<PAGE>
 
                                                                    Exhibit 10.5

                            CONTRIBUTION AGREEMENT

          This Contribution Agreement dated as of August 1, 1995 is by and
between Red Lion Hotels, Inc., a Delaware corporation ("RLI"), and Red Lion, a
California Limited Partnership (the "Partnership").

                                   RECITALS
                                   --------

          WHEREAS, as part of a plan of reorganization, the Partnership intends
to transfer certain of its hotel properties, and certain of the assets and
liabilities associated with those hotels, to a wholly owned subsidiary, RLH
Partnership, L.P., a Delaware limited partnership;

          WHEREAS, RLH Partnership, L.P. will lease those certain hotel
properties to RLI pursuant to the Master Lease and, in connection therewith, RLI
will guarantee certain real property leases of RLH Partnership, L.P.;

          WHEREAS, following the transfer of hotel properties and related debt
to RLH Partnership, L.P., the Partnership will contribute all of its right,
title and interest in the Contributed Property (as hereinafter defined) to RLI
and assign to RLI all of the Assumed Liabilities (as hereinafter defined); and

          WHEREAS, RLI desires to acquire the Contributed Property and to assume
the Assumed Liabilities.

                                   AGREEMENT
                                   ---------

          NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows.


                            ARTICLE 1 - DEFINITIONS

          1.1  Defined Terms.  As used herein, the terms below shall have the
               -------------                                                 
following meanings:


          "Affiliate" of a Person means any other Person which directly or
           ---------                                                      
indirectly controls, is controlled by, or is under common control with, such
Person.  The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.

                                       1
<PAGE>
 
          "Assumed Liabilities" shall mean all Liabilities of the Partnership as
           -------------------                                                  
of the Closing Date other than the Newpart Liabilities and the Retained
Liabilities, including without limitation, Liabilities incurred in connection
with, arising out of, resulting from or incident to (i) the Contributed Property
(including Liabilities arising out of the transfer of the Contributed Property
pursuant to this Agreement) or any event or condition relating to the
Contributed Property, including Liabilities relating to mortgage debt, bank
debt, accounts payable, employee and trade payables, amounts due to creditors
for merchandise, supplies, or services, property taxes, supplemental taxes,
utility charges, Liabilities in connection with any environmental law, amounts
payable under the Contracts and the Leases, and all Liabilities in connection
with the Plan which are not satisfied by the Partnership as contemplated hereby,
and (ii) the Newpart Property (including Liabilities arising out of the transfer
of the Newpart Property pursuant to the Newpart Contribution Agreement) or any
event or condition relating to the Newpart Property, including mortgage debt,
bank debt, accounts payable, employee and trade payables, amounts due to
creditors for merchandise, supplies, or services, property taxes, supplemental
taxes, utility charges, and Liabilities in connection with any environmental
law, but with respect to this clause (ii), only to the extent not assumed by
Newpart as a Newpart Liability.

          "Books and Records" shall mean all books, ledgers, files, reports,
           -----------------                                                
plans, drawings and operating records of every kind maintained by the
Partnership pertaining to the Contributed Property and the Assumed Liabilities,
but excluding books and records included in the Retained Property or the Newpart
Property.

          "Closing Date" shall mean the date of the closing of the Offering or
           ------------                                                       
such other date as the Partnership and RLI shall mutually agree upon.

          "Contract" shall mean any agreement, contract, note, loan, evidence of
           --------                                                             
indebtedness, purchase order, letter of credit, franchise agreement,
undertaking, covenant not to compete, employment agreement, employee pension and
welfare benefit plan, policy and agreement, compensation plan, policy and
agreement, license, concession, instrument, obligation or commitment to which
the Partnership is a party or is bound, or to which its property is subject,
whether oral or written, other than the Leases, the Management Agreements, the
Transferred Joint Venture Interests and the Retained Joint Venture Interests.

          "Contributed Property" shall mean all of the Partnership's right,
           --------------------                                            
title and interest in the business, goodwill, real and personal property, assets
and rights of any kind, whether tangible or intangible, of the Partnership,
other than the Newpart Property and the Retained Property, including without
limitation the following:

          (a) all accounts and notes receivable (whether current or noncurrent),
     refunds, deposits, prepayments or prepaid expenses (including without
     limitation any prepaid insurance premiums) and deferred loan costs of the
     Partnership;

                                       2
<PAGE>
 
          (b) all cash and cash equivalents held by the Partnership as of the
Closing Date, other than the Retained Cash;

          (c)  all Leases, Contracts and Management Agreements;

          (d)  all Owned Real Property;

          (e)  all Leasehold Estates;

          (f)  all Leasehold Improvements;

          (g)  all Fixtures and Equipment;

          (h)  all Inventory;

          (i)  all Books and Records;

          (j)  all Proprietary Rights;

          (k)  all Permits;

          (l)  all computers and software;

          (m)  all Insurance Policies;

          (n)  all supplies, sales literature, promotional literature, customer,
     supplier and distributor lists, art work, display units, telephone and fax
     numbers and purchasing records of the Partnership;

          (o)  all rights under or pursuant to all warranties, representations
     and guarantees made by suppliers to the Partnership;

          (p)  all outstanding advances from the Partnership to the Joint
     Ventures at the Closing Date other than the Retained Joint Venture
     Advances;

          (q)  the Transferred Securities;

          (r)  the Transferred Joint Venture Interests; and

          (s) all claims, causes of action, choses in action, rights of recovery
     and rights of set-off of any kind, against any person or entity, of the
     Partnership on or prior to the Closing Date.

                                        3
<PAGE>
 
          "Cooperation Agreement" shall mean the Cooperation Agreement by and
           ---------------------                                             
between the Partnership and RLI, substantially in the form of Exhibit 1.1(A)
attached hereto.

          "Escrow Agent" shall mean First American Title Insurance Company.
           ------------                                                    

          "Facilities" shall mean all hotels, plants, offices, manufacturing
           ----------                                                       
facilities, stores, warehouses, improvements, administration buildings, and all
real property and related facilities located on the Owned Real Property or the
Leased Real Property.

          "Fixtures and Equipment" shall mean all of the furniture, fixtures,
           ----------------------                                            
furnishings, machinery, automobiles, trucks, spare parts, supplies, equipment
and other tangible personal property owned by the Partnership.

          "Insurance Policies" shall mean all insurance policies of the
           ------------------                                          
Partnership.

          "Inventory" shall mean all of the Partnership's inventory held for
           ---------                                                        
resale and all of the Partnership's raw materials, work in process, finished
products, and similar items, in each case wherever the same may be located.

          "Johnson Incentive Unit Plan" shall mean the Incentive Compensation
           ---------------------------                                       
Agreement dated as of October 1, 1991 by and between the Partnership and David
J. Johnson, together with the related Escrow Agreement dated as of October 1,
1991, and the Promissory Note made by David J. Johnson dated August 10, 1992, as
such agreements and instrument have been and may be amended.

          "Joint Ventures" shall mean the following joint ventures:  Red Lion La
           --------------                                                       
Posada, Bakersfield Red Lion Motor Inn, Ontario - Red Lion Motor Inn, Village
Motor Inn, and Fess Parker - Red Lion Hotel; and the following limited
partnerships:  Red Lion Orange County Partners, L.P. and Glendale Red Lion
Hotel, a California limited partnership.

          "La Posada Guaranty" shall mean that certain guaranty dated as of the
           ------------------                                                  
date hereof, by and between the Partnership and La Posada Resort Hotel Limited
Partnership, entered into in connection with the transfer of a portion of the
Partnership's interest in the Red Lion La Posada Joint Venture to RLI.

          "Leased Personal Property" shall mean all leased personal property
           ------------------------                                         
described in the Leases.

          "Leased Real Property" shall mean all leased real property described
           --------------------                                               
in the Leases.

          "Leasehold Estates" shall mean all of the Partnership's rights and
           -----------------                                                
obligations as lessee under the Leases.

                                       4
<PAGE>
 
          "Leasehold Improvements" shall mean all leasehold improvements
           ----------------------                                       
situated in or on the Leased Real Property.

          "Lease Guaranties" shall mean the guarantee by RLI of certain real
           ----------------                                                 
property leases made in connection with the transfer of such leases to Newpart
by the Partnership pursuant to the Newpart Contribution Agreement.

          "Leases" shall mean all of the existing leases with respect to the
           ------                                                           
personal or real property of the Partnership.

          "Liabilities" shall mean all liabilities, obligations, commitments,
           -----------                                                       
claims, actions, demands, losses, damages, judgments, interests, penalties,
costs and expenses of any nature, absolute, accrued, contingent or otherwise,
known or unknown, whether matured or unmatured.

          "Management Agreements" means the Partnership's agreements to manage
           ---------------------                                              
hotel properties.

          "Master Lease" means the master lease by and between Newpart and RLI,
           ------------                                                        
substantially in the form of Exhibit 1.1(B).

          "Newpart" means RLH Partnership, L.P., a Delaware limited partnership,
           -------                                                              
and its successors and assigns.

          "Newpart Contribution Agreement" means that Contribution Agreement, by
           ------------------------------                                       
and among Newpart and the Partnership, substantially in the form attached hereto
as Exhibit 1.1(C).

          "Newpart Demand Note" means the non-interest bearing demand note of
           -------------------                                               
the Partnership held by Newpart G.P.

          "Newpart G.P." means Red Lion G.P., Inc., a Delaware corporation, and
           ------------                                                        
its successors and assigns.

          "Newpart Liabilities" means the Partnership's Liabilities assumed by
           -------------------                                                
Newpart pursuant to the Newpart Contribution Agreement.

          "Newpart Property" means the Partnership's right, title and interest
           ----------------                                                   
to the real and personal property, assets and rights of any kind, whether
tangible or intangible, of the Partnership which are transferred to Newpart
pursuant to the Newpart Contribution Agreement.

          "Offering" means the proposed initial public offering of the Common
           --------                                                          
Stock of RLI.

                                       5
<PAGE>
 
          "Owned Real Property" shall mean the real property owned in fee by the
           -------------------                                                  
Partnership, including without limitation all rights, easements and privileges
appertaining or relating thereto, all buildings, fixtures, and improvements
located thereon and all Facilities thereon, if any.

          "Permits" shall mean all of the Partnership's transferable licenses,
           -------                                                            
permits, franchises, approvals, authorizations, consents or orders of, or
filings with, any governmental authority, whether foreign, federal, state or
local, or any other person.

          "Person" shall mean any person or entity, whether an individual,
           ------                                                         
trustee, corporation, general partnership, limited partnership, trust,
unincorporated organization, business association, firm, joint venture,
governmental agency or authority.

          "Proprietary Rights"  shall mean all of the Partnership's domestic or
           ------------------                                                  
foreign federal and state registrations of trademarks and of other marks, trade
names or other trade rights, and all pending applications for any such
registrations and all of the Partnership's patents and copyrights and all
pending applications therefor, all other trademarks and other marks, trade names
and other trade rights or in which the Partnership has any interest whatsoever,
and all other trade secrets, designs, plans, specifications, technical
information and other proprietary rights, whether or not registered, created or
used by or on behalf of the Partnership.

          "Registration Rights Agreement" shall mean a registration rights
           -----------------------------                                  
agreement, substantially in the form set forth as Exhibit 1.1(D), between the
Partnership and RLI.

          "Registration Statement"  shall mean the registration statement on
           ----------------------                                           
Form S-1 filed with the Securities and Exchange Commission pursuant to which RLI
shall make the Offering.

          "Retained Cash" shall mean all funds on deposit as of the Closing Date
           -------------                                                        
in that certain account maintained by the Partnership at Bank of California and
managed by Payden & Rygel.

          "Retained Joint Venture Interests" shall mean the Partnership's
           --------------------------------                              
interests in the Joint Ventures which are not transferred to RLI, as set forth
on Schedule 1.1(a) attached hereto.

          "Retained Joint Venture Advances" shall mean the Partnership's
           -------------------------------                              
interest in the advances to Joint Ventures which are not transferred to RLI, as
set forth on Schedule 1.1(b) attached hereto.

          "Retained Liabilities" shall mean all Liabilities directly and solely
           --------------------                                                
relating to:

          (a) the Retained Joint Venture Interests;

                                       6
<PAGE>
 
          (b)  the La Posada Guaranty;

          (c)  the Newpart Demand Note;

          (d)  the McClaskey Limited Units, and;

          (e)  the Johnson Incentive Unit Plan.

          "Retained Property" shall mean the following assets of the Partnership
           -----------------                                                    
which are not to be acquired by RLI hereunder:

          (a)  the Retained Cash;

          (b)  all of the capital stock of RLI and Newpart G.P.;

          (c)  all of the limited partnership interests in Newpart;

          (d)  books, files, reports and operating records relating to the
               management, governance and finances of the Partnership,
               including, without, limitation the Partnership's minute books,
               tax returns, correspondence with the Partnership's partners and
               related items;

          (e)  the Retained Joint Venture Interests;

          (f)  the Retained Joint Venture Advances;

          (g)  the receivable from Newpart representing amounts due to the
               Partnership for fees and expenses relating to Newpart paid by the
               Partnership before the Closing Date;

          (h)  the Johnson Incentive Unit Plan; and

          (i)  all of the partnership interests in Santa Barbara Red Lion Hotel,
               a California general partnership.

          "Service Agreement" shall mean the Service Agreement by and between
           -----------------                                                 
the Partnership and RLI, substantially in the form of Exhibit 1.1(E) attached
hereto.

          "Title Company" shall mean First American Title Insurance Company.
           -------------                                                    

          "Transferred Joint Venture Interests" shall mean the Partnership's
           -----------------------------------                              
interests in the Joint Ventures which are not Retained Joint Venture Interests.

                                       7
<PAGE>
 
          "Transferred Securities" shall mean all securities of any entity in
           ----------------------                                            
which the Partnership has an interest, including the stock of Red Lion
Properties, Inc., but excluding the Retained Joint Venture Interests, the
Retained Joint Venture Advances, the capital stock of RLI and Newpart G.P. and
the limited partnership interests in Newpart.

          1.2  Other Defined Terms.  The following terms shall have the meanings
               -------------------                                              
defined for such terms in the Sections set forth below:
 
<TABLE>
<CAPTION>
          Term                                  Section
          ---------------------------------     -------
          <S>                                   <C>
          Call Option                           5.4(d)
          Call Option Commencement Date         5.4(d)
          Call Option Exercise Notice           5.4(d)
          Claim Notice                          8.2
          Closing                               3.1
          Damage                                8.1
          Dispute Notice                        8.2
          Indemnified Party                     8.1
          Indemnitor                            8.1
          McClaskey Limited Units               5.3
          Option Joint Venture Assets           5.4(c)
          Partnership                           Preamble
          Plan                                  5.3
          Put Option                            5.4(c)
          Put Option Commencement Date          5.4(c)
          Put Option Exercise Notice            5.4(c)
          RLI                                   Preamble
          RLI Advances                          5.4(b)
          RLI Common Stock                      2.1
          Securities Act                        4.1(b)
          Transfer Fees                         2.3
</TABLE>
 
                      ARTICLE 2 - CONTRIBUTION OF ASSETS

          2.1  Transfer of Contributed Property.  Upon the terms and subject to
               --------------------------------                                
the conditions contained herein, at the Closing, the Partnership will
contribute, convey, transfer, assign, and deliver to RLI, and RLI will acquire
from the Partnership, all of the Partnership's right, title and interest in and
to, the Contributed Property, and RLI shall deliver to the Partnership
20,899,900 shares of validly issued, fully paid and nonassessable common stock,
par value $.01 per share, of RLI (the "RLI Common Stock"), free and clear of all
liens and encumbrances.

                                       8
<PAGE>
 
          2.2  Assumption of Liabilities.  Upon the terms and subject to the
               -------------------------                                    
conditions contained herein, at the Closing, RLI shall assume the Assumed
Liabilities.

          2.3  Closing Costs; Transfer Taxes and Fees.  RLI shall be responsible
               --------------------------------------                           
for any documentary transfer taxes and any sales, use or other taxes (and any
deficiency, interest or penalty asserted with respect thereto), escrow fees,
including fees and charges of Escrow Agent, any recording or filing fees, and
any costs and fees of title searches or insurance premiums for title insurance
on the Owned Real Property or Leased Real Property (collectively "Transfer
Fees"), incurred in transferring and conveying the Contributed Property
hereunder, and shall promptly reimburse the Partnership for any Transfer Fees
incurred by it.  RLI shall pay all costs of applying for new permits and
obtaining the transfer of existing Permits.  In addition, RLI shall be
responsible for and shall pay all Transfer Fees or other fees or expenses
incurred in connection with obtaining or perfecting its title in the Contributed
Property after the Closing, and shall reimburse the Partnership for any such
fees or expenses incurred by it.

                              ARTICLE 3 - CLOSING

          3.1  Closing.  The Closing of the transactions contemplated herein
               -------                                                      
(the "Closing") shall be held at 8:00 a.m. local time on the Closing Date at the
offices of Latham & Watkins, 633 West Fifth Street, Los Angeles, California,
unless the parties hereto otherwise agree.

     3.2  Deliveries at Closing.
          --------------------- 

          (a) By the Partnership.  On or prior to the Closing Date, the
              ------------------                                       
Partnership shall execute and deliver, for recordation and/or delivery:

              (i) to the Escrow Agent, escrow instructions substantially in the
form attached hereto as Exhibit 3.2(a)(i);

              (ii) to the Escrow Agent, one or more recordable deeds conveying
fee simple title to all Owned Real Property included in the Contributed Property
to RLI;

              (iii) to the Escrow Agent, one or more recordable assignments
conveying all of the Partnership's interest in the Leases with respect to the
Leased Real Property and the Leased Personal Property;

              (iv) to RLI, one or more bills of sale conveying in the aggregate
all of the Partnership's owned personal property included in the Contributed
Property;

              (v) to RLI, one or more assignments of Contracts and Management
Agreements conveying all of the Partnership's interests in the Contracts and
Management Agreements;

                                       9
<PAGE>
 
              (vi) to RLI, one or more assignments of Joint Venture Interest
conveying all of the Transferred Joint Venture Interests;

              (vii) to RLI, one or more assignments conveying all of the
Proprietary Rights in recordable form to the extent necessary to assign such
rights;

              (viii) to RLI, endorsements, stock transfer certificates and other
appropriate instruments with respect to any Transferred Securities;

              (ix) to RLI, all cash and cash equivalents included in the
Contributed Property;

              (x) to RLI, a FIRPTA affidavit in the form specified in Internal
Revenue Code Section 1445;

              (xi) to RLI, an executed copy of the Cooperation Agreement, the
Registration Rights Agreement and the Service Agreement; and

              (xii) to RLI and/or the Escrow Agent, such other instruments as
shall be requested by RLI and/or the Escrow Agent to vest in RLI title in and to
the Contributed Property in accordance with the provisions hereof.

          (b) By RLI.  On the Closing Date, RLI shall execute and deliver, for
              ------                                                          
recordation and/or delivery:

              (i) to the Escrow Agent, escrow instructions substantially in the
form attached hereto as Exhibit 3.2(a)(i);

              (ii) to the Escrow Agent, one or more recordable assumptions
assuming all of the Partnership's interest in the Leases with respect to the
Leased Real Property;

              (iii)  to Newpart, an executed copy of the Master Lease and fully
executed copies of the Lease Guaranties;

              (iv) to the Partnership, one or more assumptions of Contracts and
Management Agreements assuming the Partnership's interests in the Contracts and
the Management Agreements;

              (v) to the Partnership, one or more assumptions of Joint Venture
Interest assuming the Transferred Joint Venture Interests;

              (vi) to the Partnership, an assumption of the Partnership's
obligations under the Plan as contemplated by Section 5.3;

                                      10
<PAGE>
 
              (vii) to the Partnership, one or more assumptions assuming all of
the Assumed Liabilities;

              (viii) to the Partnership, an executed copy of the Cooperation
Agreement, the Registration Rights Agreement and the Service Agreement; and

              (ix) to Tod E. McClaskey, the Registration Rights Agreement in the
form attached to the letter dated June 16, 1995 by and among the Partnership,
Tod E. McClaskey and the Partnership's other partners; and

              (x) to the Partnership, such other instruments as shall be
requested by the Partnership to evidence RLI's assumption of the Assumed
Liabilities in accordance with the provisions hereof.

         3.3  Actions by Newpart.  On the Closing Date, Newpart shall execute
              ------------------                                             
and deliver to RLI the Master Lease.

         3.4  Actions by Escrow Agent.  On the Closing Date, Escrow Agent
              -----------------------                                    
shall:

              (a) Recording.  Cause the deeds (with documentary transfer tax
                  ---------                                                 
information to be affixed by separate affidavit or other method whereby the same
shall not become a part of the Official Records), the assignments and
assumptions of Leases with respect to the Leased Real Property and any other
documents which the parties hereto may mutually designate to be recorded in the
Official Records of the appropriate counties in which the Owned Real Property
and the Leased Real Property is located.

              (b) Title Policy.  Direct the Title Company to issue and deliver 
                  ------------                                                 
the binding commitment to issue the title insurance described in Section 7.4,
effective as of the Closing Date.

         3.5  Form of Instruments.  To the extent that a form of any document
              -------------------                                            
to be delivered hereunder is not attached as an Exhibit or schedule hereto, such
documents shall be in form and substance, and shall be executed and delivered in
a manner, satisfactory to the Partnership and RLI.

                  ARTICLE 4 - REPRESENTATIONS AND WARRANTIES

         4.1  Representations and Warranties of the Partnership. The
              -------------------------------------------------     
Partnership represents and warrants to RLI as follows:

              (a) Authorization. The Partnership has the requisite partnership 
                  ------------- 
power and authority and has taken all partnership action necessary to execute
and deliver this Agreement, to consummate the transactions contemplated
hereunder and to perform its obligations hereunder. This Agreement has been duly
executed and delivered by the

                                      11
<PAGE>
 
Partnership and constitutes a legally valid and binding obligation of the
Partnership enforceable against the Partnership in accordance with its terms.

              (b) Investment Representations.  The Partnership is acquiring the 
                  --------------------------    
RLI Common Stock solely for its own account and not as nominee or agent for any
other person or entity and not with a view to, or for offer or sale in
connection with, any distribution thereof, within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"), that would be in violation of
the Securities Act, without prejudice, however, to its right at all times to
sell or otherwise dispose of all or any part of said RLI Common Stock pursuant
to a registration statement under the Securities Act or pursuant to an exemption
from the registration requirements of the Securities Act.  The Partnership
further represents that it and its partners are knowledgeable, sophisticated and
experienced in business and financial matters; that it and its partners are able
to bear the economic risk of their investment in the RLI Common Stock and are
presently able to afford the complete loss of such investment; that it is an
"accredited investor" as defined in Regulation D promulgated under the
Securities Act or 1933, as amended; and that by reason of its prior ownership of
the Contributed Property it has fully evaluated and investigated the RLI Common
Stock, and has not relied upon any representation or warranty with respect to
the Contributed Property in its decision to invest in the RLI Common Stock.

              (c) Transfer Restrictions.  The RLI Common Stock will not been
                  ---------------------                                     
registered under the Securities Act, or qualified under applicable state
securities laws and may not be sold or otherwise transferred unless, among other
things, the RLI Common Stock has been included in an effective registration
statement under the Securities Act and has been  qualified for resale under
applicable state securities laws or such sale or transfer is exempt from such
registration or qualification requirements.  A legend to this effect shall be
placed upon the certificate representing the RLI Common Stock.

         4.2  Representations, Warranties and Acknowledgements of RLI.  RLI
              -------------------------------------------------------      
represents and warrants to the Partnership as follows:

              (a) Authority.  RLI has the requisite corporate power and 
                  ---------     
authority and has taken all corporate action necessary to execute and deliver
this Agreement, to consummate the transactions contemplated hereunder and to
perform its obligations hereunder. The execution and delivery of this Agreement
by RLI and the consummation by RLI of the transactions contemplated hereunder
have been duly approved by the board of directors of RLI. No other corporate
proceedings on the part of RLI are necessary to authorize the execution and
delivery of this Agreement by RLI or the performance by RLI of its obligations
hereunder. This Agreement has been duly executed and delivered by RLI and
constitutes a legally valid and binding obligation of RLI enforceable against
RLI in accordance with its terms.

              (b) Contributed Property Transferred "As Is".  RLI acknowledges 
                  ----------------------------------------       
that each of the assets to be transferred hereunder shall be transferred "as is"
with all faults

                                      12
<PAGE>
 
and without representation, express or implied, that the same are merchantable
or fit for a particular purpose; that the Partnership is transferring whatever
title it may have in and to such assets without any representation or warranty,
express or implied, with respect to its title to such assets or its contractual
ability to do the same; and that each of the interests to be transferred
hereunder pursuant to a Lease, Contract, Management Agreement or Transferred
Joint Venture Interest shall be transferred without representation or warranty
that RLI shall receive such interest free of claims by any third party or with
any right to the quiet enjoyment of any such interest.

              (c) Validity of RLI Common Stock.  The RLI Common Stock to be 
                  ----------------------------    
issued pursuant to this Agreement has been duly authorized, and will be, upon
issuance in accordance with the terms hereof, validly issued fully paid,
nonassessable and free of all preemptive rights.

                             ARTICLE 5 - COVENANTS

          5.1  Further Assurances.  Upon the terms and subject to the conditions
               ------------------                                               
contained herein, each of the parties hereto agrees, to use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement, (ii) to execute any documents,
instruments or conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the transactions contemplated hereunder, and (iii)
to cooperate with each other in connection with the foregoing.

          5.2  Set Aside of Joint Venture Assignment.  In the event that the
               -------------------------------------                        
other venturer in the Joint Venture known as Fess Parker-Red Lion Hotel
challenges the assignment of the Partnership's interest in such joint venture
pursuant hereto, and is successful in setting aside such assignment, the
Partnership will (a) provide RLI with the net cash distributed to the
Partnership from continuing joint venture operations of Fess Parker-Red Lion
Hotel, (b) in the event that the Partnership sells its interest in Fess Parker-
Red Lion Hotel, provide RLI with the net cash received by the Partnership from
any sale of such joint venture interest, and (c) in the event that Fess Parker-
Red Lion Hotel sells the hotel, provide RLI with the net proceeds received by
the Partnership from the joint venture's sale of the hotel, in each case after
providing for any tax liability of the Partnership's partners.

          5.3  Incentive Unit Plan.  As part of the transactions contemplated by
               -------------------                                              
this Agreement, RLI shall assume the obligation of the Partnership to make
payments under the Amended and Restated RL Acquisition Incentive Unit Plan,
adopted by the Partnership as of November 1, 1987, as amended by the Amendment
to Incentive Unit Plan, dated as of July 26, 1995 (the "Plan"); except that RLI
shall not assume the obligation to pay amounts due upon 36.25 fully vested
limited units (the "McClaskey Limited Units").  In addition, and without
limiting the indemnification provided under Section 8, RLI shall promptly
indemnify and hold harmless the Partnership from all Damages, including all
expenses and fees, arising out of any dispute, claim, action, arbitration or
litigation relating to the administration of the

                                      13
<PAGE>
 
Plan or the amendment to the Plan dated as of July 26, 1995, it being understood
that RLI shall advance the Partnership all such amounts.  While RLI will assume
the Partnership's obligation to make payments under the Plan, the Plan shall
continue to be administered by the Partnership and its general partner.  The
Partnership agrees not to issue any additional Units (as defined in the Plan)
under the Plan after the Closing Date.

          5.4  Retained Joint Venture Interests and Retained Joint Venture
               -----------------------------------------------------------
Advances.
-------- 

              (a)  Cooperation Agreement.  Subject to the terms and conditions
                   ---------------------                                      
hereof, upon the Closing, the Partnership and RLI shall execute the Cooperation
Agreement.

              (b)  Joint Venture Obligations. If at any time during which the
                   -------------------------                                 
Partnership owns a Retained Joint Venture Interest the Partnership is required
(i) to contribute or advance funds to the respective joint venture, (ii) to make
payments to the lenders of such joint venture, or (iii) to otherwise satisfy any
obligation or liability as a result of owning the Retained Joint Venture
Interest, then RLI shall advance the Partnership the funds necessary to satisfy
such obligation (the "RLI Advances").  The RLI Advances shall not bear interest
and shall be repaid by the Partnership solely out of the first funds distributed
or paid to the Partnership by the respective joint venture.

              (c)  Option to Sell to RLI.  Commencing on the first anniversary 
                   ---------------------                                       
of the Closing Date plus one day (the "Put Option Commencement Date"), the
Partnership shall have the option to sell (the "Put Option") the Retained Joint
Venture Interests and the Retained Joint Venture Advances, excluding the
Retained Joint Venture Interest in the Fess Parker-Red Lion Hotel Joint Venture
and any Retained Joint Venture Interest the transfer of which would result in a
breach of the relevant joint venture agreement (collectively, the "Option Joint
Venture Assets") to RLI.  The purchase price to be paid by RLI upon the closing
of the Put Option shall be $1,300,000, payable in immediately available funds,
and the cancellation of the RLI Advances.  The Partnership may exercise the Put
Option at any time within the 60 days following the Put Option Commencement
Date, by delivering written notice to RLI that it has determined to exercise the
Put Option (the "Put Option Exercise Notice").  If the Put Option Notice has not
been received by RLI within such 60 day period, then the Put Option shall expire
and be of no further force or effect.  The sale of the Option Joint Venture
Assets shall close as soon as practicable after delivery of the Put Option
Exercise Notice.  In connection with the sale of the Option Joint Venture Assets
by the Partnership, RLI shall assume all of the Partnership's Liabilities with
respect to the Option Joint Venture Assets, and upon the closing of such a sale
such Liabilities shall be deemed Assumed Liabilities.

              (d)  Option to Purchase from the Partnership.  If the Put Option 
                   ---------------------------------------                     
has expired without being exercised, then commencing with the 70th day following
the first anniversary of the Closing Date (the "Call Option Commencement Date"),
RLI shall have the option to purchase (the "Call Option") the Option Joint
Venture Assets from the Partnership. The purchase price to be paid by RLI upon
the closing of the Call Option shall be

                                      14
<PAGE>
 
$1,300,000, payable in immediately available funds, and the cancellation of the
RLI Advances.  RLI may exercise the Call Option at any time within the 60 days
following the Call Option Commencement Date, by delivering written notice to the
Partnership that it has determined to exercise the Call Option (the "Call Option
Exercise Notice").  If the Call Option Notice has not been received by the
Partnership within such 60 day period, then the Call Option shall expire and be
of no further force or effect.  The sale of the Option Joint Venture Assets
shall close as soon as practicable after delivery of the Call Option Exercise
Notice.  In connection with the sale of the Option Joint Venture Assets by the
Partnership, RLI shall assume all of the Partnership's Liabilities with respect
to the Option Joint Venture Assets, and upon the closing of such a sale such
Liabilities shall be deemed Assumed Liabilities.  The Partnership agrees not to
sell or otherwise transfer the Option Joint Venture Assets other than pursuant
to the Put Option or the Call Option until the Call Option has expired.

          5.5  Release of Contingent Liabilities.  RLI shall use commercially
               ---------------------------------                             
reasonable efforts (i) to obtain as promptly as practicable after the Closing
the Partnership's release from all liabilities or obligations the Partnership
may have with respect to any of the Leases, Contracts, Management Agreements,
Transferred Joint Venture Interests or any other Contributed Property or Assumed
Liability, and (ii) upon the Partnership's request, to satisfy the conditions
necessary to terminate the La Posada Guaranty.

          5.6  Use of Red Lion Name by the Partnership.  RLI irrevocably grants
               ---------------------------------------                         
to each of the Partnership, Newpart and Newpart G.P. the nonexclusive right to
use the name "Red Lion" as part of their respective corporate or partnership
name and in no other capacity whatsoever.

              5.7  Access to Books and Records.  From and after the Closing, RLI
                   ---------------------------                                  
shall make available to the Partnership, its agents and employees the Books and
Records (and the assistance of RLI's employees responsible for such Books and
Records) during regular business hours.  RLI shall maintain and preserve all
such Books and Records for a period of ten years after the Closing.

              ARTICLE 6 - CONDITIONS TO PARTNERSHIP'S OBLIGATIONS

          6.1  Conditions Precedent.  The obligations of the Partnership to
               --------------------                                        
consummate the transactions provided for hereby are subject, in the discretion
of the Partnership, to the satisfaction, on or prior to the Closing Date, of
each of the following conditions, any of which may be waived by the Partnership:

          (a)  Representations, Warranties and Covenants.  All representations
               -----------------------------------------                      
and warranties of RLI contained in this Agreement shall be true and correct in
all material respects at and as of the date of this Agreement and at and as of
the Closing Date, except as and to the extent that the facts and conditions upon
which such representations and warranties are based are expressly required or
permitted to be changed by the terms hereof, and RLI

                                      15
<PAGE>
 
shall have performed and satisfied in all material respects all agreements and
covenants required hereby to be performed by it prior to or on the Closing Date.

          (b)  Deliveries.  Each of RLI, Newpart and the Escrow Agent shall have
               ----------                                                       
delivered all documents and other items under Section 3 hereof.

          (c)  No Proceedings, Litigation or Laws.  No action, proceeding or
               ----------------------------------                           
claim by any governmental authority or other person shall have been instituted
or threatened which questions the validity or legality of the transactions
contemplated hereby which could reasonably be expected to (a) materially affect
the right or ability of RLI to own, operate, possess or transfer the Contributed
Property after the Closing, or (b) materially damage the Partnership if the
transactions contemplated hereunder are consummated.

          (d)  Newpart Capitalization.  Newpart shall have been capitalized in
               ----------------------                                         
accordance with the Newpart Contribution Agreement.

          (e)  Effectiveness of Registration Statement.  The Registration
               ---------------------------------------                   
Statement shall have been declared effective by the Securities and Exchange
Commission and the Offering shall have been commenced.

          6.2  Conditions Subsequent.  The obligations of the Partnership to
               ---------------------                                        
consummate the transactions provided for hereby are subject, in the discretion
of the Partnership, to the satisfaction, on or prior to one day following the
Closing Date, of each of the following conditions, any of which may be waived by
the Partnership:

          (a)  Offering.  The Offering shall have closed.
               --------                                  

                  ARTICLE 7 - CONDITIONS TO RLI'S OBLIGATIONS

          7.1  Conditions Precedent.  The obligations of RLI to consummate the
               --------------------                                           
transactions provided for hereby are subject, in the discretion of RLI, to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by RLI:

          (a)  Representations, Warranties and Covenants.  All representations
               -----------------------------------------                      
and warranties of the Partnership contained in this Agreement shall be true and
correct in all material respects at and as of the date of this Agreement and at
and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and the
Partnership shall have performed and satisfied in all material respects all
agreements and covenants required hereby to be performed by it prior to or on
the Closing Date.

          (b)  No Proceedings, Litigation or Laws.  No action, proceeding or
               ----------------------------------                           
claim by any governmental authority or other person shall have been instituted
or threatened which

                                      16
<PAGE>
 
questions the validity or legality of the transactions contemplated hereby which
could reasonably be expected to (a) materially affect the right or ability of
RLI to own, operate, possess or transfer the Contributed Property after the
Closing, or (b) materially damage RLI if the transactions contemplated hereunder
are consummated.

          (c)  Deliveries. Each of the Partnership, Newpart and the Escrow Agent
               ----------                                                       
shall have executed and delivered each of documents and other items described in
Section 3 hereof.

          (d)  Title Policy.  RLI shall have received an owner's policy or
               ------------                                               
policies of title insurance insuring fee title to the Partnership's Owned Real
Property or written commitment to issue the same in form and substance
satisfactory to RLI and shall have received a leasehold policy or policies of
title insurance insuring the Partnership's leasehold interest in the Leased Real
Property, in form and substance satisfactory to RLI.

          (e)  Effectiveness of Registration Statement.  The Registration
               ---------------------------------------                   
Statement shall have been declared effective by the Securities and Exchange
Commission and the Offering shall have been commenced.

          (f)  Concurrent Transactions.  The Cooperation Agreement, the
               -----------------------                                 
Registration Rights Agreement and the Service Agreement shall have been executed
and delivered by the Partnership and RLI and the Master Lease shall have been
executed and delivered by RLI and Newpart, each simultaneous with the Closing.

          7.2  Conditions Subsequent.  The obligations of RLI to consummate the
               ---------------------                                           
transactions provided for hereby are subject, in the discretion of RLI, to the
satisfaction, on or prior to one day following the Closing Date, of each of the
following conditions, any of which may be waived by RLI:

          (a)  Offering. The Offering shall have closed.
               --------                                 

                          ARTICLE 8 - INDEMNIFICATION

          8.1  By RLI.  RLI and its successors and assigns (the "Indemnitor")
               ------                                                        
agrees to indemnify, save and hold harmless the Partnership and each of its
limited partners, general partners, owners, subsidiaries and affiliates, and
each of their respective officers, directors, employees, shareholders, partners,
agents, representatives and advisors, or any of the foregoing's successors and
assigns (the "Indemnified Parties") from and against all liabilities, costs,
losses (including diminution in value), lost profits, taxes, lawsuits, damages
and expenses, whether or not arising out of third-party claims (including,
without limitation, interest, penalties, costs of mitigation and losses in
connection with any environmental law), and all amounts paid in investigation,
defense or settlement, in each case grossed-up for all taxes (collectively,
"Damages") incurred in connection with, arising out of, resulting from or
incident to, (i) any event or condition, past, present or future, relating to
the assets,

                                      17
<PAGE>
 
liabilities, employees, business, rights, obligations or property transferred,
assumed, assigned or contributed to RLI, (ii) any Assumed Liability, (iii) any
event occuring prior to or condition existing as of the Closing Date relating to
the assets, liabilities, employees, business, rights, obligations or property
transferred, assumed, assigned or contributed to Newpart which Damages are not
Newpart Liabilities, (iv) any transaction contemplated hereby, (v) any breach of
any covenant or agreement made by RLI pursuant to this agreement, (vi) the
Partnership's ownership of the RLI Common Stock, or (vii) any liability imposed
upon any Indemnified Party due to the Partnership's status as the transferor to,
or predecessor of, RLI.  Without limiting the foregoing, the Indemnitor shall
indemnify, save and hold harmless the Indemnified Parties from Damage incurred
in connection with, arising out of, resulting from or incident to (a) any
litigation, claim, action, dispute or investigation in connection with the Plan,
(b) any litigation, claim, action, dispute or investigation arising out of the
transfer of the Transferred Joint Venture Interests, Transferred Joint Venture
Advances, Leases, Contracts, indebtedness, mortgages, deeds of trust or
Management Contracts, (c) any hazardous substances or violation of environmental
laws, and (d) any litigation, claim, action, dispute or investigation in
connection with the Partnership's ownership of the RLI Common Stock, including,
without limitation, securities laws litigations.  Payments by an Indemnified
Party shall not be a condition to recovery.  Indemnitor's obligation to
indemnify the Indemnified Parties shall not limit any other right, including
without limitation, rights of contribution which an Indemnified Party may have
under statute or common law.

          8.2  Indemnification Procedures.  If any Indemnified Party seeks
               --------------------------                                 
indemnification hereunder it shall give the Indemnitor a notice (a "Claim
Notice") describing in reasonable detail the facts giving rise to any claims for
indemnification hereunder and the amount or the method of computation of the
amount of such claim, and a reference to the provision of this Agreement or any
agreement, document or instrument executed pursuant hereto or in connection
herewith upon which such claim is based, provided that failure to give such
notice shall not relieve the Indemnitor of its obligations hereunder.
Indemnitor shall have thirty (30) days after the giving of any Claim Notice
pursuant hereto to (i) agree to the amount or method of determination set forth
in the Claim Notice and pay such amount to the Indemnified Party in immediately
available funds to the extent not previously advanced pursuant to Section 8.4
hereof, or (ii) provide Indemnified Party with notice that it disagrees with the
amount or method of determination set forth in the Claim Notice (the "Dispute
Notice").  Within fifteen (15) days after the giving of the Dispute Notice, a
representative of Indemnitor and a representative of Indemnified Party shall
negotiate in a bona fide attempt to resolve the matter.  In the event that the
controversy is not resolved within thirty (30) days of the giving of the Dispute
Notice, the parties shall be free to pursue whatever remedies are available to
them at law or equity.

          8.3  Third Person Claims.  If a claim by a third person is made
               -------------------                                       
against an Indemnified Party, and if such party intends to seek indemnity with
respect thereto under this Article 8, such Indemnified Party shall promptly
notify the Indemnitor in writing of such claims, setting forth such claims in
reasonable detail.  Indemnitor shall have ten (10) days

                                      18
<PAGE>
 
after receipt of such notice to elect to undertake, conduct and control, through
counsel of its own choosing and at its own expense, the settlement or defense
thereof, and the Indemnified Party shall cooperate with it in connection
therewith; provided that the Indemnified Party may participate in such
settlement or defense through counsel chosen by such Indemnified Party; and
provided further that if in the reasonable judgment of the Indemnified Party,
there exists a conflict between the Indemnified Party and the Indemnitor,
Indemnitor shall bear all costs and expenses of Indemnified Party's separate
counsel of choice.  So long as the Indemnitor is reasonably contesting any such
claim in good faith, the Indemnified Party shall not pay or settle any such
claim without the consent of the Indemnitor.  If the Indemnitor does not notify
the Indemnified Party within ten (10) days after receipt of the Indemnified
Party's notice of a claim of indemnity hereunder that it elects to undertake the
defense thereof, the Indemnified Party shall have the right to contest, settle
or compromise the claim and shall be entitled to indemnification for all fees,
costs and expenses incurred in connection therewith.  The Indemnitor shall not,
except with the consent of each Indemnified Party, enter into any settlement
that does not include as an unconditional term thereof the giving by the person
or persons asserting such claim to all Indemnified Parties of unconditional
release from all liability with respect to such claim or consent to entry of any
judgment.  The Indemnitor shall not be liable for damages relating to any
settlement entered into without the consent of such Indemnitor.

          8.4  Advance of Damages. Notwithstanding anything to the contrary, the
               ------------------                                               
Indemnitor shall advance to any Indemnified Party, all funds necessary to pay
when due all Damages, provided that if the Indemnitor disputes its obligation to
indemnify the Indemnified Party with respect to such Damages, the Indemnified
Party shall provide an undertaking to reimburse the Indemnitor for such amounts
if it is later determined in a final nonappealable order by a court of competent
jurisdiction that the Indemnified Party was not entitled to indemnification
under this Agreement.

                           ARTICLE 9 - MISCELLANEOUS

          9.1  Termination.
               ----------- 

          (a)  Failure of Condition.  If any condition precedent to the
               --------------------                                    
Partnership's obligations hereunder is not satisfied by the Closing Date and
such condition is not waived by the Partnership, the Partnership may terminate
this Agreement at its option by written notice to RLI.  If any condition
precedent to RLI's obligations hereunder is not satisfied by the Closing Date
and such condition is not waived by RLI, RLI may terminate this Agreement at its
option by written notice to the Partnership.  In the event that a condition
precedent to its obligations is not satisfied, nothing contained herein shall be
deemed to require either party to terminate this Agreement rather than to waive
such condition precedent and proceed with the Closing.

          (b)  Effect of Termination.  In the event of a termination of this
               ---------------------                                        
Agreement by either party as provided in subparagraph (a) above, this Agreement
shall thereafter

                                      19
<PAGE>
 
become void and have no effect and neither party shall have any liability
hereunder to the other party, except that nothing herein shall relieve either
party from liability for any breach of this Agreement which occurs prior to such
termination.

          9.2  Entire Agreement; Amendments and Waivers.  This Agreement,
               ----------------------------------------                  
together with all exhibits and schedules hereto constitutes the entire agreement
between the parties pertaining to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties.  This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.  No
amendment, supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby.  No waiver of any
of the provisions of this Agreement shall be deemed or shall constitute a waiver
of any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.

          9.3  Successors and Assigns.  This Agreement may not be assigned by a
               ----------------------                                          
party hereto, whether by operation of law or otherwise, without the consent of
the other party hereto, and any assignment made without such consent shall be
void and without effect.  Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns.

          9.4  Governing Law.  This Agreement shall be construed, interpreted
               -------------                                                 
and the rights of the parties determined in accordance with the laws of the
State of Washington applicable to contracts entered into and wholly to be
performed in Washington by Washington residents (without reference to its choice
of law provisions).

          9.5  Multiple Counterparts.  This Agreement may be executed in one or
               ---------------------                                           
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

          9.6  Captions and References.  The captions or headings of the
               -----------------------                                  
Articles and Sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement.

          9.7  Limited Liability.  Notwithstanding any provisions hereof, none
               -----------------                                              
of the obligations of the Partnership or RLI under or contemplated by this
Agreement shall be an obligation of any officer, director, shareholder, limited
partner, general partner, or owner of the Partnership or RLI, or any of their
respective officers, directors, shareholders, limited partners, general
partners, or owners, or successors or assigns.  The Partnership and RLI shall be
the only persons or entities liable with respect to such obligations.  Each of
the Partnership and RLI hereby irrevocably waives any right it may have against
any such officer, director, shareholder, general partner or limited partner,
owner, successor or assign identified above as a result of the performance of
the provisions under or contemplated by this Agreement.  This provision shall
survive any termination of this Agreement.

                                      20
<PAGE>
 
          9.8  Invalidity.  In the event that any one or more of the provisions
               ----------                                                      
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, then to the maximum extent permitted by
law, such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement or any other such instrument.

                                      21
<PAGE>
 
          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on their respective behalf, by their respective officers
thereunto duly authorized, all as of the day and year first above written.

                         Red Lion Hotels, Inc., a Delaware
                          corporation


                               /s/ Beth A. Ugoretz
                              --------------------------------------------------
                         By:   Beth A. Ugoretz
                         Its:  Senior Vice President



                         Red Lion, a California Limited Partnership

                              By:   RLA-GP, Inc., a Delaware corporation
                              Its:  General Partner


                                      /s/ David J. Johnson
                                    ------------------------
                              By:   David J. Johnson
                              Its:  Executive Vice President

                                      22
<PAGE>
 
                                                                  EXHIBIT 1.1(A)

                             COOPERATION AGREEMENT

          This Agreement is made and entered into as of August 1, 1995 by and
between Red Lion Hotels, Inc., a Delaware corporation ("RLI"), and Red Lion, a
California Limited Partnership ("Red Lion").

                                    RECITALS
                                    --------

          WHEREAS, Red Lion owns directly or indirectly certain interests in the
following joint ventures:  Red Lion La Posada, Bakersfield Red Lion Motor Inn,
Ontario -Red Lion Motor Inn, Village Motor Inn and Fess Parker - Red Lion Hotel;
and certain interests in the following limited partnerships:  Red Lion Orange
County Partners, L.P. and Glendale Red Lion Hotel, a California Limited
Partnership (collectively, the "Joint Ventures");

          WHEREAS, pursuant to the Contribution Agreement of even date herewith
by and between Red Lion and RLI (the "Contribution Agreement"), Red Lion will
transfer to RLI the Transferred Joint Venture Interests (as defined in the
Contribution Agreement);

          WHEREAS, subsequent to the transfer described in the preceding
recital, Red Lion will retain the Retained Joint Venture Interests (as defined
in the Contribution Agreement); and

          WHEREAS, the parties desire to enter into this Agreement in order to
regulate Red Lion's conduct with respect to any and all Retained Joint Venture
Interests.

                                   AGREEMENT
                                   ---------

          NOW, THEREFORE, in acknowledgement of the foregoing recitals and in
consideration of the mutual agreements expressed herein and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows.

          1.   Exercise of Powers by RLI.
               ------------------------- 

          The parties hereby agree that RLI has sole discretion to determine and
prescribe Red Lion's conduct with respect to any Joint Venture to the extent of
the Retained Joint Venture Interests.
<PAGE>
 
          2.  Agreement to Abide by RLI Instructions.
              -------------------------------------- 

          Red Lion hereby irrevocably agrees that with respect to the Retained
Joint Venture Interests, Red Lion will act or vote or refrain from acting or
voting with respect to any Joint Venture solely at the direction of and in
accordance with the instructions of RLI.

          3.   Termination.
               ----------- 

          This Agreement shall remain in full force and effect until such time
as all of the Retained Joint Venture Interests have been transferred to RLI.

          4.   Successors and Assigns.
               ---------------------- 

          This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties.

          5.  Amendment.
              --------- 

          This Agreement may be amended only by a written agreement signed by
the parties.

          6.  Governing Law.
              ------------- 

          This Agreement shall be governed by and construed in accordance with
the laws of the State of Washington.

          7.   Specific Performance.
               -------------------- 

          RLI and Red Lion agree that monetary damages would not be adequate
compensation for any loss incurred by RLI by reason of a breach of the
provisions of this Agreement by Red Lion.  Therefore, RLI shall be entitled to
specific performance of the provisions of this Agreement and Red Lion hereby
waives the claim or defense that there exists an adequate remedy at law to
redress the nonperformance or other breach of this Agreement.

          8.  Agreement to Perform Necessary Acts.
              ----------------------------------- 

          Each party agrees to perform any further acts and to execute and
deliver any documents that may be reasonably necessary to carry out the
provisions of this Agreement.

          9.   Conditions to Transfer.
               ---------------------- 

          Any transferee or assignee of any or all of the Retained Joint Venture
Interests must, as a condition to such transfer or assignment, execute such
documents as may be

                                       2
<PAGE>
 
requested by RLI in order to confirm the agreement of such assignee or
transferee to be bound by all of the terms and provisions of this Agreement as
though an original signatory hereto and to assume all obligations of the
transferor or assignor hereof.

          10.  Invalid Provision.
               ----------------- 

          The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions, and this Agreement shall be
construed in all respects as if the invalid or unenforceable provision were
omitted.

          11.  No Waiver of Breach.
               ------------------- 

          No failure by RLI to insist upon the strict performance of any
covenant, agreement, term or provision of this Agreement, or to exercise any
right or remedy consequent upon a breach thereof, shall constitute a waiver of
any such breach or subsequent breach of such covenant, agreement, term or
provision. No waiver of any breach shall affect or alter this Agreement and this
Agreement shall remain in full force and effect.

          12.  Entire Agreement.
               ---------------- 

          This instrument evidences the entire agreement of the parties with
respect to the matters covered herein, and supersedes all prior oral or written
agreements or other understandings.

