in aggregate annual principal amounts
                            as set forth below (with the final such installment
                            payable on the sixth anniversary of the Closing
                            Date):

<TABLE>
<CAPTION>
                                         Year             Amount     
                                         ----        ----------------
                                         <S>             <C>
                                         1               $  5,000,000
                                         2               $ 55,000,000
                                         3               $ 70,000,000
                                         4               $ 80,000,000
                                         5               $ 95,000,000
                                         6               $100,000,000
</TABLE>

Tranche B Term
Loan Facility:              $231,000,000 Tranche B Term Loan Facility.

Maturity:                   The final maturity of the Tranche B Term Loan
                            Facility shall be that date which is seven years
                            and six months from the Closing Date.  Commencing
                            on the date which is six years and three months
                            from the Closing Date, the loans under the Tranche
                            B Term Loan Facility (the "Tranche B Term Loans",
                            and together with the Tranche A Term Loans, the
                            "Term Loans") shall





__________________________________

*/  Capitalized terms used herein and not defined herein shall have the
meanings provided in the commitment letter to which this summary is attached.
<PAGE>   7
                                                                       EXHIBIT A
                                                                          Page 2




                            amortize in six equal quarterly payments of
                            $36,500,000, provided that during each year prior
                            to that time, the Tranche B Term Loans shall
                            amortize in equal quarterly installments in
                            aggregate annual principal amounts of $2,000,000.

Use of Proceeds:            The Term Loans shall only be utilized (x) to
                            finance, in part, the Acquisition and the
                            Refinancing and (y) to pay fees and expenses
                            incurred in connection with the Transaction.

Availability:               Term Loans may only be incurred on the Closing
                            Date, provided that up to $85 million of the
                            Tranche A Term Loan Facility may be utilized on two
                            additional dates within three months after the
                            Closing Date to refinance the Santa Barbara Joint
                            Venture Debt and the Glendale Joint Venture Debt
                            (each as hereinafter defined) to the extent such
                            debt is to be refinanced as part of the
                            Refinancing.  No amount of Term Loans once repaid
                            may be reborrowed.


B.       Revolving Credit Facility

Revolving Credit
Facility:                   $100,000,000 Revolving Credit Facility, with a
                            letter of credit sub-limit to be agreed upon.

Maturity:                   The final maturity of the Revolving Credit Facility
                            shall be the sixth anniversary of the Closing Date.
                            Loans made pursuant to the Revolving Credit
                            Facility (the "Revolving Loans", and together with
                            the Term Loans, the "Loans") shall be repaid in
                            full, and all letters of credit issued thereunder
                            shall terminate, on the sixth anniversary of the
                            Closing Date.

Use of Proceeds:            The Revolving Loans shall be utilized for the
                            Borrower's and its subsidiaries' working capital
                            requirements and other general corporate purposes,
                            provided that up to $15,000,000 of Revolving Loans
                            may be incurred to finance the Acquisition and the
                            Refinancing and to pay fees and expenses relating
                            to the Transaction.

Availability:               Revolving Loans may be borrowed, repaid and
                            reborrowed on and after the Closing Date, provided
                            that the Revolving Credit Facility shall have an
                            annual clean down pursuant to which all outstanding
<PAGE>   8
                                                                       EXHIBIT A
                                                                          Page 3




                            Revolving Loans thereunder will have to be reduced 
                            to no more than $50,000,000 for at least 30 
                            consecutive days.


II.  Terms Applicable to the Entire Senior Bank Financing

Syndication
Agent and Arranger:         Morgan Stanley (the "Syndication Agent").

Administrative Agent:       Scotiabank (the "Administrative Agent").

Lenders:                    Morgan Stanley, Scotiabank and a group of financial
                            institutions (collectively, the "Lenders")
                            acceptable to the Borrower and the Agents.

Borrower:                   Doubletree Corporation (the "Borrower").

Guaranty:                   All obligations under the Senior Bank Financing
                            shall be unconditionally guaranteed by all material
                            direct and indirect wholly-owned subsidiaries of
                            the Borrower (including, without limitation,
                            Doubletree Partners) (collectively, the
                            "Guarantors"), subject to customary exceptions for
                            transactions of this type.

