Document:

Exhibit1013TomMcKeirnanFinal

EXECUTIVE EMPLOYMENT AGREEMENT

This EXECUTIVE EMPLOYMENT AGREEMENT is dated effective as of February 27, 2015 (“Effective Date”) by and between Red Lion Hotels Corporation, a Washington corporation (the “Company”), and Thomas L. McKeirnan (the “Executive”), and is intended to replace and supersede that certain Executive Employment Agreement between the Company and the Executive dated April 22, 2008.
The Company desires to employ the Executive in the capacity of Senior Vice President, General Counsel, and the Executive desires to be so employed, on the terms and subject to the conditions set forth in this agreement (the “Agreement”).
Now, therefore, in consideration of the mutual covenants set forth herein and other good and valuable consideration, the parties hereto hereby agree as follows:
1.    Employment; Term. 

The Company employs the Executive, and the Executive agrees to be employed by the Company, upon the terms and subject to the conditions set forth herein, for a term commencing on the Effective Date and terminating on December 31, 2015 unless terminated earlier in accordance with Section 5 of this Agreement; provided, that, subject to earlier termination in accordance with Section 5 of this Agreement, such term shall automatically be extended from time to time for additional periods of one calendar year from the date on which it would otherwise expire unless the Executive, on one hand, or the Company, on the other, gives notice to the other party not less than 120 days prior to such date that he or it elects to permit the term of this Agreement to expire without extension on such date. The initial term of this Agreement as the same may be extended in accordance with the terms of this Agreement is hereinafter referred to as the “Term”.
2.    Positions; Conduct.

(a)    During the Term, the Executive will hold the title and office of, and serve in the position of, Executive Vice President, General Counsel of the Company. The Executive shall report to the Chief Executive Officer of the Company and shall perform such specific duties and services (including service as an officer, director or equivalent position of any direct or indirect subsidiary without additional compensation) as the Company shall reasonably request consistent with the Executive’s position. 

(b)    During the Term, the Executive agrees to devote his full business time and attention to the business and affairs of the Company and to faithfully and diligently perform, to the best of his ability, all of his duties and responsibilities hereunder.  Nothing in this Agreement shall preclude the Executive from devoting reasonable time and attention to the following (the “Exempted Activities”): (i) serving as an officer, director, trustee or member of any organization, (ii) engaging in charitable and community activities and (iii) managing his personal investments and affairs.  In no event shall the Exempted Activities involve any material conflict of interest with the interests of the Company or, individually or collectively, interfere materially with the performance by the Executive of his duties and responsibilities under this Agreement.

(c)    The Executive’s office and place of rendering his services under this Agreement shall be in the principal executive offices of the Company.  During the Term, the Company shall provide the Executive with executive office space, and administrative and secretarial assistance and other support services consistent with his positions and with his duties and responsibilities hereunder.

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3.    Board of Directors; Committees.

It is understood that the right to elect directors of the Company is by law vested in the stockholders and directors of the Company, and it is mutually contemplated that service on the board of directors of the Company (the “Board”) or any of the Company’s subsidiaries, or on any committee of the Board or the board of directors of any of the Company’s subsidiaries, is not a condition of this Agreement. 
4.    Salary; Additional Compensation; Perquisites and Benefits.

(a)    During the Term, the Company will pay the Executive a base salary at an annual rate of not less than $265,974 per annum, subject to annual review by the Compensation Committee of the Board (the “Committee”) and, in the discretion of the Committee, to increase from time to time.  Once increased, such base salary may not be decreased.  Such salary shall be paid in periodic installments in accordance with the Company’s standard practice, but not less frequently than semi-monthly.

(b)    During the Term, Executive shall participate in the Company’s Executive Officers Variable Pay Plan and any successor or replacement bonus plans as may be adopted by the Committee from time to time for senior executives of the Company (the “VPP”). If Executive achieves the target performance goals determined under the VPP by the Committee for any calendar year, he shall be entitled to a bonus for that year equal to at least 30% of his base salary for that year (with any partial year pro rated).

