Document:

RLHex103RevolvingLineofCreditNoteDatedJune202013for10000000payabletoWellsFargoBankNationalAssociation

Exhibit 10.3

REVOLVING LINE OF CREDIT NOTE

$10,000,000.00    Spokane, Washington
June 20, 2013

FOR VALUE RECEIVED, the undersigned RED LION HOTELS CORPORATION (“Borrower”) promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) at its office at 601 West First Avenue, Suite 900, Spokane, Washington 99201, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of Ten Million Dollars ($10,000,000.00), or so much thereof as may be advanced and be outstanding, with interest thereon to be computed on each advance from the date of its disbursement as set forth herein.

This Note is executed in renewal, amendment and restatement of, but not in novation, extinguishment, discharge or satisfaction of the note dated September 12, 2011, in the principal amount of $10,000,000.00 made by the Borrower and payable to the order of the Bank (as such note has been amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Prior Note”).  All amounts outstanding under the Prior Note as of the date hereof, if any, are due and payable in accordance with the terms of this Note.

DEFINITIONS:

As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined:

(a)    “Base Rate” means, for any day, a fluctuating rate equal to the highest of: (i) the Prime Rate in effect on such day, (ii) a rate determined by Bank to be one and one-half percent (1.50%) above Daily One Month LIBOR in effect on such day, and (iii) the Federal Funds Rate plus one and one-half percent (1.50%).

(b)    “Business Day” means any day except a Saturday, Sunday or any other day on which commercial banks in Washington are authorized or required by law to close.

(c)    “Daily One Month LIBOR” means, for any day, the rate of interest equal to LIBOR then in effect for delivery for a one (1) month period.

(d)    “Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers for the immediately preceding day, as published by the Federal Reserve Bank of New York; provided that if no such rate is so published on any day, then the Federal Funds Rate for such day shall be the rate most recently published.

(e)    “Fixed Rate Term” means a period commencing on a Business Day and continuing for one, three or six months, as designated by Borrower, during which all or a portion of the outstanding principal balance of this Note bears interest determined in relation to LIBOR; provided however, that no Fixed Rate Term may be selected for a principal amount less than One Million Dollars ($1,000,000) or a whole multiple of One Hundred Thousand Dollars 

($100,000) in excess thereof; and provided further, that no Fixed Rate Term shall extend beyond the scheduled maturity date hereof.  If any Fixed Rate Term would end on a day which is not a Business Day, then such Fixed Rate Term shall be extended to the next succeeding Business Day.

(f)    “LIBOR” means the rate per annum (rounded upward, if necessary, to the nearest whole 1/16 of 1%) and determined pursuant to the following formula:

	
			
	LIBOR =
	Base LIBOR
	 

	 
	100% - LIBOR Reserve Percentage
	 

(i)    “Base LIBOR” means the rate per annum for United States dollar deposits quoted by Bank (A) for the purpose of calculating effective rates of interest for loans making reference to LIBOR, as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by Bank for the purpose of calculating effective rates of interest for loans making reference thereto, on the first day of a Fixed Rate Term for delivery of funds on said date for a period of time approximately equal to the number of days in such Fixed Rate Term and in an amount approximately equal to the principal amount to which such Fixed Rate Term applies, or (B) for the purpose of calculating effective rates of interest for loans making reference to Daily One Month LIBOR, as the Inter-Bank Market Offered Rate in effect from time to time for delivery of funds for one (1) month in amounts approximately equal to the principal amount of such loans.  Borrower understands and agrees that Bank may base its quotation of the Inter-Bank Market Offered Rate upon such offers or other market indicators of the Inter-Bank Market as Bank in its discretion deems appropriate including, but not limited to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market.

(ii)    “LIBOR Reserve Percentage” means the reserve percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor) for “Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Wells Fargo Bank for expected changes in such reserve percentage during the applicable term of this Note.

(g)    “Prime Rate” means at any time the rate of interest most recently announced within Bank at its principal office as its Prime Rate, with the understanding that the Prime Rate is one of Bank’s base rates and serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto, and is evidenced by the recording thereof
after its announcement in such internal publication or publications as Bank may designate.