Security:                   The obligations of the Borrower and the Guarantors
                            under the Senior Bank Financing shall be secured by
                            a first priority perfected security interest in (x)
                            all stock owned by the Borrower and the Guarantors
                            (other than the capital stock in RFS Hotels
                            Investors, Inc. and the partnership units in RFS
                            Hotels Investors, Inc.'s affiliated limited
                            partnership), (y) all notes owned by the Borrower
                            and the Guarantors (other than notes that are in a
                            principal amount of less than $1,000,000) and (z)
                            all other tangible and intangible assets of the
                            Borrower and the Guarantors (including real estate,
                            equipment, inventory, receivables, contracts
                            (including, but not limited to, management
                            contracts, but excluding any contract (including
                            any management contract) to the extent that the
                            terms thereof prohibit the assignment thereof or
                            the grant of a security interest therein, provided
                            that such security interests in any event shall
                            include the right to receive payments for money due
                            under all such excluded contracts) and intellectual
                            property), subject to customary exceptions for
                            transactions of this type.  Notwithstanding
                            anything to the contrary contained above in this
                            paragraph, (i) the collateral shall not include any
                            asset that
<PAGE>   9
                                                                       EXHIBIT A
                                                                          Page 4




                            the Borrower or any Guarantor owns, as agent, for
                            the benefit of a third party as opposed for its own
                            benefit, (ii) the collateral shall not include any
                            equity interests in a joint venture (whether such
                            equity interests are in the form of partnership
                            interests, capital stock or otherwise) that are not
                            permitted to be assigned or a security interest
                            therein granted without the consent of a third
                            party, provided that the Borrower and each
                            Guarantor will assign its respective equity
                            interest in any joint entity to the extent that the
                            same is assignable or a security interest therein
                            permitted to be granted without the consent of any
                            third party and the Agents request an assignment
                            of, or a grant of a security interest in, same and
                            (iii) neither the Borrower nor any Guarantor shall
                            be required to obtain the consent of any third
                            party whose consent is required to grant a security
                            interest in any contract, partnership, corporate or
                            joint venture agreement or any lease.

Interest Rates:             At the option of the Borrower, Loans may be
                            maintained from time to time as (x) Base Rate Loans
                            which shall bear interest at the Applicable Margin
                            in excess of the Base Rate in effect from time to
                            time or (y) Reserve Adjusted Eurodollar Loans which
                            shall bear interest at the Applicable Margin in
                            excess of the Eurodollar Rate (adjusted for maximum
                            reserves) as determined by certain reference
                            Lenders to be agreed upon for the respective
                            interest period, provided that until the earlier to
                            occur of (x) the 90th day following the Closing
                            Date and (y) that date upon which the Agents have
                            determined (and notify the Borrower) that the
                            primary syndication of the Senior Bank Financing
                            (and the resultant addition of institutions as
                            Lenders) has been completed, Reserve Adjusted
                            Eurodollar Loans may be incurred only if they have
                            a one month interest period (and with all such
                            Reserve Adjusted Eurodollar Loans to be subject to
                            the same one month interest period).

                            "Base Rate" shall mean the higher of (x) 1/2 of 1%
                            in excess of the federal funds rate and (y) the
                            rate that the Administrative Agent announces from
                            time to time as its prime commercial lending rate,
                            as in effect from time to time.

                            "Applicable Margin" shall mean with respect to (i)
                            Loans made pursuant to the Tranche A Term Loan
                            Facility and the Revolving Credit Facility, the
                            respective per annum percentage set forth in Table
                            A below and (ii) Loans made pursuant to the Tranche
                            B
<PAGE>   10
                                                                       EXHIBIT A
                                                                          Page 5




                            Term Loan Facility, the respective percentage per
                            annum set forth in Table B below; provided, at any
                            time that a payment default, or any event of
                            default, exists under the Senior Bank Financing,
                            the Applicable Margin for a particular Credit
                            Facility shall be the highest percentage set forth
                            in Table A or Table B below, as applicable.