          13.  Counterparts.
               ------------ 

          This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

                                       3
<PAGE>
 
          IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

                         Red Lion Hotels, Inc., a Delaware corporation


                            ---------------------------------------- 
                         By:   Beth A. Ugoretz
                         Its:  Senior Vice President



                         Red Lion, a California Limited Partnership

                         By:  RLA-GP, Inc., a Delaware corporation
                              Its:  General Partner


                                  ----------------------------------
                              By:   David J. Johnson
                              Its:   Executive Vice President

                                       4
<PAGE>
 

                                                                  EXHIBIT 1.1(B)
--------------------------------------------------------------------------------


                                     LEASE

                                    BETWEEN


                             RLH PARTNERSHIP, L.P.,
                         A DELAWARE LIMITED PARTNERSHIP

                                  ("LANDLORD")


                                      AND


                             RED LION HOTELS, INC.,
                             A DELAWARE CORPORATION

                                   ("TENANT")


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

<PAGE>
 
                               TABLE OF CONTENTS
                               -----------------

                                     LEASE
                                     -----
 
<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C> 
ARTICLE I - LEASE OF PREMISES...............................................   1
     1.1  "As-Is" Letting...................................................   1
     1.2  Tenant's Right of Possession......................................   2
     1.3  Landlord's Cooperation............................................   2

ARTICLE II - DEFINITION OF TERMS............................................   3

ARTICLE III - TERM..........................................................  10
     3.1  Term..............................................................  10
     3.2  Extended Term.....................................................  10
     3.3  Notice of Termination.............................................  11
     3.4  Obligations of Parties at Termination.............................  11

ARTICLE IV - ABSOLUTELY NET LEASE...........................................  12
     4.1  Net Lease.........................................................  12
     4.2  Non-Terminability.................................................  12

ARTICLE V - RENT............................................................  13
     5.1  Base Rent and Percentage Rent.....................................  13
     5.2  Payment of Rent...................................................  13
     5.3  Records; Audit by Landlord........................................  15
     5.4  Subleases, Licenses, and Concessions..............................  16
     5.5  Rent Upon Certain Expansions......................................  17

ARTICLE VI - OPERATION AND MAINTENANCE OF PREMISES..........................  17
     6.1  Operation and Maintenance of Premises.............................  17
     6.2  Taxes.............................................................  18
     6.3  Compliance with Requirements, Covenants and Restrictions..........  19
     6.4  Landlord's Right to Perform Tenant Obligations....................  19
     6.5  Compliance with Laws and Agreements...............................  19
     6.6  Tenant's Right to Contest.........................................  19
     6.7  Liens.............................................................  20

ARTICLE VII - USE...........................................................  21

ARTICLE VIII - INDEMNIFICATION..............................................  21
     8.1  General Indemnification by Tenant.................................  21
     8.2  Environmental Indemnification.....................................  22
     8.3  Defense of Indemnified Parties....................................  22
     8.4  Payment by Tenant.................................................  23
     8.5  Survival..........................................................  23
     8.6  Continuing Obligations............................................  23
</TABLE> 

                                       i
<PAGE>
 
<TABLE>
<S>                                                                         <C> 
ARTICLE IX - ALTERATIONS AND EXPANSIONS.....................................  23
     9.1  Alterations and Expansions........................................  23
     9.2  Alterations and Expansions During Last Five Years of Term.........  24

ARTICLE X - FF&E, FIXED ASSET SUPPLIES AND INVENTORIES......................  24
     10.1  FF&E Upon Commencement Date......................................  24
     10.2  Replacement of FF&E..............................................  25
     10.3  FF&E Upon Termination............................................  25
     10.4  Landlord's Security Interest in Tenant's FF&E, Fixed Asset
               Supplies, Operating Equipment and Inventories................  26

ARTICLE XI - TRADEMARKS, TRADE NAMES AND SERVICE MARKS......................  26
     11.2  Use of Trademarks, Trade Names and Service Marks.................  26
     11.3  Proprietary Software.............................................  26

ARTICLE XII - ENVIRONMENTAL HAZARDS.........................................  27
     12.1  Compliance with Environmental Law................................  27
     12.2  Site Assessments.................................................  28

ARTICLE XIII - INSURANCE....................................................  30
     13.1  Property & Business Interruption Insurance.......................  30
     13.2  Application of Proceeds..........................................  31
     13.3  Waiver of Rights of Subrogation..................................  32
     13.4  Operational Insurance............................................  32
     13.5  Blanket and Self-Insurance.......................................  33
     13.6  Costs of Insurance...............................................  33
     13.7  Defense of Claims after Termination..............................  33
     13.8  Coverage and Certificates........................................  33
     13.9  Alternative Insurance Coverage...................................  34

ARTICLE XIV - DAMAGE BY FIRE OR OTHER CASUALTY..............................  34
     14.1  Damage by Fire or Other Casualty.................................  34
     14.2  Partial Damage by Fire or Other Casualty.........................  34
     14.3  Damage Occurring After the 10th Anniversary of Commencement 
               Date.........................................................  34
     14.4  No Abatement of Rent Due to Casualty.............................  35
     14.5  Early Termination................................................  35

ARTICLE XV - CONDEMNATION...................................................  36
     15.1  Notice of Condemnation and Assignment of Rights..................  36
     15.2  Tenant's Right to Pursue a Claim.................................  36
     15.3  Temporary Taking.................................................  36
     15.4  Total Taking.....................................................  37
     15.5  Substantial Taking...............................................  38
     15.6  Partial Taking...................................................  38

ARTICLE XVI - ASSIGNMENT, SALE AND SUBLETTING...............................  39
     16.1  Sale or Assignment by Landlord, Subject to Lease.................  39
     16.2  Assignment by Tenant.............................................  40
     16.3  Tenant's Right to Sublease.......................................  40
</TABLE> 

                                      ii
<PAGE>
 
<TABLE>
<S>                                                                         <C> 
ARTICLE XVII - HOLDING OVER.................................................  40

ARTICLE XVIII - ESTOPPEL CERTIFICATES.......................................  41

ARTICLE XIX - LANDLORD/TENANT FINANCING.....................................  41
     19.1  Right to Finance.................................................  41
     19.2  Priority.........................................................  41
     19.3  Mortgagee Amendments.............................................  42

ARTICLE XX - DEFAULT BY TENANT..............................................  42
     20.1  Events of Default................................................  42
     20.2  Landlord's Rights Upon an Event of Default.......................  44
     20.3  Implied Waiver...................................................  45
     20.4  Injunctive Relief................................................  46

ARTICLE XXI - PROVISIONS APPLICABLE TO PURCHASE BY TENANT
                  OF THE PREMISES...........................................  46
     21.1  Purchase "As Is".................................................  46
     21.2  Timing of Closing................................................  46
     21.3  Deliveries  at Closing...........................................  46
     21.4  TENANT'S FAILURE TO CLOSE........................................  47
     21.5  LANDLORD'S FAILURE TO CLOSE......................................  47
     21.6  Payment of Costs.................................................  48
     21.7  Prorations.......................................................  48

ARTICLE XXII - MISCELLANEOUS................................................  48
     22.1  Notices..........................................................  48
     22.2  Memorandum of Lease..............................................  49
     22.3  Determination of Fair Market Value...............................  49
     22.4  Partial Invalidity...............................................  51
     22.5  Headings.........................................................  51
     22.6  Binding Effect...................................................  51
     22.7  Representations..................................................  51
     22.8  Amendments.......................................................  51
     22.9  Brokers..........................................................  51
     22.10  Authority to Execute............................................  51
     22.11  Applicable Law..................................................  51
     22.12  Construction....................................................  51
     22.13  Impossibility of Performance....................................  52
     22.14  Time of Essence.................................................  52
     22.15  Attorney's Fees.................................................  52
     22.16  No Merger.......................................................  52
     22.17  Landlord's Right to Enter.......................................  52
     22.18  Corporate Reorganization of Tenant..............................  52
     22.19  No Waiver.......................................................  52
     22.20  Confidentiality.................................................  53
     22.21  Gender and Number...............................................  53
     22.22  Survival........................................................  53
     22.23  Acceptance of Surrender.........................................  53
</TABLE> 

                                      iii
<PAGE>
 
<TABLE>
<S>                                                                         <C> 
     22.24  Non-Recourse as to Landlord.....................................  53
     22.25  Entire Agreement; Integration...................................  54
     22.26  Waiver of Trial by Jury.........................................  54
     22.27  Tenant's Remedies...............................................  54
     22.28  Landlord and Tenant Relationship................................  54
     22.29  Relationship with Groundlessors.................................  54
     22.30  Limited Liability...............................................  55

EXHIBITS
--------

     A      Descriptions of Land
     B      Schedule of Rent
</TABLE>

                                      iv
<PAGE>
 
                                     LEASE
                                     -----

     THIS LEASE is made as of the 1st day of August, 1995 ("Commencement Date"),
by and between RLH PARTNERSHIP, L.P., a Delaware limited partnership
("Landlord"), with a mailing address in care of KKR Associates, 2800 Sand Hill
Road, Suite 2000, Menlo Park, California 94025, and RED LION HOTELS, INC.
("Tenant"), a Delaware corporation, with a mailing address at 4001 Main Street,
Vancouver, Washington 98663.

                                R E C I T A L S:

     WHEREAS, Landlord currently holds an interest in certain parcels of real
property either in fee or as ground lessee, which parcels are more specifically
described in Exhibits A-1 through A-17 hereto, and each of which has been
developed, improved, and is currently being utilized for, the operation of a Red
Lion hotel (individually, a "Hotel," and, collectively, the "Hotel(s)");

     WHEREAS, the lease transaction described herein is a portion of a larger
transaction involving, among other things, an initial public offering of the
common stock of Tenant, and wherein, among other matters, Tenant will succeed to
certain of the assets of the Red Lion hotel business, including the operation of
"Red Lion" hotels on other properties not the subject of this Lease, and wherein
both Tenant and Landlord shall borrow funds from certain lenders and each of
their respective interests under this Lease shall be pledged as collateral for
such loans (collectively, such larger series of transactions shall be referred
to herein as the "Restructuring"); and

     WHEREAS, prior to the Restructuring, Tenant or Tenant's predecessor's in
interest have possessed and operated each Hotel leased hereunder.


                                   ARTICLE I
                               LEASE OF PREMISES
                               -----------------

     Section 1.1  "As-Is" Letting
                  ---------------

          (a)  In consideration of the Rents, covenants and agreements to be
     paid, kept and performed hereunder, Landlord, for the term and upon the
     conditions hereinafter set forth, leases to Tenant and Tenant leases and
     takes from Landlord, the Premises (including, without limitation, all FF&E,
     Fixed Asset Supplies, Operating Equipment and Inventories located at the
     Hotels on the Commencement Date), together with all privileges, easements
     and appurtenances beneficial thereto.

          (b)  The Premises are leased to Tenant "as-is" and Landlord makes no
     representation or warranty, express or implied, with respect to the
     condition of the Premises, or as to the compliance of the Premises with any
     Legal Requirements.  Tenant has examined the Premises and title to the
     Premises and has found all of the same satisfactory for its purposes.
     Tenant accepts the Premises subject to the existing state of title.  During
     the term of this Lease, Tenant shall have the exclusive right to use,
     enforce and obtain the benefits of (i) all guaranties, representations, and
     warranties relating to the construction, improvement, alteration and repair
     of the Premises and all architectural and engineering plans, drawings and
     specifications related thereto, and (ii) all of Landlord's transferable
     licenses, permits, franchises, approvals,

                                       1
<PAGE>
 
     authorizations, consents or orders of, or filings with, any governmental
     authority, whether foreign, federal, state or local, or any other person
     related to any Hotel which is required to be held by Tenant in connection
     with the operation of the Hotels and/or the transactions contemplated
     hereby.  During the term of this Lease, Landlord shall execute such
     assignments or other transfer instruments as are necessary to transfer the
     benefits of all such items to Tenant, and shall not waive, surrender or
     modify any of Landlord's rights with respect thereto without obtaining
     Tenant's prior written consent.

     Section 1.2  Tenant's Right of Possession.  Subject to the provisions of
                  ----------------------------                               
Sections 6.4 and 12.2, and any other provision of applicable law affording any
inspection rights to Landlord and/or any Mortgagee, Tenant shall have exclusive
possession and control of the Premises during the term of this Lease.

     Section 1.3  Landlord's Cooperation
                  ----------------------

          (a)  Landlord agrees upon request by Tenant to provide all information
     relevant to Landlord, its general partners, officers and directors, and to
     execute, and to cause its general partners, officers and directors to sign,
     promptly, and without charge, all applications (including all documents
     related thereto) for licenses, permits, instruments or other general
     approvals required to be submitted to any governmental authority that are
     necessary for the proper and successful conduct of Tenant's lawful business
     operations at any of the Hotels if and to the extent such execution and/or
     information by or from Landlord and/or any of its officers and directors is
     required by law, regulation or governmental practice in order for Tenant to
     obtain any such license, permit, instrument or other governmental approval;
     provided, however, that all costs and expenses associated therewith shall
     be the sole obligation of Tenant, and Tenant shall promptly pay and
     discharge the same, and provided further, that the proper execution of any
     such application shall not expose Landlord or any of its constituent
     partners to any personal liability. In all cases, Landlord shall have a
     reasonable amount of time to comply with Tenant's requests pursuant to this
     Section 1.3(a), Landlord and Tenant shall, in good faith, cooperate with
     each other in determining and complying with relevant governmental
     requirements, and Tenant shall afford Landlord every reasonable opportunity
     to question and challenge by appropriate administrative and/or judicial
     process any relevant governmental requirement so long as such challenge
     does not materially and adversely affect any material license, permit or
     governmental approval of Tenant. Tenant hereby agrees that it will fully
     indemnify, defend and save Landlord harmless from and against any and all
     costs, losses and expenses, including, without limitation, any and all
     legal fees and court costs incurred or suffered by Landlord as a result of
     its compliance with the obligations imposed upon Landlord under this
     Section 1.3 or as a result of Tenant's contest of the results of any such
     application to any governmental entity, except in the case of Landlord's
     fraud, willful misconduct or gross negligence.

          (b) If Landlord should fail to comply with the requirements of Section
     1.3(a) above, and such failure should continue for more than thirty (30)
     days after Notice from Tenant to Landlord and the Senior Landlord's
     Mortgagee specifying the required cooperation and informing the recipients
     of such Notice that Tenant intends to act pursuant to this Section 1.3(b)
     if such cooperation is not provided (whether by action of Landlord or by
     action of the Senior Landlord's Mortgagee) within said thirty (30) day
     period and such failure results, or with reasonable certainty will result,
     in the denial, non-renewal or withdrawal of a material license, permit or
     governmental approval that will materially and adversely affect Tenant's
     business at such Hotel, then, in addition and not as a substitution for any
     remedies available to Tenant under Section

                                       2
<PAGE>
 
     22.27 of this Lease, if such failure is not cured within such thirty (30)
     day period, Tenant shall have the right to terminate this Lease with
     respect to the affected Hotel by so notifying Landlord not later than the
     date which is sixty (60) days after the date of the aforesaid Notice.  If
     Tenant elects to exercise the right described in the preceding sentence, it
     shall, simultaneously with its delivery of its Notice of termination,
     deliver to Landlord its irrevocable offer to purchase such Hotel, but only
     such Hotel, for an amount equal to the Leasehold Purchase Price.  Tenant
     shall not, by reason of exercising said right to terminate, be excluded
     from exercising any other right or remedy afforded to Tenant under Section
     22.27 as a result of Landlord's breach of this Section 1.3.

          (c)  Landlord may accept or reject Tenant's irrevocable offer to
     purchase such Hotel by sending Tenant a Notice of rejection or acceptance
     within thirty (30) days from the date upon which Landlord received Tenant's
     Notice of termination.  If Landlord fails to send Tenant a Notice of
     rejection or acceptance within thirty (30) days of its receipt of Tenant's
     irrevocable offer to purchase such Hotel, Landlord shall be deemed to have
     rejected such offer.  If Landlord accepts Tenant's offer to purchase, this
     Lease shall terminate with respect to such Hotel and closing of such
     purchase shall occur in accordance with the provisions of Article XXI.
     Upon such termination, Tenant shall pay to Landlord all Rent due through
     such date of termination, in addition to the Leasehold Purchase Price.
     Landlord shall convey such Hotel to Tenant in accordance with the
     provisions of Article XXI.

          (d)  If Landlord rejects or is deemed to have rejected Tenant's
     irrevocable offer to purchase pursuant to Section 1.3(b), this Lease shall
     terminate with respect to such Hotel on a Base Rent payment date specified
     by Tenant in its Notice of termination which occurs not earlier than ninety
     (90) days nor later than one hundred twenty (120) days after delivery to
     Landlord of Tenant's irrevocable offer to purchase, provided that this
     Lease shall not terminate with respect to such Hotel unless and until
     Tenant shall have paid all sums due hereunder (including, without
     limitation, all taxes and insurance premiums) as of the actual date of
     termination.  Upon such termination, Tenant shall vacate such Hotel in
     accordance with the provisions of Section 3.4.

          (e)  Landlord shall have the right at all times prior to either a
     closing date for any purchase under Section 1.3(c) or the termination date
     under Section 1.3(d), to cancel the right of Tenant to so purchase or
     terminate pursuant to said sections, by complying with the requirements of
     Section 1.3(a) in sufficient time and manner so that the subject license,
     permit or approval is obtained or reinstated by a date that is prior to the
     aforesaid closing date or termination date as the case may be.


                                   ARTICLE II
                              DEFINITION OF TERMS
                              -------------------

     The following terms when used in this Lease shall have the meanings
indicated:

     "Accounting Period" shall mean a calendar month.
      -----------------                              

     "Additional Rent" shall mean any obligation of Tenant to pay money to
      ---------------                                                     
Landlord under this Lease, other than Base Rent, Percentage Rent, and any
Leasehold Purchase Price.

                                       3
<PAGE>
 
     "Affiliate" shall mean, with respect to any Person, any other Person
      ---------                                                          
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such Person.  A Person shall be deemed to control a second
Person if such first Person possesses, directly or indirectly, the power (i) to
vote 10% or more of the securities having ordinary voting power for the election
of directors or managers of such second Person or (ii) to direct or cause the
direction of the management and policies of such second Person, whether through
the ownership of voting securities, by contract or otherwise.

     "Base Rent" shall have the meaning set forth in Section 5.1.
      ---------                                                  

     "Base Revenues" shall have the meaning set forth in Section 5.1(b).
      -------------                                                     

     "Business Day(s)" means Monday through Friday (except holidays); "normal
      ---------------                                                        
business hours" means 8:00 a.m. to 6:00 p.m. on Business Days; and "holidays"
means New Year's Day, President's Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.

     "Change in Control" shall mean that Kohlberg Kravis Roberts & Co., L.P., a
      -----------------                                                        
Delaware limited partnership, its general partners and its Affiliates
(determined without giving effect to the second sentence of the definition
thereof) (x) shall cease to possess, directly or indirectly, the power to direct
or cause the direction of the management policies of Landlord, whether through
the ownership of voting securities, by contract or otherwise or (y) shall cease
to own, directly or indirectly, at least 50% of the direct or indirect economic
interest owned by them in Landlord on the Commencement Date.

     "Commencement Date" shall have the meaning set forth in the Preamble.
      -----------------                                                   

     "Concurrent Tenant Credit Facility" shall mean that certain Credit
      ---------------------------------                                
Agreement of even date herewith by and among Tenant, as Borrower, various
lending institutions, as the Banks, and Credit Lyonnais, New York Branch, as
Administrative Agent, as the same may from time to time be amended, modified
and/or supplemented.

     "Effective Extended Term" means any Extended Term that has become effective
      -----------------------                                                   
by reason of the occurrence of the first day of such Extended Term or because
Tenant has irrevocably exercised its option to extend the Term through such
Extended Term.

     "Environmental Laws" shall mean any applicable federal, state, foreign, or
      ------------------                                                       
local law, statute, ordinance, rule, regulation, or rule of common law (now or
hereafter in effect), or any binding and enforceable judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree, or judgment, relating to (1) the use, generation, treatment, management,
storage, transportation or other handling of Hazardous Materials, (2)
occupational safety and health, industrial hygiene, land use or the protection
of human, plant or animal health or welfare, and (3) environmental matters,
including, without limitation, those relating to fines, injunctions, penalties,
damages, contribution, cost recovery, losses or injuries resulting from the
release, threatened release, discharge, disposal or other handling of Hazardous
Materials, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the
Clean Air Act (42 U.S.C. Section 7401 et seq.), the Clean Water Act (29 U.S.C.
Section 1251 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601
et seq.), the Federal Insecticide, Fungicide, Rodenticide Act (7 U.S.C. Section
136 et seq.), the Safe Drinking Water Act (42 U.S.C. Section 300f et seq.), the
Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.), the
Emergency Planning and Community Right-to-Know Act (42 U.S.C. Section 11001 et
seq.), any analogous present or future federal, state, foreign, or local law,

                                       4
<PAGE>
 
statute or ordinance, and any regulation or rule promulgated thereunder, each as
amended or supplemented.

     "Environmental Violation" shall mean any violation of any Environmental Law
      -----------------------                                                   
at or relating to any Premises.

     "Event of Default" shall have the meaning set forth in Section 20.1.
      ----------------                                                   

     "Expansion" shall have the meaning set forth in Section 9.1.
      ---------                                                  

     "Expansion Rent" shall have the meaning set forth in Section 5.5.
      --------------                                                  

     "Extended Term(s)" shall have the meaning set forth in Section 3.2.
      ----------------                                                  

     "Fair Market Value" shall mean the fair market value of any affected Hotel
      -----------------                                                        
determined in accordance with the appraisal procedures set forth in 
Section 22.3. Fair Market Value shall be determined without regard to any
condition such as casualty or condemnation which might have given rise to the
need to determine the Fair Market Value, and by assuming the Hotel is
unencumbered by this Lease or by any encumbrance securing funded indebtedness;
provided, however, that if any such encumbrance may not be removed without
penalty, the positive or negative effect on Fair Market Value attributable to
the interest rate, amortization schedule, maturity date, prepayment penalty and
other terms and conditions of such encumbrance shall be taken into account. The
Hotel shall be valued at its highest and best use which shall be presumed to be
as a hotel operated in accordance with the provisions of this Lease. Fair Market
Value of the Hotel shall not include "going concern" or "business enterprise"
value attributable to factors other than the highest and best use of the Hotel.

     "FF&E" shall mean the Furnishings, Fixtures, machinery and equipment
      ----                                                               
installed and used in any Hotel, including, without limitation, floor and window
coverings, decorative light fixtures and equipment.

     "FF&E Reserve Account" shall have the meaning set forth in Section 10.2.
      --------------------                                                   

     "Fiscal Year" shall mean Tenant's Fiscal Year which ends at midnight on
      -----------                                                           
December 31 in each calendar year.  If Tenant's Fiscal Year is changed in the
future, appropriate adjustment to this Lease's reporting and accounting
procedures shall be made; provided, however, that no such change or adjustment
shall alter the Term of this Lease or in any way reduce the payment of
Percentage Rent or other payments due Landlord hereunder.

     "Fixed Asset Supplies" shall mean supply items included within "Property
      --------------------                                                   
and Equipment" under the Uniform System of Accounts including linen, china,
glassware, silver, uniforms, and similar items.

     "Fixtures" shall mean all permanently affixed equipment, machinery,
      --------                                                          
fixtures, and other items of real and/or personal property, including all
components thereof, now and hereafter located in, on or used in connection with
and permanently affixed to or incorporated into any Hotel, including, without
limitation, all furnaces, boilers, heaters, electrical equipment, heating,
plumbing, lighting, ventilating, refrigerating, air and water pollution control,
waste disposal, air-cooling and air-conditioning systems and apparatus,
sprinkler systems and fire and theft protection equipment, all of which, to the
greatest extent permitted by law, are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto.

                                       5
<PAGE>
 
     "Furnishings" shall mean all furniture and furnishings (including art work
      -----------                                                              
and other items of decor) for guest rooms, public areas and non-public areas,
and movable equipment (but not Fixtures), inventory and linens.

     "GDP Deflator" shall mean the "Gross Domestic Product Implicit Price
      ------------                                                       
Deflator" issued from time to time by the United Sates Bureau of Economic
Analysis of the Department of Commerce, or if the aforesaid GDP Deflator is not
at such time so prepared and published, any comparable index selected by
Landlord and reasonably satisfactory to Tenant (a "Substitute Index") then
prepared and published by an agency of the Government of the United States,
appropriately adjusted for changes in the manner in which such index is prepared
and/or year upon which such index is based.  Except as otherwise expressly
stated herein, whenever a number or amount is required to be "adjusted by the
GDP Deflator", or similar terminology, such adjustment shall be equal to the
percentage increase in the GDP Deflator which is issued for the month which is
two months earlier than the month in which such adjustment is to be made as
compared to the GDP Deflator which was issued for the month which is two months
earlier than the month in which the Commencement Date occurred, it being agreed
that for purposes of this Lease, no GDP Deflator adjustment shall operate to
decrease any sum or number specified in this Lease.

     "Hazardous Materials" shall mean (1) any substance or material defined as
      -------------------                                                     
or included in the definition of one or more of any of the following:
"hazardous material," "hazardous waste," "hazardous substance," "regulated
substance," "toxic substance," "pollutant," "contaminant," "radioactive
material," or any other similar designation in, or otherwise subject to
regulation under an Environmental Law, (2) any oil, petroleum, petroleum
fraction or petroleum derived substance, (3) any flammable substance or
explosive, (4) asbestos in any form, (5) polychlorinated biphenyls, (6) urea
formaldehyde foam insulation, (7) pesticides, and (8) any other chemical,
material or substance, exposure to which is prohibited, limited or regulated
under any Environmental Law.

     "Hotel" shall have the meaning specified in the Recitals.
      -----                                                   

     "Improvements" shall mean the buildings and structures, together with the
      ------------                                                            
electrical, mechanical, plumbing and HVAC systems installed therein, parking
lots and all other improvements and FF&E (other than personalty owned by Tenant)
now or hereafter located on the Land.

     "Indemnified Parties" shall have the meaning set forth in Section 8.1.
      -------------------                                                  

     "Initial Term" shall have the meaning set forth in Section 3.1.
      ------------                                                  

     "Insubstantial Taking" shall mean a condemnation of a portion of any Hotel
      --------------------                                                     
that is less than all or substantially all of, or less than a material portion
of, such Hotel if: (i) the Improvements can be restored to substantially the
same physical condition which prevailed therein and thereon prior to such
condemnation at a cost not exceeding the condemnation award payable with respect
thereto, (ii) the condemnation does not cause a material reduction in the size
or useability of any such Hotel or any material disruption to Tenant's use and
occupancy of such Hotel, and (iii) such condemnation will not materially reduce
the operating profitability of Tenant's business at the Hotel after any
restoration when compared to such profitability before the condemnation.

     "Insurance Requirements" shall mean the requirements of any and all
      ----------------------                                            
insurance policies procured in accordance with the terms hereof or required to
be carried hereunder.

                                       6
<PAGE>
 
     "Insurance Trustee" shall mean a bank, insurance company, pension fund,
      -----------------                                                     
real estate investment trust or commercial lending institution, with financial
statements audited by an independent public accounting firm and a net worth of
at least One Hundred Million Dollars ($100,000,000).  The Senior Landlord's
Mortgagee for a Hotel shall be the Insurance Trustee for such Hotel if the
Senior Landlord's Mortgagee fulfills the requirements of the first sentence of
this paragraph.  If there is no Senior Landlord's Mortgagee for such Hotel that
fulfills the requirements of the first sentence of this paragraph, the Insurance
Trustee shall be such qualifying institution as is selected by Tenant and
approved by Landlord, such approval not to be unreasonably withheld, conditioned
or delayed.

     "Inventories" shall mean "Inventories" as defined in the Uniform System of
      -----------                                                              
Accounts, such as provisions in storerooms, refrigerators, pantries and
kitchens; beverages in wine cellars and bars; other merchandise intended for
sale; fuel; mechanical supplies; stationery; and other expensed supplies and
similar items.

     "Land" shall mean all of the real property owned or leased by Landlord
      ----                                                                 
underlying the Hotels as described in Exhibits A-1 through A-17 hereto, or such
lesser area for any such Hotel that from time to time may be leased by Tenant
hereunder as set forth in this Lease.

     "Landlord" shall have the meaning set forth in the Preamble and shall
      --------                                                            
include its successors and assigns.

     "Landlord's Audit" shall have the meaning set forth in Section 5.3.
      ----------------                                                  

     "Landlord's Mortgagee" shall mean the holder of, or beneficiary under, any
      --------------------                                                     
Mortgage of Landlord's interest in any of the Hotels and/or this Lease,
including without limitation all members of any syndicate and the trustee or any
other agent thereof, if Landlord's Mortgagee consists of more than one entity or
person.

     "Landlord's Temporary Taking Award" shall have the meaning set forth in
      ---------------------------------                                     
Section 15.3.

     "Lease" shall mean this Lease between Landlord and Tenant dated as of the
      -----                                                                   
Commencement Date as the same may be from time to time amended, modified and/or
supplemented.

     "Lease Interest Rate" shall mean the Prime Rate plus two (2) percentage
      -------------------                                                   
points per annum; provided, however, that the Lease Interest Rate shall not
exceed the maximum rate of interest from time to time permitted to be charged
under applicable law with respect to the indebtedness of any party for which and
against whom such interest is charged under this Lease.

     "Lease Memorandum" shall have the meaning set forth in Section 22.2.
      ----------------                                                   

     "Lease Year" shall refer to the first four full fiscal quarters (based on
      ----------                                                              
Tenant's Fiscal Year) after the Commencement Date and to each successive four
fiscal quarter period that occurs during the Term.

     "Leasehold Purchase Price" shall be at any particular time during the Term,
      ------------------------                                                  
the dollar amount equal to the present value as of the date of such purchase of
the payments of Base Rent applicable to such Hotel (as determined in accordance
with the Schedule of Rent shown on Exhibit B), that would have been payable
during the period commencing on the date of such purchase and ending on the date
of expiration of the then current term of this Lease (including any Effective
Extended Term) for such Hotel, discounted to the date of purchase at an interest
rate equal to the effective interest rate on United States Treasury

                                       7
<PAGE>
 
obligations as of the month preceding the date of such purchase and having a
maturity most nearly equal to the number of months remaining in the current term
of this Lease (including any Effective Extended Term) as of the date of such
purchase.

     "Legal Requirement(s)" shall have the meaning set forth in Section 6.5.
      --------------------                                                  

     "Major Casualty" shall mean any damage to or destruction of all or any
      --------------                                                       
portion of any Hotel when such casualty is likely to result in a reduction of
40% or more of the then operating profitability of Tenant's business at such
Hotel for a period exceeding twelve (12) months based upon the assumption that
the casualty will be repaired with reasonable diligence.

     "Mortgage" shall mean any security instrument to which Landlord or Tenant
      --------                                                                
is a party and which encumbers any interest in any of the Hotels and/or this
Lease, including, without limitation, mortgages, deeds of trust, security deeds
and similar instruments.

     "Mortgagee" shall refer to each and every Landlord's Mortgagee and Tenant's
      ---------                                                                 
Mortgagee.

     "Notice" shall have the meaning set forth in Section 22.1.
      ------                                                   

     "Operating Equipment" shall mean equipment which is capital in nature, but
      -------------------                                                      
is removable and therefore not affixed to or installed permanently in a Hotel,
such as shuttle vans, cleaning equipment and other personalty utilized by Tenant
specifically for the operation of the business of the Hotel.

     "Operating Revenues" shall mean in accordance with the Uniform System of
      ------------------                                                     
Accounts all revenues received or receivable for the use, occupancy or enjoyment
of the Hotels, or any part thereof, or received or receivable by Tenant for the
sale of any goods, services or other items sold on or provided from the Premises
in the ordinary course of each Hotel's operation, including without limitation:
(a) all income and proceeds received from rental of rooms and other space within
the Hotels including net parking revenue; (b) all income and proceeds received
from food and beverage operations and from catering services conducted from any
Hotel even though rendered outside of such Hotel; (c) all income and proceeds
(amortized over the period for which it relates) from business interruption,
rental interruption and use and occupancy insurance with respect to the
operation of each Hotel (after deducting therefrom all necessary costs and
expenses incurred in the adjustment or collection thereof); (d) all awards
allocated to Tenant for condemnation for temporary use (allocated over the
period for which it relates) (after deducting therefrom all costs incurred in
the adjustment or collection thereof); and (e) all income and proceeds from
judgments, settlements and other resolutions of disputes (allocated over the
period for which it relates) with respect to matters which would be included in
"Operating Revenues" if received in the ordinary course of any Hotel's operation
(after deducting therefrom all necessary costs and expenses incurred in the
adjustment or collection thereof).  Such term shall not include:  (1) gross
receipts received by lessees, licensees or concessionaires of any Hotel to the
extent not expressly included in Operating Revenues; (2) consideration received
at the Hotel for hotel accommodations, goods and services to be provided at
other hotels, although arranged by, for or on behalf of Tenant; (3) income and
proceeds from the sale or other disposition of goods, capital assets and other
items not in the ordinary course of any Hotel's operation; (4) federal, state
and municipal excise sales and use taxes collected directly from patrons or
guests of any Hotel as part of or based on the sales receipts, room admission,
cabaret or equivalent taxes; (5) condemnation awards (except to the extent
provided in clause (d) of the first sentence of this definition); (6) reasonable
bad debt reserves taken in the ordinary course of business, subject to
adjustment; (7) gratuities paid to Hotel employees; (8) the proceeds of any
financing or sale of any Hotel, (9) insurance proceeds other than from business
interruption, rental interruption and use and occupancy

                                       8
<PAGE>
 
insurance with respect to operation of any Hotel; (10) other income or proceeds
resulting other than from the use or occupancy of any Hotel, or any part
thereof, or other than from goods, services or other items sold on or provided
from the Premises in the ordinary course of business; or (11) interest and
income on any funds standing from time to time in any Hotel's agency or reserve
accounts.

     "Partial Condemnation Reduction Percentage" shall mean that percentage
      -----------------------------------------                            
applicable upon a condemnation equal to the fraction whose numerator is the Fair
Market Value of the condemned Hotel immediately prior to the effective date of
such condemnation less the Fair Market Value of the portion of such Hotel
remaining immediately after such condemnation has become effective, and whose
denominator is the Fair Market Value of such Hotel immediately prior to the
effective date of such condemnation.  Thus, for example, if the Fair Market
Value of the affected Hotel immediately prior to such condemnation was $20
million and the Fair Market Value of the portion of the affected Hotel remaining
immediately after such condemnation was $15 million, the Partial Condemnation
Reduction Percentage would be 25%.

     "Partial Lease Year" shall mean the period between the end of the last full
      ------------------                                                        
Lease Year and the termination of this Lease.

     "Percentage Rent" shall have the meaning set forth in Section 5.1.
      ---------------                                                  

     "Premises" shall mean all of the Land and the Improvements associated with
      --------                                                                 
the Hotels, or such lesser area or portion of each such Hotel that from time to
time may be leased by Tenant hereunder as set forth in this Lease.

     "Prime Rate"  shall mean the prime commercial lending rate as announced
      ----------                                                            
from time to time by Credit Lyonnais at its branch in New York City (or such
other financial institution as Landlord and Tenant may mutually agree in
writing), each change in said rate to be effective as of the date of such
change.

     "Prospectus" shall have the meaning set forth in Section 22.20.
      ----------                                                    

     "Renovations" shall have the meaning set forth in Section 10.2.
      -----------                                                   

     "Rent(s)" shall mean Base Rent, Percentage Rent, Additional Rent and
      -------                                                            
Expansion Rent either collectively or any one or more of same as the context may
indicate.

     "Sale of a Hotel" shall mean any sale, assignment, transfer or other
      ---------------                                                    
disposition, for value or otherwise, voluntary or involuntary, of Landlord's
title to a Hotel, including, if applicable, the Land or Landlord's leasehold
interest in the underlying ground lease for the Land or an assignment or
sublease of Landlord's leasehold interest in the underlying lease of the Hotel
but excluding any Mortgage on Landlord's interest in any Hotel and/or this
Lease.  For purposes of this Lease, a Sale of a Hotel shall also include a lease
(subject to this Lease) of all or substantially all of any Hotel or the Land
located at any such Hotel and any Change in Control of Landlord.

     "Senior Landlord's Mortgagee" for any Hotel shall mean the holder of, or
      ---------------------------                                            
beneficiary under, from time to time the most senior Mortgage against Landlord's
interest in such Hotel and/or this Lease.

     "Site Assessment" shall have the meaning ascribed to it in Section 12.2.
      ---------------                                                        

                                       9
<PAGE>
 
     "Site Reviewer"  shall have the meaning ascribed to it in Section 12.2.
      -------------                                                         

     "Substantial Taking" shall mean a condemnation of a portion of any Hotel
      ------------------                                                     
which is not an Insubstantial Taking.

     "Surviving Obligations" shall mean any obligations of Tenant under this
      ---------------------                                                 
Lease, actual or contingent, which arise on or prior to the expiration or prior
termination of this Lease and which survive such expiration or termination by
their own terms.

     "Tenant" shall have the meaning set forth in the Preamble and shall include
      ------                                                                    
its successors and assigns.

     "Tenant's Mortgagee" shall mean the holder of, or beneficiary under any
      ------------------                                                    
Mortgage of Tenant's interest in any of the Hotels and/or this Lease, including
without limitation all members of any syndicate and the trustee or any other
agent thereof, if Tenant's Mortgagee consists of more than one entity or person.

     "Term" shall have the meaning set forth in Section 3.1.
      ----                                                  

     "Uniform System of Accounts" shall mean the Uniform System of Accounts for
      --------------------------                                               
Hotels, as adopted and published from time to time by the American Hotel and
Motel Association. [Eighth Revised Edition, 1986, as published by the Hotel
Association of New York City, Inc.]

     "Use Award" shall have the meaning set forth in Section 15.3.
      ---------                                                   

     "Year" shall mean a calendar year commencing on January 1 and ending on
      ----                                                                  
December 31.  A "Partial Year" shall mean that portion of a Year that occurs
during the Term in the case of the Year in which the Commencement Date occurs
and the Year in which the expiration or termination of this Lease occurs.


                                  ARTICLE III
                                      TERM
                                      ----

     Section 3.1  Term.  The "Term" shall consist of the Initial Term and the
                  ----                                                       
Extended Term(s), if any.  The Initial Term of this Lease shall commence on the
Commencement Date, and, unless sooner terminated as otherwise provided herein,
shall expire on December 31, 2010.

     Section 3.2  Extended Term.  If Tenant has not given Notice of its
                  -------------                                        
intention to terminate this Lease with respect to any Hotel pursuant to 
Section 3.3 and the Initial Term or any then current Extended Term with respect
to such Hotel has not been sooner terminated, the Term of this Lease with
respect to each such Hotel shall automatically be extended on the same terms and
conditions as set forth herein for an Extended Term of five (5) years (the
"Extended Term"); provided, however, that there shall not be more than five such
Extended Terms and, if the Land for such Hotel is leased by Landlord, no such
Term shall extend in excess of one month less than the remaining term of
Landlord's leasehold interest in such Land. Notwithstanding the foregoing,
Tenant may elect at any time throughout the Term to exercise, by Notice to
Landlord, its option to extend the Term with respect to any or all Hotels
through any or all Extended Terms. If and to the extent Tenant elects by written
notice to Landlord to exercise its option to extend the Term for any such Hotel
through any Extended Term, Tenant's option to terminate this

                                      10
<PAGE>
 
Lease pursuant to Section 3.3 with respect to such Extended Term for which
Tenant has exercised its extension option shall no longer be applicable, but
such option to terminate pursuant to Section 3.3 shall continue to apply to any
Extended Term with respect to which such option to extend was not exercised
pursuant to this Section 3.2.  All elections to extend the Term shall be
irrevocable after exercise.

     Section 3.3  Notice of Termination.  Tenant may terminate this Lease with
                  ---------------------                                       
respect to any Hotel at the end of the Initial Term or at the end of any
Extended Term upon Notice to Landlord not less than twelve (12) calendar months
prior to the expiration of the Initial Term or the then current Extended Term,
as the case may be.  In addition, Tenant may terminate this Lease with respect
to any Hotel if Tenant gives a Notice of termination to Landlord after the date
which is twelve (12) months prior to the expiration of the Initial Term or the
then current Extended Term, as the case may be (but prior to the last day of the
Initial Term or the then current Extended Term and prior to the expiration of
the thirty (30) day period referenced below), and in such event this Lease shall
terminate with respect to such Hotel on the date which is twelve (12) months
after the date upon which Tenant delivers such Notice; except that if, after the
beginning of the twelve (12) month period prior to the expiration of the Initial
Term or the then current Extended Term, as the case may be, Tenant does not give
a Notice of termination within thirty (30) days after Landlord requests Tenant
to notify Landlord whether Tenant intends to terminate this Lease with respect
to all or any portion of the Premises, the Term of this Lease shall be
automatically extended with respect to the portion of the Premises that was the
subject of Landlord's request for the next Extended Term, and Tenant's right to
terminate this Lease with respect to such portion of the Premises prior to the
expiration of the next Extended Term shall cease to have any further force or
effect.

     Section 3.4  Obligations of Parties at Termination
                  -------------------------------------

          (a)  Promptly upon the effective date of any termination of this Lease
     with respect to any Hotel or Hotels:  (i) Tenant shall peaceably surrender
     all of such Hotel or Hotels to Landlord in the same condition as existed as
     of the Commencement Date, subject only to such additions or alterations as
     have been permitted pursuant to Article IX hereof and subject to reasonable
     wear and tear; (ii) Tenant shall assign and deliver to Landlord Tenant's
     entire interest in any and all service contracts, guaranties and warranties
     relating to the construction, improvement, alteration and repair of such
     Hotels and all architectural and engineering plans, drawings and
     specifications related thereto; (iii) if Landlord exercises its option
     described in subsection 10.3(a) to purchase certain equipment relating to
     such Hotel or Hotels from Tenant, Tenant shall assign and deliver
     appropriate title documentation and possession of such equipment; and (iv)
     if Landlord so requests, Tenant shall cause any person or entity occupying
     the Premises by, through or under Tenant to be evicted and removed from the
     Premises.

          (b)  Rent relating to such Hotel or Hotels shall be paid through the
     date of termination.  Within one hundred twenty (120) days after this Lease
     terminates, Tenant shall deliver to Landlord a complete and final
     accounting, prepared in accordance with the provisions of Section 5.3
     hereof, of Operating Revenues relating to such Hotel or Hotels together
     with all payments of Rent relating to such Hotel or Hotels due hereunder
     and, if Landlord opted to purchase the equipment described in Subsection
     10.3(a), the purchase price therefor.  Landlord's right to audit Tenant's
     books and records as described in Section 5.3 and to receive Percentage
     Rent and Additional Rent relating to such Hotel or Hotels, if any, together
     with interest at the Lease Interest Rate shall survive the termination of
     this Lease.

          (c)  If Landlord, directly or indirectly, intends to conduct upon
     termination of this Lease a business or use at any of the Hotels similar to
     Tenant's business or use at such Hotel, Tenant,

                                      11
<PAGE>
 
     at Landlord's request, shall: (i) make available to Landlord such books and
     records as are appropriate to such business and/or use (but not including
     employee records that must remain confidential either under Legal
     Requirements or reasonable policies of Tenant, or any proprietary
     information or property of Tenant), and (ii) assign or transfer to Landlord
     or its designee, to the extent permitted by Legal Requirements, all
     licenses, permits, permissions and approvals pertinent to the conduct of
     such business or use at such Hotel; provided that if Tenant has expended
     any of its own funds within the five (5) year period preceding the
     termination date in the acquisition or maintenance of any such license,
     permit, permission or approval (other than annual license fees whether
     prepaid or paid currently), or if there are any deposits or escrow funds
     relevant thereto that Tenant assigns and transfers to Landlord, Landlord
     shall, as a condition of receiving an assignment or transfer of such
     license, permit, deposit, escrow fund, permission or approval (if requested
     by Landlord), reimburse Tenant therefor.  The cost of effectuating any such
     transfer of any licenses, permits, permissions or approvals shall be borne
     by Landlord except when termination is due to Tenant's default.

          (d)  The provisions of Section 10.3 shall apply upon termination of
     this Lease with respect to all or any portion of the Premises, and Tenant
     shall take all other appropriate actions as required under all other
     applicable provisions of this Lease.  The provisions of this Section 3.4,
     as well as all Surviving Obligations, Landlord's right to receive the late
     charges described in Section 5.2(b), interest on sums outstanding at the
     Lease Interest Rate and legal fees (but if termination was not due to an
     Event of Default such Legal Fees shall be reasonable legal fees) and court
     costs, shall survive termination of this Lease with respect to all or any
     portion of the Premises.


                                   ARTICLE IV
                              ABSOLUTELY NET LEASE
                              --------------------

     Section 4.1  Net Lease.  Subject to any express obligation of Landlord to
                  ---------                                                   
the contrary under this Lease, it is expressly understood and agreed by and
between the parties that this Lease is an absolutely net lease, and that Tenant
shall pay the Rents and all other sums payable hereunder to or on behalf of
Landlord without Notice or demand and without set-off, counterclaim, abatement,
suspension, deduction, or defense, and Landlord is not obligated to expend any
of its funds in connection with the Hotels, Premises or this Lease.

     Section 4.2  Non-Terminability of Lease
                  --------------------------

          (a)  Except as otherwise expressly provided herein, this Lease shall
     not terminate, nor shall Tenant have any right to terminate this Lease, nor
     shall the obligations hereunder of Tenant be otherwise affected, for any
     reason whatsoever, including without limitation by reason of any damage to
     or destruction of all or any part of the Premises from whatever cause, the
     taking of the Premises or any portion thereof by condemnation, the
     prohibition, limitation or restriction of Tenant's use of the Premises, or
     interference with such use by any private person or corporation or by
     reason of any eviction or otherwise, or Tenant's acquisition of ownership
     of the Premises otherwise than pursuant to an express provision of this
     Lease, or for any other cause whether similar or dissimilar to the
     foregoing, any present or future Legal Requirement to the contrary
     notwithstanding, it being the intention of the parties hereto that the Rent
     and all other charges payable hereunder to or on behalf of Landlord, shall
     continue to be payable in all events

                                      12
<PAGE>
 
     and the obligations of Tenant hereunder shall continue unaffected, unless
     the requirement to pay or perform the same shall be terminated pursuant to
     an express provision of this Lease.

          (b)  Tenant covenants and agrees that it will remain obligated under
     this Lease in accordance with its terms, and that Tenant will not take any
     action to terminate, rescind, reject or avoid this Lease or any term, part,
     or provision hereof, notwithstanding the bankruptcy, insolvency,
     reorganization, composition, readjustment, liquidation, dissolution,
     winding-up or other proceeding affecting Landlord or any assignee of
     Landlord in any such proceeding and notwithstanding any action with respect
     to this Lease which may be taken by any trustee or receiver of Landlord or
     of any assignee of Landlord in any such proceeding or by any court in any
     such proceeding.

          (c)  Except as otherwise expressly provided in this Lease, Tenant
     waives all rights now or hereafter conferred by law or obtainable in equity
     (i) to quit, terminate or surrender this Lease or the Premises, or any part
     thereof, or (ii) to any abatement, suspension, deferment or reduction of
     any Rents or charges payable hereunder to or on behalf of Landlord,
     regardless of whether such rights shall arise from any present or future
     constitution, statute or rule of law.


                                   ARTICLE V
                                      RENT
                                      ----

     Section 5.1  Base Rent and Percentage Rent.  Tenant covenants to pay
                  -----------------------------                          
Landlord Rent for the Premises as follows:

          (a)  Commencing with the Commencement Date and continuing to the end
     of the Term (including all Extended Terms), "Base Rent" in an amount equal
     to Fifteen Million Dollars ($15,000,000) per Year for each Year; plus

          (b)  Commencing with the Second Lease Year and continuing for each
     succeeding Lease Year until the end of the Term (including during all
     Extended Terms), "Percentage Rent" equal to seven and one half percent
     (7.5%) of that portion of the Operating Revenues for all Hotels for such
     Lease Year that exceed the total Operating Revenues for the first Lease
     Year ("Base Revenues"); provided, however, that in the case of a Partial
     Lease Year, Percentage Rent shall be calculated by comparing Operating
     Revenues for the Partial Lease Year against Base Revenues for the
     comparable period of the first Lease Year.  Once Base Revenues are
     calculated and such figures are certified by Tenant's auditors and chief
     financial officer, and Landlord has concurred in such calculation, the Base
     Revenues with respect to each Hotel shall be inserted on Exhibit B and the
     so revised Exhibit B shall become and remain a part of this Lease to be
     utilized for reference purposes if a future recalculation of Base Revenues
     becomes necessary due to the termination of this Lease with respect to any
     one or more, but not all, Hotels.

     Section 5.2  Payment of Rent
                  ---------------

          (a)  Base Rent shall be paid (i) with respect to each calendar month
     in each of the first two (2) fiscal quarters (based on Tenant's Fiscal
     Year) after the Commencement Date, monthly in arrears, in six equal
     payments of One Million Two Hundred Fifty Thousand Dollars ($1,250,000) on
     or before the last business day of each such calendar month, and (ii) with
     respect to all periods thereafter during the Term, quarterly in arrears, in
     four equal payments of Three

                                      13
<PAGE>
 
     Million Seven Hundred Fifty Thousand Dollars ($3,750,000), on or before the
     last business day of each March, June, September and December during each
     Year of the Term.  Base Rent for any partial quarter shall be prorated and
     computed by multiplying the quarterly Base Rent by a fraction, the
     numerator of which is the number of days in such partial quarter and the
     denominator of which is ninety.  In the event this Lease terminates
     pursuant to the specific terms hereof with respect to one or more Hotels
     (but not all Hotels), Base Rent shall be recalculated in accordance with
     the Schedule contained on Exhibit B, and Percentage Rent shall be
     recalculated by deleting the Base Revenues of the so terminated Hotel or
     Hotels from the Base Revenues utilized to calculate Percentage Rent.
     Percentage Rent shall be calculated on an annual basis beginning at the end
     of the second Lease Year and then for each succeeding Lease Year.  The
     calculation of Operating Revenues for the then ended Lease Year shall be
     made by Tenant and provided to Landlord within one hundred and twenty (120)
     days after the end of such Lease Year in accordance with Section 5.3(a).
     Tenant shall pay the Percentage Rent annually in arrears on or before one
     hundred twenty (120) days after the end of the applicable Lease Year.  All
     installments of Rent not paid by Tenant when the same become due shall bear
     interest from the date due until paid at the Lease Interest Rate.  Time is
     of the essence with respect to this obligation, and installments of Rent
     shall become due and payable without Notice or demand.  All Rent payments
     shall be made in lawful money of the United States of America and shall be
     paid to Landlord at Landlord's address for receipt of Notices or to such
     other party and/or to such other address as Landlord may from time to time
     designate by Notice to Tenant in accordance with this Lease.

          (b)  Tenant acknowledges that late payment of Rent by Tenant to
     Landlord will cause Landlord to incur costs not contemplated in this Lease,
     the exact amount of which will be extremely difficult to ascertain.  Such
     costs include, but are not limited to, processing and accounting charges
     and late charges that may be imposed upon Landlord by the terms of any
     Mortgage on any or all of the Hotels.  Accordingly, in addition to the
     interest payable by Tenant pursuant to Section 5.2(a), after a period of
     five (5) days following the date all or any portion of Rent is due and
     unpaid Tenant shall pay to Landlord an amount equal to five percent (5%) of
     the amount of such unpaid installment or portion thereof. The parties agree
     such late charges represent a fair and reasonable estimate of the cost
     Landlord will incur by reason of the late payment by Tenant.

          (c)  If any of the Hotels are damaged by fire or other casualty and
     Tenant must discontinue all or substantially all business operations
     therein for a period of time in excess of the period covered by business
     interruption insurance required to be carried hereunder, Tenant's
     obligation to pay Percentage Rent for the Lease Year in which Tenant has so
     discontinued its business operations shall be computed as if such Lease
     Year were a Partial Lease Year and as if the number of days in such Partial
     Lease Year excluded the number of days during which Tenant discontinued all
     or substantially all of its business operations at such Hotel and which are
     not covered by business interruption insurance required to be carried by
     Tenant hereunder.  In no event shall Tenant's obligation to pay Base Rent
     be abated for any reason whatsoever, including without limitation, any fire
     or other casualty.

          (d)  If, at any time during the Term, there is a good faith dispute
     between Landlord and Tenant with respect to the amount of Percentage Rent
     properly due hereunder, Tenant's failure to pay the disputed amount shall
     not be deemed an Event of Default with respect to the provisions of
     Sections 20.1 and/or 20.2 until such time as the dispute is resolved;
     provided, that Tenant shall promptly pay any such disputed amount of
     Percentage Rent claimed by Landlord into an escrow

                                      14
<PAGE>
 
     account specifically created for such purpose, to be held and invested by
     the Insurance Trustee or such other escrow agent as may be mutually
     approved by Landlord and Tenant.  Any amount finally determined to be due
     Landlord shall bear interest at the Lease Interest Rate from the date which
     is one hundred twenty (120) days after the end of the Lease Year or Partial
     Lease Year as to which such disputed Percentage Rent arose until paid.  Any
     amounts in such escrow account, including any interest earned thereon, not
     required to be paid to Landlord shall be returned to Tenant.  Tenant shall
     have no right of offset as against any Base Rent for any overpayments of
     Percentage Rent.

     Section 5.3  Records; Audit by Landlord
                  --------------------------

          (a)  Tenant shall keep, in appropriate detail and in accordance with
     standard accounting practices, at its principal business office, records of
     all sums constituting and/or specifically excluded from Operating Revenues
     with respect to each Fiscal Year for a period of not less than four (4)
     Fiscal Years after the expiration of the Fiscal Year to which such records
     relate.  Within one hundred twenty (120) days after the end of the first
     Lease Year, Tenant shall deliver to Landlord a statement from an
     appropriate corporate officer of Tenant and, within two hundred ten (210)
     days after the end of the First Lease Year, from Tenant's independent
     certified public accountants, certifying the calculation of Base Revenues
     required by Section 5.1(b) hereof.  Within one hundred twenty (120) days
     after the end of each subsequent Lease Year, Tenant shall deliver to
     Landlord a statement from an appropriate corporate officer of Tenant
     certifying the annual Operating Revenues for such Lease Year.  If there is
     any overpayment of Percentage Rent, the excess shall be credited against
     any future Percentage Rent when next due.  If Landlord delivers its written
     request to Tenant for copies of records and data to support such statement,
     then Tenant shall provide same to Landlord within thirty (30) days after
     receipt of such written request.  Landlord shall be entitled to rely
     directly on Tenant's independent outside certified auditors or, at
     Landlord's option and at its own expense, to audit such statement and
     supporting records and data, provided Landlord shall cause such audit to
     commence within ninety (90) days after receipt of said statement and to be
     completed within one hundred twenty (120) days after receipt of all
     information requested by Landlord reasonably related to such audit.  In
     order to provide finality, absent fraud and, except as otherwise provided
     below in this Section, Tenant shall be entitled to treat such statement as
     being correct if Landlord does not so audit or otherwise challenge said
     statement within the time period above provided, and Landlord shall have no
     right thereafter to question or examine the same.  If the audit or any
     audit hereinafter referred to in this Section (collectively a "Landlord's
     Audit") discloses an understatement of annual Operating Revenues, Tenant
     shall immediately pay Landlord the additional Percentage Rent found to be
     due plus interest thereon at the Lease Interest Rate from the date such
     additional Percentage Rent was otherwise due until the date actually paid.
     However, if Landlord's Audit discloses that Percentage Rent has been
     overpaid by Tenant, the excess shall be credited against any future
     Percentage Rent when next due hereunder.  Tenant shall have the right to be
     informed as to any final results of any such audit.  In addition, if
     Landlord's Audit discloses any underreporting of the total Operating
     Revenues for any Lease Year, which underreporting is in excess of three
     percent (3%) of the Operating Revenue for such Lease Year, Tenant shall,
     upon demand and receipt of evidence of payment, pay Landlord as Additional
     Rent the reasonable cost of Landlord's Audit; and Landlord shall have the
     option, at Tenant's expense, to audit the certified statements and
     supporting records and data for the two (2) immediately preceding Lease
     Years, with such audit to be commenced by Landlord within sixty (60) days
     after Landlord's receipt of the initial audit showing an underpayment of
     Percentage Rent, and to be completed within one

                                      15
<PAGE>
 
     hundred twenty (120) days after receipt of all information requested by
     Landlord reasonably related to such audit.

          (b)  In addition to the deliveries required under Section 5.3(a), 
     Tenant shall, within one hundred twenty (120) days after the end of each
     Fiscal Year that ends during the Term, deliver to Landlord a statement from
     an appropriate corporate officer of Tenant and from Tenant's independent
     certified public accountants, certifying the annual Operating Revenues for
     such Fiscal Year.

