10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  For the transition period from              to             

Commission File Number: 001-13957

RED LION HOTELS CORPORATION

(Exact name of registrant as specified in its charter)

Washington	91-1032187
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
201 W. North River Drive, Suite 100
Spokane Washington	99201
(Address of principal executive offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (509) 459-6100

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $.01 per share	New York Stock Exchange
Preferred Stock Purchase Rights	New York Stock Exchange
Guarantee with Respect to 9.5% Trust Preferred Securities (Liquidation Amount of $25 per Trust Preferred Security) of Red Lion Hotels Corporation Capital Trust	New York Stock Exchange

Securities registered pursuant to section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨	Accelerated filer  þ	Non-accelerated filer  ¨	Smaller reporting company  ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.)    Yes  ¨    No  þ

The aggregate market value of the registrant’s common stock as of June 30, 2011 was $150.9 million, of which 67.3% or $101.5 million was held by non-affiliates as of that date. As of March 8, 2012, there were 19,255,939 shares of the Registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for its 2012 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days of the end of the Registrant’s 2011 fiscal year, are incorporated by reference herein in Part III.

TABLE OF CONTENTS

Item No.	Description	Page No.
PART I
Item 1	Business		3
Item 1A	Risk Factors		9
Item 1B	Unresolved Staff Comments		25
Item 2	Properties		25
Item 3	Legal Proceedings		27
Item 4	Mine and Safety Disclosures		27
Item 4A	Executive Officers of the Registrant		27
PART II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		29
Item 6	Selected Financial Data		31
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations		34
Item 7A	Quantitative and Qualitative Disclosures About Market Risk		51
Item 8	Financial Statements and Supplementary Data		52
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		87
Item 9A	Controls and Procedures		87
Item 9B	Other Information		89
PART III
Item 10	Directors, Executive Officers and Corporate Governance		89
Item 11	Executive Compensation		89
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		89
Item 13	Certain Relationships and Related Transactions, and Director Independence		89
Item 14	Principal Accountant Fees and Services		89
PART IV
Item 15	Exhibits and Financial Statement Schedules		90
	Signatures		94

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PART I

This annual report on Form 10-K includes forward-looking statements. We have based these statements on our current expectations and projections about future events. When words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “seek,” “should,” “will” and similar expressions or their negatives are used in this annual report, these are forward-looking statements. Many possible events or factors, including those discussed in “Risk Factors” under Item 1A of this annual report, could affect our future financial results and performance, and could cause actual results or performance to differ materially from those expressed. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this annual report.

In this report, “we,” “us,” “our,” “our company,” “the company” and “RLH” refer to Red Lion Hotels Corporation and, as the context requires, all of its wholly owned subsidiaries, including Red Lion Hotels Holdings, Inc. and Red Lion Hotels Franchising, Inc. and Red Lion Hotels Limited Partnership. “Red Lion” refers to the Red Lion brand. The terms “the system,” “system-wide hotels” or “system of hotels” refer to our entire group of owned, leased and franchised hotels.

Item 1.    Business

Introduction

We are a NYSE-listed hospitality and leisure company (ticker symbols RLH and RLH-pa) primarily engaged in the ownership, operation and franchising of midscale, full, select and limited service hotels under our proprietary Red Lion brand. Established over 30 years ago, the Red Lion brand is regionally recognized and is particularly well known in the western United States, where our hotels are located. The Red Lion brand is typically associated with midscale full and select service hotels.

Our company was incorporated in the state of Washington in April 1978, and until 1999 operated hotels under various brand names including Cavanaughs Hotels. In 1999, we acquired WestCoast Hotels, Inc., and rebranded our Cavanaughs hotels to the WestCoast brand, changing our name to WestCoast Hospitality Corporation. In 2001, we acquired Red Lion Hotels, Inc. In September 2005, after rebranding most of our WestCoast hotels to the Red Lion name, we changed our company name to Red Lion Hotels Corporation. All of our hotels operate under the Red Lion brand.

Red Lion works to create an environment that allows our customers to feel at home while they travel. Our hotels and their service culture are successful in both urban and smaller markets, and our hotels strive to reflect the character of the local markets in which they operate. We believe our focus on friendly, personalized customer service, cleanliness and value help deliver our brand promise in the warm and authentic manner for which Red Lion has historically been known. Delivering these customer service components in a consistent manner will help drive our hotels’ success.

As of December 31, 2011, our system of hotels was comprised of 48 hotels located in nine states and one Canadian province, with 9,010 rooms and 452,387 square feet of meeting space as provided below:

	Hotels		Total Available Rooms		Meeting Space (sq. ft.)
Red Lion Owned and Leased Hotels
Continuing Operations		28		5,563		280,574
Discontinued Operations		2		261		10,192
Red Lion Franchised Hotels		18		3,186		161,621
Total		48		9,010		452,387

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Operations

We operate in three reportable segments:

The hotels segment derives revenue primarily from guest room rentals and food and beverage operations at our owned and leased hotels. As of December 31, 2011, we operated 30 hotels, 2 of which are classified as discontinued operations and not included in reported comparable hotel statistics from continuing operations. Of our 30 hotels, 25 are wholly-owned and five are leased. During 2011, our hotel segment accounted for approximately 88.6% of total revenues.