(c)    The Board or the Committee in its sole discretion may award any additional or other amounts of cash, restricted stock or options or other equity based awards in respect of any whole or partial year during the Term.

(d)    The Company will reimburse the Executive, in accordance with its standard policies from time to time in effect, for all out-of-pocket business expenses as may be incurred by the Executive in the performance of his duties under this Agreement.

(e)    The Executive shall be entitled to vacation time to be credited and taken in accordance with the Company’s policy from time to time in effect for senior executives, which in any event shall not be less than a total of four weeks per calendar year. 

(f)    The Company shall indemnify the Executive to the fullest extent permitted under the law of the State of Washington.

5.    Termination

(a)    The Term will terminate automatically upon the Executive’s death and, in the case of a determination of the Executive’s Disability, will terminate upon notice by the Company or the Executive to the other.  As used herein the term “Disability” means the Executive’s inability to perform his duties and responsibilities under this Agreement for a period of more than 120 consecutive days, or for more than 180 days, whether or not consecutive, during any 365-day period, due to physical or mental incapacity or impairment.  A determination of Disability will be made by a physician satisfactory to both the Executive and the Company; provided that if they cannot agree as to a physician, then each shall select a physician and these two together shall select a third physician whose determination of Disability shall be binding on the Executive and the Company.  Should the Executive become incapacitated, his employment shall continue and all base salary and other compensation due the Executive hereunder shall continue to be paid through the date upon which the Executive’s employment is terminated for Disability in accordance with this section.

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(b)    The Term may be terminated by the Company upon notice to the Executive with or without “Cause” as defined herein. 

(c)    The Term shall terminate automatically and without any further notice or action upon the Executive’s resignation or retirement from the Company, with or without Good Reason (as defined below), or if the Term is not extended pursuant to the proviso to Section 1 as a result of the Executive or the Company giving notice thereunder that it elects to permit the Term to expire without extension.
6.    Severance.

(a)    If the Term terminates for any reason, the Company will pay to the Executive an aggregate amount equal to the Executive’s accrued and unpaid base salary through the date of such termination, additional salary payments in lieu of the Executive’s accrued and unused vacation time, unreimbursed business expenses, unreimbursed medical, dental and other employee benefit expenses in accordance with the applicable plans, and any and all other benefits available to the Executive or Executive’s estate under then-existing Company benefit plans or policies, including if applicable death or Disability benefits, provided for (the “Standard Termination Payments”). Except as expressly provided below, payment of the Standard Termination Payments shall be the Company’s only obligation to Executive, and the Company shall incur no further liability, in connection with such termination.
(b)    If the Term is terminated upon the Executive’s death or Disability, the Company will pay to the Executive’s estate or the Executive, as the case may be (i) the Standard Termination Payments, (ii) a lump sum payment, if applicable, equal to the Executive’s earned but unpaid bonus under the VPP for the prior fiscal year, and (iii) a lump sum payment equal to the Executive’s target bonus under the VPP for the fiscal year in which the death or Disability occurs prorated for the portion of the year elapsed at the time of the termination. Such payments shall be the Company’s only obligations to Executive in such a case.  The Company shall incur no further liability for such a termination.
(c)    If the Company terminates the Executive’s employment under this Agreement without Cause other than by reason of his death or Disability and such termination does not occur within twelve (12) months following a Change of Control (as defined below), or if the Term is not extended pursuant to the proviso to Section 1 as a result of the Company giving notice thereunder that it elects to permit the Term to expire without extension, or if the Executive terminates his employment hereunder within six months of any event constituting Good Reason and such termination does not occur within twelve (12) months following a Change of Control, the Company will (i) pay the Executive the Standard Termination Payments, (ii) pay the Executive a lump sum payment equal to the Executive’s earned but unpaid bonus under the VPP for the prior fiscal year, (iii) pay the Executive a lump sum payment equal to the Executive’s 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, (iv) pay the Executive a lump sum payment equal to the Executive’s total cash compensation for the previous fiscal year, and (v) continue in effect the Executive’s benefits with respect to life, health and insurance plans or their equivalent for one year.  Such payments and the obligations set forth below in Section 6(e) shall be the Company’s only obligations to Executive in such a case.  The Company shall incur no further liability for such a termination.
(d)    If the Company terminates the Executive’s employment under this Agreement without Cause within twelve (12) months following a Change of Control (as defined below), or if the Executive terminates his employment hereunder within twelve (12) months following a Change of Control and within six (6) months following any event constituting Good Reason, the Company will (i) pay the Executive the Standard Termination Payments, (ii) pay the Executive a lump sum payment equal to the Executive’s earned but unpaid bonus under the VPP for the prior fiscal year, (iii) pay the Executive a lump sum payment equal to (A) the Executive’s target bonus under the VPP for the fiscal year in which the termination occurs, multiplied by (B) a fraction, the numerator of which is 365 plus the number of days elapsed in that fiscal year at the time of the termination and the denominator of which is 365, (iv) pay the Executive a lump sum payment equal to the Executive’s base annual salary for the fiscal year in which the 