          (c)  Landlord shall keep all information regarding annual Operating
     Revenues and Base Revenues with respect to the Premises in strict
     confidence and shall not divulge such information to third parties except:
     (i) to Landlord's accountants and attorneys, (ii) to existing or
     prospective purchasers, Mortgagees, partners, lenders, or trustees of
     Landlord, (iii) in connection with any claim relating to Percentage Rent
     payable under this Lease, (iv) as may be required by law, or (v) to the
     holders of direct and indirect beneficial ownership interests in Landlord
     and its Affiliates.

     Section 5.4  Subleases, Licenses, and Concessions
                  ------------------------------------

          (a)  If Tenant should sublease all or substantially all of any Hotel,
     then notwithstanding any other provision of this Lease to the contrary,
     Operating Revenues shall not include any rent or other consideration paid
     by such sublessee to Tenant but Operating Revenues shall include all gross
     receipts of such sublessee that would be included in Operating Revenues if
     realized by Tenant.

          (b)  If Tenant should ever contract with a third party sublessee,
     licensee, or concessionaire to deliver goods or services to the customers
     at any of the Hotels, which goods and services had previously been provided
     by Tenant to Tenant's customers at such Hotel (and exclusive of any such
     service businesses which individually do not utilize space exceeding 500
     square feet of rentable area), then notwithstanding any other provision of
     this Lease to the contrary, the gross receipts of such sublessee(s),
     licensee(s), and concessionaire(s) that would be included in Operating
     Revenues if realized by Tenant shall be included in Operating Revenues; and
     in any case in which the gross receipts of any sublessee, licensee, or
     concessionaire are included in Operating Revenues hereunder, the rental,
     license, or concession fees, if any, paid by such sublessee, licensee, or
     concessionaire to Tenant shall not be included in Operating Revenues;
     provided, however, that the provisions of this Section 5.4(b) shall not
     apply to the gross receipts of any one or more sublessees, licensees, or
     concessionaires if the gross receipts of all such sublessees, licensees, or
     concessionaires in the applicable Lease Year do not exceed Fifty Thousand
     Dollars ($50,000), which $50,000 amount shall be increased on the fifth
     (5th) anniversary of the Commencement Date and every fifth (5th)
     anniversary thereafter by an amount proportionate to the percentage
     increase in the GDP Deflator over the preceding five (5) year period.

          (c)  If any sublessee, licensee, or concessionaire that delivers goods
     or services to Tenant's customers at any Hotel is an Affiliate of Tenant,
     the gross receipts of such sublessee, licensee, or concessionaire that
     would be included in Operating Revenues if realized by Tenant shall be
     included in Operating Revenues, and the rental, license, or concession
     fees, if any, paid by such sublessee, licensee, or concessionaire to Tenant
     shall not be included in Operating Revenues.

                                      16
<PAGE>
 
          (d)  Tenant shall not enter into any sublease, license, or concession
     agreement or amendment thereto in which the determination of the amount of
     rent, license, or concession fee depends in whole or in part on, or is
     expressed in whole or in part as, a percentage of the income or profits
     derived by such sublessee, licensee, or concessionaire or any other person
     or entity.  In any lease, license, or concession agreement or amendment
     thereto executed by Tenant in which the amount of rent, license, or
     concession fee is determined in whole or in part by reference to the gross
     sales or gross receipts of the sublessee, licensee, or concessionaire or
     any other person or entity, such sublease, license, or concession agreement
     shall contain a provision stating that the gross receipts or gross sales of
     the sublessee, licensee, or concessionaire or any other person or entity
     shall not be determined in whole or in part by reference to the income or
     profits derived by the sublessee, licensee, or concessionaire or any other
     person or entity from the Premises or the subject matter or such lease,
     license, or concession agreement (other than an amount based on a fixed
     percentage or percentages of gross receipts or gross sales).  If Tenant
     violates the provisions of this paragraph with respect to any sublease,
     license, or concession agreement, then in addition to any other rights and
     remedies that Landlord may have under this Lease or applicable law, the
     gross receipts of such sublessee, licensee, or concessionaire under such
     sublease, license, or concession agreement that would be included in
     Operating Revenues if realized by Tenant shall be included in Operating
     Revenues and the rental, license, or concession fee, if any, paid by such
     sublessee, licensee, or concessionaire shall not be included in Operating
     Revenues.

     Section 5.5  Rent Upon Certain Expansions.  If Tenant completes any
                  ----------------------------                          
Expansion at any Hotel with respect to which: (i) the cost of such Expansion
exceeds One Million Dollars ($1,000,000), and (ii) such Expansion results,
either by itself or aggregated with any and all prior Expansions, in an increase
greater than five percent (5%) in the capacity (measured either in terms of net
useable building square footage, or the aggregate number of rooms) of such Hotel
then, from the first day of the first month following the date of completion of
such Expansion throughout the remaining Term of this Lease, Tenant shall pay in
lieu of Percentage Rent with respect to such Hotel the lesser of either (x)
Percentage Rent for such Hotel calculated pursuant to Section 5.1 hereof, or 
(y) Expansion Rent for such Hotel for each Lease Year or portion thereof during
the remainder of the Term hereof in an amount equal to the average amount of
Percentage Rent payable by Tenant with respect to such Hotel (without regard to
the Gross Income from any other Hotels included in the Premises) for the two (2)
full Lease Years immediately preceding the commencement of construction of such
Expansion; provided, however, that the amount of Expansion Rent shall be
increased on each anniversary of the date such Expansion Rent first became
effective by an amount proportionate to the percentage increase in the GDP
Deflator over the preceding twelve (12) month period.


                                   ARTICLE VI
                     OPERATION AND MAINTENANCE OF PREMISES
                     -------------------------------------

     Section 6.1  Operation and Maintenance of Premises.
                  ------------------------------------- 

          (a)  Tenant shall not alter its operational and/or management
     practices with respect to any of the Hotels so as to cause the standard at
     which the Hotels are operated and managed to deviate significantly from the
     standard of operation and management existing on the Commencement Date,
     without obtaining Landlord's prior written consent.

                                      17
<PAGE>
 
          (b) Throughout the Term, Tenant, at its own expense, shall keep and
     maintain each of the Hotels in condition and repair at least as good as the
     condition and repair of each Hotel on the Commencement Date, reasonable
     wear and tear excepted, and in conformity with all applicable Legal
     Requirements and shall make or cause to be made all ordinary and
     extraordinary, foreseen and unforeseen items of maintenance, repair,
     replacement and alteration to the Premises as necessary for such purpose.
     Landlord shall not be required to maintain, repair, or rebuild all or any
     part of the Premises.  Tenant shall provide all services required and
     perform all obligations incurred in connection with the use, operation and
     maintenance of the Premises, and Tenant shall be responsible for the
     payment of all costs and expenses incurred in the use, operation, or
     maintenance of the Premises, including, but not limited to, rents and other
     amounts owed under any ground lease, management fees, real estate taxes,
     insurance, supplies and materials used in the operation and maintenance of
     the Premises, the cost of all maintenance, janitorial, security and service
     agreements for the Premises and the equipment therein and thereon, and the
     cost of electricity, water and any and all other utilities, supplied to the
     Premises, but not including any costs or expenses affirmatively incurred by
     Landlord that are not attributable to a default by Tenant in the
     performance of Tenant's obligations under this Lease.

     Section 6.2  Taxes
                  -----

          (a)  Tenant shall pay, prior to delinquency:  (i) all taxes, including
     sales, excise, value added, use, real estate and personal property taxes,
     assessments, levies and fees, water and sewer rents and charges, vault
     charges, and all other taxes, levies, assessments, and other similar
     charges, general and special, ordinary and extraordinary, foreseen and
     unforeseen, of every kind and nature whatsoever, which are imposed or
     levied upon or assessed against or which arise with respect to the
     Premises, any Rent or other sums payable hereunder, this Lease or the
     leasehold estate hereby created or which arise in respect of the ownership
     of the Premises by Landlord, the operation, possession or use of the
     Premises by Tenant or the leasing, operation, possession or use of the
     Premises; (ii) all gross receipts, sales, excise or similar taxes (i.e.,
     taxes based upon gross income which fail to take into account deductions
     with respect to the Premises, such as depreciation, interest, taxes or
     ordinary and necessary business expenses) imposed or levied upon, assessed
     against or measured by any Rent, or other issues or profits derived from
     the Premises or other sums payable hereunder; and (iii) all charges of
     utilities, communications and other services serving the Premises, together
     with any and all interest costs or penalties with respect to any of the
     foregoing.

          (b)  Notwithstanding the foregoing provisions of Section 6.2(a) but
     subject to the provisions of Section 6.2(c), Tenant shall not be required
     to pay any franchise, estate, inheritance, transfer, income or similar tax
     assessed or imposed against Landlord, any Rent or other sums payable
     hereunder, this Lease, the Land or Improvements (other than any tax
     referred to in clause (ii) of Section 6.2(a)). Tenant will furnish to
     Landlord, within ten (10) days after demand therefor, proof of payment of
     all items referred to above which are payable by Tenant.

          (c)  If, at any time, any federal, state or local governmental entity
     shall impose upon the Rent payable to Landlord any tax or other imposition
     in lieu of any existing real estate or other tax payable by Tenant as of
     the Commencement Date, then notwithstanding the provisions of 
     Section 6.2(b), Tenant, at its sole cost and expense, shall pay such tax or
     imposition on Landlord's behalf the same as if such tax or imposition had
     been levied against Tenant or Tenant's interest in the Premises, as well as
     any additional income taxes assessed against Landlord with respect to such
     payment.

                                      18
<PAGE>
 
     Section 6.3  Compliance with Requirements, Covenants and Restrictions.
                  --------------------------------------------------------  
Tenant shall comply with and cause each of the Hotels to comply with all
obligations and liabilities with respect to all Insurance Requirements
(including, without limitation, to the extent necessary to prevent cancellation
thereof and to insure full payment of any claims made under such policies).
Tenant shall comply with, cause each of the Hotels to comply with, and shall
assume all easements, agreements, covenants, conditions and restrictions
applicable to each such Hotel or the ownership, operation, use or possession
thereof that are of record on the Commencement Date or are hereafter executed by
Tenant or are hereafter consented to by Tenant in writing, including, without
limitation, (i) any superior ground lease currently in effect with respect to
any portion of the Premises, and (ii) any Mortgage or other agreement executed
directly in connection therewith.  During the Term, Tenant will not enter into
or consent to any easements, covenants, conditions or restrictions which would
materially affect any Hotel beyond the Term or any termination of this Lease
without the prior consent of Landlord, which consent will not be unreasonably
withheld, conditioned, or delayed.

     Section 6.4  Landlord's Right to Perform Tenant Obligations.  If Tenant
                  ----------------------------------------------            
fails promptly to make any repairs, payments or otherwise take any actions that
are Tenant's obligation to make or do under this Lease, Landlord, at its option,
may make or perform same at the expiration of any applicable Notice and grace
period provided for herein (except that upon any emergency presenting immediate
danger to person or property, such Notice and grace period shall only be what is
reasonable under the circumstances), and Tenant shall pay Landlord, upon demand
and receipt of evidence of payment, as Additional Rent, Landlord's actual costs
plus interest thereon from the date of expenditure until paid at the Lease
Interest Rate.  The provisions of this Section 6.4 shall be for the sole and
exclusive benefit of Landlord.  Nothing contained herein shall be construed so
as to require Landlord to exercise any of its rights under this Section 6.4.

     Section 6.5  Compliance with Laws and Agreements.  Subject to the
                  -----------------------------------                 
provisions of Section 6.6, Tenant, at its sole expense, shall comply with and
cause each Hotel to comply with, and assume all obligations and liabilities with
respect to all federal, state, county, municipal and other governmental
statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and
injunctions affecting each Hotel or the construction, use or alteration thereof,
whether now or hereafter enacted and in force, including any which may (i)
require repairs, modifications or alterations in or to any Hotel; (ii) in any
way adversely affect the use and enjoyment thereof, and all permits, licenses
and authorizations and regulations relating thereto, and all covenants,
agreements, restrictions and encumbrances contained in any instruments, either
of record or known to Tenant (other than encumbrances created by Landlord
without the consent of Tenant), at any time in force affecting any Hotel,
including without limitation, all superior ground leasehold agreements and any
Mortgage or other agreement executed directly in connection therewith; or (iii)
require the cleanup or other treatment of any Hazardous Material (such laws,
orders, ordinances, agreements and regulations being herein referred to as
"Legal Requirements").

     Section 6.6  Tenant's Right to Contest.  Notwithstanding any other
                  -------------------------                            
provision of this Lease, Tenant shall have the right to contest (a) the payment
of any tax or other imposition, (b) compliance with any Legal Requirement or (c)
any lien referred to in Section 6.7 so long as (i) at the time of any such
contest, no Event of Default exists, (ii) no such contest shall subject Landlord
to the risk of criminal liability, (iii) any such taxes or impositions are paid
prior to the assessment of penalties or interest thereon unless such payment
would deprive Tenant of the right to contest the validity or amount of such
taxes or impositions, and (iv) Tenant shall contest, in good faith, the
existence, amount or validity thereof, the amount of the damages caused thereby,
or the extent of its or Landlord's liability therefor by appropriate proceedings
which shall operate during the pendency thereof to prevent or stay (1) the
collection of, or other realization upon, the matter contested, (2) the sale,
forfeiture or loss of any of the Hotels or any

                                      19
<PAGE>
 
portion thereof or any Rent to satisfy or to pay any damages caused by any of
the matters described in clauses (a), (b), and (c), (3) any interference with
the use or occupancy of any of the Hotels, (4) any interference with the payment
of any Rent, (5) the cancellation of any insurance policy, and (6) the
enforcement or execution of any injunction, order or Legal Requirement with
respect to such matter.  Tenant further agrees that any such contest shall be
prosecuted to a final conclusion or settled as expeditiously as is reasonably
possible under the circumstances.  Any rebate made on account of any taxes or
other impositions shall be repaid to the party who made such payment, or if such
payment relates to a period prior to the Commencement Date, such payment shall
be made to Tenant.  If and to the extent required by applicable law or
regulation, Landlord shall render to Tenant, at no cost to Landlord, any and all
reasonable assistance in contesting the validity or amount of any impositions,
including (if requested by Tenant) joining in the signing of any protests or
pleading which Tenant may reasonably deem advisable to file.  Tenant shall pay
any and all losses, judgments, decrees and costs in connection with any such
contest and shall, promptly after the final determination of such contest, fully
pay and discharge the amounts which shall be levied, assessed, charged or
imposed or be determined to be payable therein or in connection therewith,
together with all penalties, fines, interest and costs thereof or in connection
therewith, and perform all acts the performance of which shall be ordered or
decreed as a result thereof.  Upon termination of this Lease for any reason
other than an Event of Default, Landlord shall promptly reimburse Tenant for any
such payment made by Tenant for taxes and impositions described in 
Section 6.2(a) attributable to the Premises applicable to any period subsequent
to the termination of this Lease.

     Section 6.7  Liens.  Tenant shall keep the Premises free from any liens
                  -----                                                     
arising from any work performed, materials furnished, or obligations incurred by
or at the request of Tenant or any sublessee, licensee, or concessionaire of
Tenant or arising from any breach by Tenant of its obligations under this Lease,
and any liens with respect to any taxes Tenant is obligated to pay under this
Lease or Legal Requirements.  If any lien is filed against any Hotel or Tenant's
leasehold interest therein, or if any lien is filed against any Hotel which
arises out of any purported act or agreement of Tenant, or any sublessee,
licensee, or concessionaire of Tenant, Tenant shall discharge the same within
thirty (30) days after Tenant receives Notice of its filing by payment, filing
of the bond required by law, or endorsement over by a title company reasonably
satisfactory to Landlord (it being understood that any title company with a
national presence and a sound financial condition and reputation shall be
acceptable to Landlord).  If Tenant fails to discharge such lien within such
period, then, in addition to any other right or remedy of Landlord, Landlord
may, at its election, discharge the lien by paying the amount claimed to be due,
by obtaining the discharge by deposit with a court or a title company, or by
bonding.  Tenant shall pay on demand, as Additional Rent, any amount paid by
Landlord for the discharge or satisfaction of any such lien, together with
interest thereon from the date of such expenditure until paid at the Lease
Interest Rate, and all reasonable attorneys' fees and other costs and expenses
of Landlord incurred in defending any such action or in obtaining the discharge
of such lien, together with all necessary disbursements in connection therewith.
Nothing contained in this Lease shall be construed as constituting the consent
or request of Landlord, express or implied, to or for the performance by any
contractor, laborer, materialman, or vendor of any labor or services or for the
furnishing of any materials for any construction, alteration, addition, repair
or demolition of or to any of the Hotels or any part thereof, or as making
Tenant the agent of Landlord with respect to any such matter, and no such agency
relationship shall exist unless Tenant and Landlord so agree in writing.  Notice
is hereby given that Landlord will not be liable for any labor, services or
materials furnished or to be furnished to Tenant, or to anyone holding an
interest in the Premises or any part thereof through or under Tenant, and that
no mechanic's, materialmen's or other liens for any such labor, services or
materials shall attach to or affect the interest of Landlord in and to the
Premises; and appropriate notice to this effect will be included in the Lease
Memorandum and all construction contracts entered into by Tenant, and Tenant
shall take all steps

                                      20
<PAGE>
 
reasonably necessary under the laws of the jurisdiction(s) in which the relevant
portion of the Premises is located to protect Landlord against such liability
(including, if required, the posting of notices of nonresponsibility on
Landlord's behalf).


                                  ARTICLE VII
                                      USE
                                      ---

     Subject to the provisions of Section 6.5, Tenant shall have the right to
use the Premises for hotel and related purposes, including, without limitation,
restaurants, bars, gift shops, car rental agencies, airline reservations desks,
golf, tennis and other recreational activities, and other ancillary services.


                                  ARTICLE VIII
                                INDEMNIFICATION
                                ---------------

     Section 8.1  General Indemnification by Tenant.  In addition to the
                  ---------------------------------                     
provisions of any indemnity provided elsewhere in this Lease, Tenant shall pay,
protect, indemnify, defend, save and hold harmless, Landlord, Landlord's
constituent partners, any ground lessor, and any Affiliate, partner, trustee,
officer, director, employee, agent or shareholder or other holder of any
beneficial interest in any of them (collectively, the "Indemnified Parties" and,
individually, an "Indemnified Party"), from and against all liabilities
(including, without limitation, liabilities expressly retained by Landlord in
connection with a sale of all or any portion of the Premises), obligations,
claims, damages (including, without limitation, punitive damages), penalties and
causes of action or judgments of any nature whatsoever, whether foreseen or
unforeseen, howsoever and whensoever caused including, without limitation, if
caused prior to the Commencement Date, without regard to the form of action and
whether based on strict or statutory liability, gross negligence, negligence
(including the negligence of any Indemnified Party) or any other theory of
recovery at law or in equity, and all reasonable and documented costs and
expenses (including reasonable attorneys' fees, costs of experts, and other
legal costs and expenses), imposed upon or incurred by or asserted against any
of the Indemnified Parties by reason of or in connection with:

          (a)  Any matter pertaining to the leasing, use, non-use, occupancy,
     operation, management, condition, design, construction, maintenance, repair
     or restoration of any of the Hotels or Premises, or the employment of any
     persons at the Hotels or on the Premises, in each case whether by Tenant or
     otherwise;

          (b)  Any casualty in any matter arising from or in connection with any
     of the Premises or any operations or activities thereon, whether or not
     Landlord or any Indemnified Party has or should have knowledge or notice of
     any default or condition causing or contributing to the casualty;

          (c)  Any violation by Tenant (or any employees, agents, invitees,
     guests, sublessees, concessionaires, or licensees of Tenant) of any
     provision of this Lease, any contract or agreement to which Tenant (or any
     sublessee, concessionaire, or licensee of Tenant) is a party, any violation
     or alleged violation of any Legal Requirement (including anti-
     discrimination laws) or any Insurance Requirement; and

          (d)  Any contest undertaken by or on behalf of Tenant with respect to
     any Legal Requirement, Insurance Requirement, tax imposition or otherwise,
     regardless of whether the same

                                      21
<PAGE>
 
     is permitted pursuant to the terms hereof; except in each case to the
     extent the same directly result from the gross negligence or willful
     misconduct by an Indemnified Party.

     Section 8.2  Environmental Indemnification.  Tenant shall pay, protect,
                  -----------------------------                             
indemnify, defend, save and hold harmless the Indemnified Parties and each of
them, from and against all liabilities (including, without limitation,
liabilities expressly retained by Landlord in connection with a sale of all or
any portion of the Premises), obligations, claims (including, without
limitation, claims by third parties alleging violation of or liability under any
Environmental Law), damages (including, without limitation, punitive damages and
damages to natural resources), penalties and causes of action or judgments of
any nature whatsoever, both foreseen and unforeseen, howsoever and whensoever
caused including, without limitation, if caused prior to the Commencement Date,
without regard to the form of action and whether based on strict or statutory
liability, gross negligence, negligence (including the negligence of any
Indemnified Party or their agents), or any other theory of recovery at law or in
equity, and all reasonable and documented costs and expenses (including
reasonable attorneys' fees, costs of experts, and other legal costs and
expenses), imposed upon or incurred by or asserted against any of the
Indemnified Parties by reason of or in connection with:

          (a)  Tenant's failure to perform its duties and obligations as set
     forth in Article XII;

          (b)  All claims asserted during or after the Term by any third party
     for personal or bodily injury or death where such claims allege injury or
     damages as a result of exposure, that occurred prior to or during the Term,
     to Hazardous Material that existed at or were located in, on, or under, or
     were released from, any of the Hotels and/or any portion of the Premises at
     any time prior to or during the Term; provided, however, that this
     indemnity shall not cover claims arising by reason of the gross negligence
     or willful misconduct of Landlord and its agents, or of an Indemnified
     Party and its agents; and

          (c)  The violation of any Environmental Law occurring at any time
     prior to the Commencement Date at or in connection with the leasing, use,
     non-use, occupancy, management or operation of any of the Hotels and/or any
     portion of the Premises; the discharge, disposal or release of any
     Hazardous Material at any time prior to the Commencement Date in, on,
     under, at or from, or in connection with the leasing, use, non-use,
     occupancy, management or operation of, any of the Hotels and/or any portion
     of the Premises; or the presence of any Hazardous Material at any time
     prior to the Commencement Date in, on, under or at any of the Hotels and/or
     any portion of the Premises, including without limitation any off-site
     migration onto any of the Hotels and/or any portion of the Premises.

     Section 8.3  Defense of Indemnified Parties.  Promptly after receipt by an
                  ------------------------------                               
Indemnified Party of notice of the commencement or assertion against it of any
claim, action or proceeding, such Indemnified Party shall, if a claim in respect
thereof is to be made against Tenant under this Article VIII, notify Tenant
thereof; but the omission so to notify Tenant shall not relieve Tenant from any
liability which it may have to such Indemnified Party under this Article VIII
except to the extent that Tenant shall have been prejudiced by such failure.  As
long as no Event of Default exists and provided that representation by counsel
selected by Tenant will not, in Indemnified Party's reasonable judgment (which
judgment may be based on, without limitation, due consideration of any
obligation such Indemnified Party may have to indemnify other parties in
connection with the same matter, including requirements as to right of contest,
time of indemnification and undertaking of defense of such other parties),
prejudice Indemnified Party in any manner, Tenant, at its sole cost and expense,
shall have the right by counsel reasonably satisfactory to the Indemnified
Party, to contest, resist and defend any claim, action or proceeding with

                                      22
<PAGE>
 
respect to which it shall have received the Notice described in the preceding
sentence; provided, however, that Tenant may not compromise or otherwise dispose
of the same without the prior written approval of the Indemnified Party, such
approval not to be unreasonably withheld, conditioned, or delayed so long as the
Indemnified Party receives a full release with respect to the claim, action or
proceeding.  If an Event of Default exists, or, in Indemnified Party's judgment,
representation by counsel selected by Tenant will prejudice Indemnified Party in
any manner, such Indemnified Party shall have the right to retain its own
counsel and defend such action.  If Tenant shall have assumed responsibility for
such contest and defense, Tenant shall not be obligated to pay any attorneys'
fees or other legal costs incurred by or on behalf of the Indemnified Party
unless an Event of Default exists.  Notwithstanding the foregoing, each
Indemnified Party shall, at Tenant's request and expense, cooperate with Tenant,
at no cost or expense to the Indemnified Party, in the defense of any such
claim, action or proceeding.

     Section 8.4  Payment by Tenant.  Any amounts which become payable by Tenant
                  -----------------                                             
under this Article VIII shall be paid as Additional Rent no later than ten (10)
days after demand by the Indemnified Party entitled thereto (which demand shall
not be made more than ten (10) days prior to the proposed date of actual payment
by the Indemnified Party to a third party) and, if such payment is not timely
paid, shall bear interest at the Lease Interest Rate form the date when due to
the date of payment.

     Section 8.5  Survival.  Tenant's liability under this Article VIII shall
                  --------                                                
survive the expiration or earlier termination of this Lease.  The failure or
inability on the part of Tenant to carry insurance required to be maintained
under Article XIII shall not affect in any way its indemnification obligations
hereunder.

     Section 8.6  Continuing Obligations.  The indemnities set forth herein
                  ----------------------                                   
shall in no way affect or impact any other obligations on the part of Tenant or
any of its Affiliates that may exist under law or under any other agreement in
favor of any Indemnified Party.


                                   ARTICLE IX
                           ALTERATIONS AND EXPANSIONS
                           --------------------------

     Section 9.1  Alterations and Expansions
                  --------------------------

          (a)  Tenant may at its expense and without Landlord's prior written
     consent, make any replacements or aesthetic alterations to any of the
     Hotels.  Tenant may expand the existing Improvements or construct
     additional Improvements on the Land located at a Hotel (the expansion of
     existing Improvements or the construction of additional Improvements being
     referred to collectively herein as an "Expansion"), provided, that:  (i)
     such Expansion does not (A) increase the rooms available for occupancy at
     the subject Hotel by greater than 10% of those existing as of the
     Commencement Date; or (B) increase the net area of other revenue producing
     square footage at the subject Hotel by more than 10% of that existing as of
     the Commencement Date, (ii) no structural elements of the improvements
     shall be demolished without obtaining Landlord's prior written consent,
     which consent shall not be unreasonably withheld, conditioned, or delayed,
     and (iii) such replacements, alterations and/or Expansions will not
     adversely affect the structure or the safety of the Improvements, or
     adversely affect the electrical, heating, ventilating, air-conditioning,
     plumbing or mechanical systems or the functioning thereof.  Landlord has
     the right to require from Tenant assurances, reasonably acceptable to
     Landlord, to be delivered to Landlord prior to the commencement of any
     work, that Tenant will fully perform and complete its Expansion, free and
     clear of any mechanics' and materialmen's liens.  Tenant shall procure

                                      23
<PAGE>
 
     at its own expense such governmental approvals and permits as may be
     required for any alterations made by Tenant.  At Tenant's expense, Landlord
     shall join in submitting Tenant's plans for any necessary governmental
     approval, if required by Legal Requirements.  All such construction,
     alterations, and maintenance work done by, or for, Tenant, shall comply
     with all Legal Requirements and Insurance Requirements, and shall be
     completed in a good and workmanlike manner and with reasonable diligence,
     and will be completed in all material respects in accordance with plans
     prepared by a licensed architect.  If any Expansion will cost more than One
     Million Dollars ($1,000,000), adjusted by the GDP Deflator, (w) Tenant
     shall furnish Landlord with the plans and specifications therefor prior to
     commencing work, (x) the contractor selected by Tenant to perform the work
     shall be subject to Landlord's approval, which approval shall not be
     unreasonably withheld, conditioned or delayed, (y) Tenant shall carry
     builder's risk insurance in amounts reasonably sufficient to cover the cost
     of replacement of the work during the course of such construction, and (z)
     upon the request of Landlord or any Mortgagee, Tenant will provide
     appropriate securities, completion bonds, guarantees, or like reasonable
     assurances that construction will be completed.  Tenant shall also furnish
     Landlord with copies of any and all final plans and specifications
     (including all changes and modifications thereto) and all necessary
     governmental permits prepared or issued for all alterations (whether or not
     Landlord's consent was required in connection with such alterations).  With
     respect to any Expansion or other alteration for which Tenant must obtain
     Landlord's consent, Landlord shall not unreasonably withhold, condition or
     delay such consent.

          (b)  All replacements, alterations and substitutions of Improvements
     and Expansions made to the Premises pursuant to this Article 9.1 (but not
     the replacement FF&E, Fixed Asset Supplies, Operating Equipment or
     Inventories described in Article 10.1) shall be and remain part of the
     realty and the property of Landlord and shall be subject to this Lease.

     Section 9.2  Alterations and Expansions During Last Five Years of Term.
                  ---------------------------------------------------------  
Landlord's prior written consent, which may be withheld in Landlord's sole,
absolute, and subjective discretion, shall be required for any Expansions of or
to the Premises to be constructed during the last five (5) years of the Term
(including any Effective Extended Term); provided, however, that if Tenant shall
then exercise its rights under Section 3.2 to extend the Term hereof so that at
least five (5) years will remain in the Term once the construction is completed,
the provisions of Section 9.1(a) shall apply.


                                   ARTICLE X
                   FF&E, FIXED ASSET SUPPLIES AND INVENTORIES
                   ------------------------------------------

     Section 10.1  FF&E Upon Commencement Date.  On the Commencement Date,
                   ---------------------------                            
Landlord shall make available to Tenant all of the FF&E, Fixed Asset Supplies,
Operating Equipment and Inventories located at the Premises and to be used and
consumed at the Premises during the Term at no further cost to Tenant and the
FF&E shall be owned by Landlord and leased to Tenant hereunder as part of the
Premises.  Landlord shall have no further obligations to provide any additional
FF&E, Fixed Asset Supplies, Operating Equipment or Inventories.  Thereafter
during the Term, Tenant shall, at its own cost, replace FF&E as hereinafter
provided, and shall provide such Fixed Asset Supplies, Operating Equipment and
Inventories as it deems necessary and all such replacement FF&E, Fixed Asset
Supplies, Operating Equipment and Inventories shall be and remain the property
of Tenant.  Tenant shall also repair and replace, as necessary, all Fixtures
which, as such may be repaired or replaced, shall be and remain property of
Tenant.  Tenant shall be obligated to maintain all such Fixtures which are
necessary for the operation of the Hotel in good operating condition.

                                      24
<PAGE>
 
     Section 10.2  Replacement of FF&E.  On or before one hundred twenty (120)
                   -------------------                                        
days after the end of each Fiscal Year that ends during the Term (for purposes
of this Section 10.2, the "Subject Fiscal Year"), Tenant shall deposit, into a
reserve account to be maintained as a separate interest bearing account with a
bank or banks reasonably acceptable to Landlord (the "FF&E Reserve Account"), an
amount equal to (A) the positive result, if any, of (I) three percent (3%) of
the Operating Revenues for the subject Fiscal Year minus (II) the amount
actually expended by Tenant during the Subject Fiscal Year to repair and/or
replace FF&E, Fixtures, Fixed Asset Supplies and/or Operating Equipment at any
one or more of the Hotels (individually or collectively, the "Renovations"),
minus (B) with respect to each Fiscal Year prior to the Subject Fiscal Year, if
any, the aggregate amount, if any, by which Tenant's expenditures for
Renovations in each such prior Fiscal Year exceeded three percent (3%) of the
Operating Revenues for that Fiscal Year, less the portion of such amount which
has previously been taken into account in determining the amount to be deposited
into the FF&E Reserve Account in and with respect to Fiscal Years prior to the
Subject Fiscal Year, if any.  Tenant shall be entitled to withdraw funds from
such FF&E Reserve Account without Landlord's prior written approval; provided
that Tenant shall deliver to Landlord an annual auditor's statement, with
reasonable supporting detail, within one hundred twenty (120) days of the end of
each Fiscal Year, of all amounts expended for Renovations during such Fiscal
Year, including all amounts withdrawn from the FF&E Reserve Account.

     Section 10.3  FF&E Upon Termination
                   ---------------------

          (a)  Landlord shall have the option, to be exercised by sending Notice
     to Tenant on or before the date that is either (i) six (6) months prior to
     the date of expiration of the Term of this Lease or (ii) the date of
     termination of the Term of this Lease, if this Lease terminates prior to
     the expiration of the Term, to purchase from Tenant upon the date of
     termination of this Lease any or all of the items of FF&E, Furnishings,
     Fixed Asset Supplies, Operating Equipment and Inventories then located at
     the Premises and owned by Tenant at their then fair market value.  If the
     parties are unable to agree upon such fair market value within thirty (30)
     days following such expiration or termination, the parties shall appoint an
     independent appraiser mutually agreeable to them to determine such fair
     market value, which determination shall be net of the cost to Tenant to
     remove such items from the Premises, and which shall be binding on the
     parties.  The costs of such appraiser shall be shared equally by the
     parties.  If Landlord exercises its option to purchase, Landlord shall have
     the right to use, after the date of expiration or termination of this
     Lease, the items of FF&E, Furnishings, Fixed Asset Supplies, Operating
     Equipment and Inventories so elected to be purchased by Landlord and
     Landlord shall pay such fair market value to Tenant within thirty (30) days
     after agreement by the parties or determination by the appraiser; and this
     provision shall survive such expiration or termination.  Landlord shall not
     have the option of purchasing from Tenant any computer software that is
     proprietary to Tenant, any Affiliate, or the licensor of any of them
     (including without limitation applications used by Tenant as part of
     Tenant's accounting, centralized or local sales, business management
     systems and otherwise), or any leased equipment.  The option granted to
     Landlord under this Section 10.3 shall be in addition to, and shall not
     prevent, delay or otherwise restrict Landlord from exercising, any and all
     rights and remedies as against Tenant in the event of a default under this
     Lease, including without limitation, foreclosure of its security interest
     described in Section 10.4.

          (b)  Subject to the provisions of Section 10.3(a), Tenant shall 
     remove, at Tenant's expense, all of its Furnishings, Fixed Asset Supplies
     and Inventories from the Premises on or before the date of expiration or
     termination of this Lease and repair any damage caused to the Premises by
     such removal. If Tenant fails to remove such items by such date and/or
     fails to

                                      25
<PAGE>
 
     repair such damage, Landlord shall have the right to do so and charge
     Tenant the cost therefor together with interest thereon from the date of
     such expenditure until paid at the Lease Interest Rate.  The provisions of
     this Section 10.3 shall survive the expiration or termination of this
     Lease.

     Section 10.4  Landlord's Security Interest in Tenant's FF&E, Fixed Asset
                   ----------------------------------------------------------
Supplies, Operating Equipment and Inventories.  As security for payment by
---------------------------------------------                             
Tenant of the Rents payable hereunder and the performance of all of Tenant's
obligations under this Lease, Tenant hereby grants to Landlord a security
interest under the Uniform Commercial Code of each of the States in which a
Hotel is located, in the FF&E Reserve Account and in all FF&E, Fixed Asset
Supplies, Operating Equipment and Inventories now or hereafter owned by Tenant
and now or hereafter ordinarily used on or in the Premises.  Tenant shall
execute and deliver to Landlord such documentation as is reasonably necessary to
evidence or perfect said security interest, including without limitation, such
Uniform Commercial Code financing statements and continuation statements as
Landlord determines to be necessary from time to time to perfect and continue
the perfection of Landlord's security interest in such collateral.  Provided no
Event of Default shall exist, Tenant shall have the right to replace any such
collateral, to remove any such collateral from the Premises and dispose of any
such collateral, in the ordinary course of Tenant's business.

                                   ARTICLE XI
                   TRADEMARKS, TRADE NAMES AND SERVICE MARKS
                   -----------------------------------------

     Section 11.1  Tenant's Trademarks, Trade Names and Service Marks.  All
                   --------------------------------------------------      
Tenant's trademarks, service marks, trade names, logos, symbols and designs
shall in all events remain the exclusive property of Tenant and its Affiliates,
and nothing contained herein shall confer on Landlord the right to use such
names, trademarks, service marks, trade names, logos, symbols or designs other
than in strict accordance with the terms of this Lease.  Except as provided in
Section 11.2, upon the expiration or termination of this Lease, any use of or
right to use said names, trademarks, service marks, trade names, logos, symbols
or designs by Landlord shall cease forthwith and Tenant shall (at Tenant's sole
cost and expense) promptly remove from the Premises any signs or similar items
which contain any of Tenant's names, trademarks, trade names, service marks,
logos, symbols or designs; provided, however, that Tenant shall be responsible
for the cost of any resulting repairs that may be necessary as a result of such
removal.  Included under the terms of this Section are all trademarks, service
marks, trade names, symbols, logos or designs used in conjunction with the
Premises, including but not limited to restaurant names, lounge names, etc.,
whether or not the marks contain the "Red Lion" name.  The right to use such
trademarks, service marks, trade names, symbols, logos or designs belongs
exclusively to Tenant, and the use thereof inures to the benefit of Tenant
whether or not the same are registered and regardless of the source of the same.

     Section 11.2  Use of Trademarks, Trade Names and Service Marks.  Landlord
                   ------------------------------------------------           
covenants that any items of FF&E, Furnishings, Operating Equipment, Inventories
or Fixed Asset Supplies which are purchased by Landlord upon the expiration or
termination of this Lease, and which are marked with Tenant's name or any Tenant
trademark, trade name, logo, symbol or design, shall be used exclusively in
connection with the Premises until they are consumed; but in no event for more
than sixty (60) days after any such termination of this Lease, unless such
trademark, trade name, logo, symbol or design is thereafter removed from such
items.

     Section 11.3  Proprietary Software.  Any computer software (including
                   --------------------                                   
upgrades and replacements) at the Premises owned by Tenant, an Affiliate, or the
licensor of any of them which is

                                      26
<PAGE>
 
proprietary to Tenant, such Affiliate, or the licensor of any of them and shall
remain proprietary to Tenant and shall in all events remain the exclusive
property of Tenant, the Affiliate, or the licensor of any of them, as the case
may be, and nothing contained in this Lease shall confer on Landlord the right
to use any of such software.  Upon expiration or termination of this Lease,
Tenant shall have the right to remove from the Premises without compensation to
Landlord any computer software (including upgrades and replacements) owned by
Tenant, any Affiliate, or the licensor of any of them, provided Tenant repairs
any damage caused by removing such computer software.


                                  ARTICLE XII
                             ENVIRONMENTAL HAZARDS
                             ---------------------

     Section 12.1  Compliance with Environmental Law
                   ---------------------------------

          (a)  During the Term, Tenant at its cost shall cause the Premises to
     be in compliance with all Environmental Laws, whether or not such
     noncompliance is the result of a breach of Tenant's obligations under
     Sections 12.1(c) or 12.2(b).

          (b)  Tenant shall never during the Term permit Hazardous Materials to
     be (i) generated, used, treated, stored, discharged, released, or otherwise
     disposed of in, on, under, or at, or (ii) transported to or from any of the
     Hotels, in each case other than in the ordinary course of Tenant's
     operation of the Hotels.  If, with or without Tenant's knowledge or
     permission, there is any generation, use, treatment, storage, discharge,
     release, or other disposal of Hazardous Materials in, on, under, or at any
     of the Hotels during the Term other than as permitted in the preceding
     sentence, Tenant shall, subject to the provisions of this Article XII,
     diligently clean up and remove such Hazardous Materials in compliance with
     all applicable Environmental Laws.

          (c)  During the Term and for a period of five (5) years commencing
     after the expiration of the Term, if any Hazardous Materials are discovered
     in, on or under any of the Hotels and result from, are introduced by, or
     arise out of, or the damage from which is materially expanded as a result
     of Tenant's acts or failure to act, its negligence, or the acts or
     negligence of its employees or agents, or the acts or negligence of any
     sublessees, licensees, concessionaires, contractors or entities acting on
     behalf of Tenant or any of their employees or agents, the cost incurred in
     complying with Environmental Laws with respect to such Hazardous Materials
     shall be borne by Tenant.  Tenant's obligation under this Section 12.1(c)
     shall continue after expiration of the Term until no further compliance is
     required with respect to such Hazardous Materials.

          (d)  If during the Term any Hazardous Materials are discovered in, on
     or under any of the Hotels and are the result of migration from a source
     other than any of the Hotels and are not a result of Tenant's acts, its
     negligence, or the acts or negligence of its employees or agents, or the
     acts or negligence of any sublessees, licensees, concessionaires,
     contractors or entities acting on behalf of Tenant or any of their
     employees or agents, the cost incurred in complying with Environmental Laws
     for such Hazardous Materials shall be borne by Tenant.

          (e)  If Tenant is required to implement a plan to investigate,
     monitor, abate or remove Hazardous Materials pursuant to the requirements
     of any Environmental Law, Tenant shall notify Landlord of its planned
     method, time and procedure for such implementation and Landlord shall have
     the right to require reasonable changes in such method, time or procedure.
     Nothing

                                      27
<PAGE>
 
     contained herein shall be deemed to vest any control whatsoever in Landlord
     with respect to Tenant's use, management, or disposal of Hazardous
     Materials on any of the Hotels.

          (f)  During the Term, Landlord may not enter into any agreement,
     settlement or consent order with any third party or governmental entity
     concerning the payment or possible payment of funds, or the investigation,
     monitoring, abatement or removal of Hazardous Materials located in, on, or
     near any of the Hotels without the written consent of Tenant which consent
     shall not be unreasonably withheld, conditioned or delayed.  If Landlord
     fails to obtain Tenant's written consent prior to entering into any such
     agreement, settlement or consent order, any terms, conditions, obligations
     or liabilities contained therein shall be non-binding on Tenant, Tenant
     shall have no responsibility to Landlord under this Article XII, and
     Landlord shall indemnify Tenant for any costs or losses incurred by Tenant
     as a result of such agreement, settlement or consent order.

          (g)  During the Term, Tenant may not enter into any agreement,
     settlement or consent order with any third party or governmental entity
     concerning the payment or possible payment of funds, or the investigation,
     monitoring, abatement or removal of Hazardous Materials located in, on, or
     near any of the Hotels without the written consent of Landlord if such
     agreement, settlement or consent order will impose any financial
     obligations on (1) Landlord which are to be paid, in whole or in part, at
     any time during the Term or after expiration thereof, or (2) on Tenant
     which are to be paid, in whole or in part, after the expiration of the
     Term.  Landlord's consent shall not be unreasonably withheld, conditioned
     or delayed.  Failure by Tenant to obtain Landlord's written consent shall
     be an Event of Default.

          (h)  During the Term and so long as no Event of Default exists, Tenant
     may elect to defend any imposition, order, demand, decree, lawsuit or
     governmental action that seeks to impose liability on Tenant or Landlord
     due to the existence of Hazardous Materials in, on, or near any of the
     Hotels.  If Tenant elects to take such action, Tenant shall not be deemed
     to be in violation of any provision of this Article XII so long as such
     action or contest by Tenant does not result in a risk of the imposition of
     any criminal sanctions against Landlord or any of its directors, officers
     or employees; provided, however, if Landlord or Tenant is ultimately held
     liable for the costs associated with the existence of such Hazardous
     Materials, Tenant's liability shall not be reduced by reason of any delay
     in such remediation.

     Section 12.2  Site Assessments
                   ----------------

          (a)  If Landlord has reasonable cause to believe that an Environmental
     Violation may exist on the Premises, or if Landlord desires to sell or
     finance any of the Premises, or if any Mortgagee desires to sell or
     participate its interest in any of the Hotels, or if an Event of Default
     exists, or if there is less than one (1) year remaining prior to the
     expiration of the Term, then, upon written direction by Landlord to Tenant,
     Tenant shall engage such persons as Tenant shall select ("Site Reviewers"),
     such selection subject to the reasonable approval of Landlord, to visit any
     of the Hotels and perform such environmental site investigations and
     assessments ("Site Assessments") as may be necessary to determine whether
     any Environmental Violation exists, and, if any Environmental Violation
     exists, to estimate the cost of remediating any such Environmental
     Violation; provided, however, if an Event of Default exists or if there is
     less than one year remaining prior to the expiration of the Term, Tenant
     shall select the Site Reviewer from a list of no less than five (5)
     nationally recognized Site Reviewers, such list to be provided by Landlord,
     and Landlord and Landlord's Mortgagee, if any, shall have the right to
     approve the

                                      28
<PAGE>
 
     Site Reviewer, such approval to be exercised in a reasonable manner
     recognizing Landlord's significant interest in the adequacy of the report
     and the scope of work to be performed by such Site Reviewer.  Landlord
     shall have the right to approve any guidance or instruction requested by
     such Site Reviewer during the Site Assessment, and Landlord shall have the
     right to confirm that any draft or final reports furnished by such Site
     Reviewers conform to approved scope of work, guidance and instructions,
     provided that such approvals or confirmation shall not be unreasonably
     withheld.  If Tenant fails or refuses to engage Site Reviewers within
     thirty (30) days after such direction, Landlord may engage the Site
     Reviewers.  If an Event of Default or a material Environmental Violation
     exists that was caused by Tenant, its employees or agents, or by any
     sublessee, licensee, concessionaire, contractor or entity acting on behalf
     of Tenant, or any of their employees or agents, the cost of any Site
     Assessment shall be paid by Tenant.  In all other cases, the costs of a
     Site Assessment shall be paid by Landlord or by the Mortgagee requesting
     such Site Assessment, and Tenant may demand adequate assurances that such
     costs will be paid before engaging the Site Reviewers.  Such Site
     Assessments may, at the option of Landlord, include both above and below
     the ground testing and such other tests as may be necessary, in the
     reasonable opinion of the Site Reviewers, to verify the existence of an
     Environmental Violation or to estimate the cost of remediating any such
     Environmental Violation.  Tenant shall supply to the Site Reviewers such
     historical and operational information regarding the Premises as may be
     reasonably requested by the Site Reviewers to facilitate the Site
     Assessments, and shall make available for meetings with the Site Reviewers
     appropriate personnel having knowledge of such matters.  The Site Reviewers
     shall include in their report a statement estimating the cost of any
     remediation, monitoring and other compliance program, if any, necessary to
     cure or remediate such Environmental Violation.  All of the Site Reviewers'
     work shall be made available to Landlord and Tenant.

          (b)  If Tenant fails diligently to pursue any of its obligations under
     this Section 12.2 and such failure continues for a period of thirty (30)
     days after Notice from Landlord, Landlord shall have the right (but no
     obligation), in addition to any other rights or remedies it may have
     pursuant to this Lease or under applicable law, to take any and all
     reasonable actions as Landlord shall deem necessary or advisable in order
     to effect such compliance, for and on behalf of Tenant and at the cost and
     expense of Tenant, including to enter the Premises for the purpose of
     making tests, obtaining samples and surveys and performing any other acts
     as may be reasonably necessary or desirable, in the reasonable discretion
     of Landlord, and reimbursement to Landlord of the cost thereof shall be due
     and payable by Tenant as Additional Rent on demand with interest thereon at
     the Lease Interest Rate from the date such cost is incurred.

          (c)  If, during the Term, an Environmental Violation occurs or is
     found to exist at the Premises which shall impose a liability to Tenant
     after the expiration of the Term pursuant to this Article XII, and in the
     judgment of the Site Reviewers, remediation, monitoring or other compliance
     program relating to any such Environmental Violation has not or will not be
     completed as required by any applicable Environmental Laws by the
     expiration or earlier termination of the Term, then Tenant shall provide to
     Landlord, no later than thirty (30) days prior to the expiration or earlier
     termination of the Term, a bond, letter of credit or other security
     reasonably satisfactory to Landlord for 110% of the amount determined by
     the Site Reviewers to be necessary to complete such remediation, monitoring
     or other compliance program.  Upon completion of such remediation,
     monitoring or other action in accordance with the applicable Environmental
     Law, Landlord shall release the security provided by Tenant.  If an
     Environmental Violation occurs because of the existence of Hazardous
     Material in, on or under any of the Hotels in excess of any reportable
     quantity established under any Environmental Law, and Tenant makes

                                      29
<PAGE>
 
     all notifications and undertakes and diligently prosecutes to completion
     all regulatory, remedial or other actions which are required by any
     applicable Environmental Law by any federal, state or local governmental
     agency having jurisdiction over such affected Premises, then Tenant shall
     not be in default under this Lease so long as Tenant diligently pursues any
     and all such actions toward completion, and any action or non-action by
     Tenant does not result in a risk of the imposition of any criminal
     sanctions against Landlord or any of its directors, officers or employees.


                                  ARTICLE XIII
                                   INSURANCE
                                   ---------

     Section 13.1  Property & Business Interruption Insurance.  Tenant shall, at
                   ------------------------------------------                   
its own expense, commencing with the Commencement Date and continuing throughout
the Term, procure and maintain with insurance companies of recognized
responsibility (with a rating of no less than A-VI by A.M. Best, except that
such rating shall not be applicable to those insurers providing flood and
earthquake insurance under this Section), in a manner consistent with prudent
industry practice, property insurance with the following minimum coverages:

          (a)  insurance on the Hotels and Premises (including contents) against
     loss or damage by fire, lightning and all other risks covered by the usual
     standard extended coverage endorsement, and with coverage in the amount of
     not less than one hundred percent (100%) of the replacement cost thereof,
     exclusive of footings and foundations;

          (b)  insurance against loss or damage from explosion of boilers,
     pressure vessels, pressure pipes and sprinklers installed in the Hotels;

          (c)  business interruption insurance covering loss of profits and
     necessary continuing expenses (including Rents payable under this Lease)
     for interruptions caused by any occurrences covered by the insurance
     referred to in Sections 13.1(a) and 13.1(b), for a period of at least
     eighteen (18) months and of a type and in amounts generally carried by
     prudent owners of similar properties;

          (d)  for each Hotel which is located in a zone identified by the
     Federal Emergency management Agency as flood hazard area, flood insurance
     in an amount not less than the maximum limit available under the National
     Flood Insurance Program;

          (e)  if and to the extent such insurance is then carried by prudent
     owners of similar properties:  (i) earthquake insurance and, (ii) for the
     Hotels which are not located in a zone identified by the Federal Emergency
     Management Agency as a flood hazard area, flood insurance; and

          (f)  such other property risk insurance, as may from time to time be
     generally carried by prudent owners of similar properties, in such amounts
     and against such risks as are then customary for property similar in use to
     the Premises.

                                      30
<PAGE>
 
     Section 13.2  Application of Proceeds
                   -----------------------

          (a)  All proceeds of any insurance payable on account of any casualty
     other than proceeds attributable to Tenant's personal property and other
     than the proceeds of insurance referred to in Section 13.1(c) shall be paid
     to the Insurance Trustee, who shall hold said proceeds in trust for the
     parties in accordance with the provisions of this Section 13.2; provided,
     however, that if the aggregate amount of such proceeds with respect to any
     such casualty is less than Five Hundred Thousand Dollars ($500,000), such
     proceeds shall be paid to Tenant who shall use such proceeds for the
     purpose of restoration of the Premises.  Insurance proceeds attributable to
     Tenant's personal property shall be paid directly to Tenant and shall not
     be considered when making calculations pursuant to the preceding sentence.
     The proceeds of the insurance referred to in Section 13.1 shall be paid to
     Tenant except that any such proceeds attributable to the Rents payable
     under this Lease shall be paid to Landlord (as a credit against such Rents)
     to the extent that such Rents have not been previously paid by Tenant to
     Landlord.

          (b)  Provided that no Tenant default hereunder has occurred and is
     continuing, and provided that Tenant complies with all of the terms and
     conditions of this Section 13.2, all insurance proceeds received with
     respect to a casualty shall be applied to the restoration of the Premises.

          (c)  Tenant shall commence the restoration of the Premises not later
     than the date which is one hundred eighty (180) days after the date upon
     which the casualty occurred and thereafter prosecute the restoration with
     diligence and continuity without regard to whether insurance proceeds
     available to Tenant at any particular time are sufficient to fund the costs
     of such restoration.

          (d)  Prior to commencing any restoration work that will cost more than
     One Million Dollars ($1,000,000) to repair, as adjusted by the GDP
     Deflator, Tenant, at its sole cost shall (i) obtain the services of a
     licensed architect to prepare any required plans and specifications for
     such restoration to the extent that such restoration work cannot be
     performed based upon previously existing plans and specifications for the
     Improvements; and (ii) submit a set of final plans and specifications to
     Landlord and the Senior Landlord's Mortgagee for approval to the extent
     that such restoration work involves a departure from or addition to
     previously existing plans and specifications for the Premises (which
     approval may not be unreasonably withheld, conditioned, or delayed); and
     (iii) the contractor selected by Tenant to perform the work shall be
     subject to Landlord's approval, which approval shall not be unreasonably
     withheld, conditioned or delayed, and (iv) Tenant shall carry builder's
     risk insurance in amounts reasonably sufficient to cover the cost of
     replacement of the work during the course of such construction.

          (e)  In proceeding with such restoration work, Tenant shall first
     expend an amount, if any, equal to the excess of the projected cost of the
     restoration work over the amount of all proceeds paid to the Insurance
     Trustee.  Thereafter, Tenant shall be entitled to submit to the Insurance
     Trustee, not more frequently than once every thirty (30) days, an invoice
     together with such other documentation (including an architect's
     certificate as to the status of work completion, mechanics lien waivers and
     title insurance policy endorsements, all obtained at Tenant's sole cost and
     expense) as is customarily required by lenders at such time making
     construction loans.  Upon receipt of an invoice in proper form, the
     Insurance Trustee shall make a disbursement within ten (10) business days
     equal to the amount shown on the invoice; provided, however, that the
     Insurance Trustee shall not be required to disburse more than 90% of the
     total projected cost of

                                      31
<PAGE>
 
     the work, unless and until it has received all of the following:  (i) final
     mechanics lien waivers from all parties having rights to mechanics liens
     against the Premises on account of such restoration work, (ii) appropriate
     endorsements or policies of title insurance protecting Landlord and
     Mortgagee against mechanics liens arising out of the restoration work, or a
     mechanic's lien bond, and (iii) final certification from the architect that
     the restoration work has been completed in accordance with the plans and
     specifications therefor and all applicable building codes.