INTEREST:

(a)    Interest.  The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) either (i) at a fluctuating rate per annum equal to three-quarters of one percent (0.75%) above the Base Rate in effect from time to time, or (ii) at a fixed rate per annum determined by Bank to be three and one-quarter percent (3.25%) above LIBOR in effect on the first day of the applicable Fixed Rate Term.  When interest is determined in relation to the Base Rate, each change in the rate of interest hereunder shall become effective on the date each Base Rate change is announced within Bank.  With respect to each LIBOR selection hereunder, Bank is hereby authorized to note the 

date, principal amount, interest rate and Fixed Rate Term applicable thereto and any payments made thereon on Bank’s books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted.

(b)    Selection of Interest Rate Options.  At any time any portion of this Note bears interest determined in relation to LIBOR, it may be continued by Borrower at the end of the Fixed Rate Term applicable thereto so that all or a portion thereof bears interest determined in relation to the Base Rate or to LIBOR for a new Fixed Rate Term designated by Borrower.  At any time any portion of this Note bears interest determined in relation to the Base Rate, Borrower may convert all or a portion thereof so that it bears interest determined in relation to LIBOR for a Fixed Rate Term designated by Borrower.  At such time as Borrower requests an advance hereunder or wishes to select a LIBOR option for all or a portion of the outstanding principal balance hereof, and at the end of each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the interest rate option selected by Borrower; (ii) the principal amount subject thereto; and (iii) for each LIBOR selection, the length of the applicable Fixed Rate Term. Any such notice may be given by telephone (or such other electronic method as Bank may permit) so long as, with respect to each LIBOR selection, (A) if requested by Bank, Borrower provides to Bank written confirmation thereof not later than three (3) Business Days after such notice is given, and (B) such notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate Term, or at a later time during any Business Day if Bank, at its sole option but without obligation to do so, accepts Borrower’s notice and quotes a fixed rate to Borrower.  If Borrower does not immediately accept a fixed rate when quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request from Borrower shall be subject to a redetermination by Bank of the applicable fixed rate.  If no specific designation of interest is made at the time any advance is requested hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to have made a Base Rate interest selection for such advance or the principal amount to which such Fixed Rate Term applied.

(c)    Taxes and Regulatory Costs.  Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (i) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (ii) future, supplemental, emergency or other changes in the LIBOR Reserve Percentage, assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR to the extent they are not included in the calculation of LIBOR.  In determining which of the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower.

(d)    Payment of Interest.  Interest accrued on any portion of this Note that bears interest determined in relation to the Base Rate shall be due and payable in arrears on the last Business Day of each calendar month, commencing June 30, 2013; and interest on each portion of this Note that bears interest determined in relation to LIBOR for a Fixed Rate Term shall be due and payable on the last day of the Fixed Rate Term, and if such Fixed Rate Term 

extends over three (3) months, at the end of each three (3) month interval during such Fixed Rate Term.

(e)    Default Interest.  From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, or at Bank’s option upon the occurrence and during the continuance of an Event of Default, the outstanding principal balance of this Note shall bear interest at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to four percent (4%) above the rate of interest from time to time applicable to this Note.

BORROWING AND REPAYMENT:

(a)    Borrowing and Repayment.  Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note and of any document executed in connection with or governing this Note; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above.  The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for Borrower, which balance may be endorsed hereon from time to time by the holder.  The outstanding principal balance of this Note shall be due and payable in full on June 30, 2015.

(b)    Advances.  Unless otherwise agreed to in writing between Borrower and Bank, advances hereunder, to the total amount of the principal sum stated above, may be made by the holder at the oral or written request of (i) Julie A. Shiflett, Sandra J. Heffernan or Katherine M. Kiehl, any one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by the holder at the office designated above, or (ii) any person, with respect to advances deposited to the credit of any deposit account of Borrower, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of Borrower regardless of the fact that persons other than those authorized to request advances may have authority to draw against such account.  The holder shall have no obligation to determine whether any person requesting an advance to be deposited to the credit of any deposit account of Borrower is or has been authorized by Borrower. 

(c)    Application of Payments.  Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof.  All payments credited to principal shall be applied first, to the outstanding principal balance of this Note which bears interest determined in relation to the Base Rate, if any, and second, to the outstanding principal balance of this Note which bears interest determined in relation to LIBOR, with such payments applied to the oldest Fixed Rate Term first.

PREPAYMENT:

(a)    Base Rate.  Borrower may prepay principal on any portion of this Note which bears interest determined in relation to the Base Rate, at any time and in any amount, without penalty.