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termination occurs, and (v) continue in effect the Executive’s benefits with respect to life, health and insurance plans or their equivalent for one year.  Such payments and the obligations set forth below in Section 6(e) shall be the Company’s only obligations to Executive in such a case.  The Company shall incur no further liability for such a termination.
(e)    If the Company terminates the Executive’s employment under this Agreement without Cause other than by reason of his Disability, or if the Term is not extended pursuant to the proviso to Section 1 as a result of the Company giving notice thereunder that it elects to permit the Term to expire without extension, or if there is a Change of Control, or if the Executive terminates his employment hereunder within six months of any event constituting Good Reason, then (i) the Company shall accelerate vesting on any portion of any equity grant previously made to the Executive under the Company’s 2006 Stock Incentive Plan, or any successor plan, that would otherwise have vested after the date of the termination of the Executive’s employment; and (ii) all Company imposed restrictions under any restricted stock, restricted stock unit or other similar equity-based awards granted to the Executive by the Company shall be terminated upon the termination of the Executive’s employment, and the Company shall issue all common stock that underlies such awards but has not yet been issued; provided that (A) if the terms of any such award require the Executive to pay monetary consideration for such stock, the stock underlying such award shall be issued only if the Executive pays such consideration, and (B) if any restrictions under any such award are performance-based, such restrictions shall terminate and the stock underlying such award shall be issued only if and to the extent expressly provided in the agreement evidencing the award.
(f)    As used herein, the term “Cause” means:  (i) the Executive’s willful and intentional failure or refusal to perform or observe any of his material duties, responsibilities or obligations set forth in this Agreement, if such breach is not cured within 30 days after notice thereof to the Executive by the Company, which notice shall state that such conduct shall, without cure, constitute Cause and makes specific reference to this Section 6(f); (ii) any willful and intentional act of the Executive involving fraud, theft, embezzlement or dishonesty affecting the Company; or (iii) the Executive’s conviction of (or a plea of nolo contendere to) an offense which is a felony in the jurisdiction involved.
(g)    As used herein, the term “Good Reason” means the occurrence of any of the following, without the prior written consent of the Executive: (i) assignment to the Executive of duties materially inconsistent with the Executive’s position and responsibilities described in Section 2(a) hereof,; (ii) the removal of the Executive from the position described in Section 2(a); (iii) any material breach of this Agreement by the Company which is continuing; or (iv) a Change of Control; provided that a Change of Control shall only constitute Good Reason if, within 12 months after such Change of Control: (a) the Company changes its headquarters office location to a location more than 40 miles from the city limits of Spokane, Washington, (b) the Company changes Executive’s job title, or (c) Executive experiences a significant diminution in his duties or responsibilities or compensation compared to prior to the Change of Control, other than in connection with the termination of the Executive’s employment by the Company for Cause, by the Executive without Good Reason, or as a result of the Executive’s death or Disability.  Notwithstanding anything to the contrary in this Section 6(g), the Executive shall not be deemed to have Good Reason unless the Executive gives the Company written notice that the specified conduct or event has occurred giving rise to Executive having Good Reason, and the Company fails to cure such conduct or event within thirty (30) days after the receipt of such notice.
(h)    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 a “person” or “group” (as those terms are defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934), adoption of a plan for liquidation of the Company or for sale of all or 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 a “person” or “group” (as those terms are defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934).
(i)    The amounts required to be paid and the benefits required to be made available to the Executive under this Section 6 are absolute.  Under no circumstances shall the Executive, upon the termination of his 