          (f)  If (i) the amount disbursed upon final completion of the
     restoration work in accordance with Section 13.2(e) is less than the total
     insurance proceeds then held by the Insurance Trustee, and (ii) no Event of
     Default is existing, such excess shall be paid to Tenant.

          (g)  If Tenant shall fail to prosecute the restoration work with
     diligence and continuity until completion, regardless of whether an Event
     of Default has occurred, Landlord shall have the right to use any proceeds
     held by Insurance Trustee to complete such renovation work.  Tenant shall
     be liable for any sums incurred by Landlord to complete such restoration
     work in excess of the amount held and disbursed by the Insurance Trustee.

          (h)  If an Event of Default has occurred, Tenant shall not have access
     to any insurance proceeds unless and until Tenant shall have cured such
     Event of Default, and until such time, Tenant shall use its own funds to
     prosecute the restoration work.

          (i)  Upon the expiration or termination of this Lease, all insurance
     proceeds received by the Insurance Trustee or Tenant and not applied to the
     costs of restoration shall be paid to Landlord except as otherwise provided
     in Article XXI.

     Section 13.3  Waiver of Rights of Subrogation.  Landlord and Tenant hereby
                   -------------------------------                             
waive their rights of recovery against each other, their respective officers,
directors, agents and employees for loss or damage to the Premises and any
resultant business interruption to the extent covered by the insurance
maintained under Section 13.1.  Should any such policies of insurance require an
endorsement to effect such a waiver, Tenant shall cause them to be so endorsed.

     Section 13.4  Operational Insurance.  Tenant shall, at its own expense,
                   ---------------------                                    
commencing with the Commencement Date and continuing throughout the Term,
procure and maintain operational insurance with reputable insurance companies of
recognized responsibility; provided, however, that with respect to the first One
Million Dollars ($1,000,000) of coverage required by this Section such coverage
shall be obtained from insurance companies authorized to do business in the
United States with a rating of no less than A-VII by A.M. Best.  All other
coverage shall be obtained from one or more insurance companies with an A.M.
Best rating of no less than B+V with respect to domestic insurance companies or
of at least comparable standing if a foreign-based insurer.  Operational
insurance required herein shall have the following minimum coverage:

          (a)  comprehensive or commercial general liability insurance against
     claims for death, bodily injury, or property damage occurring on, in or
     about the Premises, and automobile liability insurance on vehicles operated
     in conjunction with the Premises with a combined single limit of not less
     than One Hundred Million Dollars ($100,000,000) per occurrence or such
     other amounts, with Landlord's consent, that may from time to time be more
     prudent in light of then current practices with respect to insurance costs
     and premiums.

                                      32
<PAGE>
 
          (b)  such other insurance as Tenant in its reasonable judgment deems
     advisable for protection against claims, liabilities and losses arising out
     of or connected with its operation of the Premises.

     Section 13.5  Blanket and Self-Insurance.  All insurance described in
                   --------------------------                             
Sections 13.1 and 13.4 may be obtained by Tenant by endorsement or equivalent
means under its blanket insurance policies, provided that such blanket policies
fulfill the requirements specified herein.  With respect to the insurance
described in Section 13.4, the deductible or self-insured retention limits shall
not exceed Two Hundred Fifty Thousand Dollars ($250,000) (to be increased on the
fifth (5th) anniversary of the Commencement Date and every subsequent fifth
(5th) anniversary thereof by an amount proportionate to the percentage increase
in the GDP Deflator over the preceding five (5) year period) or such other
amounts, with Landlord's consent, that Tenant may reasonably deem from time to
time be more prudent in light of the then current practices with respect to
insurance costs and premiums; provided that, with respect to earthquake
insurance, the deductible shall be no higher than 10% of the building cost.  As
to all insurance described in Section 13.1, deductible limits or self-insured
retentions shall not exceed Two Hundred Fifty Thousand Dollars ($250,000) (to be
increased on the fifth (5th) anniversary of the Commencement Date and every
subsequent fifth (5th) anniversary thereof by an amount proportionate to the
percentage increase in the GDP Deflator over the preceding five (5) year period)
or, with respect to "high hazard classification" (as such term is customarily
understood in the insurance industry), such other amount as may then be required
by responsible insurance companies for similar properties and risks.

     Section 13.6  Costs of Insurance.  Insurance premiums and any costs or
                   ------------------                                      
expenses with respect to the insurance described in this Article XIII shall be
borne by Tenant.  Any losses, costs, damages or expenses which fall within the
deductible limits or are included within an allowed self-insurance program
pursuant to Section 13.5 above shall be borne by Tenant. If Tenant shall fail to
pay any premium for any such insurance, or if an Event of Default with respect
to any of the provisions of this Article XIII shall occur, Landlord may pay such
premium or procure the insurance coverages required by this Article XIII and all
amounts paid by Landlord in accordance herewith shall become Additional Rent
which is due and payable within five (5) Business Days after such expenditures
are made.

     Section 13.7  Defense of Claims after Termination.  With respect to any
                   -----------------------------------                      
claim relating to an accident or other occurrence within a given Year for which
Tenant is obligated to indemnify Landlord under Article VIII which is not
finally resolved either through litigation or settlement prior to the expiration
or termination of this Lease, Tenant shall be obligated to continue to defend
such accrued claims regardless of such expiration or termination.

     Section 13.8  Coverage and Certificates.  All insurance policies provided
                   -------------------------                                  
for under Section 13.1 or Section 13.4 above shall be carried in the name of
Tenant, with Landlord and any Mortgagee on the Premises as additional insureds,
and with loss payable, in the case of any policies procured under Section 13.1,
in accordance with the provisions of Section 13.2.  Tenant shall deliver to
Landlord original certificates of insurance with respect to all policies so
procured under Section 13.1 or Section 13.4, including existing, additional and
renewal policy certificates and, in the case of insurance about to expire, shall
deliver certificates of insurance with respect to the renewal policies prior to
the respective dates of expiration.  All insurance policies provided for under
Section 13.1 or Section 13.4 above shall, to the extent obtainable, have
attached thereto an endorsement that such policy shall not be cancelled or
materially changed without at least thirty (30) days' prior written Notice to
Landlord, Tenant, and the holder of any Mortgage.  Upon request by Landlord or
any Mortgagee, the requesting party or its representatives shall be entitled to
examine at Tenant's corporate headquarters all insurance policies maintained by
Tenant with respect to the Premises.

                                      33
<PAGE>
 
     Section 13.9  Alternative Insurance Coverage.  Notwithstanding any other
                   ------------------------------                            
provision of this Lease to the contrary, if at any time during the Term hereof
Tenant is not able to obtain any one or more of the insurance coverages required
pursuant to this Article XIII because the subject insurance coverage(s) are not
then reasonably available in the insurance marketplace, then Tenant's failure to
so obtain such insurance coverage(s) shall not constitute an Event of Default so
long as Tenant does obtain coverage as similar to that required under this Lease
as is reasonably available.  For purposes of this Section 13.9 the term
"reasonably available" means that type of coverage then obtainable from
reputable insurance companies for properties similar to the Premises and
purchased by prudent owners of businesses similar to that operated by Tenant at
the Premises.


                                  ARTICLE XIV
                        DAMAGE BY FIRE OR OTHER CASUALTY
                        --------------------------------

     Section 14.1  Damage by Fire or Other Casualty.  If during the Term any of
                   --------------------------------                            
the Hotels shall be damaged or destroyed by fire, or any other casualty or cause
whatsoever, Tenant shall forthwith proceed to repair and/or rebuild the same,
free of all liens, claims and encumbrances, to the same general design and
specification as existed immediately before such damage or destruction occurred,
subject to such delays as may be reasonably attributable to governmental
restrictions or failure to obtain materials or labor, or other causes (other
than financial), whether similar or dissimilar, beyond the control of Tenant.
Materials used in repair shall be as nearly like or superior in quality to
original materials as may then be reasonably procured in regular channels of
supply. All proceeds of insurance carried on the Premises pursuant to Article
XIII hereof and payable as a result of such damage or destruction, other than
proceeds attributable to Tenant's personal property and other than the proceeds
of insurance referred to in Section 13.1(c), shall be used for the purpose of
such repair or rebuilding in accordance with the provisions of Article XIII,
and, if either Landlord or the Insurance Trustee shall fail to make such
insurance proceeds available in violation of the provisions of Article XIII, and
such failure shall continue for a period of 90 days after Notice of such failure
is delivered by Tenant to Landlord, Tenant's obligation to repair and rebuild
hereunder shall be suspended until such time as such insurance proceeds are so
made available. If such insurance proceeds are not so made available within one
(1) year thereafter as a result of a continued violation of the provisions of
Article XIII by the Insurance Trustee or Landlord then, but only then, may
Tenant at its option, terminate this Lease upon ninety (90) days prior Notice to
Landlord. Upon any such termination, Landlord shall have all rights to any
insurance proceeds. If Tenant is not required to repair or rebuild by the terms
or conditions of this Lease, all such insurance proceeds (whether paid to the
Insurance Trustee or Tenant) shall be paid to Landlord. If Tenant is required
to, and does repair or rebuild, any excess insurance proceeds shall be paid to
Tenant.

     Section 14.2  Partial Damage by Fire or Other Casualty.  Upon any partial
                   ----------------------------------------                   
damage or destruction, Tenant shall continue to occupy and use the Premises to
the extent that it may be practicable to do so, and Tenant shall proceed to
repair and/or rebuild the Premises in the manner and at the time described in
Sections 13.2 and 14.1.

     Section 14.3  Damage Occurring After the 10th Anniversary of Commencement
                   -----------------------------------------------------------
Date
----

          (a)  Upon a Major Casualty occurring after the tenth (10th)
     anniversary of the Commencement Date, Tenant shall have the right to
     terminate this Lease with respect to the affected Hotel by so notifying
     Landlord not later than the date which is sixty (60) days after the
     occurrence of such Major Casualty.  If Tenant elects to exercise the right
     described in the preceding sentence, it shall, simultaneously with its
     delivery of its Notice of termination, deliver

                                      34
<PAGE>
 
     to Landlord its irrevocable offer to purchase the applicable portion of the
     Premises for an amount equal to the Fair Market Value thereof.

          (b)  Landlord may accept or reject Tenant's irrevocable offer to
     purchase the applicable portion of the Premises by sending Tenant a Notice
     of rejection or acceptance within thirty (30) days from the date upon which
     Landlord received Tenant's Notice of termination.  If Landlord fails to
     send Tenant a Notice of rejection or acceptance within thirty (30) days of
     its receipt of Tenant's irrevocable offer to purchase the applicable
     portion of the Premises, Landlord shall be deemed to have rejected such
     offer.  If Landlord accepts Tenant's offer to purchase, this Lease shall
     terminate with respect to such portion of the Premises upon the closing of
     such purchase, which shall occur in accordance with the provisions of
     Article XXI.  Upon such termination, Tenant shall pay to Landlord all Rent
     due with respect to such portion of the Premises through such date of
     termination, in addition to the Fair Market Value thereof, and Landlord and
     the Insurance Trustee shall assign to Tenant all their right, title and
     interest in insurance proceeds payable and shall deliver to Tenant any
     insurance proceeds previously paid to, or then held by, either Landlord or
     the Insurance Trustee with respect to such Major Casualty, and Landlord
     shall convey the Premises to Tenant in accordance with the provisions of
     Article XXI.

          (c)  If Landlord rejects or is deemed to reject Tenant's irrevocable
     offer to purchase pursuant to Section 14.3(a), this Lease shall terminate
     with respect to the applicable portion of the Premises on a Base Rent
     payment date specified by Tenant in its Notice of termination which occurs
     not earlier than ninety (90) days nor later than one hundred twenty (120)
     days after Landlord's receipt of Tenant's irrevocable offer to purchase,
     provided that this Lease shall not so terminate unless and until Tenant
     shall have paid all sums due hereunder (including, without limitation, all
     taxes and insurance premiums) with respect to the applicable portion of the
     Premises as of the actual date of termination. Upon such termination,
     Tenant shall vacate the applicable portion of the Premises in accordance
     with the provisions of Section 3.4, and Tenant shall have no right to
     receive any insurance proceeds payable, previously paid to, or then held
     by, either Landlord or the Insurance Trustee with respect to such Major
     Casualty, other than insurance proceeds attributable to Tenant's personal
     property, if any such proceeds have not been paid directly to Tenant in
     accordance with Section 13.2(a).

     Section 14.4  No Abatement of Rent Due to Casualty.  No damages,
                   ------------------------------------              
compensation, or claim shall be payable by Landlord for inconvenience, loss of
business, or annoyance arising from any repair or restoration of any portion of
the Premises or the Improvements. If this Lease is not terminated as a result of
a casualty pursuant to Section 14.3, all proceeds of insurance carried pursuant
to Section 13.1 shall be paid to Tenant (except as otherwise provided in 
Section 13.2). Except with respect to Percentage Rent as set forth in 
Section 5.2(c), there shall be no abatement of Rents following any casualty and
during any period of repair or reconstruction contemplated in this Article 14.

     Section 14.5  Early Termination.  Upon the termination of this Lease
                   -----------------                                     
pursuant to the provisions of Sections 14.3 or 15.4 of this Lease, the Term and
the estate hereby granted shall expire as of the date of such termination in the
same manner and with the same effect as if it were the date set for the normal
expiration of the Term, and Rent shall be apportioned as of the date of
termination.

                                      35
<PAGE>
 
                                  ARTICLE XV
                                 CONDEMNATION
                                 ------------

     Section 15.1  Notice of Condemnation and Assignment of Rights
                   -----------------------------------------------

          (a)  The party receiving any notice of the kinds specified below with
     respect to any one or more Hotels shall promptly give the other party
     Notice of the receipt, contents and date of the Notice received:

               (i)  Notice of intended condemnation;

               (ii)  Service of any legal process relating to condemnation of
          any portion of any of the Hotels or Improvements;

               (iii)  Notice in connection with any proceedings or negotiations
          with respect to such a condemnation; or

               (iv)  Notice of intent or willingness to make or negotiate a
          private purchase, sale or transfer in lieu of condemnation.

          (b)  Subject to the rights of each party as set forth in this 
     Article XV, each party hereby irrevocably assigns to Insurance Trustee any
     award or payment to which they may be or become entitled by reason of any
     taking of any Hotel or any part thereof, in or by condemnation or other
     eminent domain proceedings pursuant to any law, general or special.
     Insurance Trustee shall distribute all such condemnation proceeds to the
     benefit of Landlord and/or Tenant in accordance with the provisions of this
     Article XV. Each party shall be entitled to participate at its own expense
     in any such proceedings.

     Section 15.2  Tenant's Right to Pursue a Claim.  Notwithstanding anything
                   --------------------------------                           
herein to the contrary, provided that no Tenant default hereunder has occurred
and is continuing, Tenant shall have the right to pursue a claim with and retain
any award from the condemning authority or entity for damage to or loss of
Tenant's leasehold estate in any Hotel or any portion thereof as well as for any
other separate damages that Tenant may suffer; provided, however, that such
award or payment to Tenant is completely separate from and shall in no manner
reduce the award or payment to Landlord for the value of any such Hotel
unencumbered by this Lease.  If the foregoing contingency is not met, any
Tenant's award or payment shall be deemed assigned to the Insurance Trustee
pursuant to Section 15.1.

     Section 15.3  Temporary Taking.  If the use of any Hotel or any part
                   ----------------                                      
thereof is taken in condemnation by any governmental authority under the power
of eminent domain for a period of time, whether definite or indefinite (but less
than the acquisition of a fee simple interest in perpetuity), or whether less
than, equal to or greater than the unexpired portion of the Term of this Lease,
this Lease shall nevertheless continue in full force and effect and Tenant shall
have the right (except as hereinafter provided) to receive the entire award
("Use Award") attributable to the unexpired portion of the Term of this Lease
(including any Effective Extended Term), and Landlord shall have the right to
receive the entire award ("Landlord's Temporary Taking Award") attributable to
the period after the expiration of the Term of this Lease (including any
Effective Extended Term), such allocation between periods to be determined
either (i) by the court in which the complaint in eminent domain was filed (a
request for which determination Tenant shall make to such court) or (ii) absent
a decision by such court, by Landlord using a formula reasonably calculated to
arrive at a fair and equitable allocation, and no claim or demand

                                      36
<PAGE>
 
of any kind shall be made by Tenant against Landlord by reason of such taking,
no claim for abatement of Base Rent or Percentage Rent and other amounts which
may become due under this Lease shall be made by reason of such taking and the
rights and liabilities of the parties hereto shall be the same as if there had
been no such taking.

          (a)  The Use Award, in such amount as may be eventually determined,
     shall be paid to and held in trust by the Insurance Trustee and shall be
     administered as hereinafter set forth.  There shall first be deducted
     therefrom and paid out all legal and other expenses, reasonable in amount,
     which were incurred in obtaining such Use Award, except that Landlord shall
     pay that portion of such expenses (but not to exceed the amount of
     Landlord's Temporary Taking Award) that Landlord's Temporary Taking Award
     bears to the sum of Landlord's Temporary Taking Award and the Use Award.
     The Use Award shall be administered as follows:

               (i)  If any such Use Award shall be in the form of rent
          recoverable for such taking and shall be payable in quarterly (or more
          frequent) installments, the Insurance Trustee shall pay to Landlord
          quarterly such installments of the Use Award on account of and to the
          extent of Tenant's obligations to pay Base Rent and Percentage Rent
          under this Lease; any balance remaining from each such quarterly (or
          more frequent) installment shall be paid by the Insurance Trustee to
          Tenant.  The entire amount of such quarterly (or more frequent)
          installments of the Use Award received by the Insurance Trustee
          (whether paid to Landlord or Tenant) shall be included in the cash
          receipts of Tenant during the quarter when received by the Insurance
          Trustee for purposes of determining Operating Revenues.

               (ii)  If any such Use Award is made in a lump sum or in the form
          of rent recoverable for such taking and is payable in installments
          less frequently than quarterly, the lump sum or other installment
          shall be divided by the number of calendar quarters included in the
          period for which such award has been paid, and the Insurance Trustee
          shall pay to Landlord such quotient quarterly on account of and to the
          extent of Tenant's obligation to pay Base Rent and Percentage Rent
          under this Lease; any balance remaining from each such quarterly
          quotient shall be paid by the Insurance Trustee to Tenant.  The entire
          amount of such quarterly installments of the Use Award received by the
          Insurance Trustee (whether paid to Landlord or Tenant) shall be
          included in the cash receipts of Tenant during the quarter in which
          such quarterly quotient is distributed by the Insurance Trustee to
          Landlord and Tenant for purposes of determining Operating Revenues.

               (iii)  If any such Use Award shall be made for the cost of
          repairs and restoration following termination of such temporary
          taking, then the Insurance Trustee shall apply the same to Tenant's
          obligation hereunder to repair and restore as herein provided.

          (b)  Any Use Award deposited with the Insurance Trustee shall be
     invested by the Insurance Trustee in an interest-bearing account, with
     interest to be added to the amount of the Use Award and distributed as part
     of the Use Award in accordance with the provisions of this Section 15.3.
     All such interest shall be included in Operating Revenues for the month in
     which such interest is distributed by the Insurance Trustee.

     Section 15.4  Total Taking.  If, during the Term, all or substantially all
                   ------------                                                
of any Hotel shall be taken in or by condemnation or other eminent domain
proceedings pursuant to any law, general or special, then this Lease shall
terminate with respect to such Hotel on the date such taking becomes

                                      37
<PAGE>
 
effective.  Tenant shall pay all Rent and all other sums due hereunder
(including, without limitation, all taxes and insurance premiums) through such
date with respect to such Hotel.  All condemnation proceeds shall belong to and
be paid to Landlord, except that, to the extent such proceeds exceed the Fair
Market Value thereof as of such termination date, such excess shall be paid to
Tenant up to an amount equal to any unamortized investments made by Tenant in
Expansions, with any remaining portion of such excess being payable to Landlord.

     Section 15.5  Substantial Taking
                   ------------------

          (a)  Upon a Substantial Taking of any Hotel, Tenant shall have the
     right to terminate this Lease with respect to such Hotel by so notifying
     Landlord not later than the date which is sixty (60) days after the
     occurrence of such Substantial Taking.  If Tenant elects to exercise the
     right described in the preceding sentence, it shall, simultaneously with
     its delivery of its Notice of termination, deliver to Landlord its
     irrevocable offer to purchase such Hotel for an amount equal to the Fair
     Market Value thereof.

          (b)  Landlord may reject or accept Tenant's irrevocable offer to
     purchase such Hotel by sending Tenant a Notice of such rejection or
     acceptance within thirty (30) days from the date upon which Landlord
     received Tenant's Notice of termination.  If Landlord fails to send Tenant
     a Notice of rejection or acceptance within thirty (30) days of its receipt
     of Tenant's irrevocable offer to Purchase such Hotel, Landlord shall be
     deemed to have rejected such offer.  If Landlord accepts Tenant's offer to
     purchase, this Lease shall terminate with respect to such Hotel on a Base
     Rent payment date specified by Tenant in its Notice of termination which
     occurs not earlier than ninety (90) days nor later than one hundred twenty
     (120) days after Landlord's receipt of Tenant's irrevocable offer to
     purchase.  Upon such termination, Tenant shall pay Landlord all Rent due
     with respect to such Hotel through such date in addition to the Fair Market
     Value thereof, and Landlord and the Insurance Trustee shall assign to
     Tenant all their right, title and interest in condemnation proceeds payable
     and shall deliver to Tenant any condemnation proceeds previously paid to,
     or then held by, either Landlord or the Insurance Trustee with respect to
     such Substantial Taking, and Landlord shall convey such Hotel to Tenant in
     accordance with the provisions of Article XXI.

          (c)  If Landlord rejects or is deemed to reject Tenant's irrevocable
     offer to purchase pursuant to Section 15.5(a), this Lease shall terminate
     with respect to the affected Hotel on a Base Rent payment date specified by
     Tenant in its Notice of termination which occurs not earlier than ninety
     (90) days nor later than one hundred twenty (120) days after Landlord's
     receipt of Tenant's irrevocable offer to purchase, provided that this Lease
     shall not terminate with respect to such Hotel unless and until Tenant
     shall have paid all sums due hereunder (including, without limitation, all
     taxes and insurance premiums) as of the actual date of termination. Upon
     such termination, all condemnation proceeds shall be delivered to Landlord
     and Tenant shall vacate such Hotel in accordance with the provisions of
     Section 3.4.

     Section 15.6  Partial Taking
                   --------------

          (a)  Upon a Substantial Taking of any Hotel pursuant to which Tenant
     has not given an irrevocable offer to purchase pursuant to the provisions
     of Section 15.5, Tenant shall be obligated to restore the portion of such
     Hotel not taken by the governmental authority to a condition as good as or
     better than the condition which prevailed thereon and therein prior to such
     condemnation as nearly as is practicable under the circumstances,
     regardless of whether the

                                      38
<PAGE>
 
     condemnation proceeds are sufficient to complete such restoration.  Upon an
     Insubstantial Taking, Tenant shall not be obligated to replace any
     landscaping or facilities taken by the governmental authority but shall
     only be obligated to repair any damage to the portion of the affected Hotel
     not taken by the governmental authority.  Materials used in repair and
     restoration shall be as nearly like or superior in quality to the original
     materials as may then be reasonably procured in regular channels of supply,
     and construction shall be completed in a workmanlike manner free of all
     liens and encumbrances.  All condemnation proceeds payable on account of
     such condemnation other than proceeds attributable to Tenant's personal
     property shall be paid to the Insurance Trustee who shall hold said
     proceeds in trust for the parties in accordance with the provisions of this
     Section 15.6.

          (b)  Tenant shall commence the restoration of any affected Hotel as
     soon as practicable, but in no event later than the date which is one
     hundred eighty (180) days after the date upon which the condemnation
     occurred, and thereafter shall prosecute the restoration with diligence and
     continuity. The provisions of Section 13.2(d) and 13.2(e) shall apply to
     any such restoration.

          (c)  If the amount disbursed in accordance with Section 13.2(e) shall 
     be less than the total condemnation proceeds, such excess shall be
     distributed to Landlord.

          (d)  Any award attributable to personal property owned by Tenant that
     is not attributable to FF&E owned by Landlord shall be paid to Tenant.  Any
     award attributable to FF&E owned by Tenant shall be paid to Tenant and
     applied by Tenant for the purpose of replacing such FF&E if and to the
     extent that the Hotel requires such replacement FF&E to be fully
     operational.

          (e)  Upon a condemnation that is an Insubstantial Taking, there shall
     be no reduction in or abatement of the Base Rent or Percentage Rent
     thereafter payable by Tenant.  Upon a condemnation that is a Substantial
     Taking and if this Lease is not terminated pursuant to Section 15.5, there
     shall be a reduction in the Base Rent payable by Tenant effective as of the
     date of the Substantial Taking in an amount equal to the lesser of:  
     (i) 7 1/2% of the condemnation award received by Landlord with respect to
     such affected Hotel; or (ii) an amount equal to the Base Rent shown for
     such Hotel on Exhibit B, multiplied by the Partial Condemnation Reduction
     Percentage.

          (f)  If Tenant shall fail to prosecute the restoration work with
     diligence and continuity until completion, regardless of whether an Event
     of Default has occurred, Landlord shall have the right to use any proceeds
     held by Insurance Trustee to complete such restoration work.  Tenant shall
     be liable for any sums incurred by Landlord to complete such restoration
     work in excess of the amount held and disbursed by the Insurance Trustee.

          (g)  If an Event of Default has occurred, Tenant shall not have access
     to any condemnation proceeds unless and until Tenant shall have cured such
     Event of Default, and until such time, Tenant shall use its own funds to
     prosecute the restoration work.


                                  ARTICLE XVI
                        ASSIGNMENT, SALE AND SUBLETTING
                        -------------------------------

     Section 16.1  Sale or Assignment by Landlord, Subject to Lease.  Landlord
                   ------------------------------------------------           
shall have the right to assign or transfer its interest in this Lease in
connection with a Sale of a Hotel subject to this Lease

                                      39
<PAGE>
 
which shall remain in full force and effect, but may be evidenced by a separate
lease agreement on the same terms and conditions, except that Base Rent shall be
calculated in accordance with the amounts shown on Exhibit B and Percentage Rent
shall be calculated based solely on the Operating Revenues of such Hotel (or
Hotels) alone.  For purposes of calculating Percentage Rent under this Lease,
the Base Revenues attributed to such Hotel shall be deducted from total Base
Revenues for purposes of the next Percentage Rent due to Landlord hereunder.  In
the event such sale or assignment takes place at any time other than the end of
a Lease Year, Percentage Rent for both the Hotel or Hotels so assigned and the
then remaining Hotels shall be calculated based on a proration computed in
accordance with the number of days in the Partial Lease Year.   Furthermore,
Landlord shall have right to assign or transfer without restriction its interest
in this Lease as collateral security with respect to any financing secured by an
interest in the Premises.  Upon any Sale of a Hotel, Landlord shall assign this
Lease to the purchaser and, concurrently with the finalization thereof, the
purchaser shall, by an appropriate written instrument, assume (subject to the
provisions of Section 22.24) all of Landlord's obligations hereunder.  Any
attempted sale or assignment in violation of the provisions of this Section 16.1
shall be void and without effect.  Within thirty (30) days after Landlord sends
Notice to Tenant advising Tenant of the name, identity and address of any
proposed assignee or transferee and requesting a determination as to whether the
proposed assignment or transfer would violate the requirements of the first
sentence of this Section 16.1, Tenant shall advise Landlord by Notice to
Landlord whether or not such proposed assignment or transfer would violate such
requirements and, if so, setting forth in reasonable detail the basis for such
violation (which Notice shall be binding upon Tenant), and if Tenant fails to
send such Notice to Landlord prior to the expiration of such thirty (30) day
period, such assignment or transfer shall be deemed to comply with the
requirements of the first sentence of this Section 16.1.

     Section 16.2  Assignment by Tenant.  Tenant shall have the right to
                   --------------------                                 
transfer or assign its interest in any Hotel demised hereunder without
Landlord's consent provided that (w) the transferee or assignee is a corporation
organized under the laws of any state in the United States and in good standing
and authorized to do business in each state in which any of the Hotels is
located, (x) such transferee or assignee assumes this Lease by an appropriate
writing, (y) Tenant shall continue to remain liable under all of the provisions
of this Lease and (z) Tenant first obtains the consent of any and all applicable
ground lessors, if such consent is required.

     Section 16.3  Tenant's Right to Sublease.  Tenant may sublease space or
                   --------------------------                               
grant concessions or licenses at any of the Hotels so long as the terms of any
such subleases, concessions or licenses do not exceed the Term and shall expire
upon any termination of this Lease.


                                  ARTICLE XVII
                                  HOLDING OVER
                                  ------------

     Should Tenant continue to hold any Hotel after the termination of this
Lease, whether the termination occurs by lapse of time or otherwise, such
holding over, unless otherwise agreed to by Landlord in writing, shall
constitute and be construed as a tenancy at sufferance at a daily Rent equal to
1/30th of an amount equal to two hundred percent (200%) of the monthly Base Rent
last in effect and subject to all of the other obligations imposed on Tenant
hereunder, but the foregoing shall not constitute a consent by Landlord to such
holding over and shall not prevent Landlord from exercising any of its remedies
under this Lease or applicable law by reason of such holding over.

                                      40
<PAGE>
 
                                 ARTICLE XVIII
                             ESTOPPEL CERTIFICATES
                             ---------------------

          Tenant agrees to furnish periodically, within ten (10) days after
written request therefor by Landlord, or any actual or prospective Mortgagee for
any Hotel, or any interest of Landlord therein or any actual or prospective
purchaser of Landlord's interest, a certificate signed by Tenant (which may
require a true and correct copy of this Lease and any and all amendments hereto
to be attached) certifying (to the extent same is true) to the then current Rent
due hereunder; that Tenant is not in default hereunder; that this Lease is in
full force and effect and unmodified; that the Term has commenced and the full
rental is then accruing hereunder; that no Rent under this Lease has been paid
more than ninety (90) days in advance of its due date; that the address for
Notices to be sent to Tenant is as set forth in this Lease (or has been changed
by Notice duly given and is as set forth in the certificate); that Tenant has no
knowledge of any default by Landlord then existing under this Lease; and such
other matters as may be reasonably requested by Landlord or any Mortgagee,
prospective Mortgagee or prospective purchaser.  If Tenant is unable to so
certify as to one or more of the foregoing items, Tenant shall specify its
reason therefor in writing.  Any such certificate may be relied upon by any
prospective purchaser, ground lessor, Mortgagee, or any beneficiary under any
deed of trust on the Improvements or the Land or any part thereof.  Landlord
agrees to furnish periodically, within ten (10) days after written request
therefor by Tenant or any actual or prospective Mortgagee, a certificate signed
by Landlord containing substantially the same information as described above.


                                  ARTICLE XIX
                           LANDLORD/TENANT FINANCING
                           -------------------------

     Section 19.1  Right to Finance
                   ----------------

          Landlord shall have the right, at any time, and from time to time, to
subject its interest in any of the Hotels to one or more Mortgages without
Tenant's consent.  Landlord also acknowledges that, concurrently with the
Commencement Date, Tenant's interests under this Lease shall be collaterally
assigned to Tenant's Mortgagee and that Tenant from time to time may secure
additional financings and/or refinancings with all or some portion of its
interests hereunder.  Landlord agrees to cooperate with Tenant with respect to
any such financings; provided, however, that Landlord shall have no obligation
to amend the terms of this Lease, expend any sums in connection therewith, or
subordinate or waive any of its rights hereunder.

     Section 19.2  Priority
                   --------

          (a)  Landlord agrees that this Lease and any extensions, renewals,
     replacements or modifications thereto and all right and interest of Tenant
     in and to the Hotels shall be superior to any and all Mortgages now or
     hereafter granted by Landlord.

          (b)  As more particularly described herein, Tenant has no right to
     cancel, rescind or terminate this Lease except as expressly provided in the
     particular provisions specified herein.  If Tenant exercises any such right
     to cancel or terminate this Lease with respect to a specific Hotel or
     Hotels, this Lease shall remain in full force and effect with respect to
     all other Hotels leased hereunder.

                                      41
<PAGE>
 
          (c)  If at any time there shall occur a foreclosure action with
     respect to the interest of Landlord under this Lease, or a deed in lieu of
     foreclosure, or any similar action or proceeding, then (i) this Lease shall
     not terminate, and (ii) Tenant shall attorn to and recognize the purchaser
     at such foreclosure sale (whether such person is the Mortgagee or another
     person or entity) or the grantee of a deed in lieu of foreclosure as
     Tenant's Landlord under this Lease, except that neither such purchaser or
     grantee, nor anyone claiming by, through or under any such person or
     grantee, shall be:

               (i)  liable for any action or omission of Landlord (or its
          predecessors in interest);

               (ii)  subject to any offsets or defenses which Tenant may have
          against Landlord (or its predecessors in interest); or

               (iii)  bound by any payment of Rent which Tenant might have made
          to Landlord (or its predecessors in interest) for more than one month
          in advance of the date the same was due under this Lease; but the
          foregoing shall not relieve any such purchaser or grantee, or anyone
          claiming by, through or under any such purchaser or grantee from
          performing all obligations of Landlord under this Lease with respect
          to each Hotel so owned after it acquires title to such Hotels.

     Section 19.3  Mortgagee Amendments.  If at any time, any prospective
                   --------------------                                  
Mortgagee requests any change or modification to this Lease as a condition of
granting a Mortgage to either Landlord or Tenant, the other party shall consent
to such change or modification provided that (i) the requesting party bears the
cost of preparing all documentation required to effect such change or
modification; (ii) such change or modification does not materially and adversely
increase the other party's cost of operating any of the Hotels or performing its
obligations under this Lease; and (iii) such change does not materially and
adversely affect the rights of the other party and/or its Mortgagees hereunder.
Examples of modifications to which each party shall consent include, without
limitation, obligations to give copies of notices and other documents to
Mortgagees where one party has previously agreed to give same to the other, to
obtain a Mortgagee's consent or approval where one party has previously agreed
to obtain the other's consent or approval, to allow a Mortgagee to act for the
requesting party if such party fails to exercise a right granted to it
hereunder, and provisions which govern the relationship between the other party
and Mortgagee.


                                   ARTICLE XX
                               DEFAULT BY TENANT
                               -----------------

     Section 20.1  Events of Default.  The occurrence of any one or more of the
                   -----------------                                           
following events shall constitute an "Event of Default" by Tenant under this
Lease:

          (a)  if Tenant shall fail to make any payment of Base Rent payable by
     it under this Lease when the same becomes due and payable and such failure
     continues for five or more days;

          (b)  if Tenant shall fail to make any payment of Percentage Rent or
     Additional Rent payable by it under this Lease when the same becomes due
     and payable and such failure is not cured by Tenant within a period of 10
     days after receipt by Tenant of notice thereof from Landlord; provided,
     however, that such notice shall, to the full extent permitted by applicable
     law, be in lieu of and not in addition to any notice required under
     applicable law; and provided,

                                      42
<PAGE>
 
     further, that such notice requirement shall not prevent the imposition of
     the required payment of interest and/or late charges on such overdue
     amounts;

          (c)  if Tenant shall fail to observe or perform any material term,
     covenant or condition of this Lease and such failure is not cured by Tenant
     within a period of 30 days after receipt by Tenant of notice thereof from
     Landlord, unless such failure cannot with diligence be cured within a
     period of 30 days, in which case such failure shall not be deemed to
     continue if Tenant proceeds promptly and with diligence to cure the failure
     and diligently completes the curing thereof in no event later than 180 days
     after receipt of such notice; provided, however, that such 180-day
     limitation shall not apply with respect to the cure by Tenant of defaults
     in its obligations under Article XII, so long as Tenant has promptly
     commence to cure said default within the initial 30-day period, and
     thereafter diligently prosecutes the cure to completion; and provided,
     further, that such notice described above shall, to the full extent
     permitted by applicable law, be in lieu of and not in addition to any
     notice required under applicable law;

          (d)  if Tenant shall:

               (i)  admit in writing its inability to pay its debts generally as
          they become due,

               (ii)  file a petition in bankruptcy or a petition to take
          advantage of any insolvency act,

               (iii)  make an assignment for the benefit of its creditors,

               (iv)  consent to the appointment of a receiver of itself or of
          the whole or any substantial part of its property, or

               (v)  file a petition or answer seeking reorganization or
          arrangement under the Federal bankruptcy laws or any other applicable
          law or statute of the United States of America or any state thereof;

          (e)  if Tenant shall, on a petition in bankruptcy filed against it, be
     adjudicated as bankrupt or a court of competent jurisdiction shall enter an
     order or decree appointing, without the consent of Tenant, a receiver of
     Tenant or of the whole or substantially all of its property, or approving a
     petition filed against it seeking reorganization or arrangement of Tenant
     under the federal bankruptcy laws or any other applicable law or statute of
     the United States of America or any state thereof, and such judgment, order
     or decree shall not be vacated or set aside or stayed within 60 days from
     the date of the entry thereof;

          (f)  if Tenant shall be liquidated or dissolved, or shall begin
     proceedings toward such liquidation or dissolution;

          (g)  if the estate or interest of Tenant in any Hotel or any part
     thereof shall be levied upon or attached in any proceeding and the same
     shall not be vacated or discharged within the later of 90 days after
     commencement thereof or 30 days after receipt by Tenant of notice thereof
     from Landlord (unless Tenant shall be contesting such lien or attachment in
     accordance with the terms of this Lease); provided, however, that such
     notice shall, to the full extent permitted by applicable law, be in lieu of
     and not in addition to any notice required under applicable law;

                                      43
<PAGE>
 
          (h)  if, except as a result of damage, destruction or a partial or
     complete Condemnation, Tenant voluntarily ceases operations at any Hotel
     for a period in excess of 30 consecutive days;

          (i)  if, with respect to the Concurrent Tenant Credit Facility, any
     written notice is sent to Tenant by the Administrative Agent or the
     Required Banks (as such terms are defined in the Concurrent Tenant Credit
     Facility) notifying Tenant in its capacity as Borrower thereunder that it
     is in default under the Concurrent Tenant Credit Facility, and such default
     shall not be cured within the cure period applicable therefor, if any; or

          (j)  if Tenant shall make, or purport to make, any assignment or
     subletting of its interest under this Lease for which Landlord's consent is
     required without first obtaining such consent.

     Section 20.2  Landlord's Rights Upon an Event of Default
                   ------------------------------------------

          (a)  If an Event of Default occurs, then Landlord may commence doing
     any one or more of the following provided that such commencement is prior
     to the date that Tenant cures such default:

               (i)  Terminate this Lease upon ten (10) days Notice to Tenant, in
          which event Tenant shall immediately surrender the Premises to
          Landlord and Tenant shall be liable to Landlord for all Surviving
          Obligations and to the extent provided in Article XVII and to the
          extent hereinafter provided in this Section 20.2(a). If Tenant fails
          to do so, Landlord may, without Notice and without prejudice to any
          other remedy Landlord may have, enter upon and take possession of any
          or all of the Premises and expel or remove Tenant and its effects
          without being liable to prosecution or any claim for damages therefor.
          Tenant shall indemnify Landlord for all loss and damage which Landlord
          may suffer by reason of such Termination, whether through inability to
          relet any or all of the Premises or otherwise, including any loss of
          Rent for the remainder of the Term. In connection with Landlord's
          exercise of the remedy described in this Subparagraph, Landlord shall
          have the right to seize and take possession of all of Tenant's FF&E
          located at the Hotels and either use same in connection with operating
          the property or dispose of same as Landlord sees fit to do. To the
          greatest extent permitted by law, Tenant hereby fully, finally and
          forever waives any and all protections provided by applicable law
          against Landlord's right of distraint.

               (ii)  Enter upon and take possession of any or all of the
          Premises as Tenant's agent, with the right but not the obligation of
          terminating this Lease and without being liable to prosecution or any
          claim for damages therefor, and Landlord may relet any or all of the
          Premises either in its own name or as Tenant's agent and in either
          event receive the rent therefor, in any of which events Tenant shall
          pay to Landlord on demand (i) any and all costs of re-leasing,
          renovating, repairing, and altering any or all of the Premises and/or
          the Hotels (including but not limited to advertising costs,
          commissions, finders fees, legal fees and other costs) for a new
          Tenant or Tenants and (ii) any deficiency that may arise by reason of
          such reletting from the net income from the Hotels that Landlord would
          have received if there had not been a default by Tenant.  In addition,
          to the extent any of the Hotels are not relet, Tenant shall continue
          to be obligated to satisfy all of its obligations under this Lease.
          In connection with Landlord's exercise of the remedy described in this
          Subparagraph, Landlord shall have the right to seize and take
          possession of all of Tenant's FF&E located in the Hotels and either
          use same in connection with

                                      44
<PAGE>
 
          operating the property or dispose of same as Landlord sees fit to do.
          To the greatest extent permitted by law, Tenant hereby fully, finally
          and forever waives any and all protections provided by applicable law
          against Landlord's right of distraint.

               (iii)  Do whatever Tenant is obligated to do under this Lease and
          enter any or all of the Hotels without being liable to prosecution or
          any claim for damages therefor to accomplish this purpose.  Tenant
          shall reimburse Landlord, as Additional Rent, immediately upon demand
          for any expenses which Landlord incurs in thus effecting compliance
          with this Lease on Tenant's behalf, together with interest thereon
          from the date of such expenditure until paid at the Lease Interest
          Rate.

               (iv)  Bring a summary proceeding/action for ejectment in order to
          recover possession of any or all of the Hotels.

               (v)  Landlord hereby reserves the right to institute successive
          legal actions to collect any damages payable to Landlord hereunder, it
          being intended that a suit for damages shall not bar any subsequent
          suit for damages that have subsequently accrued.

               (vi)  Accelerate the Base Rents due under this Lease.  Upon any
          termination pursuant to subsection 20.2(a)(i) hereunder, in addition
          to all other rights and remedies it may have under this Lease,
          Landlord may recover from Tenant: (A) the worth at the time of award
          of any unpaid Rent which has been earned at the time of such
          termination, plus (B) the worth at the time of award of any unpaid
          Rent which would have been earned after termination until the time of
          award (less any rental loss which applicable law requires Landlord to
          mitigate and which is proved by Tenant that Landlord could reasonably
          have avoided), plus (C) the worth at the time of award of the amount
          of the unpaid Rent for the balance of the term of this Lease after the
          time of award (less any rental loss that Tenant proves reasonably
          could be avoided if applicable law requires such to be deducted), plus
          (D) any other amount in addition to or in lieu of the foregoing as may
          be permitted from time to time under applicable law.  The discount
          rate to be used in computing the amount of Base Rent due hereunder
          shall be equal to the effective annual yield prevailing on the date
          the Event of Default occurred with respect to United States treasury
          obligations having a maturity date that is the same or nearest to the
          date on which this Lease would have expired if no Event of Default
          occurred.

          (b)  If an Event of Default has occurred under Section 20.1(b), then,
     notwithstanding anything in applicable law to the contrary, Landlord shall
     have no obligation whatsoever to mitigate any of its damages.  If any other
     Event of Default shall have occurred, Landlord shall be obligated to
     mitigate its damages only to the extent it is required to do so under
     applicable law.

     Section 20.3  Implied Waiver
                   --------------

          (a)  No act or thing done by Landlord or its agents during the Term
     shall constitute an acceptance of an attempted surrender of the premises,
     and no agreement to accept a surrender of the Premises shall be valid
     unless made in writing and signed by Landlord.  No re-entry or taking
     possession of the Premises by Landlord pursuant to Section 20.2(a)(ii) or
     otherwise shall constitute an election by Landlord to terminate this Lease,
     unless a written Notice of such

                                      45
<PAGE>
 
     intention is given to Tenant.  No waiver by Landlord of any breach of this
     Lease shall constitute a waiver of any other violation or breach of any of
     the terms hereof.

          (b)  No provision of this Lease shall be deemed to have been waived by
     Landlord or Tenant unless such waiver is in writing and signed by such
     party.  The rights granted to Landlord and Tenant in this Lease shall be
     cumulative of every other right or remedy which Landlord or Tenant may
     otherwise have at law or in equity or by statute, and the exercise of one
     or more rights or remedies shall not prejudice or impair the concurrent or
     subsequent exercise of other rights or remedies.

     Section 20.4  Injunctive Relief.  Landlord shall be entitled to obtain
                   -----------------                                       
injunctive relief in case of the violation, or attempted or threatened
violation, of any of the provisions hereof, or to a decree compelling
performance of any of the provisions hereof, to the extent that any such relief
is provided by a court of equity.


                                  ARTICLE XXI
                            PROVISIONS APPLICABLE TO
                            ------------------------
                       PURCHASE BY TENANT OF THE PREMISES
                       ----------------------------------

     Section 21.1  Purchase "As Is".  If Tenant is to acquire any Hotel pursuant
                   ----------------                                             
to Sections 1.3, 14.3 or 15.5 of this Lease, such Hotel shall be transferred 
"As Is" on the date of transfer and otherwise as provided in Section 1.1 hereof.
Landlord shall convey title to such Hotel to Tenant in the same condition of
title (including all restrictions, limitations, covenants and easements of
record and all encroachments) that existed as of the Commencement Date, subject,
however, to (i) the lien of real estate taxes, water and sewer charges and other
governmental charges that are not then due and payable, (ii) all restrictions,
limitations, covenants, easements and encroachments that were created after the
Commencement Date other than those created by Landlord without the written
consent of Tenant, and (iii) all Legal Requirements, but free of the following
items ("Landlord Obligations"): (x) the lien of any security interest created by
any Mortgage on Landlord's interest, (y) the lien of any judgment, tax
assessment or other obligation incurred by Landlord that is not the
responsibility of Tenant under this Lease, and (z) any liens created on and
after the Commencement Date which have been created by or resulted solely from
acts of Landlord undertaken without the written consent of Tenant. Landlord
shall pay off and discharge all Landlord Obligations at closing of Tenant's
purchase of such Hotel, but Landlord shall have the right to apply the purchase
price proceeds for the purpose of discharging such Landlord Obligations.

     Section 21.2  Timing of Closing.  If Landlord accepts Tenant's irrevocable
                   -----------------                                           
offer pursuant to Sections 1.3, 14.3 or 15.5 to purchase any Hotel, closing of
such purchase shall be held on the date (the "Purchase Closing Date") specified
by Tenant in its notice of Termination pursuant to Sections 1.3, 14.3 or 15.5
which occurs not earlier than ninety (90) days nor later than one hundred twenty
(120) days after Landlord's receipt of Tenant's irrevocable offer to purchase.
Closing of such purchase shall be conducted by an escrow agent (the "Closing
Escrow Agent") which shall be a national title insurance company designated by
Tenant that meets with the reasonable satisfaction of Landlord.

     Section 21.3  Deliveries  at Closing.  On the Purchase Closing Date,
                   ----------------------                                
Landlord shall deliver to the Closing Escrow Agent:

          (a)  a deed ("Landlord's Deed") conveying such Hotel to Tenant or
     Tenant's designee and containing no warranties other than a warranty that
     any of the Hotels are not subject to: (i)

                                      46
<PAGE>
 
     the lien of any security interest created by an Mortgage executed by
     Landlord on Landlord's interest, (ii) the lien of any judgment, tax
     assessment or other obligation incurred by Landlord that is not the
     responsibility of Tenant under this Lease and (iii) any liens created on or
     after the Commencement Date which have been created by or resulted solely
     from acts of Landlord undertaken without the consent of Tenant.

          (b)  a written instrument (the "Assignment"), without warranty of
     title, assigning and transferring to Tenant or Tenant's designee (i)
     Landlord's interest in any FF&E leased by Landlord to Tenant hereunder and
     any licenses or permits relating to such Hotel and (ii) Landlord's interest
     in any insurance proceeds payable with respect to any casualty that has
     previously occurred to such Hotel (if any) (which assignment of insurance
     proceeds shall be consented to by the Insurance Trustee).  If and to the
     extent that there are any insurance proceeds previously paid to Landlord or
     the Insurance Trustee which have not been applied for the purpose of repair
     or restoration and are then held by Landlord or the Insurance Trustee,
     Landlord and the Insurance Trustee, as the case may be, shall deliver such
     insurance proceeds (the "Escrowed Insurance Proceeds") to the Closing
     Escrow Agent.  Tenant shall deliver to the closing Escrow Agent current
     immediately available funds in the amount of the purchase price and any
     costs payable by Tenant hereunder that are set forth in Section 21.7
     ("Tenant's Funds").  Closing Agent shall then proceed to consummate the
     Closing in accordance with local custom and practice.

     SECTION 21.4  TENANT'S FAILURE TO CLOSE.  IF TENANT FAILS TO PERFORM ITS
                   -------------------------                                 
OBLIGATIONS UNDER THIS ARTICLE XXI ON THE PURCHASE CLOSING DATE FOR ANY REASON
OTHER THAN THE DEFAULT OF LANDLORD, AND SUBJECT TO ANY CURE RIGHTS EXPRESSLY
GRANTED TO TENANT'S MORTGAGEE, TENANT'S NOTICE OF TERMINATION PURSUANT TO
SECTIONS 1.3, 14.3 OR 15.5 SHALL BE RESCINDED AND DEEMED NULL AND VOID, THIS
LEASE SHALL CONTINUE IN FULL FORCE AND EFFECT AND NEITHER TENANT NOR LANDLORD
SHALL HAVE ANY LIABILITY OR OBLIGATION TO THE OTHER BY REASON OF SUCH FAILURE TO
CONSUMMATE SETTLEMENT OF SUCH PURCHASE EXCEPT THAT, IN RECOGNITION OF THE FACT
THAT SUCH FAILURE OF PERFORMANCE WILL CAUSE LANDLORD TO INCUR COSTS NOT
CONTEMPLATED IN THIS LEASE, THE EXACT AMOUNT OF WHICH WILL BE EXTREMELY
DIFFICULT TO ASCERTAIN, TENANT SHALL PAY TO LANDLORD, AS FIXED, AGREED AND
LIQUIDATED DAMAGES FOR TENANT'S DEFAULT, THE SUM OF FIFTY THOUSAND DOLLARS
($50,000), WHICH AMOUNT THE PARTIES AGREE REPRESENTS A FAIR AND REASONABLE
ESTIMATE OF SUCH COSTS.


     -------------------------          --------------------------
     Tenant's Initials                  Landlord's Initials

     SECTION 21.5  LANDLORD'S FAILURE TO CLOSE.  IF LANDLORD FAILS TO PERFORM
                   ---------------------------                               
ITS OBLIGATIONS UNDER THIS ARTICLE XXI ON THE PURCHASE CLOSING DATE FOR ANY
REASON OTHER THAN THE DEFAULT OF TENANT AND SUBJECT TO ANY CURE RIGHTS EXPRESSLY
GRANTED TO LANDLORD'S MORTGAGEE, AND AN ORDER OF SPECIFIC PERFORMANCE IS NOT
OBTAINED BY TENANT AND COMPLIED WITH, THIS LEASE SHALL TERMINATE AS OF THE
PURCHASE CLOSING DATE AND NEITHER TENANT NOR LANDLORD SHALL HAVE ANY LIABILITY
OR OBLIGATION TO THE OTHER BY REASON OF SUCH FAILURE TO CONSUMMATE SETTLEMENT OF
SUCH PURCHASE EXCEPT

                                      47
<PAGE>
 
THAT, IN RECOGNITION OF THE FACT THAT SUCH FAILURE OF PERFORMANCE WILL CAUSE
TENANT TO INCUR COSTS NOT CONTEMPLATED IN THIS LEASE, THE EXACT AMOUNT OF WHICH
WILL BE EXTREMELY DIFFICULT TO ASCERTAIN, LANDLORD SHALL PAY TO TENANT, AS
FIXED, AGREED AND LIQUIDATED DAMAGES FOR LANDLORD'S DEFAULT, THE SUM OF FIFTY
THOUSAND DOLLARS ($50,000), WHICH AMOUNT THE PARTIES AGREE REPRESENTS A FAIR AND
REASONABLE ESTIMATE OF SUCH COSTS.


     -------------------------          --------------------------
     Tenant's Initials                  Landlord's Initials

     Section 21.6  Payment of Costs.  All costs and expenses in connection with
                   ----------------                                            
any such purchase, including title insurance, transfer taxes, recording costs
and the reasonable attorney's fees of Landlord and any Mortgagee, shall be paid
by Tenant.

     Section 21.7  Prorations.  Percentage Rent shall be prorated as of the date
                   ----------                                                   
of such purchase, calculated in accordance with Section 5.1(b) and Exhibit B, so
that such dollar figure is multiplied by a fraction whose numerator is the
number of days in such Lease Year that precede the date of such purchase and
whose denominator is three hundred sixty-five (365).


