Document:

exv10w3

 

Exhibit 10.3

EXECUTIVE EMPLOYMENT AGREEMENT

EXECUTIVE EMPLOYMENT AGREEMENT, is dated effective as of April 12, 2007 (“Effective Date”) by and
between Red Lion Hotels Corporation, a Washington corporation (the “Company”), and John Taffin (the
“Executive”) and is intended to replace and supercede that certain Executive Employment Agreement
between the Company and the Executive dated July 24, 2006.

The Company desires to employ the Executive in the capacities of Executive Vice President, Hotel
Operations, 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, 2007 unless terminated earlier in accordance with
Section 5 of this Agreement; provided, that 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 or
parties not less than 120 days prior to such date that 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, Hotel Operations 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, with the approval of the Chief Executive Officer of the Company, 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. Company and Executive specifically agree that
Executive’s oversight of the operations and management of the Yogo Inn in Lewistown, Montana (the
“Yogo Inn”) shall constitute an Exempted Activity so long as such oversight does not interfere with
Executive’s duties and responsibilities hereunder.

(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 or any of its subsidiaries or on any respective committee of the
Board of Directors of the Company or any of its 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 $210,000 per annum, subject to annual review by the Compensation Committee of the Board of
Directors of the Company (the “Compensation Committee”) and in the discretion of such Committee,
increased 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 be eligible to receive a cash bonus (“Bonus”) as follows:
Executive shall participate in such annual Bonus plans or programs as may be adopted by the
Company’s Compensation Committee (collectively with any of its successors in authority, the
“Committee”) from time to time for senior executives, provided, however, that conditioned upon
attainment of target performance measure requirements based on one or more performance measures as
may be determined by the Committee, the target Bonus for each calendar year during the Term for
which Executive shall be eligible shall be 30% of Executive’s base salary.

(c) The Board (or the committee to which it has delegate applicable authority) 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 upon the Executive’s death or, upon notice by the Company or the
Executive to the other, in the case of a determination of the Executive’s Disability. 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 continuous, 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 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 upon the occurrence of
any event constituting “Cause” as defined herein.

(c) The Term may be terminated by the Executive upon notice to the Company within six months of the
occurrence of any event constituting “Good Reason” as defined herein.

6. Severance.

(a) If the Term is terminated by the Company for Cause, 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 provided under the
terms of applicable employee plans to terminated employees (the “Standard Termination Payments”).

(b) If the Term is terminated upon the Executive’s death or Disability, the Company and the
Subsidiary 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 Company’s Executive Officers Variable Pay Plan dated effective
January 1, 2005 (including any successor or replacement bonus plans, the “VPP”), for the prior
fiscal year, (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, and (iv) all death or disability payments or other employee benefits
under their employee benefit plans.

(c) If the Company terminates the Executive’s employment under this Agreement without Cause other
than by reason of his death or Disability or if the Executive terminates his employment hereunder
for Good Reason, the Company shall (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 previous fiscal year, if applicable, (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 twice the Executive’s total cash compensation for the previous fiscal
year (but not less than twice $210,000), and (v) continue in effect the Executive’s benefits with
respect to life, health and insurance plans or their equivalent for two years. 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 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 of this Agreement to expire without
extension, the Company shall (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
previous fiscal year, if applicable, (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 twice the Executive’s total cash compensation for the previous fiscal year
(but not less than twice $210,000), and (v) continue in effect the Executive’s benefits with
respect to life, health and insurance plans or their equivalent for two years. 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 death or Disability, or if the Term is not extended as a result of the
Company giving notice that it elects to permit the term of this Agreement to expire without
extension, or if there is a Change of Control, or if the Executive terminates his employment
hereunder for Good Reason pursuant to Section 5(c): all stock options granted to the Executive
shall immediately vest and be exercisable and any stock grant to the Executive shall immediately
vest, all Company imposed restrictions on restricted stock

 
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issued to the Executive shall be terminated and all restricted stock awarded to Executive but
not yet issued shall be promptly issued to Executive.