The franchise segment is engaged primarily in licensing the Red Lion brand to franchisees. This segment generates revenue from franchise fees that are typically based on a percent of room revenues and are charged to hotel owners in exchange for the use of our brand and access to our central services programs. These programs include our reservation system, guest loyalty program, national and regional sales, revenue management tools, quality inspections, advertising and brand standards. As of December 31, 2011, we had 18 franchised hotels operating under the Red Lion brand. During 2011, our franchise segment accounted for approximately 2.5% of total revenues.

The franchise segment has also historically reflected revenue from management fees charged to the owners of managed hotels. We have not managed any hotels for third parties since January 2008.

The entertainment segment derives revenues primarily from promotion and presentation of entertainment productions and ticketing services under the operations of WestCoast Entertainment and TicketsWest. The ticketing service offers ticketing inventory management systems, call center services, and outlet/electronic channel distribution for event locations. During 2011, our entertainment segment accounted for approximately 7.3% of total revenues.

Our remaining activities, none of which constitutes a reportable segment, have been aggregated into “other.”

A summary of our reporting segment revenues is provided below (in thousands, except for percentages). For further information regarding our business segments, see Note 4 of Notes to Consolidated Financial Statements.

	Year ended December 31,
	2011				2010				2009
Hotels:
Rooms revenue	$	100,735	64.5	%	$	104,356	65.5	%	$	98,717	61.2	%
Food and beverage revenue		33,731	21.6	%		35,249	22.1	%		40,354	25.0	%
Other department revenue		3,825	2.5	%		4,773	3.0	%		4,249	2.7	%
Total hotels segment revenue		138,291	88.6	%		144,378	90.6	%		143,320	88.9	%
Franchise revenue		3,955	2.5	%		3,209	2.0	%		3,616	2.2	%
Entertainment revenue		11,379	7.3	%		9,236	5.8	%		11,690	7.2	%
Other revenue		2,455	1.6	%		2,481	1.6	%		2,641	1.7	%
Total revenue	$	156,080	100.0	%	$	159,304	100.0	%	$	161,267	100.0	%

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Revenue per available room (“RevPAR”) for owned and leased hotels on a comparable basis from continuing operations for 2011 increased 2.7% due to a 120 basis point increase in occupancy and a 0.6% increase in average daily rate (“ADR”). The increase in occupancy was primarily driven by an increase in transient business. Including franchised hotels, system-wide RevPAR on a comparable basis from continuing operations increased 3.6% year-over-year due to a 200 basis point increase in occupancy and a 0.1% increase in ADR. Average occupancy, ADR and RevPAR statistics for comparable hotels from continuing operations are provided below:

	2011							2010
	Average Occupancy			ADR		RevPAR		Average Occupancy			ADR		RevPAR
Owned and Leased Hotels		58.1	%	$	81.71	$	47.45		56.9	%	$	81.24	$	46.22
Franchised Hotels		64.5	%	$	85.59	$	55.24		60.3	%	$	86.70	$	52.27
Total System Wide(1)		59.8	%	$	82.86	$	49.59		57.8	%	$	82.80	$	47.88

Change from prior comparative periods:

	2011 vs. 2010
Owned and Leased Hotels		1.2	0.6	%	2.7	%
Franchised Hotels		4.2	-1.3	%	5.7	%
Total System Wide		2.0	0.1	%	3.6	%

(1) Includes all hotels owned, leased and franchised, presented on a comparable basis. This excludes two owned hotels identified as discontinued operations. The Red Lion Hotel on Fifth Avenue in Seattle, WA, which was sold in June 2011, has been excluded from the owned and leased hotel statistics and included in the franchised statistics as we maintained a franchise agreement on that property.

Average occupancy, ADR and RevPAR, as defined below, are widely used in the hospitality industry and appear throughout this document as important measures to the discussion of our operating performance.

• Average occupancy represents total paid rooms occupied divided by total available rooms. We use average occupancy as a measure of the utilization of capacity in our system of hotels.

• RevPAR represents total room and related revenues divided by total available rooms. We use RevPAR as a measure of performance yield in our system of hotels.

• ADR represents total room revenues divided by the total number of paid rooms occupied by hotel guests. We use ADR as a measure of room pricing in our system of hotels.

• Total available rooms represents the number of rooms available multiplied by the number of days in the reported period. We use total available rooms as a measure of capacity in our system of hotels and do not adjust total available rooms for rooms temporarily out of service for remodel or other short-term periods.

• Comparable hotels are hotels that have been owned, leased or franchised by us and were in operation throughout each of the full periods presented and excludes hotels that are classified as discontinued operations.

Throughout this document and unless otherwise stated, RevPAR, ADR and average occupancy statistics are calculated using statistics for comparable hotels. Some of the terms used in this report, such as “full service,” “upscale” and “midscale” are consistent with those used by Smith Travel Research, an independent statistical research service that specializes in the lodging industry. Our hotels are typically classified by Smith Travel Research as midscale with food and beverage.