                                  ARTICLE XXII
                                 MISCELLANEOUS
                                 -------------

     Section 22.1  Notices
                   -------

          (a)  Any Notice or demand, consent, approval or disapproval, or
     statement (collectively called "Notice" or "Notices") required or permitted
     to be given by the terms and provisions of this Lease, or by any law or
     governmental regulation, shall be in writing (unless otherwise specified
     herein) and unless otherwise required by such law or regulation, shall be
     personally delivered with receipt acknowledged in writing or sent by United
     States mail postage prepaid as registered or certified mail, return receipt
     requested or by courier service guarantying overnight delivery.  Any Notice
     shall be addressed to Landlord or Tenant, as applicable, at its address
     specified below as said address may be changed from time to time as
     hereinafter provided.  By giving the other party at least ten (10) days'
     prior written Notice, either party may designate a different address or
     addresses for Notices.  Landlord may elect to require Tenant to send a copy
     of any Notice of Landlord's default to Landlord's Mortgagee(s)
     simultaneously with the sending of Notice to Landlord, provided that
     Landlord shall have supplied to Tenant the name and address of such
     Mortgagee(s).

          (b)  Any Notice shall be deemed given as of the date of delivery as
     indicated by affidavit in case of personal delivery or by the return
     receipt in the case of mailing or by the confirmation of the courier
     service making delivery; and upon any failure to deliver by reason of
     changed address of which no Notice was given or refusal to accept delivery,
     as of the date of such failure as indicated by affidavit or on the return
     receipt or by Notice of the postal service or by the confirmation of the
     courier service making delivery, as the case may be.

          (c)  A copy of each Notice given pursuant to Section 22.1(a) above 
     shall also be sent to the addressee by FAX.

                                      48
<PAGE>
 
     (d)  Notices shall be sent as follows:

          To Tenant:    Red Lion Hotels, Inc.
                        4001 Main Street
                        Vancouver, WA  98663
                        Attention:  Mr. Anupam Narayan
                        FAX No: (360) 750-4165

          with a        Beth A. Ugoretz, Esq.
          copy to:      4001 Main Street
                        Vancouver, WA  98663
                        FAX No: (360) 693-1739


          To Landlord:  RLH Partnership, L.P.
                        in care of Mr. Todd A. Fisher
                        2800 Sand Hill Rd., Suite 2000
                        Menlo Park, CA  94025
                        FAX No.: (415) 233-6564

          with a        Beth A. Ugoretz, Esq.
          copy to:      4001 Main Street
                        Vancouver, WA  98663
                        FAX No: (360) 693-1739

     Section 22.2  Memorandum of Lease
                   -------------------

          (a)  Landlord and Tenant shall execute, acknowledge and deliver a
     memorandum of this Lease (a "Lease Memorandum") in recordable form setting
     forth the date and general description of this Lease, the names of the
     parties hereto, the Commencement Date, the Expiration Date, a description
     of the Land and the Hotels, Tenant's rights to renew this Lease, Landlord's
     disclaimer of liability for mechanic's liens attributable to Tenant's use,
     occupancy and possession of the Hotels, and such other provisions of this
     Lease (including, if necessary or advisable under applicable law, the
     incorporation by reference of all of the terms of this Lease) as either
     party may designate.  Said Lease Memorandum shall not in any circumstances
     be deemed to modify or to change any of the provisions of this Lease.

          (b)  Tenant shall after the expiration or termination of the Term, at
     the request of Landlord, execute, acknowledge and deliver to Landlord a
     memorandum in recordable form evidencing the expiration or Termination of
     this Lease.

     Section 22.3  Determination of Fair Market Value
                   ----------------------------------

          (a)  If it becomes necessary to determine the Fair Market Value of any
     Hotel for any purpose of this Lease, the party required or permitted to
     give notice of such required determination shall give the other party
     Notice that such determination is required and shall set forth such party's
     estimate of the Fair Market Value of the Hotel to be valued.  The parties
     shall thereupon attempt, in good faith, to agree upon the Fair Market Value
     of such Hotel within 10 days of such Notice.  Failing any agreement within
     such 10 day period, the party who gave such

                                      49
<PAGE>
 
     Notice shall send a second notice of such required determination and shall
     include in such Notice the name of a Person selected to act as appraiser on
     its behalf.  Within 10 days after receipt of any such notice, Landlord or
     Tenant, as the case may be, shall by notice to Tenant or Landlord, as the
     case may be, appoint a second Person as appraiser on its behalf.  Each
     appraiser must be licensed as an appraiser in the State and be a member of
     the Appraisal Institute (or any successor organization thereto).

          (b)  After appointment, the appraisers shall, within 45 days after the
     date of the notice appointing the first appraiser, determine the Fair
     Market Value of the Hotel as of the date it becomes necessary to determine
     the Fair Market Value (giving effect to the impact, if any, of inflation
     from that date to the date the appraisers determine such Fair Market
     Value); provided, however, that if only one appraiser shall have been so
     appointed, or if two appraisers shall have been so appointed but only one
     such appraiser shall have made such determination within the required 45
     days, then the determination of such appraiser shall be final and binding
     upon the parties.

          (c)  Unless the parties otherwise jointly instruct the appraisers in
     writing to the contrary, the appraisers shall value the Hotel at Fair
     Market Value pursuant to the Uniform Standards of Professional Appraisal
     Practice and, to the extent not inconsistent therewith, the Appraisal
     Institute's Standards of Professional Practice, and in accordance with
     generally accepted appraisal methodology.

          (d)  Subject to Sections 22.3(d)(i) and 22.3(d)(ii), if two 
     appraisers shall have been appointed and shall have made their
     determinations of the Fair Market Value of the Hotel within the required 
     45-day period, then the Fair Market Value of that property shall be an
     amount equal to the sum of fifty percent (50%) of each appraiser's
     determination.

               (i)  If the difference between the appraisals made pursuant to
          Section 22.3(b) shall exceed ten percent (10%) of the lesser of such
          amounts, then the appraisers shall have 20 days to appoint a third
          appraiser.  If such appraisers fail to appoint such third appraiser,
          then either party may request the American Arbitration Association (or
          any successor organization) or a court (having jurisdiction over such
          appointment) to appoint the third appraiser.  The third appraiser
          shall be licensed as an appraiser in the State and be a member of the
          Appraisal Institute.  If a third appraiser is not appointed under this
          Section 22.3(d)(i), then the Fair Market Value of the Hotel shall be
          determined as provided for in Section 22.3(d) notwithstanding this
          Section 22.3(d)(i).

               (ii)  Any appraiser appointed by the original appraisers, by the
          American Arbitration Association or by an appropriate court shall be
          instructed to determine the Fair Market Value within 30 days after
          appointment of such appraiser.  The determination of the appraiser
          which differs most in terms of dollar amount from the determinations
          of the other two appraisers shall be excluded, and fifty percent (50%)
          of the sum of the remaining two determinations shall be final and
          binding upon Landlord and Tenant as the Fair Market Value for the
          Hotel.

          (e)  This provision for determination by appraisal shall be
     specifically enforceable to the extent such remedy is available under
     applicable law, and any determination hereunder shall be final and binding
     upon the parties except as otherwise provided by applicable law.  Landlord
     and Tenant shall each pay the fees and expenses of the appraiser appointed
     by it and each shall pay

                                      50
<PAGE>
 
     one-half of the fees and expenses of the third appraiser and one-half of
     all other costs and expenses incurred in connection with each appraisal.

     Section 22.4  Partial Invalidity.  If any portion of this Lease shall be
                   ------------------                                        
declared invalid by order, decree or judgment of a court, or governmental agency
having jurisdiction, this Lease shall be construed as if such portion had not
been inserted herein, except when such construction would operate as an undue
hardship on Tenant or Landlord, constitute a substantial deviation from the
general intent and purpose of said parties as reflected in this Lease, or deny
either Tenant or Landlord to a material extent a right or benefit pursuant to
this Lease as originally written, in which event this Lease in pertinent part
shall be reformed so as to place both Landlord and Tenant to the greatest extent
permitted by law in the same relative positions as they would have enjoyed under
this Lease as originally written.

     Section 22.5  Headings.  The article and section headings and the Table of
                   --------                                                    
Contents contained in this Lease are for convenience only and shall not enlarge
or limit the scope or meaning of the various and several provisions hereof.

     Section 22.6  Binding Effect.  All agreements and covenants herein
                   --------------                                      
contained shall be binding upon the respective heirs, personal representatives,
successors, and, to the extent permitted under this Lease, assigns of the
parties hereto.

     Section 22.7  Representations.  Neither Landlord nor Landlord's agents have
                   ---------------                                              
made any representations or promises with respect to the Premises except as
herein expressly set forth and all reliance with respect to any representations
or promises is based solely on those contained herein.

     Section 22.8  Amendments.  No amendment or modification of this Lease shall
                   ----------                                                   
be binding or valid unless expressed in a writing executed by both parties
hereto or their respective successors and assigns.

     Section 22.9  Brokers.  Neither party has engaged any agents or brokers
                   -------                                                  
with respect to the negotiation and execution of this Lease and each party shall
indemnify and defend the other with respect to any claim by an agent or broker
claiming through the indemnifying party against the indemnified party.

     Section 22.10  Authority to Execute
                    --------------------

          (a)  Tenant represents and warrants that Tenant has the full right and
     authority to enter into this Lease, and that all persons signing on behalf
     of Tenant were authorized to do so by any and all necessary or appropriate
     corporate actions.

          (b)  Landlord represents and warrants that Landlord has the full right
     and authority to enter into this Lease, and that all persons signing on
     behalf of Landlord were authorized to do so by any and all necessary or
     appropriate corporate or Landlord actions.

     Section 22.11  Applicable Law.  This Lease shall be governed by and
                    --------------                                      
construed under the laws of the state within which the Land is located.

     Section 22.12  Construction.  All exhibits referred to in this Lease are by
                    ------------                                                
this reference incorporated fully herein.  The term "this Lease" shall be
considered to include all such exhibits.

                                      51
<PAGE>
 
     Section 22.13  Impossibility of Performance.  If any covenant or obligation
                    ----------------------------                                
of Tenant under this Lease (other than a covenant or obligation to pay Rent or
other sums payable by Tenant hereunder) as applied to a particular circumstance
would be incapable of being fully performed by any person or entity
notwithstanding the fact that such person or entity had sufficient funds
available to enable it to perform such covenants or obligations under this
Lease, then Tenant shall only be obligated to perform such covenant or
obligation as applied to such circumstance to the extent that such covenant or
obligation can be so performed.

     Section 22.14  Time of Essence.  Time is of the essence with respect to the
                    ---------------                                             
rights and obligations of Landlord and Tenant under this Lease.

     Section 22.15  Attorney's Fees.  Except as otherwise provided herein, in
                    ---------------                                          
any action or proceeding (including without limitation appellate proceedings)
brought by either party against the other under this Lease, the prevailing party
shall be entitled to recover from the other party reasonable attorneys' fees,
investigation costs, and other reasonable legal expenses and court costs
incurred by such party in such action or proceeding.

     Section 22.16  No Merger.  There shall be no merger of the leasehold estate
                    ---------                                                   
created by this Lease with respect to each of the Hotel sites, with the fee
estate or any superior ground leasehold estate, by reason of the fact that the
same legal entity or person may own or hold the leasehold estate created by this
Lease or any interest in such leasehold estate, and any interest in either or
both of the fee estate or any superior ground leasehold estate.  No merger of
any leasehold estate and fee estate shall occur unless and until all persons or
entities, having any interest in:  (i) the leasehold estate created by this
Lease, (ii) the leasehold estate created by any applicable superior ground
leasehold estate, and (iii) the fee estate in the site of the affected Hotel,
shall join in a written instrument effecting such merger and shall duly record
the same.

     Section 22.17  Landlord's Right to Enter.  Landlord and its agents and
                    -------------------------                              
designees may enter upon and examine any Hotel at reasonable times, accompanied
by a representative of Tenant that Tenant shall make available to Landlord, and
show any Hotel to prospective purchasers, partners, investors, mortgagees or
lessees as long as such examination or showing shall not unreasonably interfere
with the business operations of Tenant at the Hotel.

     Section 22.18  Corporate Reorganization of Tenant.  Upon the merger of
                    ----------------------------------                     
Tenant into another corporation where Tenant is not the surviving corporation or
the consolidation of Tenant with one or more other corporations where Tenant is
not the surviving corporation, or the sale or other disposition of all or
substantially all of the assets of Tenant to one or more other entities, the
surviving entity or transferee of assets, as the case may be, shall be deemed to
have assumed all obligations, covenants and responsibilities of Tenant under
this Lease.  Promptly after such corporate reorganization, such entity shall
deliver to Landlord an instrument in recordable form reasonably acceptable to
counsel for both parties, evidencing such assumption.

     Section 22.19  No Waiver.  The failure of either party to insist upon a
                    ---------                                               
strict performance of any of the terms or provisions of this Lease or to
exercise any option, right or remedy herein contained shall not be construed as
a waiver or as a relinquishment for the future of such term, provision, option,
right or remedy, but the same shall continue and remain in full force and
effect.  No waiver by either party of any term or provision hereof shall be
deemed to have been made unless expressed in writing and signed by such party.

                                      52
<PAGE>
 
     Section 22.20  Confidentiality.  The parties hereby agree that the matters
                    ---------------                                            
set forth in this Lease (except to the extent such matters are expressly
disclosed in any Memorandum of Lease recorded pursuant to Section 22.2(a)) are
strictly confidential and each party will make every effort to ensure that such
information is not disclosed to any outside persons or entities (including the
press) without the consent of the other party, except as required by ERISA or
any other Legal Requirement reporting and disclosure rules or otherwise
specifically provided herein.  For purposes of the preceding sentence, the words
"outside persons or entities" do not include the parties' attorneys,
accountants, consultants, shareholders, lenders, partners, investors, or any
prospective lenders, partners and investors.  No references to Tenant or to any
Affiliate will be made in any prospectus, private placement memorandum, offering
circular or offering documentation related thereto (collectively referred to as
the "Prospectus"), issued by Landlord or one of its affiliates, which is
designated to interest potential investors in any Hotel, unless Tenant has
previously received a copy of all such references.  However, regardless of
whether Tenant does or does not so receive a copy of all such references,
neither Tenant nor any Affiliate will be deemed a sponsor of the offering
described in the Prospectus, nor will it have any responsibility for the
Prospectus, and the Prospectus will so state.  Landlord shall indemnify, defend
and hold Tenant harmless from and against all loss, costs, liability and damage
(including reasonable attorneys' fees and expenses, and the cost of litigation)
arising out of any Prospectus or the offering described therein; and this
obligation of Landlord shall survive Termination of this Lease.

     Section 22.21  Gender and Number.  Words of any gender used in this Lease
                    -----------------                                         
shall be held to include any other gender, and words in the singular shall be
held to include the plural and vice versa, when the sense requires and the
following words and phrases shall have the following meanings:  (i) "including"
shall mean "including without limitation"; (ii) "provisions" shall mean
"provisions, terms, agreements, covenants and/or conditions"; (iii) "lien" shall
mean "lien, charge, encumbrance, title retention agreement, pledge, security
interest, mortgage and/or deed of trust"; (iv) "obligation" shall mean
"obligation, duty, agreement, liability, covenant and/or condition"; (v) "the
Premises" shall mean "the Premises or any part thereof or interest therein";
(vi) "Hotel" shall mean "Hotel or any part thereof or interest therein"; (vii)
"any of the Land" shall mean "the Land or any part thereof or interest therein";
(viii) "any of the Improvements" shall mean "the Improvements or any part
thereof or interest therein"; and (ix) "any of the personal property" shall mean
"the personal property or any part thereof or interest therein."

     Section 22.22  Survival.  All claims and liabilities of either party
                    --------                                             
existing or arising prior to the expiration or earlier termination of this
Lease, unless otherwise specifically provided herein, and all Surviving
Obligations shall survive such expiration or earlier Termination.

     Section 22.23  Acceptance of Surrender.  No surrender to Landlord of this
                    -----------------------                                   
Lease or of any of the Hotels or of any part thereof or of any interest therein
shall be valid or effective unless agreed to and accepted in writing by Landlord
and the Senior Mortgagee if any, and no act by Landlord or any representative or
agent of Landlord, other than a written acceptance, shall constitute an
acceptance of any such surrender.

     Section 22.24  Non-Recourse as to Landlord.  Anything contained herein to
                    ---------------------------                               
the contrary notwithstanding, any claim based on or in respect of any liability
of Landlord under this Lease shall be enforced only against the Premises and not
against any other tangible or intangible assets, properties or funds of (i)
Landlord, (ii) any shareholder of Landlord or any director, officer, general
partner, limited partner, employee or agent of Landlord, (or any legal
representative, heir, estate, successor or assign of any thereof), (iii) any
predecessor or successor partnership or corporation (or other entity) of
Landlord, or any of its shareholders, either directly or through Landlord or its
shareholders or any predecessor or

                                      53
<PAGE>
 
successor partnership or corporation or their shareholders, officers, directors,
employees or agents (or other entity), or (iv) any other Affiliate of any of the
foregoing, or any director, officer, employee or agent of any thereof; provided,
however, that if, as a result of a judicial foreclosure of any Mortgage, the
interest of Landlord in any Hotel is transferred to a Mortgagee or any other
person or entity and at the date of such foreclosure, Tenant has a legal
proceeding against Landlord, which is determined adversely to Landlord after the
exhaustion of all appeal periods, Tenant shall have the right to enforce any
judgment from any assets or other properties of Landlord but not against any
Mortgagee or any other person or any of the parties listed at (ii) through (iv)
above.

     Section 22.25  Entire Agreement; Integration
                    -----------------------------

          (a)  This Lease contains all the agreements and conditions made
     between the parties hereto with respect to the matters contained herein and
     may not be modified orally or in any manner other than as provided in
     Section 22.8.  All prior written and oral understandings and agreements
     shall be deemed to have merged into this Lease and have no further force
     and effect.

          (b)  Landlord and Tenant are business entities having substantial
     experience with the subject matter of this Lease and have each fully
     participated in the negotiation and drafting of this Lease.  Accordingly,
     this Lease shall be construed without regard to the rule that ambiguities
     in a document are to be construed against the drafter.

          (c)  No inferences shall be drawn from the fact that the final, duly
     executed Lease differs in any respect from any previous draft hereof.

          (d)  If there is more than one Tenant, the obligations of each shall
     be joint and several.

     Section 22.26  Waiver of Trial by Jury.  The parties hereto each waive, to
                    -----------------------                                    
the full extent permitted by applicable law, all right to elect a trial by jury
in any litigation relative to this Lease.

     Section 22.27  Tenant's Remedies.  Tenant shall have the right to seek all
                    -----------------                                          
remedies at law and/or in equity, including an order for specific performance,
to obtain full performance of all Landlord's obligations under this Lease,
and/or to recover damages for any breach by Landlord hereunder; provided,
however, that Tenant shall not have the right (i) to terminate this Lease
(except as otherwise specifically provided in this Lease) by reason of any
breach of Landlord's obligations hereunder; (ii) to set-off against Rents
hereunder any amounts owing to Tenant by Landlord; or (iii) to assert by way of
defense, cross-claim or counterclaim in any action by Landlord to recover Rent
or other sums due from Tenant any right to withhold Rent or to pay less than the
amount due hereunder.  Any exercise of Tenant's rights hereunder shall be
through a separate and independent action unrelated to any claim Landlord has
against Tenant for Rent due hereunder.

     Section 22.28  Landlord and Tenant Relationship.  The parties hereto
                    --------------------------------                     
specifically acknowledge and agree that, notwithstanding any other provision
contained in this Lease (including the provisions for payment of Percentage
Rent), it is the intent of the parties that their relationship hereunder is and
shall at all times be that of Landlord and Tenant and not that of partners,
joint venturers, lender and borrower, agent, or any other relationship other
than that of Landlord and Tenant.

     Section 22.29  Relationship with Groundlessors.  With respect to any ground
                    -------------------------------                             
lease concerning any portion of the Premises which terminates by its terms prior
to the end of the Term of this Lease, Landlord shall cooperate with Tenant in
negotiating with the subject ground lessor (i) to extend the term

                                      54
<PAGE>
 
of said ground lease so as to have its term terminate no earlier than the last
day of the Term, or (ii) to persuade the ground lessor to enter into a separate
ground lease directly with Tenant following the termination of said ground
lease.

     Section 22.30  Limited Liability of Landlord.  Notwithstanding any
                    -----------------------------                      
provisions hereof, none of the obligations of Landlord under or contemplated by
this Lease shall be an obligation of any officer, director, shareholder, limited
partner, general partner, or owner of Landlord, or any of their respective
officers, directors, shareholders, limited partners, general partners, or
owners, or successors or assigns.  Landlord shall be the only person or entity
liable with respect to such obligations.  Tenant hereby irrevocably waives any
right it may have against any such officer, director, shareholder, general
partner or limited partner, owner, successor or assign identified above as a
result of the performance of the provisions under or contemplated by this Lease.
This provision shall survive any termination of this Lease.

     EXECUTED as of the date first written above.


TENANT:                             LANDLORD:

RED LION HOTELS, INC.,              RLH PARTNERSHIP, L.P.,
a Delaware corporation              a Delaware limited partnership


By: /s/ Anupam Narayan                  By: /s/ David J. Johnson
   -------------------                     ---------------------
Its: Vice President & Treasurer         Its: Executive Vice President
    ---------------------------             -------------------------


ATTEST:



By:
   ----------------------------
     [Assistant] Secretary

                                      55
<PAGE>
 
STATE OF _______________  )
                          )  ss.
COUNTY OF _______________ )

          On this ____ day of ______________, 1995, before me personally
appeared _________________________, to me personally known to be the
______________________ of RED LION HOTELS, INC., the Delaware corporation that
executed the within and foregoing instrument, and acknowledged said instrument
to be the free and voluntary act and deed of said corporation, for the uses and
purposes therein mentioned, and on oath stated that (s)he was authorized to
execute said instrument and that the seal affixed, if any, is the corporate seal
of said corporation.

          IN WITNESS WHEREOF, I have hereunto set my hand and affixed my seal
the day and year first above written.


 
                                    --------------------------------------------
[Seal or Stamp]                     Notary Public in and for the State of
                                                   , residing at 
                                    ---------------              ---------------

                                    Printed Name:
                                                 -------------------------------

                                    My appointment expires:
                                                           ---------------------

                                      56
<PAGE>
 
STATE OF _______________ )
                         )  ss.
COUNTY OF ______________ )

          On this ____ day of ______________, 1995, before me personally
appeared _________________________, the ______________________ of Red Lion G.P.,
Inc., a Delaware corporation and the Managing General Partner in RLH
PARTNERSHIP, L.P., the Delaware limited partnership that executed the within and
foregoing instrument, and acknowledged said instrument to be the free and
voluntary act and deed of said corporation and partnership, for the uses and
purposes therein mentioned, and on oath stated that (s)he was authorized to
execute said instrument on behalf of said corporation and that said corporation
was authorized to do so on behalf of said partnership.

          IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.


 
                                    --------------------------------------------
[Seal or Stamp]                     Notary Public in and for the State of
                                                   , residing at 
                                    ---------------              ---------------

                                    Printed Name:
                                                 -------------------------------

                                    My appointment expires:
                                                           ---------------------

                                      57
<PAGE>
 
                                   EXHIBIT A

                       LEGAL DESCRIPTIONS OF PROPERTIES


                                 See Attached
<PAGE>
 
                                   EXHIBIT A
                             PROPERTY DESCRIPTION
                      (Property: Sonoma/Rohnert Park, CA)
                                 -----------------------
  

             The land is located in the State of California, County of Sonoma,
City of Rohnert Park, and is described as follows:


      Beginning at the most Easterly corner of Lot 137, as shown upon the Map of
      Mountain Shadows Subdivision, Unit No. 1, filed in Book 257 of Maps, pages
      16, 17, 18, 19 and 20, Sonoma County Records; thence from said point of
      beginning South 62 degrees 28' 00" East 86.00 feet to a 3/4" iron pipe
      set, tagged LS 2757; thence North 34 degrees 09' 17" East 295.09 feet to a
      3/4" iron pipe set, tagged LS 2757; thence North 38 degrees 42' 59" East
      497.31 feet to a 3/4" iron pipe set tagged LS 2757; thence North 20
      degrees 53' 59" West 455.44 feet to a 3/4" iron pipe set, tagged LS 2757;
      thence North 38 degrees 49' 36" West 70.75 feet to a 3/4" iron pipe set,
      tagged LS 2757; thence South 86 degrees 31' 13" West 418.79 feet to a 3/4"
      iron pipe set, tagged LS 2757; thence South 76 degrees 36' 01" West 12.44
      feet to a 3/4" iron pipe set, tagged LS 2757; thence South 3 degrees 05'
      00" West 412.47 feet to a 3/4" iron pipe set tagged LS 2757; thence North
      86 degrees 55' 00" West 5.00 feet to a 3/4" iron pipe set, tagged LS 2757;
      thence South 3 degrees 05' 00" West 100.00 feet to a 3/4" iron pipe set,
      tagged LS 2757; thence North 86 degrees 55' 00" West 6.00 feet to a 3/4"
      iron pipe set tagged LS 2757; thence South 3 degrees 05' 00" West 42.00
      feet to a 3/4" iron pipe set, tagged LS 2757; thence South 86 degrees 55'
      00" East 6.00 feet to a 3/4" iron pipe set, tagged LS 2757; thence South 3
      degrees 05' 00" West 61.00 feet to a 3/4" iron pipe set, tagged LS 2757;
      thence South 86 degrees 55' 00" East 5.00 feet to a 3/4" iron pipe set,
      tagged LS 2757; thence South 3 degrees 05' 00" West 265.20 feet to a 3/4"
      iron pipe set, tagged LS 2757; thence South 6 degrees 35' 00" West 92.00
      feet to a 3/4" iron pipe set, tagged LS 2757, said point being the
      Northeast corner of the aforementioned Lot 137, Mountain Shadows
      Subdivision, Unit No. 1, thence along the Northeasterly lot line of said
      Lot 137, South 62 degrees 28' 00" East 160.00 feet to the point of
      beginning of the herein above described tract of land.

      A.P. No.: 160-010-23

                                       1
<PAGE>
 
                                   EXHIBIT A
                             PROPERTY DESCRIPTION
                        (Property: Sacramento Inn, CA)
                                   ------------------

THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF
SACRAMENTO, CITY OF SACRAMENTO, DESCRIBED AS FOLLOWS:

PARCEL 1:
---------

ALL THAT PORTION OF SECTION 15, AS SAID SECTION IS SHOWN AND SO DESIGNATED ON
THE "MAP OF SURVEY AND SUBDIVISION OF RANCHO DEL PASO", RECORDED IN BOOK A OF
SURVEYS, MAP NO. 94, RECORDS OF SACRAMENTO COUNTY, DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT ON THE NORTHEASTERLY BOUNDARY OF THAT CERTAIN 7.32 ACRE
TRACT OF LAND DESCRIBED IN THE DEED DATED JULY 8, 1952, EXECUTED BY ROBERT
SWANSTON, JR. AND LILLIAN SWANSTON, HIS WIFE, TO STATE OF CALIFORNIA, RECORDED
IN BOOK 2280 OF OFFICIAL RECORDS AT PAGE 331, RECORDS OF SAID COUNTY, FROM WHICH
SAID POINT OF BEGINNING, THE SOUTHEAST CORNER OF SAID SECTION 15 BEARS SOUTH 11
degrees 19'10" EAST 285.00 FEET, SOUTH 25 degrees 12' EAST 167.93 FEET, SOUTH 47
degrees 28' EAST 102.09 FEET, SOUTH 55 degrees 51'10" EAST 454.55 FEET, SOUTH 30
degrees 19'50" WEST 50 FEET TO A POINT ON THE CENTER LINE OF ARDEN WAY, A PUBLIC
ROAD 60.00 FEET IN WIDTH, SAID POINT BEING ON THE NORTHEASTERLY LINE OF PROPERTY
ACQUIRED BY STATE OF CALIFORNIA, AS DESCRIBED IN THE FINAL DECREE OF
CONDEMNATION IN THE MATTER OF THE STATE OF CALIFORNIA VS. ROBERT SWANSTON, ET
AL, A CERTIFIED COPY THEREOF, RECORDED IN THE OFFICE OF THE RECORDER OF
SACRAMENTO COUNTY IN BOOK 1769 OF OFFICIAL RECORDS AT PAGE 470, ET SEQ., SOUTH
59 degrees 40'10" EAST 3653.94 FEET ALONG SAID CENTER LINE AND THE NORTHEASTERLY
LINE OF SAID STATE OF CALIFORNIA PROPERTY TO A POINT ON THE CENTER LINE OF ETHAN
WAY, A PUBLIC ROAD 60.00 FEET IN WIDTH, AND NORTH 01 degrees 46'30" WEST 18.54
FEET ALONG THE CENTER LINE TO THE SOUTHEAST CORNER OF SAID SECTION 15; THENCE
FROM SAID POINT OF BEGINNING ALONG THE NORTHEASTERLY AND EASTERLY BOUNDARY OF
SAID 7.32 ACRE TRACT THE FOLLOWING THREE COURSES AND DISTANCES: NORTH 11 degrees
19'10" WEST 234.97 FEET; THENCE CURVING TO THE RIGHT ON AN ARC OF 550.00 FOOT
RADIUS, SAID ARC BEING SUBTENDED BY A CHORD BEARING NORTH 10 degrees 41'50" EAST
412.36 FEET; AND THENCE NORTH 31 degrees 39'40" EAST 268.77 FEET; THENCE SOUTH
34 degrees 01'30" EAST 740.62 FEET; THENCE SOUTH 41 degrees 46'30" WEST 355.20
FEET; THENCE NORTH 87 degrees 38'40" WEST 349.58 FEET TO THE POINT OF BEGINNING.

                                       2
<PAGE>
 
EXCEPTING THEREFROM ANY PORTION THEREOF WHICH MAY BE WITHIN THE FOLLOWING:

BEGINNING AT A POINT IN SECTION 15 FROM WHICH THE SOUTHEAST CORNER OF SAID
SECTION 15 BEARS THE FOLLOWING EIGHT (8) COURSES AND DISTANCES: NORTH 89
degrees09' WEST 323.88 FEET; SOUTH 11 degrees 19'10" EAST 345.57 FEET; SOUTH 25
degrees 12'00" EAST 167.93 FEET; SOUTH 47 degrees 28'00" EAST 102.09 FEET; AND
SOUTH 55 degrees 51'10" EAST 454.55 FEET; SOUTH 30 degrees 19'50" WEST 50.00
FEET TO A POINT ON THE CENTER LINE OF ARDEN WAY, A PUBLIC ROAD 60.00 FEET IN
WIDTH, SAID POINT BEING ON THE NORTHEASTERLY LINE OF THAT CERTAIN PROPERTY
ACQUIRED BY THE STATE OF CALIFORNIA, AS DESCRIBED IN THE FINAL DECREE OF
CONDEMNATION IN THE MATTER OF THE STATE OF CALIFORNIA VS. ROBERT SWANSTON, ET
AL, A CERTIFIED COPY THEREOF, RECORDED IN THE OFFICE OF THE RECORDER OF
SACRAMENTO COUNTY IN BOOK 1769 OF OFFICIAL RECORDS AT PAGE 470, ET SEQ., SOUTH
59 degrees 40'10" EAST 3652.94 FEET ALONG SAID CENTER LINE AND THE NORTHEASTERLY
LINE OF SAID STATE OF CALIFORNIA PROPERTY TO A POINT ON THE CENTER LINE OF ETHAN
WAY, A PUBLIC ROAD 60.00 FEET IN WIDTH AND NORTH 01 degrees 46'30" WEST 18.54
FEET ALONG SAID CENTER LINE TO THE SAID SOUTHEAST CORNER OF SAID SECTION 15;
THENCE FROM SAID POINT OF BEGINNING SOUTH 89 degrees 09'00" EAST 81.28 FEET;
THENCE NORTH 02 degrees 07'40" WEST 87.21 FEET; THENCE NORTH 39 degrees 35'00"
EAST 233.43 FEET; THENCE SOUTH 34 degrees 01'30" EAST 248.78 FEET; THENCE SOUTH
50 degrees 42'00" WEST 321.00 FEET; THENCE NORTH 39 degrees 18'00" WEST 185.64
FEET TO THE POINT OF BEGINNING.

ALSO EXCEPTING THEREFROM THAT PORTION WHICH LIES WEST AND NORTH OF THE LINE
DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT THAT BEARS SOUTH 89 degrees 30'32" EAST 211.29 FEET FROM
THE SOUTHWEST CORNER OF LOT 7, SAID BLOCK F, SAID POINT IS ALSO 113.00 FEET
SOUTHEASTERLY, MEASURED AT RIGHT ANGLES FROM THE "B 3" LINE AT ENGINEER'S
STATION "B 3" 180+70.59 OF THE DEPARTMENT OF PUBLIC WORKS' 1959 SURVEY BETWEEN
800 FEET SOUTHWEST OF ARDEN WAY AND 0.3 MILE NORTHEAST OF EL CAMINO AVENUE, ROAD
III-SAC-3-B (THE CALIFORNIA STATE ZONE II COORDINATES FOR SAID POINT ARE X=2,
163,073.395 AND Y=343,140.590); THENCE FROM SAID POINT OF BEGINNING PARALLEL TO
SAID "B 3" LINE SOUTH 40 degrees 45'28" WEST 730.59 FEET; THENCE SOUTH 30
degrees 16'27" WEST 258.31 FEET; THENCE ALONG A CURVE TO THE LEFT WITH A RADIUS
OF 500 FEET, THROUGH AN ANGLE OF 40 degrees 01'46", AN ARC LENGTH OF 349.32 FEET
THE CHORD OF WHICH CURVE BEARS SOUTH 10 degrees 37'23" WEST 342.26 FEET TO A
POINT IN THE EXISTING STATE HIGHWAY RIGHT OF WAY AS ACQUIRED BY DEED RECORDED
JUNE 28, 1943, IN BOOK 1009, AT PAGE 357 OF OFFICIAL RECORDS, SACRAMENTO COUNTY.

                                       3
<PAGE>
 
PARCEL 1-A:
-----------

A NON-EXCLUSIVE EASEMENT FOR PRIVATE STREET PURPOSES, TO BE APPURTENANT TO
PARCEL NO. 1, ABOVE DESCRIBED, ON, OVER AND ACROSS A STRIP OF LAND OF THE
UNIFORM WIDTH OF 50.00 FEET, THE WESTERN LINE OF SAID STRIP OF LAND BEING
DESCRIBED AS FOLLOWS:

BEGINNING AT THE SOUTHWEST CORNER OF THE ABOVE DESCRIBED PARCEL NO. 1; THENCE
FROM SAID POINT OF BEGINNING ALONG THE EASTERN LINE OF THE ABOVE REFERRED TO
7.32 ACRE TRACT OF LAND DESCRIBED IN THE DEED RECORDED IN BOOK 2280 OF OFFICIAL
RECORDS AT PAGE 331, SOUTH 11 degrees 19'10" EAST 285.00 FEET; THENCE ALONG THE
ARC OF A CURVE TO THE LEFT WITH A RADIUS OF 350.00 FEET, THE CHORD OF WHICH
BEARS SOUTH 25 degrees 12' EAST 167.93 FEET TO THE WESTERN LINE OF THE PROPERTY
DESCRIBED IN THE DEED FROM HERATY & GANNON TO SEARS, ROEBUCK & CO., RECORDED MAY
5, 1955, IN BOOK 2825 OF OFFICIAL RECORDS AT PAGE 200, THE EASTERN LINE OF SAID
50 FOOT STRIP TO BE EXTENDED OR SHORTENED SO AS TO EXTEND, FROM THE SOUTHERN
LINE OF PARCEL NO. 1, ABOVE DESCRIBED IN DEED TO SEARS, ROEBUCK & CO., RECORDED
IN BOOK 2825 OF OFFICIAL RECORDS AT PAGE 200.

PARCEL 1-B:
-----------

NON-EXCLUSIVE EASEMENTS FOR VEHICULAR ACCESS AS DESCRIBED IN EXHIBIT "B" AS
ATTACHED TO THAT CERTAIN INSTRUMENT ENTITLED "EASEMENT AGREEMENT", RECORDED
APRIL 26, 1989, IN BOOK 8904-26, PAGE 2537, OFFICIAL RECORDS, DESCRIBED AS
FOLLOWS:

ALL THAT PORTION OF SECTION 15, AS SAID SECTION IS SHOWN AND SO DESIGNATED ON
THE "MAP OF SURVEY AND SUBDIVISION OF RANCHO DEL PASO", RECORDED IN THE OFFICE
OF THE SACRAMENTO COUNTY RECORDER IN BOOK A OF SURVEYS, MAP NO. 94, DESCRIBED AS
FOLLOWS:

A STRIP OF LAND 40.00 FEET WIDE, THE CENTERLINE OF SAID STRIP BEGINNING AT A
POINT ON THE NORTHERLY LINE OF ARDEN WAY, A PUBLIC ROAD, AS SAID ROAD IS SHOWN
ON THE PLAT OF SURVEY ENTITLED "A PORTION OF SECTIONS 15, 64 AND 65 OF RANCHO
DEL PASO", RECORDED IN THE OFFICE OF THE SACRAMENTO COUNTY RECORDER IN BOOK 9 OF
SURVEYS, MAP NO. 22, FROM WHICH POINT OF BEGINNING THE SOUTHEAST CORNER OF SAID
SECTION 15 BEARS SOUTH 30 degrees 19'50" WEST 30.00 FEET TO A POINT ON THE
CENTERLINE OF ARDEN WAY, AND ALONG SAID CENTERLINE SOUTH 59 degrees 40'10" WEST
3,583.93 FEET TO A POINT ON THE CENTERLINE OF ETHAN WAY, A PUBLIC ROAD 60.00
FEET IN WIDTH, AND NORTH 01 degrees 46'30" WEST 18.54 FEET ALONG SAID CENTERLINE
TO SAID SOUTHEAST CORNER; THENCE FROM SAID POINT OF BEGINNING NORTH

                                       4
<PAGE>
 
30 degrees 19'50" EAST 103.00 FEET; THENCE NORTH 59 degrees 40'10" WEST 616.57
FEET MORE OR LESS TO A POINT ON THE WESTERLY BOUNDARY OF PARCEL I AS SAID PARCEL
IS SHOWN ON "RECORD OF SURVEY, PORTION OF SECTIONS 15 AND 66, RANCHO DEL PASO",
RECORDED IN THE OFFICE OF THE SACRAMENTO COUNTY RECORDER IN BOOK 21 OF SURVEYS,
MAP NO. 13.

PARCEL 2:
---------

ALL THAT PORTION OF SECTION 15, AS SAID SECTION IS SHOWN AND SO DESIGNATED ON
THE "MAP OF SURVEY AND SUBDIVISION OF RANCHO DEL PASO", RECORDED IN THE OFFICE
OF THE RECORDER OF SACRAMENTO COUNTY, IN BOOK A OF SURVEYS, MAP NO. 94,
DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT IN SAID SECTION 15 FROM WHICH THE SOUTHEAST CORNER OF SAID
SECTION 15 BEARS THE FOLLOWING EIGHT (8) COURSES AND DISTANCES: NORTH 89 degrees
09' WEST 323.88 FEET; SOUTH 11 degrees 19'10" EAST 345.57 FEET; SOUTH 25 degrees
12'00" EAST 167.93 FEET; SOUTH 47 degrees 28'00" EAST 102.09 FEET; AND SOUTH 55
degrees 51'10" EAST 454.55 FEET; SOUTH 30 degrees 19'50" WEST 50.00 FEET TO A
POINT ON THE CENTER LINE OF ARDEN WAY, A PUBLIC ROAD 60.00 FEET IN WIDTH, SAID
POINT BEING ON THE NORTHEASTERLY LINE OF THAT CERTAIN PROPERTY ACQUIRED BY THE
STATE OF CALIFORNIA, AS DESCRIBED IN THE FINAL DECREE OF CONDEMNATION IN THE
MATTER OF THE STATE OF CALIFORNIA VS. ROBERT SWANSTON, ET AL, A CERTIFIED COPY
THEREOF RECORDED IN THE OFFICE OF THE RECORDER OF SACRAMENTO COUNTY IN BOOK 1780
OF OFFICIAL RECORDS AT PAGE 470, ET SEQ., SOUTH 59 degrees 40'10" EAST 3653.94
FEET ALONG SAID CENTER LINE AND THE NORTHEASTERLY LINE OF SAID STATE OF
CALIFORNIA PROPERTY TO A POINT ON THE CENTER LINE OF ETHAN WAY, A PUBLIC ROAD
60.00 FEET IN WIDTH AND NORTH 01 degrees 46'30" WEST 18.54 FEET ALONG SAID
CENTER LINE TO SAID SOUTHEAST CORNER OF SAID SECTION 15; THENCE FROM SAID POINT
OF BEGINNING SOUTH 89 degrees 09'00" EAST 81.28 FEET; THENCE NORTH 02 degrees
07'40" WEST 87.21 FEET; THENCE NORTH 39 degrees 35'00" EAST 233.43 FEET; THENCE
SOUTH 34 degrees 01'30" EAST 248.78 FEET; THENCE SOUTH 50 degrees 42'00" WEST
321.00 FEET; THENCE NORTH 39 degrees 18'00" WEST 185.64 FEET TO THE POINT OF
BEGINNING.

EXCEPTING THEREFROM ALL THAT PORTION OF "PARCEL H", AS SAID PARCEL IS SHOWN ON
THAT CERTAIN RECORD OF SURVEY ENTITLED "PORTION OF SECTIONS 15 AND 66, RANCHO
DEL PASO", RECORDED IN THE OFFICE OF THE RECORDER OF SACRAMENTO COUNTY, IN BOOK
21 OF SURVEYS, MAP NO. 13, DESCRIBED AS FOLLOWS:

BEGINNING AT THE MOST EASTERLY CORNER OF SAID "PARCEL H"; THENCE FROM SAID POINT
OF BEGINNING ALONG THE NORTHEASTERLY LINE OF SAID "PARCEL H" NORTH 34 degrees
01'30" WEST 166.69 FEET TO A POINT ON THE SOUTHEASTERLY LINE OF THAT CERTAIN
50.00 FOOT ROAD

                                       5
<PAGE>
 
EASEMENT DESCRIBED IN THAT CERTAIN DEED RECORDED IN THE OFFICE OF THE SAID
RECORDER IN BOOK 2825 OF OFFICIAL RECORDS, PAGE 202, SAID EASEMENT BEING
DESIGNATED (EASEMENT NO. 5) ON SAID RECORD OF SURVEY; THENCE ALONG THE
SOUTHEASTERLY AND EASTERLY LINE OF SAID 50.00 FOOT ROAD EASEMENT THE FOLLOWING
THREE (3) COURSES AND DISTANCES: (1) SOUTH 50 degrees 42'00" WEST 33.71 FEET;
(2) CURVING TO THE LEFT ON AN ARC OF 68.33 FOOT RADIUS, SAID ARC BEING SUBTENDED
BY A CHORD BEARING SOUTH 04 degrees 29'00" EAST 112.20 FEET AND (3) SOUTH 59
degrees 40'10" EAST 78.79 FEET TO A POINT ON THE SOUTHEASTERLY LINE OF SAID
"PARCEL H"; THENCE ALONG THE SOUTHEASTERLY LINE OF SAID "PARCEL H" NORTH 50
degrees 42'00" EAST 55.02 FEET TO THE POINT OF BEGINNING.

PARCEL 3:
---------

ALL THAT PORTION OF SECTION 15, AS SHOWN ON THE "MAP OF SURVEYS AND SUBDIVISION
OF RANCHO DEL PASO", RECORDED IN BOOK A OF SURVEYS, MAP NO. 94, RECORDS OF
SACRAMENTO COUNTY, DESCRIBED AS FOLLOWS:

BEGINNING AT THE MOST WESTERLY CORNER OF THAT CERTAIN TRACT OF LAND DESCRIBED IN
THE DEED DATED JANUARY 30, 1959, EXECUTED BY WILLIAM G. GANNON AND CLARA D.
GANNON TO PHILIP G. HERATY, RECORDED FEBRUARY 24, 1959, IN THE OFFICE OF SAID
RECORDER IN BOOK 3708 OF OFFICIAL RECORDS AT PAGE 35; THENCE FROM SAID POINT OF
BEGINNING ALONG THE BOUNDARY LINE OF SAID HERATY PROPERTY THE FOLLOWING TWO
COURSES AND DISTANCES: NORTH 50 degrees 42'00" EAST 220.00 FEET AND SOUTH 34
degrees 01'30" EAST 81.33 FEET; THENCE NORTH 55 degrees 58'30" EAST 74.00 FEET;
THENCE NORTH 34 degrees 01'30" WEST 226.71 FEET; THENCE SOUTH 50 degrees 42'00"
WEST 294.31 FEET TO A POINT ON THE EASTERLY LINE OF THAT CERTAIN 11.893 ACRE
TRACT OF LAND DESCRIBED IN THE DOCUMENT RECORDED IN THE OFFICE OF SAID RECORDER
IN BOOK 3294 OF OFFICIAL RECORDS, AT PAGE 91; THENCE ALONG SAID EASTERLY LINE
SOUTH 34 degrees 01'30" EAST 138.55 FEET TO THE POINT OF BEGINNING.

PARCEL 4:
---------

ALL THAT PORTION OF SECTION 15, AS SHOWN ON THE OFFICIAL "MAP OF SURVEY AND
SUBDIVISION OF RANCHO DEL PASO", RECORDED IN BOOK A OF SURVEYS, MAP NO. 94,
RECORDS OF SACRAMENTO COUNTY, DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT ON THE NORTHWESTERN LINE OF PROPERTY DESCRIBED IN THE DEED
FROM PHILIP F. HERATY, ET UX, TO WILLIAM G. GANNON, ET UX, DATED JULY 17, 1958
AND RECORDED JULY 18, 1958, IN BOOK 3550 OF OFFICIAL RECORDS AT PAGE 255, SAID
POINT BEING

                                       6
<PAGE>
 
LOCATED SOUTH 50 degrees 42' WEST 323.47 FEET FROM THE MOST WESTERN CORNER OF
LOT 548, AS SHOWN ON THE OFFICIAL "PLAT OF SWANSTON ESTATES UNIT NO. 5",
RECORDED MAY 29, 1958, IN BOOK 49 OF MAPS, MAP NO. 13; THENCE FROM SAID POINT OF
BEGINNING SOUTH 50 degrees 42' WEST 220.00 FEET TO A POINT ON THE NORTHEASTERN
LINE OF PROPERTY DESCRIBED IN THE LEASE EXECUTED BY HERATY & GANNON, A CO-
PARTNERSHIP, AS LESSOR, AND SACRAMENTO, INN, INC., A CORPORATION, AS LESSEE,
DATED JANUARY 10, 1957, AND RECORDED MAY 3, 1957, IN BOOK 3294 OF OFFICIAL
RECORDS AT PAGE 30; THENCE ALONG THE NORTHEASTERN LINE OF SAID SACRAMENTO INN,
INC., A PROPERTY NORTH 34 degrees 01'30" WEST 200.00 FEET; THENCE NORTH 50
degrees 42' EAST 220.00 FEET; THENCE SOUTH 34 degrees 01'30" EAST 200.00 FEET TO
THE POINT OF BEGINNING.

PARCEL 5:
---------

ALL THAT PORTION OF SECTION 15, AS SAID SECTION IS SHOWN AND SO DESIGNATED ON
THE OFFICIAL "MAP OF SURVEY AND SUBDIVISION OF RANCHO DEL PASO", RECORDED IN
BOOK A OF SURVEYS, MAP NO. 94, RECORDS OF SAID COUNTY, DESCRIBED AS FOLLOWS:

BEGINNING AT THE NORTHWEST CORNER OF LOT 540, AS SHOWN ON THE "PLAT OF SWANSTON
ESTATES UNIT NO. 5", RECORDED MAY 29, 1958, IN BOOK 49 OF MAPS, MAP NO. 13;
THENCE FROM SAID POINT OF BEGINNING ALONG THE WESTERLY BOUNDARY OF SAID SWANSTON
ESTATES UNIT NO. 5, THE FOLLOWING THREE COURSES AND DISTANCES; SOUTH 00 degrees
57'30" EAST 144.50 FEET, SOUTH 21 degrees 00'02" WEST 99.05 FEET AND SOUTH 50
degrees 42'00" WEST 234.00 FEET; THENCE CONTINUING SOUTH 50 degrees 42'00" WEST
323.47 FEET; THENCE NORTH 34 degrees 01'30" WEST 200.00 FEET; THENCE SOUTH 50
degrees 43'00" WEST 220.00 FEET; THENCE NORTH 34 degrees 01'30" WEST 275.85 FEET
TO A POINT ON THE SOUTHEASTERLY LINE OF A ROADWAY; THENCE NORTH 31 degrees
38'20" EAST 93.47 FEET AND NORTH 39 degrees 17'30" EAST 512.87 FEET; THENCE
NORTH 89 degrees 02'30" EAST 43.20 FEET; THENCE CURVING TO THE RIGHT ON AN ARC
OF 143.42 FEET RADIUS, SAID ARC BEING SUBTENDED BY A CHORD BEARING SOUTH 62
degrees 51'35" EAST 135.10 FEET; THENCE CURVING TO THE LEFT ON AN ARC OF 195.42
FOOT RADIUS, SAID ARC BEING SUBTENDED BY A CHORD BEARING SOUTH 62 degrees 51'35"
EAST 184.08 FEET AND THENCE NORTH 89 degrees 02'30" EAST 200.00 FEET TO THE
POINT OF BEGINNING.

EXCEPTING THEREFROM ALL THAT PORTION OF SECTION 15, AS SHOWN ON THE "MAP OF
SURVEYS AND SUBDIVISION OF RANCHO DEL PASO", RECORDED IN BOOK A OF SURVEYS, MAP
NO. 94, RECORDS OF SAID COUNTY, DESCRIBED AS FOLLOWS:

BEGINNING AT THE MOST WESTERLY CORNER OF THAT CERTAIN TRACT OF LAND DESCRIBED IN
THE DEED DATED JANUARY 30, 1959, EXECUTED BY WILLIAM G. GANNON AND CLARA D.
GANNON TO PHILIP F. HERATY,

                                       7
<PAGE>
 
RECORDED FEBRUARY 24, 1959, IN THE OFFICE OF THE SAID RECORDER IN BOOK 3708 OF
OFFICIAL RECORDS, AT PAGE 35; THENCE FROM SAID POINT OF BEGINNING ALONG THE
BOUNDARY LINE OF SAID HERATY PROPERTY THE FOLLOWING TWO COURSES AND DISTANCES;
NORTH 50 degrees 42'00" EAST 220.00 FEET AND SOUTH 34 degrees 01'30" EAST 81.33
FEET; THENCE NORTH 55 degrees 58'30" EAST 74.00 FEET; THENCE NORTH 34 degrees
01'30" WEST 226.71 FEET; THENCE SOUTH 50 degrees 42'00" WEST 294.31 FEET TO A
POINT ON THE EASTERLY LINE OF THAT CERTAIN 11.893 ACRE TRACT OF LAND DESCRIBED
IN THE DOCUMENTS RECORDED IN THE OFFICE OF THE SAID RECORDER IN BOOK 3294 OF
OFFICIAL RECORDS AT PAGE 91; THENCE ALONG SAID EASTERLY LINE SOUTH 34 degrees
01'30" EAST 138.55 FEET TO THE POINT OF BEGINNING.

FURTHER EXCEPTING THEREFROM ALL THAT PORTION OF "PARCEL A" AND "PARCEL B" AS
SAID PARCELS ARE SHOWN ON THAT CERTAIN RECORD OF SURVEY ENTITLED "PORTION OF
SECTION 15 & 66 RANCHO DEL PASO", RECORDED IN THE OFFICE OF THE RECORDER OF
SACRAMENTO COUNTY IN BOOK 21 OF SURVEYS, MAP NO. 13, DESCRIBED AS FOLLOWS:

BEGINNING AT THE NORTHEAST CORNER OF SAID "PARCEL A" SAID CORNER ALSO BEING THE
NORTHWEST CORNER OF LOT 540 AS SAID LOT IS SHOWN ON THE OFFICIAL "PLAT OF
SWANSTON ESTATES UNIT NO. 5", RECORDED IN THE OFFICE OF SAID RECORDER IN BOOK 49
OF MAPS, MAP NO. 13; THENCE FROM SAID POINT OF BEGINNING ALONG THE EAST BOUNDARY
OF SAID "PARCEL A" AND THE WEST BOUNDARY OF SAID SWANSTON ESTATES UNIT NO. 5,
THE FOLLOWING TWO (2) COURSES AND DISTANCES: (1) SOUTH 00 degrees 57'30" EAST
144.50 FEET AND (2) SOUTH 21 degrees 02'00" WEST 55.00 FEET; THENCE SOUTH 89
degrees 02'30" WEST 347.04 FEET; THENCE NORTH 50 degrees 42'30" WEST 360.41 FEET
TO A POINT ON THE NORTHWESTERLY BOUNDARY OF SAID "PARCEL B"; THENCE ALONG THE
NORTHWESTERLY BOUNDARY OF SAID "PARCEL B" NORTH 39 degrees 17'30" EAST 148.00
FEET TO THE NORTHWEST CORNER OF SAID "PARCEL B"; THENCE ALONG THE NORTH BOUNDARY
OF SAID "PARCEL A" AND "PARCEL B" THE FOLLOWING FOUR (4) COURSES AND DISTANCES:
(1) NORTH 89 degrees 02'30" EAST 65.52 FEET; (2) CURVING TO THE RIGHT ON AN ARC
OF 143.42 FOOT RADIUS, SAID ARC BEING SUBTENDED BY A CHORD BEARING SOUTH 62
degrees 51'35" EAST 135.10 FEET; (3) CURVING TO THE LEFT ON AN ARC OF 195.42
FOOT RADIUS, SAID ARC BEING SUBTENDED BY A CHORD BEARING SOUTH 62 degrees 51'35"
EAST 184.08 FEET AND (4) NORTH 89 degrees 02'30" EAST 200.00 FEET TO THE POINT
OF BEGINNING.