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employment hereunder, be required to seek alternative employment and, in the event that the Executive does secure other employment, no compensation or other benefits received in respect of such employment shall be set-off or in any other way limit or reduce the obligations of the Company under this Section 6.
(j)    The amounts required to be paid to the Executive under this Section 6, together with any Gross-Up Payment required to be paid to the Executive under Section 10(b), shall, subject to Section 11 below, be paid to the Executive as soon as practicable following the occurrence of the event that entitles the Executive to such payments.
7.    Confidential Information.

(a)    The Executive acknowledges that the Company and its Affiliates (as defined below) own and have developed and compiled, and will in the future own, develop and compile certain Confidential Information and that during the course of his rendering services to the Company Confidential Information has and will be disclosed to the Executive by the Company and its Affiliates.  The Executive hereby agrees that, during the Term (except as required to conduct the business of the Company) and thereafter, he will not in any way use or disclose, furnish or make accessible to anyone, directly or indirectly, any Confidential Information of the Company or its Affiliates. As used herein, an “Affiliate” of a person or other entity means a person or other entity that directly or indirectly controls, is controlled by or is under common control with the person or other entity specified (including without limitation any investment entity managed by the person or other entity specified or a person or entity that directly or indirectly controls, is controlled by or under common control with the person or other entity specified).
(b)    As used herein, the term “Confidential Information” means any trade secrets, confidential or proprietary information, or other knowledge, know-how, information, documents or materials, owned, developed or possessed by the Company or one of its Affiliates pertaining to its businesses the confidentiality of which such company takes reasonable measures to protect, including, but not limited to, trade secrets, techniques, know-how (including designs, plans, procedures, processes and research records), software, computer programs, innovations, discoveries, improvements, research, developments, test results, reports, specifications, data, formats, marketing data and business plans and strategies, business opportunities, guest lists, vendor terms, agreements and other forms of documents, expansion plans, budgets, projections, and salary, staffing and employment information.  Notwithstanding the foregoing, Confidential Information shall not in any event include information which (i) was generally known or generally available to the public prior to its disclosure to the Executive, (ii) becomes generally known or generally available to the public subsequent to its disclosure to the Executive through no wrongful act of the Executive, (iii) is or becomes available to the Executive from sources other than the Company or its Affiliates which sources are not known to the Executive to be under any duty of confidentiality with respect thereto or (iv) the Executive is required to disclose by applicable law or regulation or by order of any court or federal, state or local regulatory or administrative body (provided that the Executive provides the Company with prior notice of the contemplated disclosure and reasonably cooperates with the Company, at the Company’s sole expense, in seeking a protective order or other appropriate protection of such information).
8.    Restrictive Covenants.

(a)    The Executive agrees that during his employment hereunder and for a period of twelve months thereafter the Executive will not, directly or indirectly, engage or participate or make any financial investments in (other than ownership of up to 5% of the aggregate of any class of securities of any corporation if such securities are listed on a national stock exchange or registered under section 12(g) of the Securities Exchange Act of 1934) or become employed by, or act as an agent or principal of, or render advisory or other management services to or for, any Competing Business.  As used herein the term “Competing Business” means any business which includes hotel ownership, hotel management, hotel 

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services or hotel franchising and has a headquarters in Washington, Oregon, Idaho, Montana, Utah or Northern California, defined as the area from San Jose, California north to California’s border with Oregon.