(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 positions and responsibilities as described in Section 2(a)
hereof; (ii) the removal of the Executive from the position as 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 18 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 titles, 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 for Cause, Disability or as a result
of the Executive’s death or by the Executive other than for Good Reason. 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: (i) the majority of the Board of Directors of the Company consists of individuals other
than Incumbent Members, which shall mean the members of the Company’s Board of Directors on the
Effective Date; provided that any person becoming a director subsequent to the Effective Date whose
election or nomination for election was supported by the Executive or a majority of the directors
who then comprised the Incumbent Directors shall be considered an Incumbent Director; (ii) the
Company adopts a plan of liquidation providing for the distribution of all or substantially all of
the assets of the Company on a consolidated basis; or (iii) the Company sells all or substantially
all of its assets on a consolidated basis in a single transaction or series of transactions. 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).

(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 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 and the Subsidiary under this Section 6.

7. Confidential Information.

(a) The Executive acknowledges that the Company and its Affiliates own and have developed and
compile, 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.

 
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(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 a Company Affiliate 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 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 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 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. Notwithstanding anything to the contrary in this Section 8(a) the
Company acknowledges that the Executive owns 50% of the Yogo Inn in Lewistown, Montana and does not
consider it a Competing Business. Further notwithstanding anything to the contrary in this Section
8(a), without the Company’s prior written consent, during Executive’s employment hereunder and for
a period of twelve months thereafter, the Executive will not work full-time or part-time in
Lewistown, Montana as an employee or independent contractor of the Yogo Inn, provided that
Executive may oversee the Yogo Inn’s operations and management in a manner consistent with his
oversight of the Yogo Inn’s operations and management during the
Term.

(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
a Company Affiliate (other than a person whose employment with such Company Affiliate has been
terminated by such Company Affiliate), to become employed by any person, firm or corporation.

 
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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 Affiliates 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 of the Company.

(b) The parties intend that the severance payments and other compensation provided for herein are
reasonable compensation for Executive’s services to 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”), 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, net of the reduction in 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
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

 
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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), 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. Notices.

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:

John Taffin
5111 S Menaul Ct
Spokane, WA 99224

If to the Company, to:

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

With copy to:

Red Lion Hotels Corporation
201 W. North River Drive
Spokane, WA 99201
Attn. Corporate Counsel

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

12. 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 their respective 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 and the Subsidiary 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 their reasonable attorney fees and

 
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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.

(f) Upon the Effective Date, this Agreement supersedes any existing employment agreements between
the Employee and the Company and any of its Affiliates all of which shall be terminated upon the
Commencement Date of this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date first
above written.

	 	 	 	 	 
	EXECUTIVE:	 	COMPANY:	 
	 
	 	 	 
	 	 	RED LION HOTELS CORPORATION	 
	 
	 	 	 	 
	 
	 	By	 	 
	 

	 	 	 	 
	John Taffin

	 	 	Arthur Coffey, President and Chief Executive Officer	 

 
John Taffin Executive Employment Agreement Page 8exv10w4

 

Exhibit 10.4

EXECUTIVE EMPLOYMENT AGREEMENT

This EXECUTIVE EMPLOYMENT AGREEMENT, is dated effective as of April 12, 2007 (“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 supercede that certain
Executive Employment Agreement between the Company and the Executive dated August 10, 2006.

The Company desires to employ the Executive in the capacities 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, 2007 unless terminated earlier in accordance
with Section 5 of this Agreement; provided, that 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 or parties not less than 120 days prior to such date that 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, Senior 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, with the approval of the Chief Executive Officer of the Company, 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.

 
Thomas L. McKeirnan Executive Employment Agreement Page 1

 

 

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 or any of its subsidiaries or on any respective committee of the
Board of Directors of the Company or any of its 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 $190,000 per annum, subject to annual review by the Compensation Committee of the Board
of Directors of the Company (the “Compensation Committee”) and in the discretion of such Committee,
increased 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 be eligible to receive a cash bonus (“Bonus”) as follows:
Executive shall participate in such annual Bonus plans or programs as may be adopted by the
Company’s Compensation Committee (collectively with any of its successors in authority, the
“Committee”) from time to time for senior executives, provided, however, that conditioned upon
attainment of target performance measure requirements based on one or more performance measures as
may be determined by the Committee, the target Bonus for each calendar year during the Term for
which Executive shall be eligible shall be 30% of Executive’s base salary.

(c) The Board (or the committee to which it has delegate applicable authority) 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 upon the Executive’s death or, upon notice by the Company or the
Executive to the other, in the case of a determination of the Executive’s Disability. 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 continuous, 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 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.