ALSO EXCEPTING THEREFROM ALL THAT PORTION OF THE ABOVE DESCRIBED PROPERTY LYING
WITHIN ANY PUBLIC ROAD.

                                       8
<PAGE>
 
PARCEL 6:
---------

ALL THAT PORTION OF SECTION 15, AS SAID SECTION IS SHOWN AND SO DESIGNATED ON
THE OFFICIAL "MAP OF SURVEY AND SUBDIVISION OF RANCHO DEL PASO", RECORDED IN
BOOK A OF SURVEYS, MAP NO. 94, RECORDS OF SACRAMENTO COUNTY, DESCRIBED AS
FOLLOWS:

BEGINNING AT A POINT FROM WHICH THE MOST SOUTHERLY CORNER OF LOT 548, AS SAID
LOT IS SHOWN AND SO DESIGNATED ON THE OFFICIAL "PLAT OF SWANSTON ESTATES UNIT
NO. 5", RECORDED IN THE OFFICE OF THE RECORDER OF SACRAMENTO COUNTY, IN BOOK 49
OF MAPS, MAP NO. 13, SAID CORNER BEING A POINT ON THE NORTHWESTERLY LINE OF
ROYALE ROAD, AS SHOWN ON SAID SWANSTON ESTATES UNIT NO. 5, BEARS NORTH 50
degrees 42' EAST 311.47 FEET; THENCE FROM SAID POINT OF BEGINNING SOUTH 50
degrees 42' WEST 250.00 FEET; THENCE NORTH 34 degrees 01'30" WEST 195.83 FEET;
THENCE NORTH 50 degrees 42' EAST 232.00 FEET; THENCE SOUTH 39 degrees 18' EAST
195.00 FEET TO THE POINT OF BEGINNING.

PARCEL 7:
---------

ALL THAT PORTION OF PARCEL H AS SAID PARCEL IS SHOWN ON THE RECORD OF SURVEY
ENTITLED "PORTION OF SECTIONS 15 & 66 RANCHO DEL PASO", RECORDED IN THE OFFICE
OF THE RECORDER OF SACRAMENTO COUNTY IN BOOK 21 OF SURVEYS, MAP NO. 13,
DESCRIBED AS FOLLOWS:

BEGINNING AT THE MOST SOUTHERLY CORNER OF SAID PARCEL H; THENCE FROM SAID POINT
OF BEGINNING ALONG THE SOUTHEASTERLY BOUNDARY OF SAID PARCEL H NORTH 30 degrees
19'50" EAST 96.82 FEET; THENCE CONTINUING ALONG THE SOUTHEASTERLY BOUNDARY OF
SAID PARCEL H NORTH 50 degrees 42'00" EAST 677.21 FEET TO THE MOST EASTERLY
CORNER OF SAID PARCEL H; THENCE ALONG THE BOUNDARY OF SAID PARCEL H NORTH 34
degrees 01'30" WEST 166.69 FEET TO A POINT ON THE SOUTHEASTERLY LINE OF THAT
CERTAIN 50.00 FOOT ROAD EASEMENT DESCRIBED IN THE DOCUMENT RECORDED IN THE
OFFICE OF SAID RECORDER IN BOOK 3497 OF OFFICIAL RECORDS, AT PAGE 131; THENCE
ALONG THE SOUTHEASTERLY AND EASTERLY LINE OF SAID 50.00 FOOT ROAD EASEMENT THE
FOLLOWING THREE (3) COURSES AND DISTANCES: (1) SOUTH 50 degrees 42'00" WEST
33.71 FEET; (2) CURVING TO THE LEFT ON AN ARC OF 68.33 FOOT RADIUS, SAID ARC
BEING SUBTENDED BY A CHORD BEARING SOUTH 04 degrees 09'00" EAST 112.20 FEET AND
(3) SOUTH 59 degrees 40'10" EAST 36.12 FEET TO A POINT ON THE SOUTHEASTERLY LINE
OF THAT CERTAIN 1.549 ACRE TRACT OF LAND DESCRIBED AS PARCEL NO. 2 IN THE DEED
RECORDED IN THE OFFICE OF SAID RECORDER IN BOOK 7608-31 OF OFFICIAL RECORDS, AT
PAGE 1333; THENCE ALONG THE BOUNDARY OF SAID 1.589 ACRE TRACT OF LAND THE
FOLLOWING TWO (2) COURSES AND DISTANCES: (1) SOUTH 50 degrees 42'00" WEST 247.43
FEET TO THE MOST SOUTHERLY CORNER OF SAID

                                       9
<PAGE>
 
1.549 ACRE TRACT OF LAND AND (2) NORTH 39 degrees 13'00" WEST 110.85 FEET TO A
POINT ON THE SOUTHEASTERLY LINE OF THAT CERTAIN 8.001 ACRE TRACT OF LAND
DESCRIBED AS PARCEL NO. 1 IN THE DEED RECORDED IN THE OFFICE OF SAID RECORDER IN
BOOK 7608-31 OF OFFICIAL RECORDS AT PAGE 1333; THENCE ALONG THE BOUNDARY OF SAID
8.001 ACRE TRACT OF LAND THE FOLLOWING TWO (2) COURSES AND DISTANCES: (1) SOUTH
41 degrees 46'30" WEST 15.04 FEET TO THE MOST SOUTHERLY CORNER OF SAID 8.001
ACRE TRACT OF LAND AND (2) NORTH 87 degrees 38'40" WEST 350.40 FEET TO A POINT
ON THE NORTHEASTERLY BOUNDARY OF THAT CERTAIN 7.32 ACRE TRACT OF LAND DESCRIBED
IN THE DEED RECORDED IN THE OFFICE OF SAID RECORDER IN BOOK 2280 OF OFFICIAL
RECORDS AT PAGE 331; SAID POINT ALSO BEING LOCATED ON THE WESTERLY LINE OF SAID
PARCEL H; THENCE ALONG SAID NORTH-EASTERLY BOUNDARY AND SAID WESTERLY LINE THE
FOLLOWING TWO (2) COURSES AND DISTANCES: (1) SOUTH 11 degrees 19'00" EAST 286.27
FEET AND (2) CURVING TO THE LEFT ON AN ARC OF 350.00 FOOT RADIUS, SAID ARC BEING
SUBTENDED BY A CHORD BEARING SOUTH 25 degrees 33'54" EAST 167.10 FEET TO THE
POINT OF BEGINNING.

NON-EXCLUSIVE EASEMENTS FOR RIGHT-OF-WAY FOR INGRESS AND EGRESS AND MUTUAL
PARKING AS DESCRIBED IN "ARTICLE I" OF THAT CERTAIN INSTRUMENT ENTITLED "GRANTS
OF EASEMENTS, COVENANTS AND AGREEMENT FOR MAINTENANCE OF PARKING AREA", RECORDED
JULY 28, 1967, IN BOOK 6707-28, PAGE 645, OFFICIAL RECORDS.

                                       10
<PAGE>
 
                                   EXHIBIT A
                             PROPERTY DESCRIPTION
                           (Property: San Diego, CA)
                                      -------------
  
THE LAND REFERRED TO HEREIN IS SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF
SAN DIEGO, AND IS DESCRIBED AS FOLLOWS:

PARCEL 1:
---------

PARCEL 2, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA,
ACCORDING TO MAP NO. 15912, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN
DIEGO COUNTY, ON DECEMBER 19, 1989

PARCEL 2:
---------

A NON-EXCLUSIVE AND EXCLUSIVE UTILITY, FIRE AND SERVICE CORRIDOR, AND HOTEL
COURTYARD EASEMENTS WHICH ARE ALL PERPETUAL AND IRREVOCABLE, ENCUMBERING LOTS 2
THROUGH 4 OF HAZARD CENTER, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE
OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 11949, FILED IN THE OFFICE OF THE
COUNTY RECORDER OF SAN DIEGO COUNTY ON NOVEMBER 10, 1987, ALL AS MORE
PARTICULARLY DESCRIBED IN ARTICLE 2, PARAGRAPHS 2.6, 2.7 AND 2.8 OF THE
CONSTRUCTION OPERATION AND RECIPROCAL EASEMENT AGREEMENT, EXECUTED BY AND
BETWEEN R. E. HAZARD CONTRACTING CO., A CALIFORNIA CORPORATION, CROW-HAZARD
ASSOCIATES, A CALIFORNIA GENERAL PARTNERSHIP AND RL ACQUISITION COMPANY, A
CALIFORNIA LIMITED PARTNERSHIP, RECORDED MAY 19, 1988 AS FILE NO. 88-234744 OF
OFFICIAL RECORDS.

THE EASEMENT HEREIN DESCRIBED ARE HEREBY DECLARED TO BE APPURTENANT TO AND FOR
THE USE AND BENEFIT OF THE PRESENT AND FUTURE OWNERS OF ALL OR ANY PORTION OF
PARCEL 1 HEREINDESCRIBED.

PARCEL 3:
---------

AN EXCLUSIVE PARKING EASEMENT, TEMPORARY ADDITIONAL EXCLUSIVE PARKING, A NON-
EXCLUSIVE PARKING EASEMENT, AND NON-EXCLUSIVE ACCESS EASEMENT, WHICH ARE ALL
PERPETUAL AND IRREVOCABLE, ENCUMBERING LOTS 2 THROUGH 4 OF HAZARD CENTER, IN THE
CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP
THEREOF NO. 11949, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO
COUNTY ON NOVEMBER 10, 1987, ALL AS MORE PARTICULARLY DESCRIBED IN ARTICLE 2,
PARAGRAPHS 2.2, 2.3, 2.4 AND 2.5 OF THE CONSTRUCTION, OPERATION AND RECIPROCAL
EASEMENT AGREEMENT, EXECUTED BY AND BETWEEN R. E. HAZARD CONTRACTING

                                       11
<PAGE>
 
CO., A CALIFORNIA CORPORATION; CROW-HAZARD ASSOCIATES, A CALIFORNIA GENERAL
PARTNERSHIP AND RL ACQUISITION COMPANY, A CALIFORNIA LIMITED PARTNERSHIP,
RECORDED MAY 19, 1988 AS FILE NO. 88-234744 OF OFFICIAL RECORDS.

THE EASEMENTS HEREIN DESCRIBED ARE HEREBY DECLARED TO BE APPURTENANT TO AND FOR
THE USE AND BENEFIT OF THE PRESENT AND FUTURE OWNERS OF ALL OR ANY PORTION OF
PARCEL 1 HEREINDESCRIBED.

PARCEL 4:
---------

AN EXCLUSIVE PARKING GARAGE CONNECTION EASEMENT ENCUMBERING LOT 2 OF HAZARD
CENTER, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA,
ACCORDING TO MAP THEREOF NO. 11949, FILED IN THE OFFICE OF THE COUNTY RECORDER
OF SAN DIEGO COUNTY, ON NOVEMBER 10, 1987, AS MORE PARTICULARLY DESCRIBED IN THE
CONSTRUCTION, OPERATION AND RECIPROCAL EASEMENT AGREEMENT EXECUTED BY AND
BETWEEN R. E. HAZARD CONTRACTING CO., A CALIFORNIA CORPORATION; CROW-HAZARD
ASSOCIATES, A CALIFORNIA GENERAL PARTNERSHIP AND RED LION, A CALIFORNIA LIMITED
PARTNERSHIP (FORMERLY KNOWN AS RL ACQUISITION COMPANY, A CALIFORNIA LIMITED
PARTNERSHIP), RECORDED MAY 19, 1988 AS FILE NO. 88-234744 OF OFFICIAL RECORDS.

THE EASEMENT HEREIN DESCRIBED IS HEREBY DECLARED TO BE APPURTENANT TO AND FOR
THE USE AND BENEFIT OF THE PRESENT AND FUTURE OWNERS OF ALL OR ANY PORTION OF
PARCEL 1 HEREIN DESCRIBED.

                                       12
<PAGE>
 
                                   EXHIBIT A
                             PROPERTY DESCRIPTION
                           (Property:  Durango, CO)
                                       ----------- 

Situated in the County of La Plata, State of Colorado, to-wit:

Lot 1A in RED LION INN RESUBDIVISION, according to the plat thereof filed for
record July 1, 1993 under Reception No. 649036.

Tax Parcel Numbers:   5665-301-00048
                      5665-301-00120
                      5665-301-00129

                                       13
<PAGE>
 
                                   EXHIBIT A
                             PROPERTY DESCRIPTION
                       (Property: Boise Downtowner, ID)
                                  --------------------
 
The land is situated in the State of Idaho, County of Ada, and is described as
follows:

PARCEL A:

PARCEL I:

All of Lots 1 and 2 in Block 40 and all of Block 41 of FAIRVIEW ADDITION,
according to the official plat thereof, filed in Book 2 of Plats at Page 73,
Official Records of Ada County, Idaho, and all of Block 40-A CITIZENS RIGHT-OF-
WAY, according to the official plat thereof, filed in Block 7 of Plats at Page
341, and a portion of Lots 1 and 2 in Block 10 and all of Lots 11, 12, 13 and 14
in Block 9 of McCARTY'S SECOND ADDITION, according to the official plat thereof,
filed in Book 2 of Plats at Page 85, Official Records, and the vacated streets
and alley included within the boundaries thereof, more particularly described as
follows:

Beginning at the intersection of the Easterly boundary of 22nd Street and
      Northerly boundary of Fairview Avenue, being the Southwest corner of Block
      41 of FAIRVIEW ADDITION, said point being THE TRUE POINT OF BEGINNING;
      thence
North 0 degrees 00'00" East 350.16 feet along the Easterly boundary of said 22nd
      street to a point on the Southerly boundary of Main Street; thence
North 89 degrees 59'20" East 157.99(8) feet along the said Southerly boundary of
      Main Street to a point; thence
South 89 degrees 50'40" East 157.98(151.50) feet along the said Southerly
      boundary of Main Street to a point; thence
South 54 degrees 50'40" East 57.50 feet along the said Southerly boundary of
      Main Street to a point; thence
South 1 degrees 57'20" West 192.00 feet to a point, said point being the
      Southeast corner of said Lot 14 in Block 9 of said McCARTY'S SECOND
      ADDITION; thence
North 88 degrees 02'40" West 230.08 feet to a point; thence
South 2 degrees 53'20" West 136.32 feet to a point on the Northerly boundary of
      said Fairview Avenue; thence
North 88 degrees 13'50" West 113.20 feet along the said Northerly boundary of
      said Fairview Avenue to the POINT OF BEGINNING.

PARCEL II:

Lots 9 and 10 in Block 9 of McCARTY'S SECOND ADDITION, according to the official
plat thereof, filed in Book 2 of Plats at Page 85, Official Records.

EXCEPT THEREFROM that portion of said Lot 10, more particularly described as
follows:

                                       14
<PAGE>
 
Commencing at the Northwest corner of said Lot 10, said point being the TRUE
      POINT OF BEGINNING; thence
South 88 degrees 02'40" East 20.00 feet along the Northerly boundary of said Lot
      10 to a point; thence
South 46 degrees 57'20" West 28.28 feet to a point on the Westerly boundary of
      said Lot 10; thence
North 1 degrees 57'20" East 20.00 feet along the said Westerly boundary of said
      Lot 10 to the POINT OF BEGINNING.

ALSO EXCEPT a parcel of land for public right-of-way being a portion of Lots 9
and 10 of Block 9 of McCARTY'S SECOND ADDITION, a subdivision according to the
official plat thereof, filed in Book 2 of Plats at Page 85, lying in the
Southeast quarter of Section 4, Township 3 North, Range 2 East, Boise Meridian,
Ada County Idaho, and more particularly described as follows:

Beginning at a lead plug and tack marking the Northwest corner of Lot 2 of Block
      40 of FAIRVIEW ADDITION, a subdivision, according to the official plat
      thereof, filed in Book 2 of Plats at Page 73, Official Records; thence
South 0 degrees 00'00" West 350.16 feet along the Westerly boundaries of said
      Lot 2 of Block 40 of FAIRVIEW ADDITION, Block 40-A CITIZEN'S RIGHT-OF-WAY,
      a subdivision, according to the official plat thereof, filed in Book 7 of
      Plats at Page 341, and Block 41 of said FAIRVIEW ADDITION, which is also
      the Easterly right-of-way line 22nd Street, to a point marking the
      Southwest corner of the said Block 41 of FAIRVIEW ADDITION; thence
South 88 degrees 13'50" East 190.58 feet along the Southerly boundary of the
      said Block 41 of FAIRVIEW ADDITION, Block 40-A of Citizens Right-of-Way,
      the adjacent alley to the said Lot 10 of Block 9, McCARTY'S SECOND
      ADDITION, all of Lot 10 and a portion of Lot 9 of Block 9 of McCARTY'S
      SECOND ADDITION, which is also the Northerly right-of-way line of Fairview
      Avenue, to a point, also said point being the REAL POINT OF BEGINNING;
      thence continuing
South 88 degrees 13'50" East 30.0 feet along the said Southerly boundaries of
      Lots 10 and 9 of Block 9 of McCARTY'S SECOND ADDITION to a point; thence
North 1 degrees 57'20" East 99.95 feet along a line 25.00 feet Westerly of and
      parallel with the Easterly boundary of the said Lot 9 of Block 9 of
      McCARTY'S SECOND ADDITION to a iron pin; thence
North 46 degrees 57'20" East 28.28 feet to an iron pin on the Northerly boundary
      line of the said Lot 9 of Block 9 of McCARTY'S SECOND ADDITION; thence
North 88 degrees 02'40" West 50.00 feet along the said Northerly boundary of Lot
      9 and the Northerly boundary of the said Lot 10 of Block 9 of McCARTY'S
      SECOND ADDITION to a iron pin; thence
South 1 degrees 57'20" West 120.05 feet along line 5.00 feet Westerly of and
      parallel with Easterly boundary of the said Lot 10 of Block 9 of McCARTY'S
      SECOND ADDITION to THE REAL POINT OF BEGINNING.

                                       15
<PAGE>
 
PARCEL III:

The East 150 feet of Lot 1 in Block 38 and all of Block 39 of FAIRVIEW ADDITION,
according to the official plat thereof, filed in Book 2 of Plats at Page 73 and
the East 150 feet of Block 38-A of CITIZEN'S RIGHT-OF-WAY, according to the
official plat thereof, filed in Book 7 of Plats at Page 341, Official Records,
of Ada County, Idaho.

PARCEL IV:

Lots 15 and 16 of Block 9 of McCARTY'S SECOND ADDITION, according to the
official plat thereof, filed in Book 2 of Plats at Page 85, Official Records of
Ada County, Idaho and that portion of 18th Street, now vacated, described as
follows: Beginning at the Northeast corner of said Lot 16; thence West 100 feet;
thence 
North 69.88 feet; thence
Southeast 119.28 feet; thence
South 4.86 feet to THE POINT OF BEGINNING.

PARCEL V:

A parcel of land being all of the alley lying Westerly of and adjacent with the
Westerly boundary of Lot 10 of Block 9 and a portion of the 16.00 foot alley
lying Northerly of and adjacent with said Lot 10 of Block 9 of McCARTY'S SECOND
ADDITION, a subdivision according to the official plat thereof, filed in Book 2
of Plats at Page 85, lying in the Southeast quarter of Section 4, Township 3
North, Range 2 East, Boise Meridian, Ada County Idaho, more particularly
described as follows:

Beginning at a lead plug and tack marking the Northwest corner of Lot 2 of Block
      40 of FAIRVIEW ADDITION, a subdivision, according to the official plat
      thereof, filed in Book 2 of Plats at Page 73, Official Records; thence
South 0 degrees 00'00" West 350.16 feet along the Westerly boundaries of said
      Lot 2 of Block 40 of FAIRVIEW ADDITION, Block 40-A CITIZEN'S RIGHT-OF-WAY,
      a subdivision, according to the official plat thereof, filed in Book 7 of
      Plats at Page 341, and Block 41 of said FAIRVIEW ADDITION, which is also
      the Easterly right-of-way line 22nd Street, to a point marking the
      Southwest corner of the said Block 41 of FAIRVIEW ADDITION; thence
South 88 degrees 13'50" East 145.58 feet along the Southerly boundaries of said
      Block 41 of FAIRVIEW ADDITION and Block 40-A of CITIZENS RIGHT-OF-WAY and
      adjacent alley to said Lot 10 of Block 9 OF McCARTY'S SECOND ADDITION
      which is also the Northerly right-of-way line of FAIRVIEW AVENUE, to a
      point marking the Southwest corner of the said Lot 10 of Block 9 of
      McCARTY'S SECOND ADDITION, also said point being the REAL POINT OF
      BEGINNING; thence
North 1 degrees 57'20" East 100.20 feet along the Westerly boundary of the said
      Lot 10 of Block 9 of McCARTY'S SECOND ADDITION to an iron pin; thence
North 46 degrees 57'20" East 26.28 feet to an iron pin on the Northerly boundary
      of the said Lot 10 of Block 9 of McCARTY'S SECOND ADDITION; thence

                                       16
<PAGE>
 
South 88 degrees 02'40" East 25.00 feet along the said Northerly boundary of the
      said Lot 10 of Block 9 of McCARTY'S SECOND ADDITION to an iron pin; thence
North 1 degrees 57'20" East 16.0 feet along a line Westerly of and parallel with
      the Westerly boundary extended of the said Lot 9 in Block 9 of McCARTY'S
      SECOND ADDITION to an iron pin on the Northerly boundary of the said 16-
      foot alley; thence
North 88 degrees 02'40" West 75.16 feet along the said Northerly boundary of the
      said 16-foot alley to an iron pin on the Westerly boundary of the said
      McCARTY'S SECOND ADDITION; thence
South 2 degrees 53'20" West 136.32 feet along the said Westerly boundary of
      McCARTY'S SECOND ADDITION, which is also the Westerly boundary of the said
      adjacent alley to Lot 10 of Block 9 of McCARTY'S SECOND ADDITION, to a
      point marking the Southwest corner of the said adjacent alley to Lot 10 of
      Block 9 of McCARTY'S SECOND ADDITION; thence
South 88 degrees 13'50" East 32.38 feet along the said Southerly boundary of the
      adjacent alley to Lot 10 of Block 9 of McCARTY'S SECOND ADDITION to the
      REAL POINT OF BEGINNING.

PARCEL VI:

Lots 7 and 8 in Block 9 of McCARTY's SECOND ADDITION, according to the official
plat thereof, filed in Book 2 of Plats at Page 85, Official Records of Ada
County, Idaho.

As to leasehold estate in:

PARCEL B:

Lots 3, 4, 5, 6 and 17 in BLock 9 of McCARTY'S SECOND ADDITION, according to the
official plat thereof, filed in Book 2 of Plats at Page 85, Official Records of
Ada County, Idaho, and Lots 18 and 19 in Block 9, EXCEPT the hereinafter
described:

A parcel of land being on the Westerly side of the center line of Boise One-Way
Couplet, Project No. U-3021 (21) Highway Survey, as shown on the plans thereof
now on file in the office of the Department of Highways of the State of Idaho,
and being a portion of Lot 18 in Block 9 of McCARTY'S SECOND ADDITION, according
to the official plat thereof, filed in Book 2 of Plats at Page 85, Official
Records of Ada County, Idaho, described as follows:

Beginning at the Northeast corner of Lot 18 in Block 9 of said McCARTY'S SECOND
      ADDITION; thence
Southerly along the Easterly boundary line of said Lot 18 a distance of 12.2
      feet to a point that bears
North 87 degrees 54'04" West, 58.74 feet from Station 80456.72 of Boise, One Way
      Couplet, Project No. U-3021 (21) Highway Survey; thence Northwesterly
      along a 140.50 foot radius curve left 35.94 feet to a point that bears

                                       17
<PAGE>
 
South 35 degrees 10'41" West 42.38 feet from Station 79462.58 of said Highway
      Survey; thence Northerly 3.0 feet, more or less, to a point in the
      Northeasterly line of said Lot 18 that bears
South 35 degrees 10'41" West 40.00 feet from Station 79460.90 of said Highway
      Survey; thence Southeasterly along the Northeasterly line of said Lot 18
      to the PLACE OF BEGINNING.

AND

All of Lot 19, Block 9 of McCARTY'S SECOND SUBDIVISION, according to the
official plat thereof, filed in Book 2 of Plats at Page 85, Official Records of
Ada County, Idaho.

EXCEPTING THEREFROM a parcel of land being on both sides of the centerline of
Boise One-Way Couplet, Project No. U-3021 (21) Highway Survey as shown on the
plans thereof now on file in the office of the Department of Highways of the
State of Idaho and being a portion of Lot 19 in Block 9 of MCCARTY'S SECOND
SUBDIVISION, according to the official plat thereof, filed in Book 2 of Plats at
Page 85, Official Records of Ada County, Idaho, described as follows:

Beginning at the East corner of Lot 19 in Block 9 of said MCCARTY'S SECOND
      ADDITION; thence
Westerly along the South boundary line of said Lot 19, a distance of 95.44 feet
      to the Southwest corner thereof; thence
North 62 degrees 17'36" East 23.12 feet to a point that bears North 87 degrees
      54'04" West 38.67 feet from Station 80194.74 of Boise, One-Way Couplet,
      Project No. U-3021 (21) Highway Survey; thence
Northwesterly along a 140.50 foot radius curve left 55.10 feet to a point in the
      Westerly line of said Lot 19 that bears
North 87 degrees 54'04" West, 58.74 feet from Station 80+56.73 of said Highway
      Survey; thence
Northerly along said Westerly line 12.7 feet, to the Northwesterly corner of
      said Lot 19; thence
Southeasterly along the Northeasterly boundary line of said Lot 19 to the REAL
      POINT OF BEGINNING.

Tax Parcel Numbers:   R2734252191
                      R2734252200
                      R2734252210
                      R5538940984
                      R5538940940
                      R5538941120

Also described as follows pursuant to Survey dated May 13, 1994 and revised July
17, 1995:

                                       18
<PAGE>
 
Parcel 1:

The east 150.00 feet of Lot 1 Block 38 and all of Block 39 of the FAIRVIEW
ADDITION according to the official plat thereof filed in the office of the Ada
County Recorder in Book 2 of Plats at Page 73, and the east 150.00 feet of Block
38-A of CITIZEN'S RIGHT OF WAY, according to the official plat thereof, filed in
Book 7 of Plats at Page 341, being more particularly described as follows:

BEGINNING at a 5/8 inch iron pin at the northeasterly corner of said Block 39,
being the point of intersection of the southerly sideline of West Main Street
with the westerly sideline of North 22nd Street; thence,

      1.)  S.00 degrees 00'00"E., 165.60 feet along the westerly sideline of
           said 22nd Street to a 5/8 inch iron pin; thence,

      2.)  N.89 degrees 00'42"W., 150.02 feet along the southerly line of said
           Lot 1 Block 38 to a 5/8 inch iron pin; thence,

      3.)  N.00 degrees 00'00"W., 162.98 feet along a line parallel with and
           150.00 feet west of the westerly sideline of 22nd Street to a 5/8
           inch iron pin; thence,

      4.)  N.89 degrees 59'20"E., 150.00 feet along the southerly sideline of
           said West Main Street to the POINT OF BEGINNING;

said Parcel 1 containing 0.5657 acres of land, and being the same parcel as
described as Parcel III in Instrument No. 8564000, Deed of Trust and Assignment
of Leases and Rents.

Parcel 2:

All of Lots 1 and 2 of Block 40 and all of Block 41 of the FAIRVIEW ADDITION,
according to the official plat thereof filed in the office of the Ada County
Recorder in Book 2 of Plats at Page 73; all of Block 40-A of CITIZEN'S RIGHT OF
WAY according to the official plat thereof filed in Book 7 of Plats at Page 341;
portions of Lots 1 and 2 of Block 10 and a portion of Lot 10 and all of Lots 11,
12, 13, 14, 15 and 16 of Block 9 of McCARTY'S 2ND ADDITION, according to the
official plat thereof filed in Book 2 of Plats at Page 85; and certain vacated
portions of streets and alleys shown on said plat and included within the
following more particularly described Parcel 2: BEGINNING at the point of
intersection of the easterly sideline of North 22nd with the northerly sideline
of Fairview Avenue, said point being the southwesterly corner of said Block 41
of the FAIRVIEW ADDITION; thence,

      1.)  N.00 degrees 00'00"W., 350.18 feet along the easterly sideline of
           said North 22nd Street, being along the westerly lines of said Block
           41, Block 40-A of said CITIZEN'S RIGHT OF WAY and Block 40 of said
           FAIRVIEW

                                       19
<PAGE>
 
           ADDITION to the point of intersection of said easterly sideline of
           North 22nd Street with the southerly sideline of West Main Street;
           thence,

      2.)  N.89 degrees 59'20"E., 157.98 feet along the southerly sideline of
           West Main Street, being along the northerly line of Lots 1 and 2 of
           Block 40 FAIRVIEW ADDITION and along the northerly terminus of a
           vacated portion of 19th Street to a point in the westerly line of Lot
           2 Block 10 of said McCARTY'S 2ND ADDITION; thence,

      3.)  S.89 degrees 50'40"E., 151.50 feet along said sideline of West Main
           Street to a point in the northeasterly line of Lot 1 of said Block
           10; thence,

      4.)  S.54 degrees 50'40"E., 185.34 feet along said sideline, being along
           the northeasterly line of said Lot 1, and along the easterly terminus
           of vacated 18th Street to a point in the northerly line of Lot 17
           Block 9 of said McCARTY'S 2ND ADDITION; thence,

      5.)  N.88 degrees 02'40"W., 6.97 feet along the northerly line of said Lot
           17 to the northwesterly corner thereof; thence,

      6.)  S.01 degrees 57'20"W., 122.00 feet along the westerly line of said
           Lot 17 to the southwesterly corner of said Lot 17 Block 9; thence,

      7.)  N.88 degrees 02'40"W., 255.00 feet along the southerly lines of Lots
           16, 15, 14, 13, 12 and 11 to a point; thence,

      8.)  S.01 degrees 57'20"W., 136.05 feet along the easterly terminus of the
           vacated portion of a 16 foot wide alley and along a line parallel
           with and 5.00 feet westerly of the easterly line of Lot 10 Block 9 to
           a point in the southerly line of said Lot 10, being the northerly
           sideline of West Fairview Avenue; thence,

      9.)  N.88 degrees 13'50"W., 190.48 feet along the southerly lines of said
           Lot 10 Block 9, the vacated portion of 19th Street, Lot 40-A of
           CITIZEN'S RIGHT OF WAY and Block 41 of the FAIRVIEW ADDITION, being
           along the northerly sideline of West Fairview Avenue, to the POINT OF
           BEGINNING,

said Parcel 2 containing 2.7328 acres, more or less and being the same land as
contained in Parcel No.s I, II, IV and V as described in Instrument No.8564000,
Deed of Trust and Assignment of Leases and Rents.

                                       20
<PAGE>
 
Parcel 3:

All of Lots 7 and 8 and a portion of Lot 9, of Block 9, McCARTY'S 2ND ADDITION,
according to the official plat thereof filed in the office of the Ada County
Recorder in Book 2 of Plats at Page 85, and being more particularly described as
follows:

commencing at the point of intersection of the easterly sideline of North 22nd
Street with the northerly sideline of Fairview Avenue, said point being the
southwesterly corner of Block 41 of the FAIRVIEW ADDITION according to the
official plat thereof filed in Book 2 of Plats at page 73; thence,

A.)   S.88 degrees 13'50"E., 220.48 feet along the southerly lines of said Block
      41 FAIRVIEW ADDITION, Block 40-A of Citizen's Right of Way, the vacated
      portion of 19th Street, and Lots 10 and 9 of Block 9 of said McCARTY'S 2ND
      ADDITION to a point 25 feet easterly of the westerly line of said Lot 9,
      being the POINT OF BEGINNING; thence,

      1.)  N.01 degrees 57'20"E., 99.95 feet along a line parallel with and
           25.00 feet easterly of the westerly line of said Lot 9; thence,

      2.)  N.46 degrees 57'20"E., 28.28 feet to a point in the northerly line of
           said Lot 9; thence,

      3)   S.88 degrees 02'40"E., 105.00 feet along the northerly lines of Lots
           9, 8 and 7 to the northeasterly corner of said Lot 7; thence,

      4.)  S.01 degrees 57'20"W., 119.55 feet along the easterly line of said
           Lot 7 to a point in the northerly sideline of West Fairview Avenue;
           thence,

      5.)  N.88 degrees 13'50"W., 125.00 feet along said sideline to the POINT
           OF BEGINNING,

said Parcel 3 containing 0.5474 acres, more or less, and being the same land as
contained in Parcel VI and a portion of Parcel II as described in Instrument No.
8564000, Deed of Trust and Assignment of Leases and Rents.

Parcel 4:

All of Lot 17 and portions of Lots 18 and 19, Block 9, McCARTY'S 2ND ADDITION,
according to the official plat thereof filed in the office of the Ada County
Recorder in Book 2 of Plats at Page 85, and being more particularly described as
follows:

commencing at the point of intersection of the easterly sideline of North 22nd
Street with the northerly sideline of Fairview Avenue, said point being the
southwesterly corner of Block 41 of the FAIRVIEW ADDITION according to the
official plat thereof filed in Book 2 of Plats at page 73; thence,

                                       21
<PAGE>
 
A.)   S.88 degrees 13'50"E., 190.48 feet along the southerly lines of said Block
      41 FAIRVIEW ADDITION, Block 40-A of Citizen's Right of Way, the vacated
      portion of 19th Street, and Lot 10, Block 9 of said McCARTY'S 2ND ADDITION
      to a point 5.00 feet west of the easterly line of said Lot 10; thence,

B.)   N.01 degrees 57'20"E., 136.05 feet along a line parallel with and 5.00
      feet westerly of the easterly line of said Lot 10 to a point in the
      southerly line of Lot 11 Block 9; thence,

C.)   S.88 degrees 02'40"E., 255.00 feet along the southerly lines of Lots 11,
      12, 13, 14, 15 and 16 to the southwesterly corner of said Lot 17 and the
      POINT OF BEGINNING; thence,

      1.)  N.01 degrees 57'20"E., 122.00 feet along the westerly line of said
           Lot 17 to the northwesterly corner of same; thence,

      2.)  S.88 degrees 02'40"E., 6.97 feet along the northerly line of said Lot
           17 to the point of intersection of same with the southerly sideline
           of West Main Street; thence,

      3.)  S.54 degrees 50'40"E., 81.62 feet along said sideline of West Main
           Street to a point in the westerly sideline of West Grove Street, also
           known as the Boise One-Way Couplet, according to the plans of Project
           No. U-3021 (21) on file with the Idaho Department of Transportation,
           District 3; thence,

      4.)  S.01 degrees 01'48"W., 2.88 feet (formerly 3.0 feet more or less)
           along said westerly sideline of West Grove Street to a point on a 
           non-tangent curve; thence,

      5.)  southeasterly along said sideline along a curve to the right having a
           radius of 140.50 feet, an arc length of 79.12 feet, a central angle
           of 32 degrees 16'38", a chord bearing of S.32 degrees 44'09"E., and a
           chord distance of 78.07 feet, crossing through Lots 18 and 19 of said
           Block 9 to an angle point in said sideline; thence,

      6.)  S.64 degrees 33'28"W., 22.25 feet (formerly S.62 degrees 17'36"W.,
           23.12) along said sideline to the southeasterly corner of said Lot 18
           Block 9; thence,

      7.)  N.88 degrees 02'40"W., 100.00 feet along the southerly lines of Lots
           18 and 17 of Block 9 to the POINT OF BEGINNING,

said Parcel 4 containing 0.2233 acres, more or less, and being the same land as
contained in a portion of Parcel B as described in Instrument No. 8564000, Deed
of Trust and and Assignment of Leases and Rents.

                                       22
<PAGE>
 
Parcel 5:

All of Lots 3, 4, 5 and 6 of Block 9, McCARTY'S 2ND ADDITION, according to the
official plat thereof filed in the office of the Ada County Recorder in Book 2
of Plats at Page 85, and being more particularly described as follows:

commencing at the point of intersection of the easterly sideline of North 22nd
Street with the northerly sideline of Fairview Avenue, said point being the
southwesterly corner of Block 41 of the FAIRVIEW ADDITION according to the
official plat thereof filed in Book 2 of Plats at page 73; thence,

A.)   S.88 degrees 13'50"E., 345.48 feet along the southerly lines of said Block
      41 FAIRVIEW ADDITION, Block 40-A of Citizen's Right of Way, the vacated
      portion of 19th Street, and Lots 10, 9, 8 and 7 of Block 9 of said
      McCARTY'S 2ND ADDITION to the southwesterly corner of Lot 6 Block 9 and
      the POINT OF BEGINNING; thence,

      1.)  N.01 degrees 57'20"E., 119.55 feet along the westerly line of said
           Lot 6 to the northwesterly corner of same; thence,

      3.)  S.88 degrees 02'40"E., 200.00 feet along the northerly lines of Lots
           6, 5, 4 and 3 to the northeasterly corner of Lot 3 Block 9; thence,

      4.)  S.01 degrees 57'20"W., 118.90 feet along the easterly line of said
           Lot 3 to a point in the northerly sideline of West Fairview Avenue;
           thence,

      5.)  N.88 degrees 13'50"W., 200.00 feet along said sideline to the POINT
           OF BEGINNING,

said Parcel 5 containing 0.5487 acres of land, and being the same land as
contained in a portion of Parcel B as described in Instrument No. 8564000, Deed
of Trust and Assignment of Leases and Rents.

                                       23
<PAGE>
 
                                   EXHIBIT A
                             PROPERTY DESCRIPTION
                           (Property: Missoula, MT)


Situated in the City of Missoula, Missoula County, Montana, to-wit:

Lots 3, 4 and the East 10 feet of Lot 17, all of Lots 18, 19 and 20, in Block 49
of W.J. McCormick's Addition, in the City of Missoula, Missoula County, Montana,
according to the official recorded plat thereof, together with the vacated
alley.

Lots 1, 2, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 and the West 20 feet of Lot
17 in Block 49 of W.J. McCormick's Addition, in the City of Missoula, Missoula
County, Montana, according to the official recorded plat thereof, together with
the vacated alley and the East one-half of vacated Blanche Street lying between
Pine Street and Broadway Street.

Recording reference:  Book 271 of Micro Records at page 1613.

Tax Parcel Number:  1864500

                                       24
<PAGE>
 
                                   EXHIBIT A
                             PROPERTY DESCRIPTION
                            (Property: Astoria, OR)

PARCEL NO. 1:
------------
      A parcel of land situated in the Northwest quarter of the Southwest
quarter of Section 7, Township 8 North, Range 9 West, Willamette Meridian, City
of Astoria, Clatsop County, Oregon, more particularly described as follows:
      Beginning at a point which bears North 56 degrees 53' East a distance of
24 feet from the Southeasterly corner of that certain tract of land conveyed to
Henry J. Barbey et ux by deed recorded in Book 198, page 240, Deed Records,
Clatsop County, Oregon;
      thence North 56 degrees 53' East 385.0 feet;
      thence North 24 degrees 30' West 132.0 feet;
      thence South 56 degrees 53' West 385.0 feet;
      thence South 24 degrees 36' East 132.0 feet to the point of beginning;
      Together with the following non-exclusive easement for ingress and egress
over the following described property;
      A parcel of land in the Northwest quarter of the Southwest quarter of
Section 7, Township 8 North, Range 9 West, Willamette Meridian in Clatsop
County, Oregon described as follows:
      Beginning at the Southeasterly corner of that certain tract of land
conveyed by Henry J. Barbey and Ethel G. Barbey to Barbey Packing Corp. as
recorded in Book 198, page 240, Clatsop County Records of Deeds, said point
being also on the Northerly right of way line of Spokane, Portland and Seattle
Railroad;
      thence North 56 degrees 53' East along said Northerly right of way a
distance of 710.93 feet to the Westerly line of Industry Street;
      thence North 24 degrees 30' West a distance of 15.0 feet;
      thence South 56 degrees 53' West a distance of 710.93 feet to a point of
intersection with the Easterly line of said Barbey tract;
      thence South 24 degrees 30' East along the Easterly line of the Barbey
tract a distance of 15.0 feet to the point of beginning.

PARCEL NO. 2:
------------
      A tract of land being part of Parcel No. 1 as described in Volume 198,
page 240 of the Clatsop County Deeds and Records, and bounds as follows:
      Beginning at a one-half inch iron pipe, said iron pipe being North
24 degrees 30' West 238.35 feet from the Southwest corner of said Parcel No. 1;
      thence North 24 degrees 30' West 246.10 feet to a one-half inch iron pipe;
      thence North 65 degrees 30' East 200.00 feet to a one-half inch iron pipe;
      thence South 24 degrees 30' East 373.52 feet to a one-half inch iron pipe;
      thence South 67 degrees 44' West 45.66 feet to a one-half inch iron pipe;
      thence North 82 degrees 07' West 80.56 feet to a one-half inch iron pipe;
      thence North 70 degrees 30' West 119.85 feet to the point of beginning;
      Situated in the City of Astoria, County of Clatsop, State of Oregon;
      Together with the right to connect to the extension of Port Road for the
purposes of ingress and/or egress as set forth in that certain easement granted
by the Port of 
<PAGE>
 
Astoria, a municipal corporation, to Barbey Packing Corporation dated September
27, 1971, recorded September 27, 1971 in Book 353, page 565, Film Records.

PARCEL NO. 3:
------------
      Beginning at an iron pipe which bears North 56 degrees 53' East a distance
of 202.26 feet from the Southwest corner of Parcel No. 1 as described in deed
recorded in Volume 198, page 240, Deed Records, Clatsop County, Oregon;
      thence North 24 degrees 30' West 380.0 feet to a point on the East line of
the Barbey Tract as described in Volume 198, page 240, Deed Records, Clatsop
County, Oregon;
      thence North 65 degrees 30' East 46.0 feet;
      thence South 24 degrees 30' East 248.0 feet to a point;
      thence South 56 degrees 53' West 22.0 feet;
      thence South 24 degrees 30' East 132.0 feet;
      thence South 56 degrees 53' West 24.0 feet to the point of beginning.

PARCEL NO. 4:
------------
      Beginning at a point on the West line of Parcel No. 1 as described by deed
recorded in Book 198, page 240, Clatsop County Deed Records, said point being
North 24 degrees 30' West, a distance of 464 feet from the Southwest corner of
said Parcel No. 1;
      thence North 24 degrees 30' West a distance of 72.5 feet;
      thence North 65 degrees 30' East a distance of 253 feet;
      thence South 24 degrees 30' East a distance of 145.25 feet;
      thence South 65 degrees 30' West a distance of 72.5 feet;
      thence North 24 degrees 30' West a distance of 72.75 feet:
      thence South 65 degrees 30' West a distance of 180.5 feet to the point of
beginning, all situated in the City of Astoria, County of Clatsop, State of
Oregon. NOTE: Parcel No. 4 overlaps with Parcels No. 2 and No. 3.

PARCEL NO. 5:
------------
      All that portion of the following tract of land and uplands lying
Northerly of the North line of the right of way of the S. P. & S. Railway
Company described as follows:
      Beginning at a point on the South bank of the Columbia River on the
meander line of the Samuel C. Smith D.L.C. in Clatsop County, Oregon, 30.23
chains Westerly according to said meander line of the Northeast corner of said
claim; and running
      thence North 65 degrees 30' East 300 feet;
      thence North 24 degrees 30' West to the ordinary low tide line;
      thence Westerly along the line of ordinary low tide to the East line of
the Henry J. Barbey tract, that is, a tract of land accordingly as described in
that certain deed recorded at page 353, Volume 123 of Records of Deeds in the
Office of the County Clerk of Clatsop County, Oregon;
      thence South 24 degrees 30' East to a point on the meander line of the
Samuel C. Smith D.L.C. which point is South 47' 00' West a distance of 400 feet
from the point of beginning;
      thence North 47 degrees 00' East a distance of 400 feet to the point of
beginning, all being situate in Section 7, Township 8 North, Range 9 West,
Willamette Meridian, Clatsop County, Oregon.
<PAGE>
 
      EXCEPTING THEREFROM the following:
      A parcel of land situated in the Northwest quarter of the Southwest
quarter of Section 7, Township 8 North, Range 9 West, Willamette Meridian, City
of Astoria, Clatsop County, Oregon, more particularly described as follows:
      Beginning at a point which bears North 56 degrees 53' East a distance of
24 feet from the Southeasterly corner of that certain tract of land conveyed to
Henry J. Barbey, et ux, by deed recorded in Book 198, page 240, Deed Records,
Clatsop County, Oregon;
      thence North 56 degrees 53' East 385.0 feet;
      thence North 24 degrees 30' West 132.0 feet;
      thence South 56 degrees 53' West 385.0 feet;
      thence South 24 degrees 36' East 132.0 feet to the point of beginning;
      Together with the following non-exclusive easement for ingress and egress
over the following described property;
      A parcel of land in the Northwest quarter of the Southwest quarter of
Section 7, Township 8 North, Range 9 West, Willamette Meridian, Clatsop County,
Oregon, described as follows:
      Beginning at the Southeasterly corner of that certain tract of land
conveyed by Henry J. Barbey and Ethel G. Barbey to Barbey Packing Corp. as
recorded in Book 198, page 240, Clatsop County Records of Deeds, said point
being also on the Northerly right of way line of Spokane, Portland and Seattle
Railroad;
      thence North 56 degrees 53' East along said Northerly right of way a
distance of 710.93 feet to the Westerly line of Industry Street;
      thence North 24 degrees 30' West a distance of 15.0 feet;
      thence South 56 degrees 53' West a distance of 710.93 feet to a point of
intersection with the Easterly line of said Barbey tract;
      thence South 24 degrees 30' East along the Easterly line of the Barbey
tract a distance of 15.0 feet to the point of beginning.
      ALSO EXCEPTING THEREFROM:
      Beginning at an iron pipe which bears North 58 degrees 53' East a distance
of 202.26 feet from the Southwest corner of Parcel No. 1 as described in deed
recorded in Volume 198, Page 240, Deed Records, Clatsop County, Oregon;
      thence North 24 degrees 30' West 380.0 feet to a point on the East line of
the Barbey tract as described in Volume 198, Page 240, Deed Records, Clatsop
County, Oregon;
      thence North 65 degrees 30' East 46.0 feet;
      thence South 24 degrees 30' East 248.0 feet to a point;
      thence South 56 degrees 53' West 22.0 feet;
      thence South 24 degrees 30' East 132.0 feet;
      thence South 56 degrees 53' West 24.0 feet to the point of beginning.
      ALSO EXCEPTING THEREFROM:
      Beginning at a point on the West line of Parcel No. 1 as described by deed
recorded in Book 198, Page 240, Clatsop County Deed Records, said point being
North 24 degrees 30' West, a distance of 464 feet from the Southwest corner of
said Parcel No. 1; thence North 24 degrees30' West a distance of 72.5 feet;
      thence North 65 degrees 30' East a distance of 253 feet;
      thence South 24 degrees 30' East a distance of 145.25 feet;
      thence South 65 degrees 30' West a distance of 72.5 feet;
<PAGE>
 
      thence North 24 degrees 30' West a distance of 72.75 feet;
      thence South 65 degrees 30' West a distance of 180.5 feet to the point of
beginning, all situated in the City of Astoria, County of Clatsop, State of
Oregon.

PARCEL NO. 6:
------------

      That parcel of land bounded on the North by the South line of Industry
Street, on the East by the West line of Basin Street, on the South by the North
right-of-way line of the Spokane, Portland & Seattle (now Burlington Northern)
Railway, and on the West by a line 200 feet, more or less, distant from the West
line of Basin Street and running parallel thereto. All being situate in the City
of Astoria, County of Clatsop, State of Oregon.
<PAGE>
 
                                   EXHIBIT A
                             PROPERTY DESCRIPTION
                          (Property: Bend-North, OR)

Lots 1 through 12 in Block 3 of WIESTORIA, City of Bend, Deschutes County,
Oregon, TOGETHER WITH that portion of a vacated alley which inured thereto upon
the vacation thereof, by ORDINANCE NO. 850, recorded July 8, 1971 in Book 176 at
page 956 of Deschutes County Deed Records.

Tax Parcel Number: 1-001 17 12 33 BB 02101 and 1-001 17 12 33 BB 02100
<PAGE>
 
                                   EXHIBIT A
                             PROPERTY DESCRIPTION
                           (Property: Coos Bay, OR)

Being a portion of Blocks 35 and 36, of Nasburg's Addition along with a portion
of Blocks 36, 32, 63 and 62, of Bennett's Addition to Coos Bay. Including that
portion of vacated 4th, 5th and 6th Street and 7th Court.

More particularly described as follows:

Beginning at the Southwest corner of Block 35, Nasburg's Addition to Coos Bay;
thence 00 degrees 00' 20" West a distance of 171.17 feet; thence North 60
degrees 30' 00" East a distance of 591.96 feet to a point located on the
Westerly line of U.S. Highway 101; thence along said Westerly line along a curve
to the left having a radius of 1949.86 feet and a central angle of 1 degree 36'
18" a distance of 54.62 feet (whose long chord bears South 40 degrees 18' 48"
East 54.62 feet); thence along a spiral curve to the left having a centerline
length of 300.00 feet and an S value of 4 degrees 30' (whose long chord bears
South 42 degrees 24' 10" East 303.05 feet); thence South 43 degrees 54' 35" East
a distance of 241.83 feet to the beginning of a curve; thence along a curve to
the right having a radius of 13.50 feet and a central angle of 133 degrees 54'
00" a distance of 31.54 feet (whose long chord bears South 23 degrees 02' 25"
West 24.84 feet); thence South 89 degrees 59' 25" West a distance of 471.94
feet; thence North 00 degrees 04' 35" East a distance of 99.97 feet; thence
South 89 degrees 59' 25" West a distance of 242.89 feet, thence South 00 degrees
04' 35" West a distance of 99.97 feet; thence South 89 degrees 59' 25" West a
distance of 197.97 feet, to the point of beginning.

Tax Parcel Number: 251326BB500
<PAGE>
 
                                   EXHIBIT A
                             PROPERTY DESCRIPTION
                            (Property: Eugene, OR)


PARCEL 1:
--------
A parcel of land lying within Section 29, Township 17 South, Range 3 West of the
Willamette Meridian, in Lane County, Oregon: Beginning at the concrete monument
designated as Station "A" in County Survey Number 1781, said survey being filed
in Volume 5, Page 41 of County Surveys for Lane County, Oregon, said Station "A"
being East 13.34 chains of the Southeast corner of the Charles W. Young Donation
Land Claim No. 53, Township 17 South, Range 3 West of the Willamette Meridian,
according to said survey; thence South 0 degrees 10'20" East, 957.88 feet along
the West line of said survey to a point, said point being the TRUE POINT OF
BEGINNING; running thence South 0 degrees 10'20" East 382.89 feet along the West
line of said survey to the North line of the Eugene-Springfield Highway; thence
North 77 degrees 37'30" West, 620.02 feet along the North line of said highway;
thence North 1 degrees 31' West 68.07 feet along the North line of said highway
to a point on the Southeasterly line of Coburg Road; thence North 55 degrees
29'21" East 340.90 feet along the Southeasterly line of Coburg Road to a point;
thence South 35 degrees 03'40" East 206.36 feet; thence North 54 degrees 56'20"
East 210.00 feet; thence North 35 degrees 03'40" West 4.31 feet; thence North 48
degrees 03'20" East 50.29 feet to the TRUE POINT OF BEGINNING, all in the City
of Eugene, Lane County, Oregon.

PARCEL 2:
--------
Beginning at a point on the Easterly right of way line of County Road No. 431,
said point being 1142.75 feet North and 181.36 feet West of the Southwest corner
of County Survey No. 1781 in Section 29, Township 17 South, Range 3 West of the
Willamette Meridian; running thence South 34 degrees 32' East 204.46 feet to the
true point of beginning; thence South 55 degrees 28' West 180 feet; thence South
34 degrees 32' East 30 feet; thence North 55 degrees 28' East 180 feet; thence
North 34 degrees 32' West 30 feet to the true point of beginning, in Lane
County, Oregon.

Tax Parcel Number:  170329/000500
<PAGE>
 
                                   EXHIBIT A
                             PROPERTY DESCRIPTION
                           (Property:  Medford, OR)

The land is situated in the State of Oregon, County of Jackson and is described
as follows:

PARCEL 1:
Commencing at the Northeast corner of Riverside Avenue and East Main Street in
the City of Medford, Jackson County, Oregon; thence North 28 degrees 43'00" West
273.83 feet, along the Easterly line of North Riverside Avenue, to the center
line of the Northerly wall of the Denison Building for the true point of
beginning; thence continue North 27 degrees 43'00" West 100.00 feet, along said
Easterly line of North Riverside Avenue; thence North 66 degrees 08'20" East
106.08 feet (Record North 66 degrees 08'30" East); thence South 27 degrees
43'00" East 100.00 feet to an intersection of the outside line of the Easterly
wall of the Denison Building with the projection of center line of the Northerly
wall of said Denison Building; thence South 60 degrees 08'30" West 106.08 feet
along the center line and the projection thereof, of the Northerly wall of said
Denison Building, to the true point of beginning. EXCEPTING THEREFROM all that
portion of the Northerly wall of the Denison Building lying Northerly of the
centerline of said wall, including all footings and foundations thereof,
together with the land upon which or underneath which said wall and footings
stand, the centerline of said Northerly wall of the Denison Building being
situated as follows: Beginning at a point on the Easterly line of Riverside
Avenue in the City of Medford, Jackson County, Oregon, said point being North 27
degrees 43' West 224.06 feet from the intersection of said Easterly line of
Riverside Avenue with the Northerly line of East Main Street (said intersection
being also North 34 degrees 12' East 68.0 feet from the intersection of the
Westerly line of Riverside Avenue with the center line of East Main Street);
thence along said Easterly line of Riverside Avenue, North 27 degrees 43' West
49.42 feet to the centerline of Northerly wall of the Denison Building.