(b)    LIBOR.  Borrower may prepay principal on any portion of this Note which bears interest determined in relation to LIBOR  for a Fixed Rate Term upon three business days’ advance written notice and in the minimum amount of One Million Dollars ($1,000,000) or a whole multiple of One Hundred Thousand Dollars ($100,000) in excess thereof; provided however, that if the outstanding principal balance of such portion of this Note is less than said amount, the minimum prepayment amount shall be the entire outstanding principal balance thereof.  In consideration of Bank providing this prepayment option to Borrower, or if any such portion of this Note shall become due and payable at any time prior to the last day of the Fixed Rate Term applicable thereto by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is the sum of the discounted monthly differences for each month from the month of prepayment through the month in which such Fixed Rate Term matures, calculated as follows for each such month:

(i)    Determine the amount of interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the Fixed Rate Term applicable thereto.

(ii)    Subtract from the amount determined in (i) above the amount of interest which would have accrued for the same month on the amount prepaid for the remaining term of such Fixed Rate Term at LIBOR in effect on the date of prepayment for new loans made for such term and in a principal amount equal to the amount prepaid.

(iii)    If the result obtained in (ii) for any month is greater than zero, discount that difference by LIBOR used in (ii) above.

Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses and/or liabilities.  Borrower, therefore, agrees to pay the above-described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of Bank.  If Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum two percent (2.00%) above the Prime Rate in effect from time to time (computed on the basis of a 360-day year, actual days elapsed).

EVENTS OF DEFAULT:

This Note is made pursuant to and is subject to the terms and conditions of that certain Second Amended and Restated Credit Agreement between Borrower and Bank dated as of June 20, 2013, as amended from time to time (the “Credit Agreement”).  Any default in the payment or performance of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an “Event of Default” under this Note.

MISCELLANEOUS:

(a)    Remedies.  Upon the occurrence and during the continuance of any Event of Default, the holder of this Note, at the holder’s option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, 

demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate.  Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys’ fees (to include outside counsel fees and all allocated costs of the holder’s in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder’s rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Borrower or any other person or entity.

(b)    Obligations Joint and Several.  Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.

(c)    Governing Law.  This Note shall be governed by and construed in accordance with the laws of the State of Washington.

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.

RED LION HOTELS CORPORATION

By: /s/ Julie Shiflett    
Name: Julie Shiflett
Title: Executive Vice President

ADDENDUM TO PROMISSORY NOTE
(LIBOR PRICING ADJUSTMENTS)

THIS ADDENDUM is attached to and made a part of that certain promissory note executed by RED LION HOTELS CORPORATION (“Borrower”) and payable to WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”), or order, dated as of June 20, 2013, in the principal amount of Ten Million Dollars  ($10,000,000.00) (the “Note”).

The following provisions are hereby incorporated into the Note to reflect the interest rate adjustments agreed to by Bank and Borrower:

INTEREST RATE ADJUSTMENTS:

(a)    Initial LIBOR Margin.  The initial LIBOR margin applicable to the Note shall be as set forth in the “Interest” paragraph of the Note.

(b)    LIBOR Rate Adjustments.  Bank shall adjust the LIBOR margin (“Applicable LIBOR Margin”) used to determine the rate of interest on an annual basis, commencing with the calendar year ending December 31, 2014 (such year and each calendar year thereafter, an “Applicable Year”), if required to reflect a change in Borrower’s Senior Leverage Ratio as of the last day of the Applicable Year in accordance with the following grid:

	
		