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Company Strategy

Red Lion’s strategy is to grow the brand and profitability through (1) sales and marketing initiatives; (2) leveraging existing assets to grow the franchise business; and (3) leveraging our owned assets to strengthen the balance sheet and refresh our hotels.

Sales & Marketing Initiatives

We have invested in sales and marketing talent and technology to improve our ability to manage the various channels which drive occupancy and rate at our hotels including, transient, group and preferred corporate business. These investments include engaging TravelClick, a leader in developing award-winning hotel websites, to help us create for each Red Lion hotel its own uniquely focused web identity with information tailored specifically to its region. These locally focused websites will give the customers detailed local information while also improving the reservation process online or through mobile devices. Our sales and marketing initiatives including the individual hotel websites provide additional sales resources for our franchise properties as well as to broaden the market for the Red Lion brand. Seasonal transient business is supplemented by our group market which comprises approximately 25% of total room revenue. The sales and marketing technology improves our company’s ability to drive higher rated transient business as compression occurs with available room inventory due to higher group and preferred corporate occupancy. Having restructured our corporate sales team in 2011 to focus individual employees on separate group segments such as sports, military, and school stays, we will continue to focus on driving group and preferred corporate business to offset the seasonal transient business.

Franchising

We believe franchising represents a profitable, non-capital intensive growth opportunity. Our strategy is to commit adequate resources to continue to grow the Red Lion brand in the coming years through franchising. As we have demonstrated with recent new franchisees, our near term effort will continue in Red Lion’s historic geographic footprint in the western U.S., targeting well-located limited, select and full service hotels. The Red Lion brand has been well-known for more than 30 years in the geographic areas in which we currently operate. We feel our historic brand presence and recognition in these regions is attractive to potential franchisees looking for options to offer a distinct product valued by customers.

Today’s economy has forced many hotel owners to look for ways to reduce their operating costs and capital requirements, many of which from an owner’s viewpoint are believed to be brand-imposed unnecessary. By allowing both limited and full service hotels to operate under the Red Lion brand, we are uniquely positioned to provide an appealing alternative for such owners. Our franchising plan includes pursuing 10 to 20 year old hotels whose owners face what they perceive to be unreasonable renovation requirements and who need a strong distribution system. Red Lion features an owner-friendly approach, based on the following: 1) a high level of brand support and access to Red Lion decision makers; 2) flexibility in renovations, and 3) leading distribution technology and sales support.

As the owner of the Red Lion brand, we offer a strong support system by providing a full range of franchise services that we believe are valuable to hotel owners, including (i) central reservations, (ii) a guest loyalty program (iii) revenue management, (iv) national and regional sales, (v) marketing, (vi) systems, operations and customer service training, (vii) corporate purchasing programs and (viii) quality evaluations.

Led by an experienced hotel franchise development executive, we have built an internal support team to help us deliver a positive and profitable experience for our new and existing franchise owners.

Strengthen Balance Sheet; Refresh Hotels

We have also embarked on a program of strategic asset sales to unlock real estate value by means of selective reduction in asset ownership. In June 2011, we sold the Red Lion Hotel on Fifth Avenue in downtown

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Seattle, Washington for $71 million. We used the majority of the net proceeds from this transaction to acquire the ownership interest in 10 previously leased hotels through a tax-deferred exchange. The remaining proceeds were used to retire the prior line of credit of $28 million.

Currently, we are publicly marketing four of our owned assets. Two of these hotel assets, Red Lion Hotel Denver Southeast in Aurora, Colorado, and our Red Lion Colonial Hotel in Helena, Montana, are being marketed with the goal of retaining a franchise relationship with the new owners. Management does not expect to maintain significant continuing involvement in the remaining two non-core assets offered for sale which are Red Lion Inn in Missoula, Montana and the Red Lion Hotel Medford in Medford, Oregon.

Proceeds will be used primarily to reduce debt and make improvements to our owned and leased hotels. We are committed to keeping our properties well maintained and attractive to our customers in order to enhance our competitiveness within the industry and keep our hotels in the midscale category. This requires ongoing access to capital for replacement of outdated furnishings as well as for facility repair, modernization and renovation. Over the last three to four years, our levels of capital expenditures for these purposes have been lower than normal due to the general economic conditions impacting our industry. As a result, we will be required over the next 18 months to invest significant amounts in hotel maintenance in order to support the room rates that we have historically charged.

Hotel Operations Strategy

We will continue to seek ways to improve profitability in 2012 through growth in revenue and cost efficiencies via the following:

• Business Mix.    We have an opportunity to improve our profitability through a shift in our customer mix towards more profitable segments and distribution channels. Group business provides high levels of cash flow in rooms revenue and through group food and beverage revenue primarily from banquet demand. With the group component of our customer mix still recovering from declines experienced in the recent recession, our current focus is to use the revenue management tools we invested in over the past several years to strategically manage lower-rated on-line travel agent and permanent business in an effort to improve the profitability of our transient segment. In addition, we are focused on increasing the reservations received through our website by engaging TravelClick to help us design and launch a new online presence where each Red Lion hotel will have its own uniquely focused web identity with information tailored specifically to its region. Direct e-commerce reservations carry a lower cost than those obtained through high commission or fee based on-line travel agent channels. We also continue to focus on growing group business through direct sales, as well as implementing centralized revenue management across our system of hotels, allowing for greater consistency in pricing to improve value perception and capture market share.