         A.      Applicable Margin for Tranche A Term Loans/Revolving Loans

<TABLE>
<CAPTION>
        Eurodollar     Base Rate
        Margin         Margin        Leverage Ratio**
        ------         --------      ----------------
        <S>            <C>           <C>
        2.125%         1.125%        At Least 4.50:1.00
        1.875%         0.875%        At Least 4.25:1.00  Less Than 4.50:1.00
        1.750%         0.750%        At Least 4.00:1.00  Less Than 4.25:1.00
        1.625%         0.625%        At Least 3.75:1.00  Less Than 4.00:1.00
        1.500%         0.500%        At Least 3.50:1.00  Less Than 3.75:1.00
        1.375%         0.375%        At Least 3.25:1.00  Less Than 3.50:1.00
        1.250%         0.250%        Less Than 3.25:1.00
</TABLE>


         B.      Applicable Margin for Tranche B Term Loans

<TABLE>
<CAPTION>
         Eurodollar     Base Rate    Leverage
         Margin         Margin       Ratio   
         ------         --------     --------
         <S>            <C>          <C>
         2.500%         1.500%       At Least  4.50:1.00
         2.250%         1.250%       Less Than 4.50:1.00
</TABLE>

                            Notwithstanding the foregoing, (x) in the event
                            that the Borrower does not receive gross cash
                            proceeds of at least $250 million from the Equity
                            Offering, each Applicable Margin set forth in Table
                            A and Table B above shall be increased by 0.125% or
                            (y) in the event that the Borrower receives gross
                            cash proceeds in excess of $350 million from the
                            Equity Offering and 100% of the net cash proceeds
                            therefrom in excess of $250 million are used to
                            reduce the Term Loan Facilities, each Applicable
                            Margin in Table A above shall be decreased by
                            0.125%.





__________________________

**   Leverage Ratio will be defined as Total Debt to EBITDA for the then
     most recently ended 12-month period.
<PAGE>   11
                                                                       EXHIBIT A
                                                                          Page 6





                            Interest periods of 1, 2, 3 and 6 months shall be 
                            available in the case of Reserve Adjusted 
                            Eurodollar Loans.

                            The Senior Bank Financing shall include standard
                            protective provisions for such matters as
                            defaulting banks, capital adequacy, increased
                            costs, actual reserves, funding losses, illegality
                            and withholding taxes.

                            Interest in respect of Base Rate Loans shall be
                            payable quarterly in arrears on the last business
                            day of each quarter.  Interest in respect of
                            Reserve Adjusted Eurodollar Loans shall be payable
                            in arrears at the end of the applicable interest
                            period and every three months in the case of
                            interest periods in excess of three months.
                            Interest will also be payable at the time of
                            repayment of any Loans and at maturity.  All
                            interest calculations for Base Rate Loans shall be
                            based on a 365/366-day year and actual days elapsed
                            and all other interest calculations shall be based
                            on a 360-day year and actual days elapsed.

                            Overdue principal, interest and other amounts shall
                            bear interest at a rate per annum equal to the rate
                            which is 2% in excess of the rate otherwise
                            applicable to the Base Rate Loans under the
                            respective Credit Facility from time to time.  Such
                            interest shall be payable on demand.

Agents/Lenders Fees:        The Agents and the Lenders shall receive such fees
                            as have been separately agreed upon with the 
                            Borrower.

Commitment Fees:            1/2 of 1% (or 3/8 of 1% at any time that the
                            Leverage Ratio is less than 4.00:1.00 and no
                            payment default, and no event of default, exists
                            under the Senior Bank Financing) per annum of the
                            unutilized total commitments under the Senior Bank
                            Financing, as in effect from time to time,
                            commencing on the date on which the Credit
                            Agreement is executed and continuing to but
                            excluding the date of the termination of the Senior
                            Bank Financing, payable in arrears quarterly and
                            upon the termination of the Senior Bank Financing.
                            All commitment fee and other fee calculations shall
                            be based on a 360-day year and actual days elapsed.

Letter of Credit Fees:      Applicable Margin for Reserve Adjusted Eurodollar
                            Loans which are Revolving Loans on the aggregate
                            outstanding stated amounts of letters of credit
                            plus an additional 1/4 of 1% on the aggregate
<PAGE>   12
                                                                       EXHIBIT A
                                                                          Page 7




                            outstanding stated amounts of letters of credit to 
                            be paid as a fronting fee to the issuing Lender.

Voluntary Commit-
ment Reductions:            Voluntary reductions to the unutilized portion of
                            the Revolving Credit Facility may be made from time
                            to time by the Borrower without premium or penalty.