	Senior Leverage Ratio
	Applicable LIBOR Margin

	Greater than or equal to 3.00 to 1.00
	3.25%

	Less than 3.00 to 1.00 but greater than or equal to 2.50 to 1.00
	3.00%

	Less than 2.50 to 1.00
	2.75%

Each such adjustment in the Applicable LIBOR Margin shall be effective on the first day of April of the year immediately following the Applicable Year based on Borrower’s financial statements and Compliance Certificate (as defined in the Credit Agreement) prepared for the Applicable Year and delivered in accordance with the requirements set forth in Section 4.3(a) of the Credit Agreement. Notwithstanding the foregoing, in the event that the financial statements or Compliance Certificate prepared for an Applicable Year and delivered pursuant to Section 4.3(a) of the Credit Agreement are shown to be inaccurate (regardless of whether (i) the Credit Agreement is in effect, or (ii) any Obligations (as defined in the Credit Agreement) are outstanding when such inaccuracy is discovered or such financial statements or Compliance Certificate are delivered), and such inaccuracy, if corrected, would have led to the application of a higher Applicable LIBOR Margin for any period (an “Applicable Period”) than the Applicable LIBOR Margin applied for such Applicable Period, then (A) the Borrower shall immediately deliver to the Bank a corrected Compliance Certificate for such Applicable Year, (B) the Applicable LIBOR Margin for such Applicable Period shall be determined as if the Senior Leverage Ratio reflected in the corrected Compliance Certificate were applicable for such Applicable Period, and (C) the Borrower shall immediately and retroactively be obligated to pay 

to the Bank the accrued additional interest owing as a result of such increased Applicable LIBOR Margin for such Applicable Period.  If Borrower fails to deliver a Compliance Certificate for an Applicable Year, together with accompanying financial statements, by the deadline specified in Section 4.3(a) of the Credit Agreement, then, in addition to any other remedy provided for in the Credit Agreement, the Applicable LIBOR Margin shall be 3.25% following such deadline until the first day of the first calendar month following the delivery of the Compliance Certificate and financial statements for the Applicable Year, whereupon the Applicable LIBOR Margin shall be that shown in the foregoing grid for the Senior Leverage Ratio of Borrower reflected in the Compliance Certificate. Nothing in this paragraph shall limit the rights of the Bank with respect to Section 6.2 of the Credit Agreement, nor any of its other rights under the Note.  The Borrower’s obligations under this paragraph shall survive the termination of the Credit Agreement and the repayment of all Obligations hereunder.

IN WITNESS WHEREOF, this Addendum has been executed as of the same date as the Note.

RED LION HOTELS CORPORATION

By: /s/ Julie Shiflett    
Name: Julie Shiflett
Title: Executive Vice PresidentRLHex104AmendedandRestatedEmploymentOfferLettertoJulieShiflettDateMay212013

Exhibit 10.4

                        

May 21, 2013

Ms. Julie Shiflett

Dear Julie:

This letter amends and restates your original offer letter dated August 31, 2011.

On behalf of Red Lion Hotels Corporation, we are delighted to offer you the position of Executive Vice President, Chief Financial Officer for Red Lion Hotels Corporation.  In your position, you will report to me in my role as the President and Chief Executive Officer.

As an executive officer of Red Lion Hotels Corporation, the details of your compensation and any acquisitions and dispositions of stock of Red Lion will be subject to Securities Exchange Commission reporting rules.

The following outlines the employment package for your position.

START DATE:    Thursday September 1, 2011

POSITION:  Chief Financial Officer for Red Lion Hotels Corporation located in Spokane, Washington.  Your responsibilities will be those outlined in your job description, as may be modified, and as may be assigned to you from time to time by your supervisor.

COMPENSATION:  Your position is classified as a salaried exempt position, which means it is exempt from state and federal overtime laws.  You will be paid a bi-weekly base salary of $9,615.40 which is equivalent to $250,000.00 per year, subject to normal withholdings and payroll taxes.  Our company’s pay periods run on a biweekly basis.

BONUS:  In addition to your base salary, you may be eligible to earn a bonus if you are actively employed throughout the applicable bonus period, and if you meet the other requirements outlined in the Variable Pay Plan (“VPP”), as may be amended from time to time.  Bonus targets and goals for achievement of bonuses by executive officers are set by the Compensation Committee of the Board of Directors.

201 W. North River Drive, Suite 100, Spokane, Washington 99201 l (509) 459-6100 l FAX (509) 325-7324

EQUITY GRANTS:  You will be eligible to receive issuances from time to time of equity incentives granted by the Compensation Committee of the Board of Directors.

ANNUAL PERFORMANCE EVALUATION:  Performance evaluations are generally conducted annually on or about February 1st of each year.  Red Lion may increase your salary based upon the annual performance evaluation or other facts.