• Investment in Marketing and Sales Resources.    In the third quarter of 2011, we leveraged our system investments from the fourth quarter of 2009 and first quarter of 2010, by restructuring our corporate sales division to focus on individual segments within the group and preferred corporate markets such as sports, military, schools and other key group markets. This focus is designed to improve our lead generation for our owned and franchised hotels which is an important factor in being able to maintain and grow group business and profitably manage our business mix. The systems we implemented in the prior years include an automated sales and catering system that provides our properties with a single customer data base to streamline sales and catering processes, increase efficiency of sales personnel to capture additional business and allow for immediate transparency in monitoring productivity. We also enhanced our focus on our most valuable guests, the members of our loyalty program, the R&R Club (Recognition and Rewards). We modified our program for these members and experienced growth in the club’s membership for 2011.

• Responding to Customer Demand.    The Red Lion brand is well known and recognized in the western United States. For many years our hotels have been associated with value-oriented, customer friendly

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lodging with abundant meeting spaces and food and beverage operations in the majority of our locations. To emphasize our desire to quickly and effectively respond to our customers’ needs, we support and foster a culture where every associate has the ability to address a customer’s question, needs or concerns through the empowerment of our iCare, iCan philosophy. We will continue to offer our friendly customer service, seek out and share the best of our local markets and provide a comfortable, authentic experience to our guests.

• Expense Management and Other Revenue.    During 2011, we had a decrease of 130 basis points in our comparable direct hotel operating margin from continuing operations on an improvement in hotel revenues of $2.2 million The primary driver of revenue increase was a 120 basis point in occupancy which concurrently drove higher occupied room costs. An increase in sales, marketing, utilities and maintenance expense also contributed to the margin decline. We have many ongoing margin improvement initiatives including energy efficiency to offset rising utility rates, food and beverage pricing improvements and continued review and adjustment of our supply and purchasing contracts. Our largest daily investment in operations is in labor costs. We continue to focus on improved labor management and efficiency in connection with the growth in occupancy.

Summary

Our current hotels are primarily located in nine Western states, with the majority in secondary and tertiary markets. We believe the current operating environment provides us the opportunity to grow our business through sales and marketing initiatives, including a focus on the local experience in our markets, franchising as hotel owners seek to improve profitability through an affiliation with a strong regional hotel brand and leveraging our owned assets to strengthen our balance sheet and refresh our hotels to meet customer’s current expectations. We will continue to build on the strength and recognition of the Red Lion brand in the geographic footprint we have built as a platform for growth and achievement of long-term profitability and returns to shareholders.

During 2012, we expect overall economic conditions in the United States to continue to improve, although we believe that conditions in the markets in which we operate will be challenging throughout the year. While our goal is to deliver bottom-line profitability through the above-described initiatives, there can be no assurance our results of operations will improve.

Employees

As of December 31, 2011, we employed 2,225 people on a full-time or part-time basis, with 2,083 directly related to hotel operations. We also had 88 employees in other operating segments, primarily within our entertainment segment, and 54 employees in our corporate office. Our total number of employees fluctuates seasonally, and we employ many part-time employees.

At December 31, 2011, approximately 5.26% of our total workforce was covered by various collective bargaining agreements providing, generally, for basic pay rates, working hours, other conditions of employment and organized settlement of labor disputes. We believe our employee relations are satisfactory.

Available Information

Through our website (www.redlion.com), we make available our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, amendments to these filings and all other reports and documents that we file with the U.S. Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. The public may read and copy the materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

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The SEC also maintains an Internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Our internet website also contains our Code of Business Conduct and Ethics, our Corporate Governance Guidelines; charters for our Audit, Compensation and Nominating and Corporate Governance Committees, Accounting and Audit Complaints and Concerns Procedures, our Statement of Policy with Respect to Related Party Transactions and information regarding shareholder communications with our board of directors.

Item 1A.    Risk Factors

We are subject to various risks, including those set forth below, that could have a negative effect on our financial condition and could cause results to differ materially from those expressed in forward-looking statements contained in this report or other Red Lion communications.

Certain of our shareholders, including our largest shareholder which currently owns approximately 29% of our stock, have encouraged us to sell our company in its entirety or in parts. These or other shareholders may seek to impact our corporate policy and strategy, and their interests may differ from those of other shareholders. In addition, given the amount of stock held by our largest shareholder, we would likely need its approval in order to undertake any sale or other disposition of all or substantially all of our assets. If any of our larger shareholders or any group of shareholders decided to sell their shares, this would likely result in a significant decline in the trading price of our common stock.

As of February 28, 2012, Columbia Pacific Opportunity Fund, L.P. (Columbia Pacific) held almost 29% of our outstanding shares of common stock. In June of 2008, Columbia Pacific filed a Schedule 13D with the SEC disclosing that it had communicated to us that it believed we would be better able to maximize shareholder value through a liquidation or sale. It has subsequently filed numerous amendments to the Schedule 13D disclosing additional communications with our company. An amendment filed by Columbia Pacific on February 28, 2012 included a copy of a letter to our Board of Directors encouraging us to sell our company in its entirety or in parts. A number of other significant shareholders have also expressed to us similar sentiments.