Voluntary Prepay-
ments:                      Voluntary prepayments of Loans may be made at any
                            time, with prior notice but without premium or
                            penalty, provided that voluntary prepayments of
                            Reserve Adjusted Eurodollar Loans made on any day
                            other than the last day of an interest period
                            applicable thereto shall be accompanied by
                            customary breakage costs.  Voluntary prepayments of
                            Term Loans shall be applied ratably to the Tranche
                            A Term Loans and the Tranche B Term Loans and shall
                            be applied to reduce the remaining scheduled
                            amortization payments under the Tranche A Term Loan
                            Facility and the Tranche B Term Loan Facility on a
                            pro rata basis (based on the amount of each
                            remaining scheduled amortization payment), provided
                            that the Borrower shall have the right, at its
                            option, to apply its retained share of (i) equity
                            issuance proceeds and/or (ii) excess cash flow to
                            voluntary prepay a single tranche of Term Loans in
                            an amount not to exceed $10 million per year
                            through the third year from the Closing Date and
                            $15 million per year thereafter, and with each such
                            repayment to reduce the remaining scheduled
                            amortization payments of such tranche of Term Loans
                            pro rata (based on the amount of each remaining
                            scheduled amortization payment).

Mandatory Repay-
ments:                      Mandatory repayments of Term Loans, and to the
                            extent applicable, mandatory reductions to the
                            unutilized portion of the Term Loan Facilities (and
                            after all Term Loans (and commitments in respect
                            thereof) have been repaid (and/or terminated) in
                            full, permanent reductions to the Revolving Credit
                            Facility), to be required from (a) 100% of the net
                            proceeds from asset sales (or 50% if the Leverage
                            Ratio is less than 3.00:1.00 and no payment
                            default, and no event of default, exists under the
                            Senior Bank Financing), other than asset sales in
                            the ordinary course of business and asset sales the
                            proceeds which are reinvested in like assets
                            (subject, in each case, to size and other
                            limitations to be mutually agreed upon), (b) 100%
                            of the net proceeds from issuances of debt,
                            provided, in the event that bridge Senior
<PAGE>   13
                                                                       EXHIBIT A
                                                                          Page 8




                            Subordinated Notes are issued as part of the
                            Transaction, the proceeds from the issuance of the
                            permanent Senior Subordinated Notes (or other
                            junior debt securities reasonably acceptable to the
                            Agents and the Required Lenders) shall be used to
                            refinance any outstanding bridge Senior
                            Subordinated Notes (which for purposes of this
                            clause does not include any rollover Senior
                            Subordinated Notes that bear interest at a fixed
                            rate), (c) 50% of the net proceeds from equity
                            issuances or capital contributions, provided, in
                            the event that bridge Senior Subordinated Notes are
                            issued as part of the Transaction, the proceeds
                            from any equity issuance after the Closing Date
                            shall be used to refinance any outstanding bridge
                            Senior Subordinated Notes (which for purposes of
                            this clause does not include any rollover Senior
                            Subordinated Notes that bear interest at a fixed
                            rate), (d) 50% of annual excess cash flow (the
                            definition of which will be mutually agreed upon)
                            and (e) 100% of certain insurance proceeds, with
                            certain reinvestment rights to be agreed upon.  In
                            addition, 50% of the net cash proceeds from the
                            Equity Offering in excess of $250,000,000 will be
                            applied to reduce the Term Loan Facilities.  The
                            Term Loan Facilities also shall be reduced as
                            provided in the final sentence of clause (v) under
                            the heading "Conditions Precedent to Initial Loans"
                            of this Summary of Terms.

                            All mandatory repayments of Term Loans (and, to the
                            extent applicable, all mandatory reductions to the
                            unutilized commitments under the Term Loan
                            Facilities) will be applied ratably as between the
                            Tranche A Term Loans and the Tranche B Term Loans,
                            and shall be applied to reduce the remaining
                            scheduled amortization payments under the Tranche A
                            Term Loan Facility and the Tranche B Term Loan
                            Facility on a pro rata basis (based on the amount
                            of each remaining scheduled amortization payment).

                            Notwithstanding the foregoing, the Borrower will
                            have the right to ask either the Lenders under the
                            Tranche A Term Loan Facility or the Lenders under
                            the Tranche B Term Loan Facility (but not both) to
                            forgo any mandatory prepayment applicable to that
                            tranche, and with respect to any Lender under such
                            tranche that has agreed to forgo such mandatory
                            prepayment, such Lender's portion of such mandatory
                            prepayment instead will be applied to the other
                            tranche of Term Loans.
<PAGE>   14
                                                                       EXHIBIT A
                                                                          Page 9




Documentation:              The Agents' commitments will be subject to the
                            negotiation, execution and delivery of definitive
                            financing agreements (and related security
                            documentation, guaranties, etc.) consistent with
                            the terms of this letter, in each case prepared by
                            counsel to the Agents.  All documentation shall be
                            governed by New York law.