BENEFITS:  You will be eligible to participate in all standard employee benefit programs on the same terms and conditions as other Red Lion Vice Presidents, as they may be modified from time to time, including:

		
	•
	Medical and Dental insurance

		
	•
	Employee Assistance Program (EAP)

		
	•
	Long Term Disability insurance coverage

		
	•
	Flexible Spending Account – Section 125 Medical Reimbursement and Dependent Care accounts

		
	•
	AFLAC – Voluntary Cancer Protection, Short Term Disability, Personal Recovery and Accident / Injury Protection Plans available following date of hire and also during open enrollment periods

		
	•
	Paid vacation.  You will be eligible for 4 weeks paid vacation each year of your  employment. Your vacation hours are subject to the RLH vacation policy, as detailed in the RLH benefits handbook.

		
	•
	Paid sick leave

		
	•
	A special paid Year-End Break in accordance with RLH policy

		
	•
	Eight (8) paid holidays each year and one (1) personal day

		
	•
	Participation in the RLH 401(k) Retirement Savings Plan with a discretionary match

		
	•
	Direct Deposit

		
	•
	Option to purchase shares of RLH stock at a 15% discount through payroll deduction under Red Lion’s Employee Stock Purchase Plan

		
	•
	Voluntary Term Life and AD&D Insurance coverage

		
	•
	Continuing education reimbursement

		
	•
	Gold status Alaska airlines, if available

		
	•
	Discounted Red Lion Family of Hotels accommodations for you and your family

A benefit book has been provided to you describing RLH’s benefits and eligibility requirements in detail.  You have also received a copy of RLH’s Associate Handbook with information regarding the Company’s policies and procedures.

SEVERANCE BENEFITS

If the Company terminates your employment without Cause (defined below) prior to September 1, 2014, the Company will, (i) pay you a lump sum payment equal to your earned but unpaid bonus under the VPP for the prior fiscal year, (ii) pay you a lump sum payment equal to your target bonus under the VPP for the fiscal year in which the termination occurs prorated for the portion of the year elapsed at the time of the termination, and (iii) pay you a lump sum payment 

201 W. North River Drive, Suite 100, Spokane, Washington 99201 l (509) 459-6100 l FAX (509) 325-7324

equal to your total cash compensation for the previous fiscal year (but not less than $250,000).  In addition, if the Company terminates your employment without Cause prior to September 1, 2014 (i) the Company shall accelerate vesting on any portion of any equity grant previously made to you under the Company’s 2006 Stock Incentive Plan, or any successor plan, that would otherwise have vested within twelve (12) months after the date of your termination; and (ii) all Company imposed restrictions on any restricted stock issued to you shall be terminated upon the termination of your employment and all restricted stock awarded to you but not yet issued shall be promptly issued.

UPON CHANGE OF CONTROL:  If there is a Change of Control (defined below) and there is a Constructive Termination (defined below) of your employment without Cause within twelve (12) months after such Change of Control, you will be entitled to a lump sum payment equal to one year of your then current annual salary.  Upon any Change of Control (i) the Company shall accelerate vesting on any portion of any equity grant previously made to you under the Company’s 2006 Stock Incentive Plan, or any successor plan, that would otherwise have vested within twenty-four (24) months after the date of the termination of your employment; and (ii) all Company imposed restrictions on any restricted stock issued to you shall be terminated upon the termination of your employment and all restricted stock awarded to you but not yet issued shall be promptly issued.

As used herein, the term “Cause” means:  (i) your willful and intentional failure or refusal to perform or observe any of your material duties, responsibilities or obligations, if such breach is not cured within 30 days after notice thereof to you by the Company, which notice shall state that such conduct shall, without cure, constitute Cause; (ii) any willful and intentional act by you involving fraud, theft, embezzlement or dishonesty affecting the Company; or (iii) your conviction of (or a plea of nolo contendere to) an offense which is a felony in the jurisdiction involved.

“Constructive Termination” shall be deemed to occur if (A) without your consent (i) there is a significant reduction in your overall scope of duties, authorities and responsibilities (it being understood that a new position within a larger combined company is not a constructive termination if it is in the same area of operations and involves similar scope of management responsibility notwithstanding that you may not retain as senior a position overall within the larger combined  company as your prior position within the Company), (ii) you are required to relocate your place of employment, other than a relocation within 40 miles of Spokane, Washington, or (iii) there is a reduction of more than 20% of your base salary or target bonus (other than any such reduction consistent with a general reduction of pay across the Company’s or its successor’s executive staff as a group, as an economic or strategic measure due to poor financial performance by the Company) and (B) within the thirty (30) day period immediately following such material adverse change or reduction, you elect to terminate your employment voluntarily.