These or other shareholders may take actions designed to impact our corporate policy and strategy, and their interests may differ from those of other shareholders. Such actions could include, among other things, attempting to obtain control of our Board of Directors or initiating or substantially assisting an unsolicited takeover attempt.

Under our Articles of Incorporation and the laws of the state where we are incorporated, we can undertake a merger or sale of all or substantially all of our assets only if the transaction is approved by holders of at least two-thirds of our outstanding shares of common stock. This in turn means that any person or group of persons holding at least one-third of our outstanding shares of common stock would be able to block any such transaction if they chose to do so. Because Columbia Pacific already holds so close to one-third of our shares, we believe that as a practical matter it will be able, either acting alone or with other shareholders, to prevent any such transaction believed not to be in its or their best interests.

This state of affairs adds a level of uncertainty to our business and operations, including in employee hiring and retention, in franchise acquisitions, and in generally developing corporate policy and strategy. In addition, because our common stock is relatively thinly traded, if Columbia Pacific or any other significant shareholders decided to sell their holdings of our common stock, this would likely result in a significant decline in its trading price. Our stock price may also fluctuate materially based on announcements by our shareholders disclosing acquisitions or sales of our common stock or expressing their views with respect to actions they believe should be taken by our company.

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General economic conditions will continue to negatively impact our results and liquidity.

Many businesses, including Red Lion, have been adversely affected by the state of the economy. Discretionary travel has decreased because of economic pressures, and this in turn has hurt the hospitality industry and our company. Over the last several years, high unemployment, lower family income, low corporate earnings, lower business investments and lower consumer spending all have reduced the demand for hotel rooms and related lodging services and put pressure on industry room rates and occupancy. In 2012, we expect our operations and financial results will continue to be negatively impacted by general economic conditions, weak hospitality occupancy and rates and constraints on availability of financing for us and for potential acquirers of our hotels listed for sale. These factors could also negatively impact our ability to obtain future financing and our liquidity in general. While we believe we have adequate sources of liquidity to meet our anticipated requirements for working capital and debt service for the foreseeable future, if our cash flow or capital resources prove inadequate or we do not meet our financial debt covenants, we could potentially face liquidity problems that could have a material adverse effect on our results of operations and financial condition.

Our business requires capital for ongoing hotel maintenance, as well as for any acquisitions or development projects we may want to undertake. If needed capital is not available, our ability to successfully compete with hotels in our scale category may be adversely impacted.

We are committed to keeping our properties well maintained and attractive to our customers in order to enhance our competitiveness within the industry and keep our hotels in the midscale category. This requires ongoing access to capital for replacement of outdated furnishings as well as for facility repair, modernization and renovation. To the extent we cannot fund these expenditures from cash generated from operations, funds must be borrowed or otherwise obtained.

Over the last three to four years, our levels of capital expenditures for these purposes have been lower than normal due to the general economic conditions impacting our industry. As a result, we will be required over the next 18 months to invest significant amounts in hotel maintenance in order to support the room rates that we have historically charged. If we are unable to make these investments, we may be required to reduce rates, which could cause our hotels to be classified in a lower scale category and generally have a material adverse effect on the Red Lion brand and our business in general.

Hotel maintenance and new project development are subject to a number of risks, including:

• Availability of capital;

• Construction delays and cost overruns;

• Numerous federal, state and local government regulations affecting the lodging industry, including building and zoning requirements and other required governmental permits and authorizations;

• Uncertainties as to market demand or a loss of market demand after capital improvements have begun; and

• Potential environmental problems.

The availability of capital for new investments and maintenance of existing hotels depends on a number of factors including our profitability, our degree of leverage, the value of our assets, borrowing restrictions which may be imposed by lenders and conditions in the credit markets. The condition of the capital markets and liquidity factors are outside our control, so there is no assurance that we will be able to obtain the necessary financing.

If we raise capital through issuance of additional common stock, preferred stock or convertible debt, current shareholders may experience significant dilution. Moreover, our common stock has recently been trading at a price/earnings multiple higher than many of the companies in our industry, which may make it difficult to raise money through equity issuances without adversely impacting the trading price of our stock.

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If additional capital is obtained through financing, our leverage may increase. If our leverage increases, the resulting debt service could adversely affect our operating cash flow. Our continuing indebtedness could increase our vulnerability to general economic and lodging industry conditions, including increases in interest rates.

Any unanticipated delays or expenses incurred in connection with hotel maintenance and renovation and new project development could impact expected revenues and availability of funds, negatively affect our reputation among hotel customers, owners and franchisees and otherwise adversely impact our results of operations and financial condition, including the carrying costs of our assets.

We will be required to refinance our credit facility and other indebtedness in 2013, and there is no assurance that we will be able to refinance that debt.