(b)    The Executive agrees that during his employment hereunder and for a period of twenty-four months thereafter he will not solicit, raid, entice or induce any person that then is or at any time during the twelve-month period prior to the end of the Term was an employee of the Company or any of its Affiliates (other than a person whose employment with the Company or such Affiliate has been terminated by the Company or such Affiliate), to become employed by any person, firm or corporation.
9.    Specific Performance.

(a)    The Executive acknowledges that the services to be rendered by him hereunder are of a special, unique, extraordinary and personal character and that the Company would sustain irreparable harm in the event of a violation by the Executive of Section 7 or 8 hereof.  Therefore, in addition to any other remedies available, the Company shall be entitled to specific enforcement and/or an injunction from any court of competent jurisdiction restraining the Executive from committing or continuing any such violation of this Agreement without proving actual damages or posting a bond or other security.  Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages.
(b)    If any of the restrictions on activities of the Executive contained in Sections 7 or 8 shall for any reason be held by a court of competent jurisdiction to be excessively broad as to duration, geographical scope or activity of subject, such restrictions shall be construed so as thereafter to be limited or reduced to be enforceable to the maximum extent compatible with the applicable law as it shall then appear; it being understood that by the execution of this Agreement the parties hereto regard such restrictions as reasonable and compatible with their respective rights.

(c)    Notwithstanding anything in this Agreement to the contrary, in the event that the Company fails to make any payment of any amounts or provide any of the benefits to the Executive when due as called for under Section 6 of this Agreement and such failure shall continue for twenty (20) days after notice thereof from the Executive, all restrictions on the activities of the Executive under Sections 7 and 8 shall be immediately and permanently terminated. 
10.    Withholding; Additional Payments. 

(a)    The parties agree that all payments to be made to the Executive by the Company pursuant to the Agreement shall be subject to all applicable withholding obligations.
(b)    The parties intend that the severance payments and other compensation provided for herein are reasonable compensation for Executive’s services to the Company and shall not constitute “excess parachute payments” within the meaning of Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended (the “Code”). In the event the parties determine that the severance benefits or any other benefits or payments to which Executive is entitled pursuant to this Agreement or otherwise (collectively, the “Total Benefits”), will be subject to the excise tax imposed pursuant to Section 4999 of the Code (“Excise Tax”), the Company shall pay to Executive an additional amount (the “Gross-Up Payment”) such that the net amount retained by Executive, after deduction of any Excise Tax on the Total Benefits and any federal, state and local income taxes, Excise Tax, and FICA and Medicare withholding taxes upon the payment provided for by this Section, will be equal to the Total Benefits. 

For purposes of this Section, Executive will be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Excise Tax is (or would be) payable and state and local income taxes at the highest marginal rate of taxation in the state and locality of Executive’s residence on the date of termination of Executive’s employment with the Company, net of the reduction in 

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federal income taxes that could be obtained from deduction of such state and local taxes (calculated by assuming that any reduction under Section 68 of the Code in the amount of itemized deductions allowable to Executive applies first to reduce the amount of such state and local income taxes that would otherwise be deductible by Executive). 

In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of Executive’s employment, Executive shall repay to the Company, at the time the amount of such reduction in Excise Tax is fully determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax, federal, state and local income taxes and FICA and Medicare withholding taxes imposed on the Gross-Up Payment being repaid by Executive to the extent that such repayment results in a reduction in Excise Tax, FICA and Medicare withholding taxes and/or a federal, state or local income tax deduction) plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of Executive’s employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment to Executive in respect of such excess (plus any interest, penalties or additions payable by Executive with respect to such excess) at the time that the amount of such excess is finally determined. 