PARCEL 2:
Commencing at the Northeast corner of Riverside Avenue and East Main Street in
the City of Medford, Jackson County, Oregon; thence North 27 degrees 43'00" West
273.83 feet along the Easterly line of North Riverside Avenue to the center line
of the Northerly wall of the Denison Building; thence North 66 degrees 08'30"
East 106.08 feet along the center line and the projection thereof the Northerly
wall of said Denison Building, to an intersection with the outside line of the
Easterly wall of said Denison Building, for the true point of beginning; thence
North 27 degrees 43'00" West 100.00 feet; thence South 66 degrees 08'20" West
(Record South 66 degrees 08'30" West) 106.08 feet to the Easterly line of North
Riverside Avenue; thence North 27 degrees 43'00" West 50.00 feet along the
Easterly line of North Riverside Avenue; thence North 61 degrees 49'00" East
105.84 feet; thence North 27 degrees 43'00" West 111.09 feet; thence North 67
degrees 45'00" East 23.68 feet to a 1 inch galvanized iron pipe; thence North 68
degrees 45'00" East 100.30 feet to a 1 inch galvanized iron pipe; thence North
60"58'42" East 144.73 feet (Record North 61 degrees 00'00" East 144.75 feet);
thence North 14 degrees 30'00" West 60.15 feet (Record 60.13 feet); thence North
80 degrees 00'00" East 83.08 feet to intersect the Westerly right
<PAGE>
 
of way line of Interstate Highway No. 5; thence along said Westerly right of way
line as follows: South 13 degrees 49'50" East 401.71 feet to intersect the
center line of channel of Bear Creek, and South 4 degrees 22'00" East 177.04
feet along center line of channel of said Bear Creek, to the Northerly line of
East Main Street in the City of Medford, Oregon; thence South 76 degrees 27'23"
West 51.38 feet (Record South 76 degrees 32'35" West 51.41 feet) along said
Northerly line of East Main Street; thence North 17 degrees 28'00" West 138.30
feet; thence South 66 degrees 17'00" West 171.30 feet to the Southeast corner of
the Niedermeyer Building; thence North 23 degrees 29'30" West 49.98 feet along
the outside line of the Easterly wall of said Niedermeyer Building, to the
center line of the Northerly wall of said Niedermeyer Building; thence South 66
degrees 10'00" West 1.92 feet along the center line of said Northerly wall of
said Niedermeyer Building, to a point of intersection with the projected outside
line of the Easterly wall of the Denison Building; thence North 27 degrees
37'10" West 49.81 feet along the outside line of the Easterly wall of said
Denison Building, to the center line of the Northerly wall of said Denison
Building, the true point of beginning. EXCEPTING THEREFROM all that part of said
wall between the Niedermeyer and Denison Buildings extending Easterly from the
said Denison Building.

PARCEL 3:
Commencing at the Northeast corner of Riverside Avenue and East Main Street in
the City of Medford, Jackson County, Oregon; thence North 27 degrees 43'00" West
273.83 feet along the Easterly line of north Riverside Avenue to the center line
of the Northerly wall of the Denison Building; thence continue North 27 degrees
43'00" West 150.00 feet, along said Easterly line of North Riverside Avenue, to
the true point of beginning; thence continue North 27 degrees 43'00" West 122.08
feet, along said Easterly line of North Riverside Avenue, to a 1 inch iron pipe
at the Northwest corner of "Adkins Tract"; thence North 67 degrees 45'00" East
106.32 feet; thence South 27 degrees 43'00" East 111.09 feet; thence South 61
degrees 49'00" West 105.84 feet to the true point of beginning.

PARCEL 4:
Commencing at a concrete monument with bronze disk located at the intersection
of the center line of North Riverside Avenue with the center line of East Fourth
Street in the City of Medford, Jackson County, Oregon; thence along said East
Fourth Street center line North 71 degrees 03'20" East 30.00 feet; thence
parallel with the monumented center line of North Riverside Avenue, South 18
degrees 40'45" East 298.27 feet to a 5/8 inch iron pin for the true point of
beginning; thence continue South 18 degrees 40'45" East 78.32 feet; thence South
16 degrees 02'20" East 165.00 feet to the Northwest corner of the "Adkins
Tract"; thence to and along the Northwesterly boundary of that parcel described
in Volume 537, Page 13, Jackson County, Oregon, Deed Records, North 67 degrees
50'30" East (record North 67 degrees 45'00" East) 130.05 feet; thence along said
parcel boundary North 68 degrees 51'40" East (record North 68 degrees 45'00"
East) 100.27 feet; thence along said parcel boundary North 61 degrees 05'30"
East (Record North 61 degrees 00'00" East) 144.75 feet; thence along the
Southwesterly boundary of said parcel, North 14 degrees 24'30" West 60.13 feet
(Record North 14 degrees 30'00" West 60.15 feet); thence along the Northwesterly
boundary of said parcel, North 80 degrees 05'30" East, 83.11 feet (record North
80 degrees 00'00" East 83.08 feet) to intersect the Southwesterly right of way
line of Interstate Highway No. 5; thence along said highway line North 13
degrees 44' West 110.98 feet; thence along the Southwesterly boundary of the
tract described in Final Judgment rendered November 2,
<PAGE>
 
1953, in the Circuit Court of Oregon for Jackson County, under Case No. 53-188-E
and recorded in Volume 115, Page 347, of the Circuit Court Journal, North
27 degrees 42' West 312.02 feet to the Southeasterly boundary of East Fourth
Street; thence along said street boundary, South 71 degrees 03'20" West 213.37
feet to the most Northerly corner of that tract described in Volume 579, Page
429, said Deed Records; thence along the Northeasterly boundary of said tract,
South 18 degrees 56'40" East 154.75 feet to the most Easterly corner thereof;
thence along the Southeasterly boundary of said tract, South 77 degrees 58' West
57.86 feet; thence along the Southeasterly boundary of said tract South
76 degrees 53'50" West 17.03 feet; thence South 18 degrees 40'45" East 112.80
feet; thence South 71 degrees 19'15" West 125 feet to the true point of
beginning.

PARCEL 5:
Commencing at the Northeast corner of Riverside Avenue and East Main Street in
the City of Medford, Jackson County, Oregon; thence North 27 degrees 36'40" West
(record North 27 degrees 33'00" West) 545.91 feet along the easterly line of
North Riverside Avenue to a 1 inch pipe at the Northwest corner of "Adkins
Tract"; thence North 16 degrees 40'45" West along said Easterly line 165.59
feet; thence North 18 degrees 40'45" West along said Easterly line 203.25 feet
to the true point of beginning; thence South 18 degrees 40'45" East along said
Easterly line 125.00 feet; thence North 71 degrees 19'15" East, at right angles
to the said Easterly line of North Riverside Avenue, 125.00 feet; thence North
18 degrees 40'45" West parallel with the said Easterly line to a point on the
South line of tract described in Volume 579, Page 427, Jackson County, Oregon,
Deed Records; thence South 76 degrees 53'50" West along said line to the true
point of beginning.

Tax Parcel Numbers:   371W30BB 9900, 371W30BB 10000, 371W30BB 10100,
                      371W30BB 10300, and 371W30BB 10301
<PAGE>
 
                                   EXHIBIT A
                             PROPERTY DESCRIPTION
                          (Property:  Pendleton, OR)

TRACT I:
-------

Lot 2, Block 5, REES ADDITION to City of Pendleton, Umatilla County, Oregon;

ALSO Block 3, REES ADDITION to City of Pendleton, Umatilla County, Oregon,
EXCEPTING THEREFROM that portion thereof under lease to Atlantic Richfield
Corporation and described as following:

  Beginning at the Southeast corner of said Block 3, located in the South half
  of Section 11, Township 2 North, Range 32 East of the Willamette Meridian,
  Umatilla County, Oregon; thence South 78 degrees 28'20" West a distance of 250
  feet to a point; thence Northerly a distance of 130 feet, more or less, to a
  point on the North line of said Block 3, which bears South 87 degrees 18'10"
  West a distance of 216 feet from the Northeast corner of said Block 3; thence
  North 87 degrees 18'10" East a distance of 216 feet to the Northeast corner of
  said Block 3; thence Southerly along the Easterly line of said Block 3 a
  distance of 90.36 feet to the point of beginning.

TRACT II:
--------

Lot 1, Block 5, REES ADDITION to City of Pendleton, Umatilla County, Oregon.

Tax Parcel Numbers:   112270-00600
                      112271-00700
                      112274-00800
<PAGE>
 
                                   EXHIBIT A
                             PROPERTY DESCRIPTION
                       (Property:  Salt Lake City, Utah)

BEGINNING at a point which is North 200.00 feet from the Southwest corner of
Block 58, Plat "A", Salt Lake City Survey, and running thence North 302.83 feet;
thence East 244.55 feet; thence South 302.83 feet; thence West 244.55 feet to
the point of BEGINNING.

TOGETHER WITH the rights contained in that certain Revocable Permit executed by
Salt Lake City Corporation, recorded August 9, 1983 as Entry No. 3829041 in Book
5481 at page 1600 of Official Records, as modified and superseded by that
certain Lease Agreement to Occupy Public Property by and between Salt Lake City
Corporation, a municipal corporation, as lessor, and Red Lion, a California
Limited Partnership, as lessee, dated May 17, 1988. The Lease Agreement was
renewed for an additional five years through May 16, 1998, pursuant to Notice of
Renewal of Lease Agreement to Occupy Public Property dated November 6, 1992.

ALSO TOGETHER WITH all rights, privileges, conditions, etc., as set forth in
that certain Reciprocal Easement and Maintenance Agreement with Conditions,
Covenants and Restrictions recorded March 20, 1981 as Entry No. 3566733 in Book
5250 at pages 640 through 737 of Official Records; as amended by that certain
Amendment to Reciprocal Easement and Maintenance Agreement with Conditions,
Covenants and Restrictions recorded February 19, 1988 as Entry No. 4587998, in
Book 6005, at Page 591 of Official Records.

ALSO TOGETHER WITH all rights, privileges, conditions, etc., as set forth in
that certain Cross Easement recorded December 31, 1987 as Entry No. 456856 in
Book 5993 at page 448 of Official Records.

Tax Parcel Number:  1501 280 050
<PAGE>
 
                                   EXHIBIT A
                             PROPERTY DESCRIPTION
                            (Property:  Kelso, WA)

                 IN THE COUNTY OF COWLITZ, STATE OF WASHINGTON

PARCEL A:

A tract of land in Sections 26 and 35, Township 8 North, Range 2 West of the
Willamette Meridian, lying Easterly of the Easterly right of way line of
Frontage Road No. 1, as proposed, and lying Westerly of the center line of the
existing drainage slough, being more particularly described as follows:

BEGINNING at a point on the line between Sections 26 and 35, where the same
intersects the center line of said drainage slough, said point being North
88 degrees 57' West a distance of 1,889.02 feet from the Southeast corner of
Section 26; thence South 37 degrees 38' East along the center line of said
drainage slough a distance of 415.51 feet;
thence North 88 degrees 57' West parallel with the section line between Sections
26 and 35, a distance of 645.63 feet, more or less, to the Easterly right of way
line of proposed Frontage Road No. 1;
thence North 8 degrees 16' East along the Easterly right of way of said proposed
Frontage Road a distance of 280.31 feet to a point that is North 88 degrees 04'
East a distance of 127.60 feet from a concrete post set to mark the Easterly
right of way of existing Interstate Highway No. 5 at Engineer's Station 510+00;
thence continuing North 8 degrees 16' East along the Easterly line of the
proposed Frontage Road a distance of 360.19 feet to the point of curvature of a
curve to the right;
thence along said curve having a radius of 400.00 feet, through a central angle
of 3 degrees 36' 54", an arc distance of 25.24 feet to a point that is a
distance of 216.55 feet North 88 degrees 04' East from the Easterly right of way
line of present Interstate Highway No. 5;
thence North 88 degrees 04' East a distance of 208.98 feet to the center line of
the aforementioned slough;
thence along the center line of said slough South 18 degrees 45' West a distance
of 78.60 feet;
thence South 17 degrees 39' East a distance of 230.80 feet;
thence South 37 degrees 38' East along the center line of said slough a distance
of 68.37 feet to the point of beginning.

TOGETHER WITH an easement for ingress and egress, 25 feet in width, lying South
of and abutting the Westerly extension of the North line of the above described
tract, and extending from the Easterly right of way line of Primary State
Highway No. 1 to the Westerly line of said premises.

TOGETHER WITH a non-exclusive right of way and easement over the following:

A tract of land in Section 26, Township 8 North, Range 2 West of the Willamette
Meridian, described as follows:
<PAGE>
 
BEGINNING at a point on the Easterly right of way line of Primary State Highway
No. 1 North 1 degrees 56' West a distance of 314.1 feet and West 2389.6 feet
from the Southeast corner of Section 26;
thence along said right of way North 1 degrees 56' West a distance of 28.7 feet
to a point at right angles to center line Station 514+07.5 of said highway;
thence along said right of way North 3 degrees 51' 30" West a distance of 195.8
feet to a point on a radial line from center line station 516+00 and marked by a
concrete post;
thence along said right of way on a curve to the right having a radius of 381.26
feet for 75.5 feet to the center line of the box culvert under said highway and
also the center line of a ditch that bears North 76 degrees  00' East;
thence along said right of way on a curve to the right having a radius of 381.26
feet for 110.0 feet;
thence Southerly to a point which is Easterly of said highway right of way line
25 feet on the center line of said ditch that bears North 76 degrees  00' East;
thence Southerly on a line that is parallel to and 25 feet Easterly of said
highway right of way line to the point of intersection with a line that bears
North 88 degrees  04' East from the point of beginning;
thence Westerly along said line to the point of beginning.

EXCEPTING THEREFROM those portions conveyed to the Department of Highways by
deed recorded under Auditor's File Nos. 787154 and 787155.

PARCEL B:

BEGINNING 1476.4 feet North 1 degrees 38' East and 1882.7 feet North 88 degrees
22' West from the Southeast corner of said Section 26, Township 8 North, Range 2
West, Willamette Meridian, Cowlitz County, Washington, said point being the
Northeast corner of a 5.5 acre tract of land described in Volume 620, Page 571,
Cowlitz County, Washington, deed records;
thence along the center of a ditch South 4 degrees  00' East 369.2 feet;
thence South 28 degrees 55' West 262.06 feet to a point 50.00 feet distant at
right angles to State Highway centerline FR RD NO. (1) 29+32.79 P.C.;
thence continuing parallel to the FR RD NO. (1) centerline South 30 degrees 15'
59" West 278.17 feet to a point 50.00 feet distant at right angles to centerline
station FR RD NO. (1) 26+54.62 P.T.;
thence continuing parallel to the FR RD NO. (1) centerline along a curve left
having a radius of 950.00 feet (the long chord of which bears South 24 degrees
34' 58" West 188.17 feet) 188.48 feet to the true point of beginning;
thence continuing parallel to the FR RD NO. (1) centerline along a curve having
a radius of 950.00 feet (the long chord of which bears South 15 degrees 43' 57"
West 104.95 feet) 105.00 feet;
thence North 89 degrees 42' East 224.88 feet to the center of an old river 
channel;
thence North 20 degrees 32' East along the center of said channel 105.00 feet;
thence North 89 degrees 38' 21" West 233.27 feet to the true point of beginning.

Tax Parcel Numbers:2-4021-1 and 2-4023-01
<PAGE>
 
                                   EXHIBIT A
                             PROPERTY DESCRIPTION
                          (Property: Sea-Tac, WA    )
                                     ---------------

THE LAND IS SITUATED IN THE STATE OF WASHINGTON, COUNTY OF KING
AND IS DESCRIBED AS FOLLOWS:

PARCEL A:

THAT PORTION OF THE NORTHEAST QUARTER OF THE SOUTHEAST QUARTER OF SECTION 33,
TOWNSHIP 23 NORTH, RANGE 4 EAST W.M., IN KING COUNTY, WASHINGTON, DESCRIBED AS
FOLLOWS:

BEGINNING AT A POINT OF INTERSECTION OF THE EAST LINE OF THE NORTHEAST QUARTER
OF THE SOUTHEAST QUARTER OF SAID SECTION 33, WITH THE NORTH LINE OF SOUTH 188TH
STREET, AS ESTABLISHED BY DEEDS RECORDED UNDER RECORDING NOS. 2522597 AND
5350935;
THENCE ALONG THE EAST LINE OF SAID NORTHEAST QUARTER, NORTH 3 DEGREES 04'29"
EAST 230.00 FEET TO THE TRUE POINT OF BEGINNING.
THENCE PARALLEL WITH SAID NORTH LINE, NORTH 88 DEGREES 10'06" WEST 177.36 FEET;
THENCE SOUTH 12 DEGREES 54'07" WEST 234.31 FEET TO SAID NORTH LINE;
THENCE ALONG THE NORTH LINE OF SAID SOUTH 188TH STREET, NORTH 88 DEGREES 10'06"
WEST 495.05 FEET TO THE EASTERLY LINE OF STATE ROAD NO. 1 (U.S. HIGHWAY 99) AS
ESTABLISHED IN KING COUNTY SUPERIOR COURT CAUSE NO. 181371;
THENCE ALONG SAID EASTERLY LINE, NORTH 1 DEGREES 42'50" WEST 1,252.79 FEET TO
THE NORTH LINE OF SAID NORTHEAST QUARTER;
THENCE ALONG SAID NORTH LINE, SOUTH 88 DEGREES 37'38" EAST 817.18 FEET TO THE
EAST LINE OF SAID NORTHEAST QUARTER;
THENCE ALONG SAID EAST LINE, SOUTH 3 DEGREES 04'29" WEST 1,027.23 FEET TO THE
TRUE POINT OF BEGINNING;
EXCEPT THOSE PORTIONS CONVEYED TO KING COUNTY FOR ROAD PURPOSES BY DEEDS
RECORDED JUNE 8, 1982 UNDER RECORDING NOS. 8206080659 AND 8206080664;
ALSO EXCEPT THE FOLLOWING DESCRIBED PARCEL OF LAND;

THAT PORTION OF THE NORTHEAST QUARTER OF THE SOUTHEAST QUARTER OF SECTION 33,
TOWNSHIP 23 NORTH, RANGE 4 EAST W.M., IN KING COUNTY, WASHINGTON, DESCRIBED AS
FOLLOWS:

BEGINNING AT THE INTERSECTION OF THE EAST LINE OF STATE ROAD NO. 1 (U.S. HIGHWAY
NO. 99) AS ESTABLISHED IN KING COUNTY SUPERIOR COURT NO. 181371; WITH THE NORTH
LINE OF SOUTH 188TH STREET AS ESTABLISHED BY DEEDS RECORDED UNDER RECORDING NOS.
2522597 AND 5350935;
<PAGE>
 
THENCE NORTH 01 DEGREES 42'50" WEST ALONG SAID EAST LINE OF STATE ROAD NO. 1, A
DISTANCE OF 1,053.40 FEET TO THE TRUE POINT OF BEGINNING;
THENCE CONTINUING NORTH 01 DEGREES 42'50" WEST, ALONG SAID EAST LINE OF STATE
ROAD NO. 1, A DISTANCE OF 199.39 FEET TO THE NORTH LINE OF SAID NORTHEAST
QUARTER;
THENCE SOUTH 88 DEGREES 37'38" EAST, ALONG SAID NORTH LINE, A DISTANCE OF 220.00
FEET;
THENCE SOUTH 17 DEGREES 50'30" WEST, A DISTANCE OF 208.17 FEET;
THENCE NORTH 88 DEGREES 25'22" WEST, A DISTANCE OF 150.25 FEET TO THE TRUE POINT
OF BEGINNING;
ALSO EXCEPT THE FOLLOWING DESCRIBED PARCEL OF LAND:

THAT PORTION OF THE NORTHEAST QUARTER OF THE SOUTHEAST QUARTER OF SECTION 33,
TOWNSHIP 23 NORTH, RANGE 4 EAST W.M., IN KING COUNTY, WASHINGTON, DESCRIBED AS
FOLLOWS:

BEGINNING AT THE INTERSECTION OF THE EAST LINE OF STATE ROAD NO. 1 (U.S. HIGHWAY
NO. 99) AS ESTABLISHED IN KING COUNTY SUPERIOR COURT CAUSE NO. 181371, WITH THE
NORTH LINE OF SOUTH 188TH STREET, AS ESTABLISHED BY DEEDS RECORDED UNDER
RECORDING NOS. 2522597 AND 5350935;
THENCE NORTH 01 DEGREES 55'06" WEST ALONG SAID EAST LINE OF STATE ROAD NO. 1, A
DISTANCE OF 818.40 FEET TO THE TRUE POINT OF BEGINNING;
THENCE CONTINUING NORTH 01 DEGREES 55'06" WEST ALONG SAID EAST LINE OF STATE
ROAD NO. 1, A DISTANCE OF 235.00 FEET;
THENCE SOUTH 88 DEGREES 37'38" EAST, A DISTANCE OF 150.25 FEET;
THENCE SOUTH 01 DEGREES 55'06" EAST A DISTANCE OF 171.04 FEET;
THENCE SOUTH 67 DEGREES 49'54" WEST, A DISTANCE OF 159.88 FEET TO THE TRUE POINT
OF BEGINNING.

PARCEL B:

LOT 1, KING COUNTY SHORT PLAT NO. 477027, AS RECORDED UNDER KING COUNTY
RECORDING NO. 7802270909.

PARCEL C:

THAT PORTION OF LOT 7, BLOCK 1, BOW VISTA NO. 4, ACCORDING TO THE PLAT THEREOF
RECORDED IN VOLUME 57 OF PLATS, PAGE 1, RECORDS OF KING COUNTY, WASHINGTON, AND
THAT PORTION OF LOT 1, BLOCK 3, BOW VISTA NO. 2, ACCORDING TO THE PLAT THEREOF
RECORDED IN VOLUME 53 OF PLATS, PAGES 46 AND 47, RECORDS OF KING COUNTY,
WASHINGTON, LYING NORTHWESTERLY OF A LINE DRAWN BETWEEN THE SOUTHWEST CORNER OF
SAID LOT 7 AND THE NORTHEAST CORNER OF SAID LOT 1, THE BEARING AND DISTANCE OF
SAID LINE BEING NORTH 42 DEGREES 53'49" EAST FOR 210.04 FEET.
<PAGE>
 
ALL SITUATE IN THE COUNTY OF KING, STATE OF WASHINGTON.

TAX PARCEL NUMBERS:     332304-9207-00 AND 342304-9234-09
<PAGE>
 
                                   EXHIBIT A
                             PROPERTY DESCRIPTION
                   (Property: Vancouver/Inn at the Quay, WA)
                              -----------------------------

PARCEL A
--------

THAT CERTAIN PORTION OF THE AMOS SHORT DONATION LAND CLAIM, AND ABUTTING TIDE
LAND LOCATED IN SECTION 27, TOWNSHIP 2 NORTH, RANGE 1 EAST OF THE WILLAMETTE
MERIDIAN, IN THE COUNTY OF CLARK, STATE OF WASHINGTON, BEING MORE PARTICULARLY
DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT ON THE WEST LINE OF COLUMBIA STREET THAT IS SOUTH 0 DEGREES
44'45" WEST 43.00 FEET FROM THE INTERSECTION OF THE NORTHERLY LINE OF THE PUBLIC
LEVEE WITH THE WEST LINE OF SAID STREET RUNNING THENCE SOUTH 0 DEGREES 44'45"
WEST 396.81 FEET TO THE INNER HARBOR LINE; THENCE NORTH 64 DEGREES 25'39" WEST,
ALONG SAID LINE 508.35 FEET; THENCE NORTH 25 DEGREES 34'21" EAST 77.37 FEET;
THENCE SOUTH 68 DEGREES 52'14" EAST 91.22 FEET; THENCE NORTH 29 DEGREES 11' EAST
229.00 FEET; THENCE SOUTH 75 DEGREES 44'12" EAST 241.01 FEET TO THE POINT OF
BEGINNING. EXCEPTING, HOWEVER, A STRIP OF LAND 30 FEET WIDE TO BE USED AS ACCESS
ROAD PURPOSES, BEING 15 FEET ON EITHER SIDE OF THE FOLLOWING DESCRIBED CENTER
LINE: BEGINNING AT A POINT ON THE WEST LINE OF SAID COLUMBIA STREET THAT IS
SOUTH 0 DEGREES 44'45" WEST 92.53 FEET FROM THE NORTHERLY LINE OF THE
AFOREMENTIONED LEVEE; THENCE SOUTHWESTERLY ALONG THE ARC OF A CURVE TO THE
RIGHT, HAVING A RADIUS OF 165.02 FEET; THROUGH A CENTRAL ANGLE OF 41 DEGREES
57'58" AN ARC DISTANCE OF 120.87 FEET; THENCE SOUTH 78 DEGREES 32'58" WEST
104.05 FEET; THENCE ALONG THE ARC OF A CURVE TO THE RIGHT, HAVING A RADIUS OF
288.43 FEET THROUGH A CENTRAL ANGLE OF 27 DEGREES 13'22," AN ARC LENGTH OF
137.46 FEET TO THE WESTERLY LINE OF THE ABOVE DESCRIBED PROPERTY, AND THE
TERMINUS OF SAID LINE.

PARCEL B
--------

BEGINNING AT THE POINT OF INTERSECTION OF THE EAST LINE OF COLUMBIA STREET AND
THE INNER HARBOR LINE, SAID POINT BEING NORTH 93.05 FEET AND WEST 510.8 FEET
FROM THE SOUTHEAST CORNER OF THE AMOS SHORT DONATION LAND CLAIM; THENCE NORTH
64 DEGREES 25'39" WEST 170.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE SOUTH
25 DEGREES 34'21" WEST 150.00 FEET TO THE OUTER HARBOR LINE; THENCE NORTH
64 DEGREES 25'39" WEST ALONG SAID OUTER HARBOR LINE 426.50 FEET; THENCE NORTH
25 DEGREES 34'21" EAST 150.00 FEET TO THE AFOREMENTIONED INNER HARBOR LINE;
THENCE SOUTH 64 DEGREES 25'39" EAST 426.50 FEET TO THE TRUE POINT OF BEGINNING.

PARCEL C
--------
<PAGE>
 
BEGINNING AT A POINT ON THE WEST LINE OF COLUMBIA STREET THAT IS SOUTH 0 DEGREES
44'45" WEST 43.00 FEET FROM THE INTERSECTION OF SAID WEST LINE WITH THE
NORTHERLY LINE OF THE PUBLIC LEVEE SHOWN ON THE PLAT OF THE TOWN OF VANCOUVER,
RECORDED IN VOLUME "B" OF PLATS, PAGE 40, IN CLARK COUNTY, WASHINGTON; THENCE
CONTINUING SOUTH 0 DEGREES 44'45" WEST 396.81 FEET TO THE INNER HARBOR LINE;
THENCE NORTH 64 DEGREES 25'39" WEST ALONG SAID LINE 508.35 FEET; THENCE NORTH
25 DEGREES 34'21" EAST 77.37 FEET TO THE TRUE POINT OF BEGINNING; THENCE SOUTH
68 DEGREES 52'14" EAST 91.22 FEET; THENCE NORTH 29 DEGREES 11'00" EAST 229.00
FEET; THENCE NORTH 75 DEGREES 44'12" WEST 107.46 FEET; THENCE SOUTH 25 DEGREES
34'21" WEST 214.54 FEET TO THE AFORESAID TRUE POINT OF BEGINNING.

PARCEL D
--------

THE SOUTH HALF OF LOTS 1, 2, 3 AND 4 AND THE WEST 25 FEET OF THE NORTH HALF OF
LOT 4, ALL OF LOTS 5, 6, 7 AND 8 IN BLOCK 17, PLAT OF THE CITY OF VANCOUVER
(COMMONLY KNOWN AS WEST VANCOUVER) ACCORDING TO THE PLAT THEREOF APPEARING IN
BOOK "A" OF GENERAL RECORDS, AT PAGE 84.

TOGETHER WITH TRACTS 27 AND 28 OF VANCOUVER TIDELANDS AS SHOWN ON THE PLAT OF
STATE LAND COMMISSION APPROVED MAY 8, 1906.

EXCEPTING FROM THE ABOVE DESCRIBED PROPERTY THAT PORTION TAKEN BY THE UNITED
STATES OF AMERICA FOR THE SHIPYARD ACCESS ROAD, PURSUANT TO SUPERIOR COURT CAUSE
NO. 24115, AND EXCEPTING THAT PORTION TAKEN BY THE STATE OF WASHINGTON FOR THE
INTERSTATE BRIDGE APPROACHES, PURSUANT TO SUPERIOR COURT CAUSE NO. 32160.
<PAGE>
 
                                   EXHIBIT A
                             PROPERTY DESCRIPTION
                          (Property:  Wenatchee, WA)


 Situated in the County of Chelan, State of Washington, described as follows:

Lots 1, 2, 3 and 4, Block 11, SUBURBAN HOME ADDITION TO WENATCHEE, Chelan
County, Washington, according to the plat thereof recorded in Volume 1 of Plats,
Page 22, EXCEPT the Southerly 76.9 feet of said Lots 3 and 4.

Tax Parcel Number: 23-20-34-860080
<PAGE>
 
                                   EXHIBIT B

                               LEASE ALLOCATION
 
<TABLE>
<CAPTION>
================================================================================
                             ALLOCATED        PERCENTAGE OF
      PROPERTY               AMOUNT OF         TOTAL BASE         BASE REVENUE
                             BASE RENT            RENT
--------------------------------------------------------------------------------
<S>                         <C>                 <C> 
Astoria                        181,115            1.21%
--------------------------------------------------------------------------------
Bend North                     144,820            0.97%
--------------------------------------------------------------------------------
Boise                          404,423            2.70%
--------------------------------------------------------------------------------
Coos Bay                       118,450            0.79%
--------------------------------------------------------------------------------
Durango                        860,668            5.74%
--------------------------------------------------------------------------------
Eugene                         417,660            2.78%
--------------------------------------------------------------------------------
Kelso                          360,342            2.40%
--------------------------------------------------------------------------------
Medford                        578,378            3.86%
--------------------------------------------------------------------------------
Missoula                       145,220            0.97%
--------------------------------------------------------------------------------
Pendleton                      434,170            2.89%
--------------------------------------------------------------------------------
Rohnert Park/Sonoma            733,106            4.89%
--------------------------------------------------------------------------------
Sacramento                   1,352,228            9.01%
--------------------------------------------------------------------------------
Salt Lake                    2,687,691           17.92%
--------------------------------------------------------------------------------
San Diego                    1,122,198            7.48%
--------------------------------------------------------------------------------
Seatac                       4,503,580           30.02%
--------------------------------------------------------------------------------
Vancouver                      586,220            3.91%
--------------------------------------------------------------------------------
Wenatchee                      369,731            2.46%
--------------------------------------------------------------------------------
TOTALS                      15,000,000          100.00%
================================================================================
</TABLE>
<PAGE>
 
                                                                  EXHIBIT 1.1(C)

                 RLH PARTNERSHIP, L.P. CONTRIBUTION AGREEMENT

     This RLH Partnership, L.P. Contribution Agreement, dated as of August 1,
1995 (this "Agreement") is by and between RLH Partnership, L.P., a Delaware
limited partnership ("Newpart"), and Red Lion, a California Limited Partnership
(the "Partnership").

                                   RECITALS
                                   --------

     WHEREAS, as part of a plan of reorganization, the Partnership intends to
transfer certain of its hotel properties, and certain of the liabilities
associated with those hotels, to a wholly owned subsidiary, Newpart, pursuant to
this Agreement.

     WHEREAS, Newpart will lease those certain hotel properties to Red Lion
Hotels, Inc., a Delaware corporation ("RLI"), pursuant to the Master Lease and
RLI will guarantee certain of the Real Property Leases.

                                   AGREEMENT
                                   ---------

     NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows.

                            ARTICLE 1 - DEFINITIONS

     1.1   Defined Terms.  As used herein, the terms below shall have the
           -------------                                                 
following meanings:

     "Books and Records"  shall mean all books, ledgers, files, reports, plans,
      -----------------                                                        
drawings and operating records of every kind maintained by the Partnership
pertaining to the Newpart Property and the Newpart Liabilities.

     "Closing Date" shall mean the date of the closing of the Offering or such
      ------------                                                            
other date as the Partnership and Newpart shall mutually agree upon.

     "Escrow Agent" shall mean First American Title Insurance Company.
      ------------                                                    

     "FF&E" shall have the meaning assigned in the Master Lease.
      ----                                                      

     "Fixed Asset Supplies" shall have the meaning assigned in the Master Lease.
      --------------------                                                      

     "Fixtures" shall have the meaning assigned in the Master Lease.
      --------                                                      

                                       1
<PAGE>
 
     "Furnishings" shall have the meaning assigned in the Master Lease.
      -----------                                                      

     "Improvements" shall have the meaning assigned in the Master Lease.
      ------------                                                      

     "Inventories" shall have the meaning assigned in the Master Lease;
      -----------                                                      

     "Leased Real Property" shall mean all leased real property related to the
      --------------------                                                    
Newpart Hotels, as described in the Real Property Leases.

     "Liabilities" shall mean all liabilities, obligations, commitments, claims,
      -----------                                                               
actions, demands, losses, damages, judgments, interests, penalties, costs and
expenses of any nature, absolute, accrued, contingent or otherwise, known or
unknown, whether matured or unmatured.

     "Master Lease" shall mean the Lease by and between RLI and Newpart.
      ------------                                                      

     "Newpart" means RLH Partnership, L.P., a Delaware limited partnership, and
      -------                                                                  
its successors and assigns.

     "Newpart Hotels" means each of the Partnership's hotel properties set forth
      --------------                                                            
on Schedule 1.1(a).

     "Newpart Liabilities" shall mean (a) all the indebtedness secured by the
      -------------------                                                    
Newpart Property, other than indebtedness for which amounts have been deposited
with the Escrow Agent by the Closing Date for repayment of such indebtedness by
the Partnership, (b) all Liabilities under the Real Property Leases and the
Personal Property Leases, (c) the receivable from Newpart representing amounts
due to the Partnership for fees and expenses relating to Newpart paid by the
Partnership before the Closing Date and (d) all other Liabilities as of the
Closing Date required to be paid or satisfied by RLI pursuant to the Master
Lease.

     "Newpart Property" shall mean all of the Partnership's right, title and
      ----------------                                                      
interest, as of the Closing, in the following assets and property of the
Partnership:

     (a)  the Premises;

     (b)  the Real Property Leases and Personal Property Leases;

     (c)  all FF&E located at the Premises;

     (d)  all Fixed Asset Supplies located at the Premises;

     (e)  all Operating Equipment located at the Premises;

                                       2
<PAGE>
 
     (f)  all Inventories located at the Premises;

     (g)  all Permits;

     (h)  all rights under or pursuant to all warranties, representations and
  guarantees relating to the construction, improvement, alteration and repair of
  the Premises and all architectural and engineering plans, drawings and
  specifications related thereto; and

     (i)  all Books and Records.

     "Offering" means the proposed initial public offering of the Common
      --------                                                          
Stock of RLI.

     "Operating Equipment" shall have the meaning assigned in the Master Lease;
      -------------------                                               

     "Owned Real Property" shall mean the real property owned in fee by the
      -------------------                                                  
Partnership related to the Newpart Hotels.

     "Permits" shall mean all of the Partnership's transferable licenses,
      -------                                                            
permits, franchises, approvals, authorizations, consents or orders of, or
filings with, any governmental authority, whether foreign, federal, state or
local, or any other person related to the Newpart Hotels which are required to
be held by Newpart in connection with the transactions contemplated hereby and
by the Master Lease.

     "Personal Property Leases" shall mean any agreement to which the
      ------------------------                                       
Partnership is a party for the lease of FF&E, Fixed Asset Supplies, Operating
Equipment or Inventories which are included in the Newpart Property.

     "Premises" shall mean all of the Owned Real Property and Leased Real
      --------                                                           
Property and Improvements associated with each of the Newpart Hotels.

     "Person" shall mean any person or entity, whether an individual,
      ------                                                         
trustee, corporation, general partnership, limited partnership, trust,
unincorporated organization, business association, firm, joint venture,
governmental agency or authority.

     "Real Property Leases" shall mean the leases for the Leased Real
      --------------------                                           
Property as set forth on Schedule 1.1(b).

     "Title Company" shall mean First American Title Insurance Company.
      -------------                                                    

                                       3
<PAGE>
 
     1.2  Other Defined Terms.  The following terms shall have the meanings
          -------------------                                              
defined for such terms in the Sections set forth below:
 
<TABLE>
<CAPTION>
     Term                                  Section
     ----                                  -------
     <S>                                   <C>
     Claim Notice                          8.2
     Closing                               3.1
     Dispute Notice                        8.2
     Indemnified Party                     8.2
     Indemnitor                            8.2
                                   
     Partnership                           Preamble
     RLI                                   Recitals
     Transfer Fees                         2.3
</TABLE>
 
                      ARTICLE 2 - CONTRIBUTION OF ASSETS

     2.1  Transfer of Newpart Property.  Upon the terms and subject to the
          ----------------------------                                    
conditions contained herein, at the Closing, the Partnership will contribute,
convey, transfer, assign, and deliver to Newpart, as a contribution to capital,
and Newpart will acquire from the Partnership, all of the Partnership's right,
title and interest in and to, the Newpart Property.

     2.2  Assumption of Liabilities.  Upon the terms and subject to the
          -------------------------                                    
conditions contained herein, at the Closing, Newpart shall assume the Newpart
Liabilities.

     2.3  Closing Costs; Transfer Taxes and Fees.  Newpart shall be
          --------------------------------------                   
responsible for any documentary transfer taxes and any sales, use or other taxes
(and any deficiency, interest or penalty asserted with respect thereto), escrow
fees, including fees and charges of Escrow Agent, any recording or filing fees,
and any costs and fees of title searches or insurance premiums for title
insurance on the Owned Real Property or the Leased Real Property (collectively
"Transfer Fees"), incurred in transferring and conveying the Newpart Property
hereunder, and shall promptly reimburse the Partnership for any Transfer Fees
incurred by it.  Newpart shall pay all costs of applying for new permits and
obtaining the transfer of existing Permits.  In addition, Newpart shall be
responsible for and shall pay all Transfer Fees or other fees or expenses
incurred in connection with obtaining or perfecting its title in the Newpart
Property after the Closing, and shall reimburse the Partnership for any such
fees or expenses incurred by it.

                              ARTICLE 3 - CLOSING

     3.1  Closing.  The Closing of the transactions contemplated herein
          -------                                                      
(the "Closing") shall be held at 8:00 a.m. local time on the Closing Date at the
offices

                                       4
<PAGE>
 
of Latham & Watkins, 633 West Fifth Street, Los Angeles, California, unless the
parties hereto otherwise agree.

     3.2  Deliveries at Closing.
          --------------------- 

          (a)  By the Partnership.  On or prior to the Closing Date, the
               ------------------                                       
Partnership shall execute and deliver, for recordation and/or delivery:

               (i) to the Escrow Agent, escrow instructions substantially in the
form attached hereto as Exhibit 3.2(a)(i);

               (ii) to the Escrow Agent, one or more recordable deeds conveying
fee simple title to all Owned Real Property included in the Newpart Property to
Newpart;

               (iii) to the Escrow Agent, one or more recordable assignments
conveying all of the Partnership's interest in the Real Property Leases;

               (iv) to Newpart, one or more assignments conveying all of the
Partnership's interest in the Personal Property Leases;

               (v) to Newpart, one or more bills of sale conveying in the
aggregate all of the Partnership's owned personal property included in the
Newpart Property;

               (vi) to Newpart and/or the Escrow Agent, such other instruments
as shall be requested by Newpart and/or the Escrow Agent to vest in Newpart
title in and to the Newpart Property in accordance with the provisions hereof.

          (b)  By Newpart. On the Closing Date, Newpart shall execute and
               ----------                                                
deliver, for recordation and/or delivery:

               (i) to the Escrow Agent, escrow instructions substantially in the
form attached hereto as Exhibit 3.2(a)(i);

               (ii) to the Escrow Agent, one or more recordable assumptions
assuming all of the Partnership's interest in the Real Property Leases;

               (iii)  to the Partnership, one or more assumptions assuming all
of the Newpart Liabilities;

               (iv) to the Partnership, such other instruments as shall be
requested by the Partnership to evidence Newpart's assumption of the Newpart
Liabilities in accordance with the provisions hereof.

                                       5
<PAGE>
 
     3.3  Actions by Escrow Agent.  On the Closing Date, Escrow Agent shall:
          -----------------------                                    

     (a)  Recording.  Cause the deeds (with documentary transfer tax
          ---------                                                 
information to be affixed by separate affidavit or other method whereby the same
shall not become a part of the Official Records) and the assignments and
assumptions of Real Property Leases to be recorded in the Official Records of
the appropriate counties in which the Owned Real Property and the Leased Real
Property is located.

     (b)  Title Policy.  Direct the Title Company to issue and deliver the
          ------------                                                    
binding commitment to issue the title insurance described in Section 6.4,
effective as of the Closing Date.

     3.4  Form of Instruments.  To the extent that a form of any document
          -------------------                                            
to be delivered hereunder is not attached as an Exhibit hereto, such documents
shall be in form and substance, and shall be executed and delivered in a manner,
satisfactory to the Partnership and Newpart.

                  ARTICLE 4 - REPRESENTATIONS AND WARRANTIES

     4.1  Representations and Warranties of Partnership. The Partnership
          ---------------------------------------------                 
represents and warrants to Newpart as follows:

          (a)  Authorization. The Partnership has the requisite partnership 
               -------------     
power and authority and has taken all partnership action necessary to execute
and deliver this Agreement, to consummate the transactions contemplated
hereunder and to perform its obligations hereunder. This Agreement has been duly
executed and delivered by the Partnership and constitutes the legal, valid and
binding obligation of the Partnership enforceable against the Partnership in
accordance with its terms.

     4.2  Representations, Warranties and Acknowledgements of Newpart.
          -----------------------------------------------------------  
Newpart represents and warrants to the Partnership as follows:

          (a)  Authority.  Newpart has the requisite partnership power and
               ---------                                                  
authority and has taken all partnership action necessary to execute and deliver
this Agreement, to consummate the transactions contemplated hereunder and to
perform its obligations hereunder.  This Agreement has been duly executed and
delivered by Newpart and constitutes the legal, valid and binding obligation of
Newpart enforceable against Newpart in accordance with its terms.

          (b)  Newpart Property Transferred "As Is".  Newpart acknowledges that
               ------------------------------------                            
each of the assets to be transferred hereunder shall be transferred "as is" with
all faults and without representation, express or implied, that the same are
merchantable or fit for a particular purpose; that the Partnership is
transferring whatever title it may have in and to such assets without any
representation or warranty, express or implied, with respect to its

                                       6
<PAGE>
 
title to such assets or its contractual ability to do the same; and that each of
the interests to be transferred hereunder pursuant to a Real Property Lease or a
Personal Property Lease shall be transferred without representation or warranty
that Newpart shall receive such interest free of claims by any third party or
with any right to the quiet enjoyment of any such interest.

            ARTICLE 5 - CONDITIONS TO THE PARTNERSHIP'S OBLIGATIONS

     5.1  Conditions Precedent.  The obligations of the Partnership to
          --------------------                                        
consummate the transactions provided for hereby are subject, in the discretion
of the Partnership, to the satisfaction, on or prior to the Closing Date, of
each of the following conditions, any of which may be waived by the Partnership:

     (a)  Representations, Warranties and Covenants.  All representations
          -----------------------------------------                      
and warranties of Newpart contained in this Agreement shall be true and correct
in all material respects at and as of the date of this Agreement and at and as
of the Closing Date, except as and to the extent that the facts and conditions
upon which such representations and warranties are based are expressly required
or permitted to be changed by the terms hereof, and Newpart shall have performed
and satisfied all agreements and covenants required hereby to be performed by it
prior to or on the Closing Date.

     (b)  Deliveries.  Newpart shall have executed and delivered all
          ----------                                                
documents and other items under Section 3.2(b).

     (c)  No Proceedings, Litigation or Laws.  No action, proceeding or
          ----------------------------------                           
claim by any governmental authority or other person shall have been instituted
or threatened which questions the validity or legality of the transactions
contemplated hereby and which could reasonably be expected to (a) materially
affect the right or ability of Newpart to own, operate, possess or transfer the
Newpart Property after the Closing, or (b) materially damage the Partnership if
the transactions contemplated hereunder are consummated.

     (d)  RLI Contribution Agreement.  Concurrently with the execution
          --------------------------                                  
hereof, RLI and the Partnership shall have executed and delivered a contribution
agreement dated as of the date hereof.

     5.2  Conditions Subsequent.  The obligations of the Partnership to
          ---------------------                                        
consummate the transactions provided for herein are subject, in the discretion
of the Partnership, to the satisfaction, on or prior to one day following the
Closing Date, of each of the following conditions, any of which may be waived by
the Partnership:

     (a)  Offering.  The Offering shall have closed.
          --------                                  

                                       7
<PAGE>
 
                ARTICLE 6 - CONDITIONS TO NEWPART'S OBLIGATIONS

     The obligations of Newpart to consummate the transactions provided for
hereby are subject, in the discretion of Newpart, to the satisfaction, on or
prior to the Closing Date, of each of the following conditions, any of which may
be waived by Newpart:

     6.1  Representations, Warranties and Covenants.  All representations
          -----------------------------------------                      
and warranties of the Partnership contained in this Agreement shall be true and
correct in all material respects at and as of the date of this Agreement and at
and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and the
Partnership shall have performed and satisfied all agreements and covenants
required hereby to be performed by it prior to or on the Closing Date.

     6.2  No Proceedings, Litigation or Laws.  No action, proceeding or
          ----------------------------------                           
claim by any governmental authority or other person shall have been instituted
or threatened which questions the validity or legality of the transactions
contemplated hereby and which could reasonably be expected to (a) materially
affect the right or ability of Newpart to own, operate, possess, lease pursuant
to the Master Lease or transfer the Newpart Property after the Closing, or (b)
materially damage Newpart if the transactions contemplated hereunder are
consummated.

     6.3  Conveyancing Documents.  The Partnership shall have executed and
          ----------------------                                          
delivered each of documents and other items described in Section 3.2(a) hereof.

     6.4  Title Policy.  Newpart shall have received an owner's policy or
          ------------                                                   
policies of title insurance insuring fee title to the Partnership's Owned Real
Property or written commitment to issue the same, in form and substance
satisfactory to Newpart, and shall have received a leasehold policy or policies
of title insurance insuring the Partnership's leasehold interest in the Leased
Real Property, in form and substance satisfactory to Newpart.

                          ARTICLE 7 - INDEMNIFICATION

     7.1  By Newpart.  Newpart, as of the Closing Date, shall indemnify and
          ----------                                                       
save and hold harmless the Partnership, and each of its limited partners,
general partners, owners, subsidiaries and affiliates, and each of their
respective officers, directors, employees, shareholders, partners, agent,
representatives and advisors and any of the foregoing's successors and assigns
(each an "Indemnified Party") from and against the Newpart Liabilities and any
and all Liabilities incurred in connection with, arising out of, resulting from
or incident to the breach of any representation, warranty or covenant of Newpart
contained herein.

                                       8
<PAGE>
 
     7.2  Indemnification Procedures.  If an Indemnified Party seeks
          --------------------------                                
indemnification hereunder it shall give Newpart (the "Indemnitor") a notice (a
"Claim Notice") describing in reasonable detail the facts giving rise to any
claims for indemnification hereunder and the amount or the method of computation
of the amount of such claim, and a reference to the provision of this Agreement
or any agreement, document or instrument executed pursuant hereto or in
connection herewith upon which such claim is based, provided that failure to
give such notice shall not relieve the Indemnitor of its obligations hereunder.
Indemnitor shall have thirty (30) days after the giving of any Claim Notice
pursuant hereto to (i) agree to the amount or method of determination set forth
in the Claim Notice and to pay such amount to Indemnified Party in immediately
available funds to the extent not previously advanced pursuant to Section 7.4
hereof, or (ii) to provide Indemnified Party with notice that it disagrees with
the amount or method of determination set forth in the Claim Notice (the
"Dispute Notice").  Within fifteen (15) days after the giving of the Dispute
Notice, a representative of Indemnitor and a representative of Indemnified Party
shall negotiate in a bona fide attempt to resolve the matter.  In the event that
the controversy is not resolved within thirty (30) days of the giving of the
Dispute Notice, the parties shall be free to pursue whatever remedies are
available to them at law or equity.

     7.3  Third Person Claims.  If a claim by a third person is made
          -------------------                                       
against an Indemnified Party, and if such party intends to seek indemnity with
respect thereto under this Article 7, such Indemnified Party shall promptly
notify the Indemnitor in writing of such claims, setting forth such claims in
reasonable detail.  Indemnitor shall have ten (10) days after receipt of such
notice to elect to undertake, conduct and control, through counsel of its own
choosing and at its own expense, the settlement or defense thereof, and the
Indemnified Party shall cooperate with it in connection therewith; provided that
the Indemnified Party may participate in such settlement or defense through
counsel chosen by such Indemnified Party; and provided further that if in the
reasonable judgment of the Indemnified Party, there exists a conflict between
the Indemnified Party and the Indemnitor, Indemnitor shall bear all costs and
expenses of Indemnified Party's separate counsel of choice.  So long as the
Indemnitor is reasonably contesting any such claim in good faith, the
Indemnified Party shall not pay or settle any such claim without the consent of
the Indemnitor.  If the Indemnitor does not notify the Indemnified Party within
ten (10) days after receipt of the Indemnified Party's notice of a claim of
indemnity hereunder that it elects to undertake the defense thereof, the
Indemnified Party shall have the right to contest, settle or compromise the
claim and shall be entitled to indemnification for all fees, costs and expenses
incurred in connection therewith.  The Indemnitor shall not, except with the
consent of each Indemnified Party, enter into any settlement that does not
include as an unconditional term thereof the giving by the person or persons
asserting such claim to all Indemnified Parties of unconditional release from
all liability with respect to such claim or consent to entry of any judgment.
The Indemnitor shall not be liable for damages relating to any settlement
entered into without the consent of such Indemnitor.

     7.4  Advance of Damages.  Notwithstanding anything to the contrary,
          ------------------                                            
the Indemnitor shall advance to any Indemnified Party, all funds necessary to
pay when due all

                                       9
<PAGE>
 
damages associated with the Newpart Liabilities and all other Liabilities for
which indemnification is provided pursuant to Section 7.1 ("Damages"), provided
that if the Indemnitor disputes its obligation to indemnify the Indemnified
Party with respect to such Damages, the Indemnified Party shall provide an
undertaking to reimburse the Indemnitor for such amounts if it is later
determined in a final nonappealable order by a court of competent jurisdiction
that the Indemnified Party was not entitled to indemnification under this
Agreement.

                           ARTICLE 8 - MISCELLANEOUS

     8.1  Termination.
          ----------- 

     (a)  Failure of Condition.  If any condition precedent to the
          --------------------                                    
Partnership's obligations hereunder is not satisfied by the Closing Date and
such condition is not waived by the Partnership, the Partnership may terminate
this Agreement at its option by written notice to Newpart.  If any condition
precedent to Newpart's obligations hereunder is not satisfied by the Closing
Date and such condition is not waived by Newpart, Newpart may terminate this
Agreement at its option by written notice to the Partnership.  In the event that
a condition precedent to its obligations is not satisfied, nothing contained
herein shall be deemed to require either party to terminate this Agreement
rather than to waive such condition precedent and proceed with the Closing.

     (b)  Effect of Termination.  In the event of a termination of this
          ---------------------                                        
Agreement by either party as provided in subparagraph (a) above, this Agreement
shall thereafter become void and have no effect and neither party shall have any
liability hereunder to the other party, except that nothing herein shall relieve
either party from liability for any breach of this Agreement which occurs prior
to such termination.

     8.2  Entire Agreement; Amendments and Waivers.  This Agreement,
          ----------------------------------------                  
together with all exhibits and schedules hereto constitutes the entire agreement
between the parties pertaining to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties.  This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.  No
amendment, supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby.  No waiver of any
of the provisions of this Agreement shall be deemed or shall constitute a waiver
of any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.

     8.3  Successors and Assigns.  This Agreement shall be binding upon and
          ----------------------                                           
inure to the benefit of the parties hereto and their respective successors and
assigns.

     8.4  Governing Law.  This Agreement shall be construed, interpreted
          -------------                                                 
and the rights of the parties determined in accordance with the laws of the
State of Washington

                                      10
<PAGE>
 
applicable to contracts entered into and wholly to be performed in Washington by
Washington residents (without reference to its choice of law provisions).

     8.5  Multiple Counterparts.  This Agreement may be executed in one or
          ---------------------                                           
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

     8.6  Captions and References.  The captions or headings of the
          -----------------------                                  
Articles and Sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement.

     8.7  Limited Liability.  Notwithstanding any provisions hereof, none
          -----------------                                              
of the obligations of the Partnership or Newpart under or contemplated by this
Agreement shall be an obligation of any officer, director, shareholder, limited
partner, general partner, or owner of the Partnership or Newpart, or any of
their respective officers, directors, shareholders, limited partners, general
partners, or owners, or successors or assigns.  The Partnership and Newpart
shall be the only persons or entities liable with respect to such obligations.
Each of the Partnership and Newpart hereby irrevocably waives any right it may
have against any such officer, director, shareholder, general partner or limited
partner, owner, successor or assign identified above as a result of the
performance of the provisions under or contemplated by this Agreement.  This
provision shall survive any termination of this Agreement.