Our credit facility matures on March 31, 2013, and we have an additional $40.2 million in secured debt that matures on July 11, 2013. As a result, we will be required to repay, refinance or renegotiate this indebtedness on or prior to its maturity. We are currently pursuing sales of a number of our properties. We plan to use the net proceeds of these sales primarily to repay maturing indebtedness. However, there is no assurance that we will be able to sell these properties at acceptable prices. Moreover, even if these sales do occur, we will still need to refinance a substantial portion of the maturing indebtedness. Our ability to refinance on acceptable terms will depend on a number of factors, including our recent financial performance, degree of leverage, the value of our assets, borrowing restrictions which may be imposed by lenders and conditions in the credit markets at the time we refinance. There is no assurance that we will be able to obtain additional financing when needed. For additional information, see Note10 of Notes to Consolidated Financial Statements and Note 11 of Notes to Consolidated Financial Statements.

Failure to comply with debt covenants could adversely affect our financial results or condition.

We maintain a variable interest credit facility with Wells Fargo Bank, National Association, which includes up to a $10 million revolving line of credit, $0.8 million of which was outstanding at December 31, 2011, and a term loan on which $29.5 million was outstanding on that date. The facility, which matures on March 31, 2013, is secured by 14 of our hotel properties and contains customary affirmative and negative covenants, the most restrictive of which are financial covenants related to leverage and debt service coverage. We were in compliance with all of these covenants on December 31, 2011. However, there is no assurance that we will be able to comply with these covenants in the future. Any failure to do so could result in a demand for immediate repayment of our obligations under the facility and any other indebtedness for which such failure or repayment demand constitutes an event of default, which would adversely affect our results of operation and financial condition, and limit our ability to obtain financing. For additional information, see Note 10 of Notes to Consolidated Financial Statements and Note 11 of Notes to Consolidated Financial Statements.

We have incurred debt financing and may incur increased indebtedness in connection with capital expenditures, other corporate purposes or growth of our system of hotels.

A substantial portion of our outstanding indebtedness is secured by individual properties. Neither our Articles of Incorporation nor our Bylaws limit the amount of indebtedness that we may incur. Subject to limitations in our debt instruments, we may incur additional debt in the future to finance hotel renovations, repairs and replacements, for general corporate purposes or for hotel acquisitions. If our leverage increases, the resulting debt service could adversely affect our operating cash flow. Our continuing indebtedness could increase our vulnerability to general economic and lodging industry conditions, including increases in interest rates, and could impair our ability to obtain additional financing in the future and to take advantage of significant business opportunities that may arise. Our indebtedness is, and will likely continue to be, secured by mortgages on our owned hotels. If we are not able to meet our debt service obligations, we risk the loss of some or all of our assets, including our hotels, to foreclosure.

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Adverse economic conditions could cause needed capital to be unavailable. In such circumstances, if we had to repay indebtedness, we could be required to sell one or more of our owned hotels at unattractive prices. Economic conditions could result in higher interest rates, which would increase debt service on our variable rate credit facilities and could reduce the amount of cash available for general corporate purposes.

We incurred net operating losses in each of the years 2008 through 2011, and there is no assurance that we will be able to achieve profitability in the future.

During each of the years 2008 through 2011, we incurred significant net operating losses. In addition to their direct adverse effect on our financial condition, these losses have increased our costs of borrowing and could well impair our ability to refinance maturing debt or raise capital needed for hotel maintenance and other corporate purposes. There is no assurance that we will be able to achieve profitability in the future.

Our operating results are subject to conditions affecting the lodging industry.

Our revenues and operating results may be impacted by and fluctuate due to a number of factors, including the following:

• Changes in demand for transient rooms and related lodging services, including a reduction in business travel as a result of general economic conditions;

• Extended periods of low occupancy demand, which may negatively impact our ability to increase rates;

• Changes in travel patterns, extreme weather conditions and cancellation of or changes in events scheduled to occur in our markets;

• The attractiveness of our hotels to consumers and competition from other hotels and the significant investment in hotel maintenance and renovation needed due to the last three to four years of reduced capital expenditure levels;

• The need to periodically repair and renovate the hotels in our system, including the ongoing need to refresh hotels to meet current industry standards and guest expectations;

• Insufficient available capital to fund renovations and investments needed to maintain our competitive position;

• The quality and performance of the employees of our hotels;

• Increases in transportation and fuel costs, the financial condition of the airline industry and the resulting impacts on travel, including possible cancellation or reduction of scheduled flights into our markets and reductions in our business with airlines crews which regularly stay at our hotels in many markets;

• Increases in operating costs, due to inflation and other factors such as minimum wage requirements, overtime, healthcare, working conditions, work permit requirements and other labor-related costs, energy prices, insurance and property taxes, as well as increases in construction or associated renovation costs;

• Regulations and changes therein relating to the preparation and sale of food and beverages, liquor service and health and safety of premises;

• Impact of war, actual or threatened terrorist attacks, heightened security measures and other national, regional or international political and geopolitical conditions;

• Travelers’ fears of exposure to contagious diseases or foodborne illness;

• The impact of internet intermediaries and competitor pricing;

• Oversupply of hotel rooms in markets in which we operate;

• Restrictive changes in zoning and similar land use laws and regulations, or in health, safety and environmental laws, rules and regulations;

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• Recently enacted, pending and possible future requirements to make substantial modifications to our hotels to comply with the Americans with Disabilities Act of 1990 or other governmental or regulatory requirements;

• The financial condition of third-party property owners and franchisees, which may impact their ability to fund renovations and meet their financial obligations to us as required under franchise agreements;

• Changes in guest expectations with respect to amenities at our hotels that require additional capital to meet; and

• Improvements in technology that require capital investment in infrastructure to implement and maintain.