Conditions Precedent:       In addition to conditions precedent typical for
                            these types of facilities that are mutually
                            acceptable to the Borrower and the Agents, the
                            following conditions shall apply:


A.  To the Initial Loans

                        (i) The structure and all terms of, and the
                            documentation for, the Transaction (and each
                            component thereof) shall be reasonably satisfactory
                            to the Agents and the Required Lenders it being
                            understood that (x) the form of the Merger
                            Agreement (including the exhibits thereto), and the
                            structure of the Acquisition, in each case as in
                            effect on the date hereof are satisfactory, (y) the
                            pricing, maturity and general structure of the
                            bridge Senior Subordinated Notes as in effect on
                            the date hereof are satisfactory and (z) the
                            general terms of the $100,000,000 private common
                            equity investment in the Borrower by General
                            Electric Investment (the "Private Equity
                            Investment") as in effect on the date hereof is
                            satisfactory; provided that, notwithstanding the
                            foregoing clauses (y) and (z), (A) the definitive
                            documentation for the bridge Senior Subordinated
                            Notes (including, but not limited to, the specific
                            terms and provisions of the covenants,
                            representations and warranties, events of default,
                            remedies, redemption provisions, subordination
                            provisions and guaranty terms) are still required
                            to be in form and substance reasonably satisfactory
                            to the Agents and the Required Lenders and (B) the
                            definitive documentation evidencing the Private
                            Equity Investment is still required to be
                            reasonably satisfactory to the Agents and the
                            Required Lenders.  All conditions precedent to the
                            consummation of the Transaction (and each component
                            thereof) as set forth in the documentation relating
                            thereto shall have been satisfied in all material
                            respects, and not waived except with the reasonable
                            consent of the Agents and the Required Lenders, to
                            the reasonable satisfaction of the Agents and the
                            Required Lenders.  The Agents shall have received
                            copies of the "comfort" letters referred to in
                            Sections 6.2(f) and 6.3(e) of the Merger Agreement.
<PAGE>   15
                                                                       EXHIBIT A
                                                                         Page 10





                       (ii) The Borrower shall have received $250,000,000 of
                            gross cash proceeds from the Equity Offering and/or
                            the issuance of the Senior Subordinated Notes,
                            provided that not more than $150,000,000 of such
                            proceeds may be received from the Senior
                            Subordinated Notes.  The structure and all terms
                            and conditions of, and the documentation for, the
                            Equity Offering and the Senior Subordinated Notes
                            (including, without limitation, in the case of the
                            Senior Subordinated Notes, the subordination
                            provisions, covenants, events of defaults,
                            remedies, interest rate, maturities, sinking fund
                            and redemption provision, limitations on cash
                            interest payable and all other terms) shall be
                            reasonably satisfactory to the Agents.  The Agents
                            shall have received evidence satisfactory to them
                            that the Borrower and/or Red Lion have cash on
                            hand, when added to the aggregate amount of the
                            Term Loan Facilities, up to $15,000,000 of the
                            Revolving Credit Facility and the amount received
                            from the Equity Offering and/or the issuance of the
                            Senior Subordinated Notes, that is sufficient to
                            consummate the Acquisition and the Refinancing and
                            to pay the fees and expenses incurred in connection
                            with the Transaction.

                      (iii) The Borrower shall have issued shares of its common
                            stock having an implied value of $283,000,000 (with
                            such implied value subject to adjustment based on
                            the closing pricing of the shares of stock of the
                            Borrower as provided in the merger agreement for
                            the Acquisition) as part of the Equity Rollover.

                       (iv) After giving effect to the transactions
                            contemplated in clause (ii) above, the Borrower
                            shall have used the aggregate amount of proceeds so
                            received to make payments owing in connection with
                            the Transaction before utilizing any proceeds of
                            Loans pursuant to the Senior Bank Financing for
                            such purpose.