 
Thomas L. McKeirnan Executive Employment Agreement Page 2

 

 

(b) The Term may be terminated by the Company upon notice to the Executive upon the occurrence of
any event constituting “Cause” as defined herein.

(c) The Term may be terminated by the Executive upon notice to the Company within six months of the
occurrence of any event constituting “Good Reason” as defined herein.

6. Severance.

(a) If the Term is terminated by the Company for Cause, 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 provided under the
terms of applicable employee plans to terminated employees (the “Standard Termination Payments”).

(b) If the Term is terminated upon the Executive’s death or Disability, the Company and the
Subsidiary 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 Company’s Executive Officers Variable Pay Plan dated effective
January 1, 2005 (including any successor or replacement bonus plans, the “VPP”), for the prior
fiscal year, (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, and (iv) all death or disability payments or other employee benefits
under their employee benefit plans.

(c) If the Company terminates the Executive’s employment under this Agreement without Cause other
than by reason of his death or Disability or if the Executive terminates his employment hereunder
for Good Reason, the Company shall (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 previous fiscal year, if applicable, and (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 (but not less than $190,000), 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 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 of this Agreement to expire without
extension, the Company shall (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
previous fiscal year, if applicable, (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 (but not
less than $190,000), 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 death or Disability, or if the Term is not extended as a result of the
Company giving notice that it elects to permit the term of this Agreement to expire without
extension, or if there is a Change of Control, or if the Executive terminates his employment
hereunder for Good Reason pursuant to Section 5(c): all stock options granted to the Executive shall immediately vest and be exercisable and any
stock grant to the Executive shall immediately vest, all Company imposed restrictions on restricted
stock

 
Thomas L. McKeirnan Executive Employment Agreement Page 3

 

 

issued to the Executive shall be terminated and all restricted stock awarded to Executive but
not yet issued shall be promptly issued to Executive.

(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 positions and responsibilities as described in Section 2(a)
hereof; (ii) the removal of the Executive from the position as 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 18 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 titles, 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 for Cause, Disability or as a result
of the Executive’s death or by the Executive other than for Good Reason. 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: (i) the majority of the Board of Directors of the Company consists of individuals other
than Incumbent Members, which shall mean the members of the Company’s Board of Directors on the
Effective Date; provided that any person becoming a director subsequent to the Effective Date whose
election or nomination for election was supported by the Executive or a majority of the directors
who then comprised the Incumbent Directors shall be considered an Incumbent Director; (ii) the
Company adopts a plan of liquidation providing for the distribution of all or substantially all of
the assets of the Company on a consolidated basis; or (iii) the Company sells all or substantially
all of its assets on a consolidated basis in a single transaction or series of transactions. 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).

(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 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 and the Subsidiary under this Section 6.

7. Confidential Information.

(a) The Executive acknowledges that the Company and its Affiliates own and have developed and
compile, 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.

 
Thomas L. McKeirnan Executive Employment Agreement Page 4

 

 

(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 a Company Affiliate 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 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 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 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
a Company Affiliate (other than a person whose employment with such Company Affiliate has been
terminated by such Company 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 Affiliates 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

 
Thomas L. McKeirnan Executive Employment Agreement Page 5

 

 

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 of such company.

(b) The parties intend that the severance payments and other compensation provided for herein are
reasonable compensation for Executive’s services to 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”), 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, net of the reduction in 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
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), 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. Notices.

     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

 
Thomas L. McKeirnan Executive Employment Agreement Page 6

 

 

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.

12. 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 their respective 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 and the Subsidiary 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 their 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.

(f) Upon the Effective Date, this Agreement supersedes any existing employment agreements between

 
Thomas L. McKeirnan Executive Employment Agreement Page 7

 

 

the Employee and the Company and any of its Affiliates all of which shall be terminated upon the
Commencement Date of this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date first
above written.

	 	 	 	 	 
	EXECUTIVE:	 	COMPANY:
	 
	 	 	 	 
	 	 	RED LION HOTELS CORPORATION
	 
	 	 	 	 
	 

	 	By	 	 
	 

	 	 	 	 
	Thomas L. McKeirnan

	 	 	Arthur Coffey, President and

Chief Executive Officer	 

 
Thomas L. McKeirnan Executive Employment Agreement Page 8

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