Any of these factors could adversely impact hotel room demand and pricing and thereby reduce occupancy, ADR and RevPAR; give rise to government imposed fines or private litigants winning damage awards against us; or otherwise adversely affect our results of operations and financial condition.

Due to the geographic concentration of the hotels in our system, our results of operations and financial condition are subject to fluctuations in regional economic conditions.

Of the 48 hotels in our system at December 31, 2011, 34 are located in Oregon, Washington, Idaho and Montana. Accordingly, our results of operations and financial condition may be impacted by the economy of the Pacific Northwest, which is dependent in large part on a limited number of major industries, including agriculture, tourism, technology, timber and aerospace. These industries may be affected by:

• The rate of national and local unemployment;

• The relative strength of national and local economies; and

• Changes in governmental regulations.

In addition, companies in these industries may decide to relocate all or part of their businesses outside the Pacific Northwest. Any of these factors could materially affect the local economies in which these industries operate and where we have a presence. Other adverse events specifically affecting the Pacific Northwest, such as economic recessions or natural disasters, could cause a loss of revenues for our hotels in this region. Our concentration of assets within this region may put us at greater economic risk. In addition, we operate or market multiple hotels within several markets. A downturn in general economic or other relevant conditions in these specific markets or in any other market in which we operate could lead to a decline in demand in these markets and cause a loss of revenues from these hotels.

Our expenses may remain constant or increase even if revenues decline.

The expenses of owning and operating a hotel are not necessarily reduced when circumstances such as market factors and competition cause a reduction in its revenues. Accordingly, a decrease in our revenues could result in a disproportionately higher decrease in our earnings because our expenses are unlikely to decrease proportionately. In addition, we have recently been investing in sales and marketing, franchising, technology and personnel resources in an effort to position our company for future growth. These investments may not produce returns we anticipate or the returns may take longer to achieve than expected.

We are exposed to impairment risk of goodwill, intangibles and other long-lived assets.

Financial and credit market volatility directly impacts fair value measurement through our company’s estimated weighted average cost of capital used to determine discount rate, and through our common stock price that is used to determine market capitalization. During times of volatility, significant judgment must be applied to determine whether credit or stock price changes are a short-term swing or a longer-term trend.

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At December 31, 2011 and 2010, our recorded goodwill amounts were $8.5 million and $28.0 million respectively, and other intangible assets totaled $7.0 million and $8.0 million, respectively. In the second quarter of 2011, we completed the sale of our Red Lion Hotel Fifth Avenue in Seattle, Washington to a third party. We completed an evaluation of our goodwill allocated to the hotel reporting unit during that quarter and determined that $4.7 million of goodwill should be disposed of as part of this sale. In the third quarter of 2011, we impaired $0.6 million of goodwill allocated to our Red Lion Colonial Hotel in Helena, Montana, which is listed for sale. Finally, in the fourth quarter of 2011, during our annual impairment testing, we determined that the carrying amount of the hotel reporting unit exceeded its fair value. Accordingly, a goodwill impairment charge of the remaining $14.2 million in the hotel reporting unit was recognized. Continued adverse market conditions could have a further impact on the fair value of our reporting units that could result in future impairments of goodwill, intangible and other long-lived assets. While we have not previously recorded any impairment losses on our remaining goodwill which is allocated to our franchise and entertainment reporting units, continued adverse market conditions could have a further impact on the fair value of those reporting units that could result in future impairments of goodwill, intangibles and other long-lived assets. If we do not meet our franchise reporting unit growth projections and or do not renew existing franchise agreements, the goodwill associated with this reporting unit could be impaired in future evaluations. In addition, future impairments of our assets held for sale could occur if market conditions change and or we must sell assets to meet other obligations.

The assessment for possible impairment requires us to make judgments, including:

• Estimated future cash flows from the respective properties, which are dependent upon internal forecasts;

• Estimation of the long-term rate of growth for our business;

• The useful life over which our cash flows will occur;

• The determination of real estate and prevailing market values;

• Asset appraisals; and

• Current estimated net sales proceeds from pending offers or net sales proceeds from previous, comparable transactions, if available and appropriate.

In accordance with the guidance for the impairment of long-lived assets, if the expected undiscounted future cash flows are less than net book value, the excess of net book value over estimated fair value of the assets is charged to current earnings. As discussed further in Note 5 of Notes to Consolidated Financial Statements, assets with a carrying amount of $39.8 million were written down to their estimated fair value, resulting in a non-cash impairment charge to continuing operations of $8.4 million and a non-cash impairment charge to discontinued operations of $1.0 million for the year ended December 31, 2011. Changes in our estimates and assumptions as they relate to valuation of goodwill, intangibles and other long-lived assets could affect, potentially materially, our financial condition or results of operations in the future.