As used herein, the term “Change of Control” means the occurrence of any one of the following events: any merger or consolidation involving the acquisition of 50% or more of the combined voting power of the outstanding securities of the Company by an investor group, adoption of a 

201 W. North River Drive, Suite 100, Spokane, Washington 99201 l (509) 459-6100 l FAX (509) 325-7324

sale or liquidation plan of substantially all of the assets of the Company or other similar transaction or series of transactions involving the Company, or the acquisition of 50% or more of the combined voting power of the outstanding securities of the Company by an investor group.

In addition, all of your unvested restricted stock units in the Company on the day prior to a Director Change (defined below) shall be subject to accelerated vesting if a Director Change results in either (i) ownership of the Company by a non-publicly traded entity such that the stock is no longer liquid or (ii) ownership of the Company by a publicly traded entity that has not agreed as part of any purchase and sale agreement to continue your unvested restricted stock units and stock options in substantially the same form as existed immediately prior to the Director Change. The term “Director Change” shall mean that the majority of the Company’s board of directors consists of individuals other than “Incumbent Directors,” which shall mean the members of the board of directors as of May 21, 2013 and any other persons becoming directors subsequent to that date whose election or nomination for election was supported by a majority of the directors who then comprised the Incumbent Directors.

LOYALTY, NONDISCLOSURE OF CONFIDENTIAL INFORMATION:  By accepting this offer, you agree that you will act at all times in the best interest of RLH.  You also agree that, except as required for performance of your work, you will not use, disclose or publish any Confidential Information of RLH either during or after your employment, or remove any such information from the Company’s premises.  “Confidential Information” includes, but is not limited to, lists of actual and prospective customers and clients, financial and personnel-related information, projections, operating procedures, budgets, reports, business or marketing plans, and compilations of data created by RLH or by third parties for the benefit of RLH.  Your membership on Boards of Directors and your ownership in CFO Outsourcing, LLC (dba NWCFO) are considered exempted activities as long as they do not involve any material conflict of interest with the interests of RLH.

NONSOLICITATION:  You agree that during your employment t the Company and for a period of twelve months thereafter you will not solicit, raid, entice or induce any person who then is or at any time during the twelve-month period prior to the end of your employment was an employee of the Company (other than a person whose employment with the Company has been terminated by the Company), to become employed by any person, firm or corporation.

COMPLAINT RESOLUTION:  By accepting this offer with RLH, you also agree to continue to familiarize yourself with its policies, including its policies on equal opportunity and anti-harassment, and to promptly report to the appropriate RLH supervisors or officers any matters which require their attention.

KEY EMPLOYEE STATUS:  You are regarded as a key employee under certain federal regulations governing family and medical leave.  This status will require that you work closely with us in planning if you develop a need for family or medical leave.

201 W. North River Drive, Suite 100, Spokane, Washington 99201 l (509) 459-6100 l FAX (509) 325-7324

NATURE OF EMPLOYMENT:  RLH is an at-will employer.  This means that your employment is not for a set amount of time; either you or the Company may terminate employment at any time, with or without cause.

ENTIRE AGREEMENT:  This letter contains all of the terms of your employment with RLH, and supersedes any prior understandings or agreements, whether oral or in writing.

Red Lion Hotels Corporation reserves the right, subject to limitations and provisions of applicable law and regulations, to change, interpret, withdraw, or add to any of its policies, benefits, or terms and conditions of employment at its sole discretion, and without prior notice or consideration to any associate.  The Company’s policies, benefits or terms and conditions of employment do not create a contract or make any promises of specific treatment.

Julie, we are pleased and proud to have your talents on a management team that is dedicated to making a difference in the communities we serve, creating fulfilling jobs and environments conducive to success, and providing the foundation for ongoing success of Red Lion Hotels Corporation.

Sincerely,

/s/ Jon E. Eliassen

Jon E. Eliassen
President and Chief Executive Officer
Red Lion Hotels Corporation

Accepted this 21st day of May, 2013

/s/ Julie Shiflett            
Employee Signature

201 W. North River Drive, Suite 100, Spokane, Washington 99201 l (509) 459-6100 l FAX (509) 325-7324

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