                        (v) All necessary governmental approvals (other than
                            approvals required to effect the transfer of liquor
                            licenses), all necessary shareholder and board of
                            director approvals and the approval of the lenders
                            to Red Lion Inns Operating L.P. (or (x) the written
                            acknowledgement by such lenders that such approval
                            is not necessary or (y) the issuance of an opinion
                            of counsel of the Borrower, satisfactory in form
                            and substance to the Agents, that no such approval
                            is necessary), in each case in connection with the
                            Transaction and the other transactions contemplated
                            by the Senior Bank Financing and otherwise referred
                            to herein shall have
<PAGE>   16
                                                                       EXHIBIT A
                                                                         Page 11




                            been obtained and remain in effect, and all
                            applicable waiting periods shall have expired
                            without any action being taken by any competent
                            authority which restrains, prevents, or imposes
                            materially adverse conditions upon, the
                            consummation of the Transaction or the other
                            transactions contemplated by the Senior Bank
                            Financing and otherwise referred to herein.  The
                            Borrower shall have informed the Agents as to
                            whether (x) the Borrower intends to refinance, as
                            part of the Refinancing, the loans outstanding to
                            either or both of Red Lion's joint ventures for its
                            Glendale hotel (the "Glendale Joint Venture Debt")
                            and/or its Santa Barbara hotel (the "Santa Barbara
                            Joint Venture Debt", and together with the Glendale
                            Joint Venture Debt, the "Specified Joint Venture
                            Debt") aggregating $85,000,000 and/or (y) the
                            Borrower intends to keep outstanding either or both
                            of the Glendale Joint Venture Debt and/or the Santa
                            Barbara Joint Venture Debt.  To the extent that the
                            Borrower intends to refinance, as part of the
                            Refinancing, either or both of the issues of
                            Specified Joint Venture Debt with Term Loans, such
                            debt shall be required to be refinanced within
                            three months after the Closing Date.  To the extent
                            that either or both of the issues of Specified
                            Joint Venture Debt are to remain outstanding, the
                            Term Loan Facilities would be reduced by the
                            principal amount of the issue or issues of
                            Specified Joint Venture Debt to remain so
                            outstanding.

                       (vi) Nothing shall have occurred (and (x) neither the
                            Agents nor the Lenders shall have become aware of
                            any facts or conditions not previously disclosed to
                            them and (y) no information previously submitted by
                            or on behalf of the Borrower to the Agents
                            (including, without limitation, financial,
                            accounting and tax information) is inaccurate,
                            incomplete or misleading) which (in any such case)
                            could reasonably be expected to have a Material
                            Adverse Effect.  As used herein, the term Material
                            Adverse Effect shall mean a material adverse effect
                            (i) on the Transaction or (ii) on the business,
                            property, assets, operations, liabilities or
                            financial condition of the Borrower, Red Lion and
                            their respective subsidiaries taken as a whole.

                      (vii) No material litigation by any entity (private or
                            governmental) shall be pending or threatened with
                            respect to the Transaction or the Senior Bank
                            Financing or any documentation executed in
                            connection therewith.
<PAGE>   17
                                                                       EXHIBIT A
                                                                         Page 12





                     (viii) The Lenders shall have received legal opinions from
                            counsel, and covering matters, reasonably
                            acceptable to the Agents and the Required Lenders.

                       (ix) There shall have been no material changes to the
                            corporate and capital structure (and all agreements
                            related thereto) of the Borrower and its
                            subsidiaries, or to any organizational documents of
                            such entities.

                        (x) All Loans and other financing to the Borrower shall
                            be in full compliance with all applicable
                            requirements of the margin regulations.

                       (xi) All costs, fees, expenses (including, without
                            limitation, legal fees and expenses) and other
                            compensation contemplated hereby payable to the
                            Lenders or the Agents shall have been paid to the
                            extent due.

                      (xii) The Lenders shall have received (x) insurance
                            certificates naming the collateral agent for the
                            Lenders as an additional insured and/or loss payee
                            and stating that such insurance will not be
                            terminated without at least 30 days' prior notice to
                            such collateral agent (or such shorter period of
                            time as a particular insurance company generally
                            provides) and (y) a solvency certificate from the
                            chief financial officer of the Borrower with
                            respect to the solvency of the Borrower and its
                            subsidiaries (on a consolidated basis) acceptable
                            to the Agents and the Required Lenders.

                     (xiii) The Lenders shall have a perfected first priority
                            security interest in the assets of the Borrower and
                            the Guarantors as required above.  The Guarantors
                            shall have executed their guaranty in respect of
                            the Senior Bank Financing.

                      (xiv) The Borrower and its subsidiaries shall have no
                            other indebtedness except such indebtedness which
                            shall be acceptable to the Agents and the Required
                            Lenders and permitted under the Senior Bank
                            Financing.