The parties’ obligations under this Section shall survive termination of this Agreement.
11.    Compliance with Section 409A
Notwithstanding any other provision of this Agreement to the contrary, the provision, time and manner of payment or distribution of all compensation and benefits provided by this Agreement (“Section 409A Deferred Compensation”) that constitute nonqualified deferred compensation subject to and not exempted from the requirements of Section 409A of the Code shall be subject to, limited by and construed in accordance with the requirements of such section and all regulations and other guidance promulgated by the Secretary of the Treasury pursuant to such section (such section, regulations and other guidance being referred to herein as “Section 409A”), including the following:
(a)    Separation from Service. Payments and benefits constituting Section 409A Deferred Compensation otherwise payable or provided pursuant to Section 6 upon the Executive’s termination of employment shall be paid or provided only at the time of a termination of the Executive’s employment that constitutes a Separation from Service. For the purposes of this Agreement, a “Separation from Service” is a separation from service within the meaning of Treasury Regulation Section 1.409A-1(h).
(b)    Six-Month Delay Applicable to Specified Employees. If, at the time of a Separation from Service of the Executive, the Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then any payments and benefits constituting Section 409A Deferred Compensation to be paid or provided pursuant to Section 6 upon the Separation from Service of the Executive shall be paid or provided commencing on the later of (i) the first business day after the date that is six months after the date of such Separation from Service or, if earlier, the date of death of the Executive (in either case, the “Delayed Payment Date”), or (ii) the date or dates on which such Section 409A Deferred Compensation would otherwise be paid or provided in accordance with Section 6. All such payments and benefits that would, but for this Section 11(b), become payable prior to the Delayed Payment Date shall be accumulated and paid on the Delayed Payment Date.
(c)    Installments. Executive’s right to receive any amounts payable hereunder in two or more installments shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment for purposes of Section 409A.
12.    Notices. 

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All notices required or permitted hereunder shall be in writing and shall be deemed given and received when delivered personally, four days after being mailed if sent by registered or certified mail, postage pre-paid, or by one day after delivery if sent by air courier (for next-day delivery) with evidence of receipt thereof or by facsimile with receipt confirmed by the addressee.  Such notices shall be addressed respectively:
If to the Executive, to:
Thomas L. McKeirnan
235 E 9th 
Spokane, WA 99202

If to the Company,  to:
Red Lion Hotels Corporation
201 W. North River Drive
Spokane, WA  99201
Attn:  Chief Executive Officer

or to any other address of which such party may have given notice to the other parties in the manner specified above.
13.    Miscellaneous.

(a)    This Agreement is a personal contract calling for the provision of unique services by the Executive, and the Executive’s rights and obligations hereunder may not be sold, transferred, assigned, pledged or hypothecated by the Executive.  The rights and obligations of the Company hereunder will be binding upon and run in favor of its successors and assigns.

(b)    This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Washington.

(c)    Any controversy arising out of or relating to this Agreement or any breach hereof shall be settled by arbitration in Spokane, Washington by a single neutral arbitrator who shall be a retired federal or state court judge in accordance with the Commercial Arbitration Rules of the American Arbitration Association and judgment upon any award rendered may be entered in any court having jurisdiction thereof, except in the event of a controversy relating to any alleged violation by the Executive of Section 7 or 8 hereof, the Company shall be entitled to seek injunctive relief from a court of competent jurisdiction without the requirement to seek arbitration.  In addition to all other relief, the substantially prevailing party in any arbitration or court action shall be entitled to his or its reasonable attorney fees and costs incurred by reason of the controversy (including any appellate review and bankruptcy or enforcement proceedings).

(d)    The headings of the various sections of this Agreement are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.
 
(e)    The provisions of this Agreement which by their terms call for performance subsequent to the expiration or termination of the Term shall survive such expiration or termination.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date first above written.

EXECUTIVE:                COMPANY:

RED LION HOTELS CORPORATION

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_/s/ Thomas L. McKeirnan____        By _      /s/ Gregory T. Mount__________________________
		
	Thomas L. McKeirnan 
	Gregory T. Mount, President and 

Chief Executive Officer

Thomas L. McKeirnan Executive Employment Agreement Page 9Exhibit1014HarrySladichFinal