     8.8  Invalidity.  In the event that any one or more of the provisions
          ----------                                                      
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, then to the maximum extent permitted by
law, such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement or any other such instrument.

     8.9  Books and Records.  From and after the Closing, Newpart shall
          -----------------                                            
make available to the Partnership, its agents and employees the Books and
Records (and the assistance of Newpart's employees responsible for such Books
and Records) during regular business hours.  Newpart shall maintain and preserve
all such Books and Records for a period of ten years after the Closing.

                                      11
<PAGE>
 
     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalf, by their respective officers thereunto
duly authorized, all as of the day and year first above written.

                              RLH Partnership, L.P., a Delaware
                              limited partnership

                                    By: Red Lion G.P., Inc., its general
                                    partner


                                    By:
                                       -----------------------------------------
                                       Name:  Beth A. Ugoretz
                                       Title:  Vice President



                         Red Lion, a California Limited Partnership

                              By    RLA-GP, Inc., a Delaware corporation
                              Its   General Partner


                              By:
                                 -----------------------------------------------
                                 Name:  David J. Johnson
                                 Title: Executive Vice President

                                      12
<PAGE>
 
                                                                     EXHIBIT 4.2

                         REGISTRATION RIGHTS AGREEMENT


          This REGISTRATION RIGHTS AGREEMENT, dated as of August 1, 1995, is
made and entered into by and between Red Lion Hotels, Inc., a Delaware
corporation (the "Company"), and Red Lion, a California Limited Partnership (the
"Partnership").

          1.      Background.  As of the date hereof, the Company has issued
                  ----------                                                
20,900,000 shares of its common stock, $.01 par value per share (the "Common
Stock"), to the Partnership.

          2.      Definitions. As used in this Agreement, the following
                  -----------                                            
capitalized terms shall have the following respective meanings:

          Exchange Act - The Securities Exchange Act of 1934, as amended from
     time to time.

          Holder - Any party hereto (other than the Company) and any holder of
     Registrable Securities who agrees in writing to be bound by the provisions
     of this Agreement.

          Person - Any individual, partnership, joint venture, limited liability
     company, corporation, trust, unincorporated organization or government or
     any department or agency thereof.

          Registrable Securities - Any Common Stock issued or issuable to the
     Partnership and any Common Stock which may be issued or distributed in
     respect of such Common Stock by way of stock dividend or stock split or
     other distribution, recapitalization or reclassification.  As to any
     particular Registrable Securities, once issued such Securities shall cease
     to be Registrable Securities when (i) a registration statement with respect
     to the sale of such Securities shall have become effective under the
     Securities Act and such Securities shall have been disposed of in
     accordance with such registration statement, (ii) they shall have been
     distributed to the public pursuant to Rule 144 or 144A (or any successor
     provisions) under the Securities Act, (iii) they shall have been otherwise
     transferred, new certificates for them not bearing a legend restricting
     further transfer shall have been delivered by the Company and subsequent
     disposition of them shall not require registration or qualification of them
     under the Securities Act or any state securities or blue sky law then in
     force, or (iv) the Partnership shall have delivered the notice set forth in
     Section 8(c).

          Registration Expenses - Any and all expenses incident to performance
     of or compliance with this Agreement, including, without limitation, (i)
     all SEC and stock exchange or National Association of Securities Dealers,
     Inc. registration and filing
<PAGE>
 
     fees, (ii) all fees and expenses of complying with securities or blue sky
     laws (including fees and disbursements of counsel for the underwriters in
     connection with blue sky qualifications of the Registrable Securities),
     (iii) all printing, messenger and delivery expenses, (iv) all fees and
     expenses incurred in connection with the listing of the Registrable
     Securities on any securities exchange pursuant to clause (viii) of Section
     5, (v) the fees and disbursements of counsel for the Company and of its
     independent public accountants, including the expenses of any special
     audits and/or "cold comfort" letters required by or incident to such
     performance and compliance, (vi) the reasonable fees and disbursements of
     one counsel selected by the Holders of a majority of the Registrable
     Securities being registered to represent all Holders of the Registrable
     Securities being registered in connection with each such registration, and
     (vii) any fees and disbursements of underwriters customarily paid by the
     issuers or sellers of securities, including liability insurance if the
     Company so desires or if the underwriters so require, and the reasonable
     fees and expenses of any special experts retained in connection with the
     requested registration, but excluding underwriting discounts and
     commissions and transfer taxes, if any.

          Securities Act - The Securities Act of 1933, as amended from time to
     time.

          SEC - The Securities and Exchange Commission or any other federal
     agency at the time administering the Securities Act or the Exchange Act.

          3.      Incidental Registrations.
                  ------------------------ 

          (a)     Right to Include Registrable Securities.  If the Company at 
                  ---------------------------------------  
any time after the date hereof proposes to register its Common Stock under the
Securities Act (other than a registration on Form S-4 or S-8, or any successor
or other forms promulgated for similar purposes), whether or not for sale for
its own account, pursuant to a registration statement on which it is permissible
to register Registrable Securities for sale to the public under the Securities
Act, it will each such time give prompt written notice to all Holders of
Registrable Securities of its intention to do so and of such Holders' rights
under this Section 3.  Upon the written request of any such Holder made within
15 days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such Holder), the Company
will use its best efforts to effect the registration under the Securities Act of
all Registrable Securities which the Company has been so requested to register
by the Holders thereof; provided, that (i) if, at any time after giving written
notice of its intention to register any securities and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to proceed with the proposed
registration of the securities to be sold by it, the Company may, at its
election, give written notice of such determination to each Holder of
Registrable Securities and, thereupon, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay the Registration Expenses in connection
therewith), and (ii) if such registration involves an underwritten offering, all
Holders of Registrable Securities requesting to be included in the Company's
registration must sell their Registrable Securities to the underwriters selected
by the Company on the same terms and conditions as

                                       2
<PAGE>
 
apply to the Company, with such differences, including any with respect to
indemnification and liability insurance, as may be customary or appropriate in
combined primary and secondary offerings.  If a registration requested pursuant
to this Section 3(a) involves an underwritten public offering, any Holder of
Registrable Securities requesting to be included in such registration may elect,
in writing prior to the effective date of the registration statement filed in
connection with such registration, not to register such securities in connection
with such registration.

          (b)     Expenses.  The Company will pay all Registration Expenses in
                  --------                                                    
connection with each registration of Registrable Securities requested pursuant
to this Section 3.

          (c)     Priority in Incidental Registrations.  If a registration 
                  ------------------------------------                     
pursuant to this Section 3 involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the amount of
securities requested to be included in such registration exceeds the amount
which can be sold in such offering, so as to be likely to have an adverse effect
on such offering as contemplated by the Company (including the price at which
the Company proposes to sell such securities), then the Company will include in
such registration (i) first, 100% of the securities the Company or the person
initiating the registration statement proposes to sell, (ii) second, to the
extent of the amount of securities requested to be included in such registration
which, in the opinion of such managing underwriter, can be sold without having
the adverse effect referred to above, the amount of securities which the persons
have requested to be included in such registration, such amount to be allocated
pro rata among all persons requesting to have Common Stock included in the
registration statement on the basis of the relative number of shares of Common
Stock then held by each such person, provided, that any Common Stock thereby
allocated to any such person that exceeds such person's request will be
reallocated among the remaining requesting persons in like manner.

          4.      Registration on Request.
                  ----------------------- 

          (a)     Request by Holders.  Upon the written request of any Holder or
                  ------------------                                            
Holders requesting that the Company effect the registration under the Securities
Act of all or part of such Holder's or Holders' Registrable Securities and
specifying the intended method of disposition thereof, the Company will promptly
give written notice of such requested registration to all other Holders of
Registrable Securities, and thereupon will, as expeditiously as possible, use
its best efforts to effect the registration under the Securities Act of:

          (i)     the Registrable Securities which the Company has been so 
     requested to register by such Holder or Holders; and

          (ii)    all other Registrable Securities which the Company has been
     requested to register by any other Holder thereof by written request given
     to the Company within 15 days after the giving of such written notice by
     the Company (which request shall specify the intended method of disposition
     of such Registrable

                                       3
<PAGE>
 
     Securities), so as to permit the disposition (in accordance with the
     intended method thereof as aforesaid) of the Registrable Securities so to
     be registered.

          (b)     Registration Statement Form.  If any registration requested
                  ---------------------------                                
pursuant to this Section 4 which is proposed by the Company to be effected by
the filing of a registration statement on Form S-3 (or any successor or similar
short-form registration statement) shall be in connection with an underwritten
public offering, and if the managing underwriter shall advise the Company in
writing that, in its opinion, the use of another form of registration statement
is of material importance to the success of such proposed offering, then such
registration shall be effected on such other form.

          (c)     Expenses.  The Company will pay all Registration Expenses in
                  --------                                                    
connection with the first six registrations of Registrable Securities pursuant
to this Section 4 upon the written request of any of the Holders.  All expenses
for any subsequent registrations of Registrable Securities pursuant to this
Section 4 shall be paid pro rata by the Company and all other Persons (including
the Holders) participating in such registration on the basis of the relative
number of shares of Common Stock of each such Person included in such
registration.

          (d)     Effective Registration Statement.  A registration requested
                  --------------------------------                           
pursuant to this Section 4 will not be deemed to have been effected unless it
has become effective; provided, that if, within 180 days after it has become
effective, the offering of Registrable Securities pursuant to such registration
is interfered with by any stop order, injunction or other order or requirement
of the SEC or other governmental agency or court, such registration will be
deemed not to have been effected.

          (e)     Selection of Underwriters.  If a requested registration 
                  -------------------------      
pursuant to this Section 4 involves an underwritten offering, the Company shall
have the right to select the investment banker or bankers and managers to
administer the offering; provided, however, that such investment banker or
bankers and managers shall be satisfactory to Holders of a majority of the
Registrable Securities which are held by Holders and which the Company has been
requested to register.

          (f)     Priority in Requested Registrations.  If a requested 
                  -----------------------------------    
registration pursuant to this Section 4 involves an underwritten offering and
the managing underwriter advises the Company in writing that, in its opinion,
the number of securities requested to be included in such registration
(including securities of the Company which are not Registrable Securities)
exceeds the number which can be sold in such offering without a significant
adverse effect on the price, timing or distribution of the securities offered,
the Company will include in such registration only the Registrable Securities
requested to be included in such registration. In the event that the number of
Registrable Securities requested to be included in such registration exceeds the
number which, in the opinion of such managing underwriter, can be sold without a
significant adverse effect on the price, timing or distribution of the
securities offered, the number of such Registrable Securities to be included in
such registration shall be allocated pro rata among all requesting Holders on
the basis of the relative number of shares of Registrable Securities then held
by each such

                                       4
<PAGE>
 
Holder (provided that any shares thereby allocated to any such Holder that
exceed such Holder's request shall be reallocated among the remaining requesting
Holders in like manner).  In the event that the number of Registrable Securities
requested to be included in such registration is less than the number which, in
the opinion of the managing underwriter, can be sold without a significant
adverse effect on the price, timing or distribution of the securities offered,
the Company may include in such registration the securities the Company proposes
to sell up to the number of securities that, in the opinion of the underwriter,
can be sold without a significant adverse effect on the price, timing or
distribution of the securities offered.

          (g)     Additional Rights.  If the Company at any time grants to any 
                  -----------------                                        
other holders of Common Stock any rights to request the Company to effect the
registration under the Securities Act of any such shares of Common Stock on
terms more favorable to such holders than the terms set forth in this Section 4,
the terms of this Section 4 shall be deemed amended or supplemented to the
extent necessary to provide the Holders such more favorable rights and benefits.

          5.      Registration Procedures.  If and whenever the Company is
                  -----------------------                                 
required to use its best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this Agreement,
the Company will, as expeditiously as possible:

          (i)     prepare and, in any event within 120 days after the end of the
     period within which a request for registration may be given to the Company,
     file with the SEC a registration statement with respect to such Registrable
     Securities and use its best efforts to cause such registration statement to
     become effective; provided, however, that the Company may discontinue any
     registration of its securities which is being effected pursuant to Section
     3 at any time prior to the effective date of the registration statement
     relating thereto;

          (ii)    prepare and file with the SEC such amendments and supplements 
     to such registration statement and the prospectus used in connection
     therewith as may be necessary to keep such registration statement effective
     for a period not in excess of 180 days and to comply with the provisions of
     the Securities Act with respect to the disposition of all securities
     covered by such registration statement during such period in accordance
     with the intended methods of disposition by the seller or sellers thereof
     set forth in such registration statement; provided, that before filing a
     registration statement or prospectus, or any amendments or supplements
     thereto, the Company will furnish to one counsel selected by the Holders of
     a majority of the Registrable Securities covered by such registration
     statement to represent all Holders of Registrable Securities covered by
     such registration statement, copies of all documents proposed to be filed,
     which documents will be subject to the review of such counsel;

                                       5
<PAGE>
 
          (iii)   furnish to each seller of such Registrable Securities such
     number of copies of such registration statement and of each amendment and
     supplement thereto (in each case including all exhibits), such number of
     copies of the prospectus included in such registration statement (including
     each preliminary prospectus and summary prospectus), in conformity with the
     requirements of the Securities Act, and such other documents as such seller
     may reasonably request in order to facilitate the disposition of the
     Registrable Securities by such seller;

          (iv)    use its best efforts to register or qualify such Registrable
     Securities covered by such registration statement under such other
     securities or blue sky laws of such jurisdictions as each seller shall
     reasonably request, and do any and all other acts and things which may be
     reasonably necessary or advisable to enable such seller to consummate the
     disposition in such jurisdictions of the Registrable Securities owned by
     such seller, except that the Company shall not for any such purpose be
     required to qualify generally to do business as a foreign corporation in
     any jurisdiction where, but for the requirements of this clause (iv), it
     would not be obligated to be so qualified, to subject itself to taxation in
     any such jurisdiction, or to consent to general service of process in any
     such jurisdiction;

          (v)     use its best efforts to cause such Registrable Securities 
     covered by such registration statement to be registered with or approved by
     such other governmental agencies or authorities as may be necessary to
     enable the seller or sellers thereof to consummate the disposition of such
     Registrable Securities;

          (vi)    notify each seller of any such Registrable Securities covered 
     by such registration statement, at any time when a prospectus relating
     thereto is required to be delivered under the Securities Act within the
     appropriate period mentioned in clause (ii) of this Section 5, of the
     Company's becoming aware that the prospectus included in such registration
     statement, as then in effect, includes an untrue statement of a material
     fact or omits to state a material fact required to be stated therein or
     necessary to make the statements therein not misleading in the light of the
     circumstances then existing, and at the request of any such seller, prepare
     and furnish to such seller a reasonable number of copies of an amended or
     supplemented prospectus as may be necessary so that, as thereafter
     delivered to the purchasers of such Registrable Securities, such prospectus
     shall not include an untrue statement of a material fact or omit to state a
     material fact required to be stated therein or necessary to make the
     statements therein not misleading in the light of the circumstances then
     existing;

          (vii)   otherwise use its best efforts to comply with all applicable
     rules and regulations of the SEC and make available to its security
     holders, as soon as reasonably practicable (but not more than eighteen
     months) after the effective date of the registration statement, an earnings
     statement which shall satisfy the provisions of Section 11(a) of the
     Securities Act and the rules and regulations promulgated thereunder;

                                       6
<PAGE>
 
          (viii)   use its best efforts to list such Registrable Securities on
     any securities exchange on which the Common Stock is then listed, if such
     Registrable Securities are not already so listed and if such listing is
     then permitted under the rules of such exchange, and to provide a transfer
     agent and registrar for such Registrable Securities covered by such
     registration statement not later than the effective date of such
     registration statement;

          (ix)    enter into such customary agreements (including an 
     underwriting agreement in customary form) and take such other actions as
     sellers of a majority of such Registrable Securities or the underwriters,
     if any, reasonably request in order to expedite or facilitate the
     disposition of such Registrable Securities;

          (x)     obtain a "cold comfort" letter or letters from the Company's
     independent public accountants in customary form and covering matters of
     the type customarily covered by "cold comfort" letters as the seller or
     sellers of a majority of such Registrable Securities shall reasonably
     request; and

          (xi)    make available for inspection by any seller of such 
     Registrable Securities covered by such registration statement, by any
     underwriter participating in any disposition to be effected pursuant to
     such registration statement and by any attorney, accountant or other agent
     retained by any such seller or any such underwriter, all pertinent
     financial and other records, pertinent corporate documents and properties
     of the Company, and cause all of the Company's officers, directors and
     employees to supply all information reasonably requested by any such
     seller, underwriter, attorney, accountant or agent in connection with such
     registration statement.

          The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company with such
information regarding such seller and pertinent to the disclosure requirements
relating to the registration and the distribution of such securities as the
Company may from time to time reasonably request in writing.

          Each Holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
clause (vi) of this Section 5, such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by clause (vi) of this
Section 5, and, if so directed by the Company, such Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.  In the event the
Company shall give any such notice, the period mentioned in clause (ii) of this
Section 5 shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to clause (vi) of this
Section 5 and including the date when each seller of Registrable

                                       7
<PAGE>
 
Securities covered by such registration statement shall have received the copies
of the supplemented or amended prospectus contemplated by clause (vi) of this
Section 5.

          6.      Indemnification.
                  --------------- 

          (a)     Indemnification by the Company.  In the event of any 
                  ------------------------------    
registration of any securities of the Company under the Securities Act pursuant
to Section 3 or 4, the Company will, and it hereby does, indemnify and hold
harmless, to the extent permitted by law, the seller of any Registrable
Securities covered by such registration statement, each affiliate of such seller
and their respective directors and officers or general and limited partners (and
the directors, officers, affiliates and controlling Persons thereof), each other
Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such seller or any such
underwriter within the meaning of the Securities Act (collectively, the
"Indemnified Parties"), against any and all losses, claims, damages or
liabilities, joint or several, and expenses to which such Indemnified Party may
become subject under the Securities Act, common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof, whether or not such Indemnified Party is a party thereto) arise
out of or are based upon (a) any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary, final or
summary prospectus contained therein, or any amendment or supplement thereto, or
(b) any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing, and the Company will reimburse
such Indemnified Party for any legal or any other expenses reasonably incurred
by it in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, that the Company shall not be liable
to any Indemnified Party in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement or amendment
or supplement thereto or in any such preliminary, final or summary prospectus in
reliance upon and in conformity with written information with respect to such
seller furnished to the Company by such seller for use in the preparation
thereof; and provided, further, that the Company will not be liable to any
Person who participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within the
meaning of the Securities Act, under the indemnity agreement in this Section
6(a) with respect to any preliminary prospectus or the final prospectus or the
final prospectus as amended or supplemented, as the case may be, to the extent
that any such loss, claim, damage or liability of such underwriter or
controlling Person results from the fact that such underwriter sold Registrable
Securities to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the final prospectus (including any
documents incorporated by reference therein) or of the final prospectus as then
amended or supplemented (including any documents incorporated by reference
therein), whichever is most recent, if the Company has previously furnished
copies thereof to such underwriter. Such indemnity shall remain in full force
and

                                       8
<PAGE>
 
effect regardless of any investigation made by or on behalf of such seller or
any Indemnified Party and shall survive the transfer of such securities by such
seller.

          (b)     Indemnification by the Seller.  The Company may require, as a
                  -----------------------------                                
condition to including any Registrable Securities in any registration statement
filed in accordance with Section 5 herein, that the Company shall have received
an undertaking reasonably satisfactory to it from the prospective seller of such
Registrable Securities or any underwriter to indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 6) the Company and all other prospective sellers or any underwriter, as
the case may be, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary,
final or summary prospectus contained therein, or any amendment or supplement,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information with respect to such
seller or underwriter furnished to the Company by such seller or underwriter for
use in the preparation of such registration statement, preliminary, final or
summary prospectus or amendment or supplement, or a document incorporated by
reference into any of the foregoing.  Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Company
or any of the prospective sellers, or any of their respective affiliates,
directors, officers or controlling Persons and shall survive the transfer of
such securities by such seller.

          (c)     Notices of Claims, Etc.  Promptly after receipt by an 
                  ----------------------                                
Indemnified Party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 6, such Indemnified Party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided, that the failure of the
Indemnified Party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 6, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an Indemnified Party, unless in such Indemnified Party's reasonable
judgment a conflict of interest between such Indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such Indemnified Party, and after notice from
the indemnifying party to such Indemnified Party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
Indemnified Party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party will consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof, the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation.

          (d)     Contribution.  If for any reason the indemnification provided 
                  ------------                                                  
for in the preceding clauses (a) and (b) is unavailable to an indemnified party
or insufficient to

                                       9
<PAGE>
 
hold it harmless as contemplated by the preceding clauses (a) and (b), then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by the indemnified party and the indemnifying party, but also the relative fault
of the indemnified party and the indemnifying party, as well as any other
relevant equitable considerations, provided that no selling Holder shall be
required to contribute in an amount greater than the dollar amount of the
proceeds received by such selling Holder with respect to the sale of any
securities.  No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

          (e)     Other Indemnification.  Indemnification similar to that 
                  ---------------------                                   
specified in the preceding subdivisions of this Section 6 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation or governmental
authority other than the Securities Act.

          (f)     Non-Exclusivity.  The obligations of the parties under this
                  ---------------                                            
Section 6 shall be in addition to any liability which any party may otherwise
have to any other party.

          7.      Rule 144.  The Company covenants that it will file the reports
                  --------                                                      
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any Holder of
Registrable Securities, make publicly available such information), and it will
take such further action as any Holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell shares of Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (i) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (ii) any
similar rule or regulation hereafter adopted by the SEC.  Upon the request of
any Holder of Registrable Securities, the Company will deliver to such Holder a
written statement as to whether it has complied with such requirements.
Notwithstanding anything contained in this Section 7, the Company may deregister
under Section 12 of the Exchange Act if it then is permitted to do so pursuant
to the Exchange Act and the rules and regulations thereunder.

          8.      Miscellaneous.
                  ------------- 

          (a)     Holdback Agreement.  If any such registration shall be in
                  ------------------                                       
connection with an underwritten public offering, each Holder of Registrable
Securities agrees not to effect any public sale or distribution, including any
sale pursuant to Rule 144 under the Securities Act, of any equity securities of
the Company, or of any security convertible into or exchangeable or exercisable
for any equity security of the Company (in each case, other than as part of such
underwritten public offering), within 7 days before or 180 days (or such lesser
period as the managing underwriters may permit) after the

                                       10
<PAGE>
 
effective date of such registration, and the Company hereby also so agrees and
agrees to cause each other holder of any equity security, or of any security
convertible into or exchangeable or exercisable for any equity security, of the
Company purchased from the Company (at any time other than in a public offering)
to so agree.

          (b)     Amendments and Waivers.  This Agreement may be amended and the
                  ----------------------                                        
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the Holders of
a majority of the Registrable Securities then outstanding.  Each Holder of any
Registrable Securities at the time or thereafter outstanding shall be bound by
any consent authorized by this Section 8(b), whether or not such Registrable
Securities shall have been marked to indicate such consent.

          (c)     Successors, Assigns and Transferees.  This Agreement shall be
                  -----------------------------------                          
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.  In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of the parties hereto other than the Company shall also be for the
benefit of and enforceable by any subsequent Holder of any Registrable
Securities, subject to the provisions contained herein; provided that such
subsequent Holder shall not be entitled to such benefits if the Partnership, in
connection with a transfer of Registrable Securities, provides the Company with
written notice that such transferred Registrable Securities are no longer deemed
to be Registrable Securities.

          (d)     Notices.  All notices and other communications provided for
                  -------                                                    
hereunder shall be in writing and shall be sent by first class mail, telecopier
or hand delivery:

          (i)     if to the Company, to:

                  Red Lion Hotels, Inc.
                  4001 Main Street
                  Vancouver, WA 98663
                  Attention:  President
                  Telecopy No.  (360) 693-1739


                  with a copy to:

                  Latham & Watkins
                  505 Montgomery Street, Suite 1900
                  San Francisco, California  94111
                  Attention:  Peter F. Kerman, Esq.
                  Telecopy No. (415) 395-8095

                                       11
<PAGE>
 
          (ii)    if to the Partnership, to:

                  RLA-GP, Inc.
                  4001 Main Street
                  Vancouver, WA 98663
                  Attention:  President
                  Telecopy No. (360) 693-1739

                  with a copy to:

                  Latham & Watkins
                  505 Montgomery Street, Suite 1900
                  San Francisco, California  94111
                  Attention:  Peter F. Kerman, Esq.
                  Telecopy No. (415) 395-8095

          (iii)   if to any other Holder of Registrable Securities, to the
                  address of such other Holder as shown in the books and records
                  of the Company, or to such other address as any of the above
                  shall have designated in writing to all of the other above.

All such notices and communications shall be deemed to have been given or made
(1) when delivered by hand, (2) five business days after being deposited in the
mail, postage prepaid, or (3) when telecopied, receipt acknowledged.

          (e)     Descriptive Headings.  The headings in this Agreement are for
                  --------------------                                         
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein.

          (f)     Severability.  In the event that any one or more of the
                  ------------                                           
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the remaining provisions, paragraphs,
words, clauses, phrases or sentences hereof shall not be in any way impaired, it
being intended that all rights, powers and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.

          (g)     Counterparts.  This Agreement may be executed in two or more
                  ------------                                                
counterparts, and by different parties on separate counterparts, each of which
shall be deemed an original, but all such counterparts shall together constitute
one and the same instrument, and it shall not be necessary in making proof of
this Agreement to produce or account for more than one such counterpart.

                                       12
<PAGE>
 
          (h)     Governing Law.  This Agreement shall be governed by and 
                  -------------        
construed and enforced in accordance with the laws of the State of New York
applicable to contracts made and to be performed therein. The parties to this
Agreement hereby agree to submit to the jurisdiction of the courts of the State
of New York in any action or proceeding arising out of or relating to this
Agreement.

          (i)     Specific Performance.  The parties hereto acknowledge and 
                  --------------------                                      
agree that irreparable damage would occur in the event that any of the 
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, it is agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court of competent jurisdiction in the United States or
any state thereof, in addition to any other remedy to which they may be entitled
at law or equity.

                                       13
<PAGE>
 
          IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be executed on its behalf as of the date
first written above.


                      RED LION HOTELS, INC.


                      By:  /s/ David J. Johnson
                           -----------------------------------------------------
                           David J. Johnson
                           President and Chief Executive Officer



                      RED LION, A CALIFORNIA LIMITED PARTNERSHIP

                      By:  RLA-GP, Inc.
                           Its General Partner


                      By:  /s/ David J. Johnson
                           -----------------------------------------------------
                           David J. Johnson
                           Executive Vice President

                                       14
<PAGE>
 
                                                                  EXHIBIT 1.1(E)

                               SERVICE AGREEMENT

          This Agreement is made and entered into as of August 1, 1995 by and
among Red Lion Hotels, Inc., a Delaware corporation ("RLI"), Red Lion, a
California Limited Partnership ("Historical Red Lion") and the undersigned
affiliates of Historical Red Lion (the "Affiliates" and together with Historical
Red Lion, "Red Lion").

                                    RECITALS
                                    --------

          WHEREAS, pursuant to the Contribution Agreement of even date herewith
by and between Historical Red Lion and RLI, Historical Red Lion will retain
certain interests in the hotels described in Exhibit A hereto (the "Retained
Hotels");

          WHEREAS, pursuant to the RLH Partnership, L.P. Contribution Agreement
of even date herewith between Historical Red Lion and RLH Partnership, L.P., a
Delaware limited partnership ("Newpart"), Historical Red Lion will transfer to
Newpart certain interests in the Retained Hotels;

          WHEREAS, Red Lion desires that RLI provide certain services to Red
Lion with respect to the Retained Hotels and RLI desires to provide such
services upon the terms set forth below; and

          WHEREAS, Historical Red Lion and the Affiliates desire to provide for
the manner in which payment for such services are allocated among themselves.

                                   AGREEMENT
                                   ---------

          NOW, THEREFORE, in acknowledgement of the foregoing recitals and in
consideration of the mutual agreements expressed herein and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows.

          1.   General Support Services.
               ------------------------ 

          Subject to the terms of this Agreement, from and after the date
hereof, RLI shall provide to Red Lion administrative, accounting, tax,
budgeting, computer systems, legal, environmental and certain other support
services relating to the Retained Hotels and Red Lion consistent with the
standards prevailing in and with the same degree of care as the hotels owned or
managed by RLI and certain corporation and partnership administrative services
relating to maintenance, tax reporting and accounting for Red Lion
(collectively, the "Support Services").

                                       1
<PAGE>
 
          2.   Fees.
               ---- 

          From and after the date hereof, as payment for the Support Services,
RLI shall receive an annual fee (the "Fee").  For the calendar year 1995, the
Fee shall equal Three Hundred Fifty Thousand Dollars ($350,000) and be payable
in two equal payments on or before the last business day of September and
December 1995.  Commencing in calendar year 1996 and continuing for each
calendar year during the term of this Agreement, the Fee shall equal the Fee for
the immediately preceding calendar year plus three percent (3%) of such Fee
payable in four equal payments on or before the last business day of each March,
June, September and December.  Historical Red Lion shall have the absolute right
to allocate among itself and the Affiliates the payment of fees due under this
Agreement and the Affiliates hereby agree to any such allocation.
Notwithstanding any such allocation or anything herein to the contrary,
Historical Red Lion and the Affiliates shall be jointly and severally liable for
the payment of the fees due under this Agreement.

          3.   Termination.
               ----------- 

          This Agreement shall remain in full force and effect until (i) the
parties hereto agree to terminate this Agreement or (i) 30 days after prior
written notice has been received by RLI from Red Lion of its intent to terminate
this Agreement.

          4.   Successors and Assigns.
               ---------------------- 

          This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties.

          5.  Amendment.
              --------- 

          This Agreement may be amended only by a written agreement signed by
the parties; provided, however, that an affiliate of Historical Red Lion may
hereafter become a party to this Agreement by executing a counterpart of this
Agreement and sending the same to RLI at its executive offices, whereupon such
affiliate will be deemed an Affiliate under this Agreement and, accordingly,
will be bound by and entitled to receive the benefits of this Agreement.

          6.  Governing Law.
              ------------- 

          This Agreement shall be governed by and construed in accordance with
the laws of the State of Washington.

          7.   Specific Performance.
               -------------------- 

          RLI and Red Lion agree that monetary damages would not be adequate
compensation for any loss incurred by Red Lion by reason of a breach of the
provisions of

                                       2
<PAGE>
 
this Agreement by RLI.  Therefore, Red Lion shall be entitled to specific
performance of the provisions of this Agreement and RLI hereby waives the claim
or defense that there exists an adequate remedy at law to redress the
nonperformance or other breach of this Agreement.

          8.  Agreement to Perform Necessary Acts.
              ----------------------------------- 

          Each party agrees to perform any further acts and to execute and
deliver any documents that may be reasonably necessary to carry out the
provisions of this Agreement.

          9.   Conditions to Transfer.
               ---------------------- 

          If RLI agrees to provide the services described herein to any
transferee or assignee of any or all of the Retained Hotels (other than an
affiliate of Historical Red Lion as to which RLI shall have no right to consent)
such transferee or assignee must, as a condition to such transfer or assignment,
execute such documents as may be requested by RLI in order to confirm the
agreement of such assignee or transferee to be bound by all of the terms and
provisions of this Agreement as though an original signatory hereto and to
assume all obligations of the transferor or assignor hereof.

          10.  Invalid Provision.
               ----------------- 

          The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions, and this Agreement shall be
construed in all respects as if the invalid or unenforceable provision were
omitted.

          11.  No Waiver of Breach.
               ------------------- 

          No failure by Red Lion to insist upon the strict performance of any
covenant, agreement, term or provision of this Agreement, or to exercise any
right or remedy consequent upon a breach thereof, shall constitute a waiver of
any such breach or subsequent breach of such covenant, agreement, term or
provision.  No waiver of any breach shall affect or alter this Agreement and
this Agreement shall remain in full force and effect.

          12.  Entire Agreement.
               ---------------- 

          This instrument evidences the entire agreement of the parties with
respect to the matters covered herein, and supersedes all prior oral or written
agreements or other understandings.

          13.  Counterparts.
               ------------ 

          This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

                                       3
<PAGE>
 
          IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

"RLI"                    Red Lion Hotels, Inc., a Delaware corporation


                           __________________________ 
                         By:  Beth A. Ugoretz
                         Its:   Senior Vice President


"Historical Red Lion"    Red Lion, a California Limited Partnership

                         By:  RLA-GP, Inc., a Delaware corporation
                              Its:  General Partner


                                _____________________________
                              By:   David J. Johnson
                              Its:   Executive Vice President


"Affiliate"              Red Lion G.P., Inc., a Delaware corporation


                           ______________________________           
                         By:   Beth A. Ugoretz
                         Its:   Vice President


"Affiliate"              RLH Partnership, L.P., a Delaware limited partnership

                         By:  Red Lion G.P., Inc., a Delaware corporation
                              Its:  General Partner


                                _____________________________
                              By:   Beth A. Ugoretz
                              Its:   Vice President

                                       4
<PAGE>
 
                          EXHIBIT A:  RETAINED HOTELS


Red Lion's Sacramento Inn
1401 Arden Way
Sacramento, California 95815

Red Lion Hotel, Sonoma County
One Red Lion Hotel Drive
Rohnert Park, California 94928

Red Lion Hotel
7450 Hazard Center Drive
San Diego, California 92108

Red Lion Inn
501 Camino Del Rio
Durango, Colorado 81301

Red Lion Hotel, Boise Downtowner
1800 Fairview
Boise, Idaho 83702

Red Lion Inn
700 West Broadway
Missoula, Montana 59802

Red Lion Inn
400 Industry Street
Astoria, Oregon 97103

Red Lion Inn/North
1415 N.E. Third Street
Bend, Oregon 97701

Red Lion Inn
1313 North Bayshore Drive
Coos Bay, Oregon 97420

Red Lion Inn
205 Coburg Road
Eugene, Oregon 97401

                                      A-1
<PAGE>
 
Red Lion Inn
200 North Riverside
Medford, Oregon 97501

Red Lion Inn
304 S.E. Nye Avenue
Pendleton, Oregon 97801

Red Lion Hotel Salt Lake
255 South West Temple
Salt Lake City, Utah 84101

Red Lion Inn
510 Kelso Drive
Kelso, Washington 98626

Red Lion Hotel, Seattle Airport
18740 Pacific Highway South
Seattle, Washington 98188

Red Lion Inn At The Quay
100 Columbia Street
Vancouver, Washington 98660

Red Lion Inn
1225 North Wenatchee Avenue
Wenatchee, Washington 98801

                                      A-2
<PAGE>
                                                              Exhibit 3.2 (a)(i)
 
                 [LETTERHEAD OF LATHAM & WATKINS APPEARS HERE]


                                 July 31, 1995



First American Title Insurance Company
114 E. Fifth Street
Santa Ana, California 92701

Attention:  Mr. Thomas Zowarka

          Re:  Red Lion Hotels, Inc.;
               RLH Partnership, L.P.
               Escrow No. N954072-Z
               ----------------------

Ladies and Gentlemen:

          This firm represents Red Lion, a California Limited Partnership ("Red
Lion"), Red Lion Hotels, Inc., a newly formed Delaware corporation ("RLI"), and
RLH Partnership, L.P., a newly formed Delaware limited partnership ("Newpart"),
in connection with an overall corporate restructuring of Red Lion, the
transactions associated with which (collectively, the "Restructuring") are more
fully described in that certain Funds Transfer Memorandum regarding the
Corporate Restructuring of Red Lion and Affiliates attached hereto as Exhibit A
("Funds Transfer Memorandum").  The Closing of the Restructuring ("Closing")
shall take place on August 1, 1995 beginning at 6 a.m. P.D.T. and shall be
completed specifically in accordance with the Funds Transfer Memorandum.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given them in the Funds Transfer Memorandum.

     A.   General
          -------

          As part of the Restructuring and pursuant to two separate Contribution
Agreements dated as of July 31, 1995, each by and between Red Lion, as
transferor and Newpart and RLI, respectively, as transferees, certain real
property, among other matters, will be transferred to each of Newpart and RLI,
all as
<PAGE>
 
First American Title Insurance Company
July 31, 1995
Page 2

more particularly described in said Contribution Agreements.  Each such
Contribution Agreement shall be referred to herein as the "Newpart Contribution
Agreement" or the "RLI Contribution Agreement," respectively.

          In addition, as part of the Restructuring, each of RLI and Newpart
will borrow funds pursuant to two separate credit agreements each dated as of
July 31, 1995 and each by and among Various Lending Institutions, Credit
Lyonnais New York Branch, as Administrative Agent, and Newpart and RLI
respectively.  Each such Credit Agreement shall be referred to herein as the
"Newpart Credit Agreement" or the "RLI Credit Agreement," respectively.

          In connection with the Restructuring, Red Lion, RLI and Newpart have
requested, and you have established, an "Escrow," known as Escrow Number
N954072-Z, with First American Title Insurance Company ("FATCO"), the monetary
matters of which shall be handled through an Escrow Account, established in the
name of FATCO and administrated by Tom Zowarka ("Escrow Agent"), with funds to
be held at Chase Manhattan Bank, N.A., One Chase Manhattan Plaza, New York, New
York 10081, account no. 910-2-744803 ("Escrow Account").

          This letter shall constitute the Escrow Instructions from each of Red
Lion, RLI and Newpart in connection with the above-described Escrow.  You should
be receiving separate instructions from representatives of each of the
Administrative Agent, Credit Lyonnais, for each of the lending groups under each
of the Newpart Credit Agreement and RLI Credit Agreement ("New Lenders"), as
well as instructions from certain existing lenders ("Existing Lenders") to Red
Lion who anticipate repayment of certain existing indebtedness.  Additionally
you may receive certain express instructions from or on behalf of Red Lion
Properties, Inc., a Delaware corporation ("RLP"), and/or Glendale Red Lion
Hotel, a California limited partnership (collectively the "Other Red Lion
Instructions") and/or The Yasuda Trust & Banking Co., Ltd., Los Angeles Agency
("Yasuda Trust").  You have agreed to comply with each and all of said
instructions and to notify the undersigned immediately if any of said
instructions conflict with, or are inconsistent with, the transactions
contemplated herein, including without limitation your commitment to issue the
title policies described in paragraphs C.3 and D.3 and 4 herein, or in the
instructions received from any of the New Lenders, the Exchange Lenders or the
Existing Lenders.
<PAGE>
 
First American Title Insurance Company
July 31, 1995
Page 3



     B.   Exchange Properties.
          ------------------- 

          Red Lion and RLP have executed an Exchange Agreement dated as of July
27, 1995 ("Exchange Agreement").  Capitalized terms used in this Section B and
not otherwise defined herein shall have the meanings given them in the Exchange
Agreement.

          Pursuant to the Exchange Agreement, the Red Lion Property and the RLP
Property (as such terms are defined in the Exchange Agreement) shall be
transferred in a transaction qualifying as a tax-free exchange under Section
1031 of the Internal Revenue Code of 1986, as amended.  To effectuate the
transfers in connection with the tax-free exchange, you shall receive delivery
of all of the executed original documents listed on Schedule 1 to Exhibit B
(collectively, the "Exchange Properties Transfer Documents").

          Upon Closing, you are hereby authorized and directed to commence
immediately to record and/or file the Exchange Properties Transfer Documents in
the appropriate county recorder's offices, in the states as shown on the
documents, each in the exact order shown on Schedule 1 to Exhibit B.  Upon
Closing, you are authorized to deliver the originals of said documents
transferring the Red Lion Property to RLI and the originals of said documents
transferring the RLP Property to Red Lion in accordance with the Exchange
Agreement.  You are hereby advised that with respect to this exchange
transaction, Red Lion and RLP have jointly determined that all transfers are
exempt from documentary transfer taxes, if any, under the laws of the states
where the Red Lion Property and RLP Property are located.

     C.   Newpart (Retained Properties)
          -----------------------------

          1.   Newpart Contribution Agreement.
               ------------------------------ 

          Pursuant to the Newpart Contribution Agreement, the Retained
Properties (as defined in the Funds Transfer Memorandum and listed on Schedule
C1(a) hereto) shall be transferred, subject to certain existing indebtedness, to
Newpart.  To effectuate this transfer, you shall receive delivery of all of the
executed original documents listed on Schedule 1(b) to Exhibit C (collectively,
the "Retained Properties Transfer Documents").

          Upon Closing, you are hereby authorized and directed to commence
immediately to record and/or file the Retained Properties Transfer Documents in
the appropriate county recorder's offices, in the states as shown on the
documents, each
<PAGE>
 
First American Title Insurance Company
July 31, 1995
Page 4



in the exact order shown on Schedule 1 to Exhibit C.  Upon Closing, you are also
authorized to deliver the originals of said documents to Newpart in accordance
with the Newpart Contribution Agreement.  You are hereby advised that with
respect to this transaction the transferee and transferor have jointly
determined that all transfers are exempt from documentary transfer taxes in
California pursuant to Revenue and Taxation Code 11923(d) and you are hereby
instructed and authorized to add any information required to evidence said
exemption to the deeds and other transfer documents, if any such additional
information is so required.  You are also authorized to do likewise in any other
states which required analogous declarations with respect to any comparable
transfer tax exemptions.  With respect to the recordation of the grant deed for
the Durango, Colorado property, a transfer tax will be due as shown in the
documentation provided to you and you are hereby requested to advance payment of
said sum on behalf of Newpart at the time of recordation.  You are also hereby
requested to advance and pay on behalf of Newpart any and all recordation and/or
filing fees in connection with the Memorandum of Lease.

          2.   Newpart Credit Agreement.
               ------------------------ 

          Pursuant to the Newpart Credit Agreement you shall receive the
delivery of all of the executed original documents shown in the Lender's
Instructions (as hereinafter defined) and pertaining to the Retained Properties
(collectively, the "Retained Properties Security Documents") together with
recordation escrow instructions from White & Case, as counsel to the
Administrative Agent, a copy of which is attached hereto in Exhibit C (Schedule
2) ("Lender's Instructions").

          Upon Closing, you are hereby authorized and directed to commence
immediately to record and/or file the Retained Properties Security Documents in
the appropriate county recorders' offices, in the states (and/or secretary of
states' offices) as shown on the documents, each in the order shown in Lender's
Instructions, after recordation of the Retained Properties Transfer Documents,
              -----                                                           
including without limitation the Memorandum of Lease for each Retained Property.

          3.   Newpart Title Insurance Policies.
               -------------------------------- 

          Pursuant to the Newpart Contribution Agreement, certain owner's,
leasehold owner's, and related lender's title insurance policies are to be
issued in respect of the Retained Properties.  You, on behalf of FATCO,
representatives of Newpart and RLI, and representatives of Credit Lyonnais, as
Administrative Agent for
<PAGE>
 
First American Title Insurance Company
July 31, 1995
Page 5



the New Lenders, have previously agreed on markups of preliminary title reports
for the Retained Properties to serve as commitments for such title insurance
policies (the "RP Title Insurance Commitments").  The RP Title Insurance
Commitments are attached hereto as Schedule 3 to Exhibit C.

          Upon Closing, you are hereby authorized and directed to issue title
insurance policies to the insured parties, in the liability amounts, with the
agreed endorsements, subject only to the agreed title exceptions, and otherwise
in form and substance, in each case, as set forth in the RP Title Insurance
Commitments.

     D.   RLI (Transferred Properties)
          ----------------------------

          1.   RLI Contribution Agreement.
               -------------------------- 

          Pursuant to the RLI Contribution Agreement, the Transferred Properties
(as defined in the Funds Transfer Memorandum and listed on Schedule D1(a)
hereto) shall be transferred to RLI.  To effectuate this transfer, you shall
receive delivery of all of the executed original documents listed on Schedule 1
to Exhibit D (collectively, the "Transferred Properties Transfer Documents").

          Upon Closing, you are hereby authorized and directed to commence
immediately to record and/or file the Transferred Properties Transfer Documents
in the appropriate county recorders' offices, in the states as shown on the
documents, each in the exact order shown on Schedule 1 to Exhibit D.  Upon
Closing, you are also authorized to deliver the originals of said documents to
RLI in accordance with the RLI Contribution Agreement.  You are hereby advised
that with respect to this transaction the transferee and transferor have jointly
determined that such transfers are exempt from documentary transfer taxes in
California pursuant to Revenue and Taxation Code 11923(d) and you are hereby
instructed and authorized to add any information required to evidence said
exemption to the deeds and other transfer documents, if any such additional
information is so required.  You are also authorized to do likewise in any other
states which required analogous declarations with respect to any comparable
transfer tax exemptions.

          2.   RLI Credit Agreement.
               -------------------- 

          Pursuant to the RLI Credit Agreement you shall receive the delivery of
all of the executed original documents shown in the Lender's Instructions and
pertaining to the Transferred Properties (collectively, the "Transferred
Properties Security
<PAGE>
 
First American Title Insurance Company
July 31, 1995
Page 6


Documents") together with recordation/escrow instructions from White & Case, as
counsel to the Administrative Agent, a copy of which is attached hereto in
Exhibit D.

          Upon Closing, you are hereby authorized and directed to commence
immediately to record and/or file the Transferred Properties Security Documents
in the appropriate county recorders' offices, in the states (and/or secretary of
states' offices) as shown on the documents, each in the order shown in the
Lender's Instructions.

          3.   Title Policies.
               -------------- 

          Pursuant to the RLI Contribution Agreement, certain owner's, leasehold
owner's, and related lender's title insurance policies are to be issued in
respect of the Transferred Properties.  You, on behalf of FATCO, representatives
of RLI, and representatives of Credit Lyonnais, as Administrative Agent for the
New Lenders, have previously agreed on markups of preliminary title reports for
the Transferred Properties to serve as commitments for such title insurance
policies (the "TP Title Insurance Commitments").  The TP Title Insurance
Commitments are attached hereto as Schedule 3 to Exhibit D.

          Upon Closing, you are hereby authorized and directed to issue title
insurance policies to the insured parties, in the liability amounts, with the
agreed endorsements, subject only to the agreed title exceptions, and otherwise
in form and substance, in each case, as set forth in the TP Title Insurance
Commitments.

          4.   Loans to Joint Ventures/RLP.
               --------------------------- 

          In connection with the Restructuring, RLI is making certain loans to
some of the joint ventures, particularly, and RLP in which it will be an
investor (whether by assignment of its joint venture or partnership interest, or
as a shareholder.)  The documents evidencing this debt will be delivered outside
of escrow, but FATCO will be receiving the security documents shown on Schedule
4(a) to Exhibit D the ("Intercompany Loan Security Documents".)  Upon Closing,
you are hereby authorized and directed to commence immediately to record and/or
file the Intercompany Loan Security Documents in the appropriate county
recorders' offices, in the states as shown on the documents.  Upon Closing, you
are hereby authorized and directed to issue the title insurance policies to the
insured parties in the liability amounts, with the agreed endorsements, subject
only to the agreed title exceptions, and otherwise in form and substance, in
each
<PAGE>
 
First American Title Insurance Company
July 31, 1995
Page 7



case, as set forth in the Title Insurance Comments as shown on Schedule 4(b) to
Exhibit D.

     E.   Funds Flow/Closing
          ------------------

          With respect to monetary matters, you have established the Escrow
Account at Chase Manhattan Bank, N.A. which will contain the subaccounts
described in Section VI of the Funds Transfer Memorandum.  You shall receive
funds in the Escrow Account in accordance with the Funds Transfer Memorandum.
Prior to the Closing Date, you shall also have received the RP Demand Letters,
the TP Demand Letters and the Exchange Demands (each as defined in Article VII
of the Funds Flow Memorandum).  Upon receipt of the funds in the Escrow Account,
you shall confirm orally at the Closing that you are holding sufficient funds in
the Escrow Account to satisfy all of the requirements of all of the RP Demand
Letters, the TP Demand Letters, and the Exchange Demands as well as any and all
requirements described in the Other Red Lion Instructions.  You shall also
confirm orally that you are in a position to commit to insure in accordance with
the RP Title Insurance Commitments, the TP Title Insurance Commitments and the
JV Loan Title Commitments, and that you can commit to issue the Glendale
Endorsement (as defined in Section F hereof).  You shall be prepared to, and
immediately upon Closing, shall transfer, by federal fund wire transfers, the
amounts described in paragraph C7 (Schedule 4) and paragraph C17 (Schedule 6, 7
and 8) of Article VIII of the Funds Transfer Memorandum, to each of the RP
Lenders, TP Lenders, Exchange Lenders, and Lenders of the Specified Joint
Venture Debt, each pursuant to specific wire transfer instructions set forth in
the Schedules 4, 6, 7, and 8 respectively of the Funds Transfer Memorandum.
With respect to all funds deposited in and/or disbursed from the Escrow Account,
you shall follow exactly the instructions of Section C of Article IX of the
Funds Transfer Memorandum.

     F.   Glendale Red Lion Hotel.  With respect to certain property owned by
          -----------------------                                            
Glendale Red Lion Hotel, a California Limited Partnership, ("Glendale
Partnership"), the Glendale Partnership has entered into that certain consent
and waiver dated July 26, 1995 ("Glendale Consent") by and among the Glendale
Partnership, Red Lion, RLI and The Yasuda Trust.  The Glendale Consent calls for
certain documents to be delivered at the Closing as more specifically listed on
Exhibit F (collectively, the "Glendale Documents").  The Glendale Documents have
been, or will be, delivered to you on or before Closing.  You have reviewed the
Glendale Documents and at the Closing you will commit to issue to Yasuda Trust
the CLTA Endorsement No. 110.5 described in Section
<PAGE>
 
First American Title Insurance Company
July 31, 1995
Page 8



4.4 of the Third Loan Modification Agreement ("Glendale Endorsement").
Immediately after Closing you will deliver the Glendale Documents and the
Glendale Endorsement in accordance with and to the parties indicated on,
Schedule 2 to Exhibit H.

     G.   Accommodation Recordings
          ------------------------

          In addition to the Retained Properties Transfer Documents, the
Retained Properties Security Documents, the Transferred Properties Transfer
Documents, the Transferred Properties Security Documents, the Exchange
Documents, the Intercompany Loan Security Documents and the Glendale Documents,
there have been or will be delivered to you the original documents shown on
Exhibit G ("Accommodation Documents").  The Accommodation Documents are to be
recorded in the applicable location as specified on Exhibit G.

          Each of the undersigned understands and acknowledges that in
connection with the Accommodation Documents (i) FATCO is acting in the capacity
of messengers only, without consideration, and are not responsible for the
correctness of the form, content or execution of the Accommodation Documents and
that FATCO is hereby released of any and all liability in connection with same,
(ii) FATCO assumes no responsibility or liability for any inconvenience or loss
which might be sustained due to any delay in recordation of the Accommodation
Documents, (iii) there shall be no liability and/or responsibility for payment
of any consideration by FATCO to any party, as this service is performed as an
accommodation only, and (iv) "FATCO" shall include First American Title
Insurance Company and any of its subsidiary companies.

     H.   Post Closing
          ------------

          1.   Notification.
               ------------ 

               (a) Closing.  Upon the oral confirmation given at the Closing
                   -------
referred to in paragraph E hereof, you shall also call the individuals listed on
Schedule 1 to Exhibit H.

               (b) Recording.  Upon verification that the Retained Properties
                   ---------                                                 
Transfer Documents, Retained Properties Security Documents, the Transferred
Properties Transfer Documents, the Transferred Properties Security Documents,
the Exchange Documents, the Intercompany Loan Security Documents and the
Glendale Documents have been so recorded or filed, you shall immediately notify
those parties listed on Schedule 1 (Notification Instructions) to Exhibit H.
<PAGE>
 
First American Title Insurance Company
July 31, 1995
Page 9



          2.  Delivery of Documents.
              --------------------- 

          Within 30 days after Closing, originals and copies of the Title
Policies, Transfer Documents, Security Documents, Exchange Documents,
Intercompany Loan Security Documents, Glendale Documents and the Accommodation
Documents, each indicating recordation information and numbers where applicable
should be delivered to the parties as shown on Schedule 2 to Exhibit H.

     I.   Additional Instructions
          -----------------------

          1.   Failure to Close.
               ---------------- 

          If you are unable to comply with these instructions because the
Closing does not take place on or before August 1 at 5 p.m. P.D.T., then upon
the written demand of the undersigned or any authorized representative of Red
Lion, FATCO shall return all documents deposited with it to the party depositing
the same, and any and all funds then remaining in the Escrow Account shall be
immediately returned to the depositor of the same.

          2.   Investment of Funds.
               ------------------- 

          In the event any funds remain in the Escrow Account after 1 p.m.
(P.D.T.) on August 1, said funds shall be invested in accordance with the oral
instructions of Mr. Narayan, which instructions shall be confirmed in writing
within 2 hours of being given to you.
<PAGE>
 
First American Title Insurance Company
July 31, 1995
Page 10



          Each of the parties referenced herein is relying upon your full
compliance with these Escrow Instructions in order to effectuate the Closing.
If you are unable to comply with these instructions, please notify the
undersigned immediately.  Please evidence your agreement to comply with these
instructions in the space provided below.

                              Very truly yours,



                              Martha B. Jordan
                              of LATHAM & WATKINS

Enclosures


THE FOREGOING INSTRUCTIONS ARE ACCEPTED
AND AGREED THIS ____ DAY OF JULY, 1995.

First American Title Insurance Company,
Escrow Agent


By:
   -----------------------------------
          Tom Zowarka,
          Vice President