                       (xv) There not having occurred and be continuing a
                            material disruption of or material adverse change
                            in financial, banking or capital markets that would
                            have a material adverse effect on the successful
                            syndication of the Senior Bank Financing as
                            determined
<PAGE>   18
                                                                       EXHIBIT A
                                                                         Page 13



                            by the Agents in their reasonable discretion.  The
                            Borrower and Red Lion shall have fully cooperated
                            in the syndication efforts, including, without
                            limitation, by promptly providing the Agents with
                            all information deemed necessary by them to
                            successfully complete the syndication.


B.  Conditions to All Loans

                            Absence of material adverse change, absence of
                            material litigation, absence of default or
                            unmatured default under the Senior Bank Financing,
                            continued accuracy of representations and
                            warranties and receipt of such documentation as
                            shall be required by the Agents.

Representations
and Warranties:             The Senior Bank Financing and related documentation
                            shall contain representations and warranties
                            typical for these types of facilities, as well as
                            any additional ones appropriate in the context of
                            the proposed transaction.

Covenants:                  Those typical for these types of facilities and any
                            additional covenants appropriate in the context of
                            the proposed transaction.  Although the covenants
                            have not yet been specifically determined, we
                            anticipate that the covenants shall in any event
                            include:

                        (i) Restrictions on other indebtedness.

                       (ii) Restrictions on mergers, acquisitions, joint
                            ventures, investments, partnerships and
                            acquisitions and dispositions of assets; provided
                            that, commencing on January 1, 1998, there shall be
                            a $20,000,000 aggregate investment, partnership,
                            joint venture, acquisition and additional capital
                            expenditure basket (although no more than
                            $10,000,000 may be spent in any year).

                      (iii) Restrictions on dividends and amendments of 
                            organizational, corporate and other documents.

                       (iv) Restrictions on voluntary prepayments of other
                            indebtedness and amendments thereto.

                        (v) Restrictions on transactions with affiliates 
                            and formation of subsidiaries.
<PAGE>   19
                                                                       EXHIBIT A
                                                                         Page 14





                       (vi) Restrictions on sale-leaseback transactions,
                            provided that sale-leaseback transactions shall be
                            permitted so long as such transactions (w) are for
                            at least 75% in cash, (x) are at fair market value,
                            (y) all net proceeds therefrom are applied as a
                            mandatory prepayment of Term Loans and (z) no
                            default or event of default then exists or would
                            result therefrom under the Senior Bank Financing.

                      (vii) Maintenance of existence and properties.

                     (viii) No liens, with exceptions to be negotiated.

                       (ix) Financial covenants consisting of minimum fixed
                            charge coverage, minimum interest coverage, maximum
                            total debt to EBITDA, maximum total senior debt to
                            EBITDA (which covenant shall only be included while
                            any Senior Subordinated Notes are outstanding) and
                            maximum total debt to capitalization.  The
                            financial covenants will reflect the Borrower's
                            intention to deleverage over time.

                        (x) Adequate insurance coverage.

                       (xi) ERISA covenants.

                      (xii) The obtaining of interest rate protection in 
                            amounts and for periods to be determined.

                     (xiii) Limitations on capital expenditures.
           
                      (xiv) Financial reporting.

                       (xv) Compliance with laws.

Events of Default:          Those typical for these types of facilities and any
                            additional ones appropriate in the context of the
                            proposed transaction, including, without limitation,
                            a change of control of the Borrower.

Assignments and
Participations:             The Borrower may not assign its rights or
                            obligations under the Senior Bank Financing without
                            the prior written consent of the Lenders.  Any
                            Lender may assign, and may sell participations in,
                            its rights and obligations under the Senior Bank
                            Financing, subject (x) in the case of
                            participations, to customary restrictions on the
                            voting rights of the participants and (y) in the
                            case of
<PAGE>   20
                                                                       EXHIBIT A
                                                                         Page 15




                            assignments, to such limitations as may be
                            established by the Agents (including a minimum
                            assignment amount of $5,000,000 and the receipt of
                            the consent of the Agents).  The Senior Bank
                            Financing shall provide for a mechanism which will
                            allow for each assignee to become a direct
                            signatory to the Senior Bank Financing and will
                            relieve the assigning Lender of its obligations
                            with respect to the assigned portion of its
                            commitment.

Required Lenders:           Lenders holding a majority of the loans and
                            commitments under the Credit Facilities.