February 27, 2015
Mr. Harry Sladich
2808 South Park Lane
Spokane, WA 99212 

Dear Harry, 
This letter amends and restates your original offer letter dated March 17, 2010, effective as of the date set forth above.
On behalf of Red Lion Hotels Corporation, I am delighted to offer you the position of Executive Vice President, Hotel Operations and Sales. In your new position, you will report to the President and CEO of the Company.
The following outlines the employment package for your position. 
POSITION: Full-time Executive Vice President, Hotel Operations and Sales, 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 the President and CEO.
START DATE: You will report to work no later than Monday, May 3, 2010. 
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 $9,319.62, which is equivalent to $242,310.00 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 of up to 100% of your base salary, if you are continuously and actively employed throughout the applicable bonus period, and if you meet the other requirements outlined in the bonus plan, as may be amended from time to time, and any other specific bonus criteria that may be determined by Red Lion from time to time. 
ANNUAL PERFORMANCE EVALUATION: Performance evaluations are generally conducted annually on or about February 1st of each year. Red Lion may modify your salary based upon the annual performance evaluation or other facts. Any wage increase that you may be eligible for will be pro-rated based on your Start Date in this position or any merit increases granted throughout the previous year. 
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: 

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	Medical and Dental insurance eligible the first of the month following your Start Date (company paid)

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	Employee Assistance Program (EAP)

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	Long Term Disability insurance coverage starting the first of the month following your Start Date

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	Flexible Spending Account — Section 125 Medical Reimbursement and Dependent Care accounts eligible within 30 days of your Start Date for the following 1st of the month effective date

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	AFLAC — Voluntary Cancer Protection, Short Term Disability, Personal Recovery and Accident / Injury Protection Plans available following Start Date and also during open enrollment periods

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	Paid vacation

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	Paid sick leave

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	Two weeks paid vacation within your first year of employment and three weeks paid vacation beginning in your third year of employment. Any additional weeks in vacation allowance will be subject to standard timing within the company’s normal benefit program.

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	A special paid Year-End Break to be taken each calendar year between December 25 and January 1

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

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	Participation in the RLH 401(k) Retirement Savings Plan with a discretionary match which, if made, will be on a graduated basis based on length of service, eligible on your Start Date

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	Direct Deposit

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	Option to purchase shares of RLH stock at a 15% discount through payroll deduction (Employee Stock Purchase Program)

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	Voluntary Term Life and AD&D Insurance coverage eligible the first of the month following your Start Date

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	Continuing education reimbursement

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	Complimentary Red Lion Family of Hotels accommodations for you and your family

A benefit book will be provided to you upon the commencement of your employment, describing RLH’s benefits and eligibility requirements in detail. You will also receive a copy of RLH’s Associate Handbook with information regarding the Company’s policies and procedures. 
SEVERANCE BENEFITS:
UPON CHANGE OF CONTROL AND CONSTRUCTIVE TERMINATION: If, during the term of your employment with the Company, 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 the sum of (a) your base annual salary for the then current fiscal year, plus (b) an amount equal to (i) your target annual bonus under the VPP for the then current fiscal year, multiplied by (ii) a fraction, the numerator of which is 365 plus the number of days elapsed in the then current fiscal year at the time of the termination, and the denominator of which is 365. In addition, (A) 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 after the date of the termination of your employment; and (B) all Company imposed restrictions under any restricted stock, restricted stock unit or other similar equity-based awards granted to you by the Company shall be terminated upon the termination of your employment, and the Company shall issue all common stock that underlies such awards but has not yet been issued; provided that (i) if the terms of any such award require you to pay monetary consideration for such stock, the stock underlying such award shall be issued only if you pay such 

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consideration, and (ii) if any restrictions under any such award are performance-based, such restrictions shall terminate and the stock underlying such award shall be issued only if and to the extent expressly provided in the agreement evidencing the award.
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 the Company terminates your employment without Cause, or if you voluntarily elect to terminate your employment within thirty (30) days after any of the following events occurring 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).
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 a “person” or “group” (as those terms are defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934), adoption of a plan for liquidation of the Company or for sale of all or 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 a “person” or “group” (as those terms are defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934).
The severance amounts hereunder shall, subject to COMPLIANCE WITH SECTION 409A below, be paid to you as soon as practicable following the occurrence of the event that entitles you to such payments.
COMPLIANCE WITH SECTION 409A
Notwithstanding any other provision of this letter to the contrary, the provision, time and manner of payment or distribution of all compensation and benefits provided by this letter (“Section 409A Deferred Compensation”) that constitute nonqualified deferred compensation subject to and not exempted from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), shall be subject to, limited by and construed in accordance with the requirements of such section and all regulations and other guidance promulgated by the Secretary of the Treasury pursuant to such section (such section, regulations and other guidance being referred to herein as “Section 409A”), including the following:
(a)    Separation from Service. Payments and benefits constituting Section 409A Deferred Compensation otherwise payable or provided pursuant to this letter upon your Constructive Termination shall be paid or provided only at the time of a termination of your employment that constitutes a Separation from Service. For the purposes of this letter, a “Separation from Service” is a separation from service within the meaning of Treasury Regulation Section 1.409A-1(h).

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(b)    Six-Month Delay Applicable to Specified Employees. If, at the time of your Separation from Service, you are a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then any payments and benefits constituting Section 409A Deferred Compensation to be paid or provided pursuant to this letter upon your Separation from Service shall be paid or provided commencing on the later of (i) the first business day after the date that is six months after the date of such Separation from Service or, if earlier, the date of your death (in either case, the “Delayed Payment Date”), or (ii) the date or dates on which such Section 409A Deferred Compensation would otherwise be paid or provided in accordance with this letter without regard to this paragraph. All such payments and benefits that would, but for this paragraph, become payable prior to the Delayed Payment Date shall be accumulated and paid on the Delayed Payment Date.
(c)    Installments. Your right to receive any amounts payable hereunder in two or more installments shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment for purposes of Section 409A.
(d)    Notice Upon Constructive Termination.  If you voluntarily elect to terminate your employment under circumstances that would otherwise constitute a Constructive Termination under this letter, a Constructive Termination shall not be deemed to have occurred unless (i) you have given the Company written notice that a specified event has occurred giving you the right to voluntarily terminate your employment and have that be treated as a Constructive Termination, (ii) the Company fails to cure such event within a period of thirty (30) days after the receipt of such notice, and (iii) you voluntarily terminate your employment within thirty (30) days following the end of that period.
PROOF OF ELIGIBILITY TO WORK IN U.S.: Our offer is contingent upon your submission of satisfactory proof of your identity and your legal authorization to work in the United States. If you fail to submit this proof, federal law prohibits us from hiring you. 
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, compilations of data created by RLH or by third parties for the benefit of RLH. 
NONCOMPETITION AND NONSOLICITATION: You agree that during your employment with the Company and for any period that is equivalent to a period for which you are being paid severance after termination, you will not, directly or indirectly, engage or participate or make any financial investments in (other than ownership of up to 5% of the aggregate of any class of securities of any corporation if such securities are listed on a national stock exchange or under section 12(g) of the Securities Exchange Act of 1934) or become employed by, or act as an agent or principal of, or render advisory or other management services to or for, any Competing Business. As used herein the term “Competing Business” means any business which includes hotel ownership, hotel management, hotel services or hotel franchising that competes directly or indirectly with the Company.
You also agree that during your employment at the Company and during any period that is equivalent to a period for which you are being paid severance after termination, you will not solicit, raid, entice or induce any person that 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.

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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. 
NATURE OF EMPLOYMENT: As explained to you on the application for employment you submitted, 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. 
DRUG SCREEN AND BACKGROUND CHECK: RLH has a vital interest in maintaining safe, healthful and efficient working conditions for its employees. With this in mind, employment at RLH is contingent on your satisfactory completion of a drug screen and background check. 
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. 

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Harry, I am very pleased and proud to be adding your talents to our management team which 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/ Gregory T. Mount__________ 
Gregory T. Mount
President & Chief Executive Officer 
Red Lion Hotels Corporation
Accepted as of the date first set forth above
__/s/ Harry Sladich      __________ 
Harry Sladich

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