The lodging industry is highly competitive, which may impact our ability to compete successfully with other hospitality and leisure companies.

The lodging industry is comprised of numerous national, regional and local hotel companies and is highly competitive. Competition for occupancy is focused on three major categories of travelers: business travelers, convention and group business travelers and leisure travelers. All three categories are significant occupancy drivers for our hotel system and our marketing efforts are geared towards attracting their business.

Competition in the industry is primarily based on service quality, range of services, brand name recognition, convenience of location, room rates, guest amenities and quality of accommodations. We compete against national limited and full service hotel brands and companies, as well as various regional and local hotels in the midscale and upscale full-service hotel segments of the industry. Many of our competitors have greater name recognition, a larger network of locations and greater marketing and financial resources than we do. Additionally, new and existing competitors may offer significantly lower rates, greater convenience, services or amenities or

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superior facilities, which could attract customers away from our hotels. Our ability to remain competitive and to attract and retain customers depends on our success in differentiating and enhancing the quality, value and efficiency of our product and customer service and our ability to make additional capital investment to modernize and update our hotels.

We also compete with other hotel brands and management companies for hotels to add to our system, including through franchise and management agreements. Our competitors include management companies as well as large hotel chains that own and operate their hotels and franchise their brands. As a result, the terms of prospective franchise and management agreements may not be as favorable as our current agreements. In addition, we may be required to make investments in or guarantee the obligations of third parties or guarantee minimum income to third parties in connection with future franchise or management agreements.

If we are unable to compete successfully in these areas, our market share and operating results could be diminished, resulting in a decrease in occupancy, ADR and RevPAR for our hotels. Changes in demographics and other changes in our markets may also adversely impact the convenience or desirability of our hotel locations, thereby reducing occupancy, ADR and RevPAR and otherwise adversely impacting our results of operations and financial condition.

We may be unsuccessful in identifying and completing franchise acquisitions, which could limit our ability to implement our growth strategy and result in significant expense.

We are continuing to pursue the expansion of our franchise operations in markets where we currently operate and in selected new markets. This may require considerable management time as well as expenses for market development before any significant revenues and earnings are generated. There can be no assurance that we will be successful in achieving our objectives with respect to growing the number of franchised hotels in our system or that we will be able to attract qualified franchisees.

The growth in the number of franchised hotels is subject to numerous risks, many of which are beyond the control of our franchisees or us. Among other risks, the following factors affect our ability to achieve growth in the number of franchised hotels:

• Competition with other hotel companies, many of which have more franchisees in their systems and more resources to assist new franchises with capital expenditures needed to satisfy brand standards;

• Our ability to attract and retain qualified franchisees;

• The recognition in the market and the reputation of the Red Lion brand;

• Our dependence on our independent franchisees’ skills and access to financial resources necessary to open or rebrand hotels;

• The ability of our franchisees to open and operate additional hotels profitably. Factors affecting the opening of new hotels, or the conversion of existing hotels to the Red Lion brand, include, among others:

• The availability of hotel management, staff and other personnel;

• The cost and availability of suitable hotel locations;

• The availability and cost of capital to allow hotel owners and developers to fund investments;

• Cost effective and timely construction of hotels (which can be delayed due to, among other reasons, labor and materials availability, labor disputes, local zoning and licensing matters, and weather conditions); and

• Securing required governmental permits;

• Our ability to continue to maintain and enhance our central reservation system to support additional franchisees in a timely, cost-effective manner; and

• The effectiveness and efficiency of our development organization.

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Our failure to compete successfully for franchise properties or to attract and maintain relationships with hotel owners and hotel investors could adversely affect our ability to expand our system of hotels. An inability to implement our growth strategy could limit our ability to grow our revenue base and otherwise adversely affect our results of operations.

If our franchisees terminate or fail to renew their relationship with our company, if new franchisees are unable to effectively integrate their hotels into our system, or if franchisees are unprofitable or go out of business, our franchise revenue will decline.

As of December 31, 2011, there were 18 hotels in our system that were owned by others and operated under franchise agreements. Franchise agreements generally specify a fixed term and contain an early termination provision for the licensee to terminate at specific intervals or for specific reasons with or without penalty by providing notice to us. There is no assurance that these agreements will be renewed, or that they will not be terminated prior to the end of their respective terms. We have one franchise agreement that expires in 2012 and two franchise agreements that provide the ability to exit without penalty. We have one franchise agreement expiring in each of the years 2013, 2014 and 2015. We have one franchise agreement that provides the licensee the ability to terminate without penalty in 2014 and four in 2015.

Government regulation could impact our franchise business.

The Federal Trade Commission (the “FTC”), various states and certain foreign jurisdictions where we market franchises regulate the sale of franchises. The FTC requires franchisors to make extensive disclosure to prospective franchisees but does not require registration. A number of states in which our franchisees operate require registration or disclosure in connection with franchise offers and sales. In addition, several states in which our franchisees operate have “franchise relationship laws” or “business opportunity laws” that limit the ability of the franchisor to terminate franchise agreements or to withhold consent to the renewal or transfer of these agreements. While our business has not been materially affected by such regulation, there can be no assurance that this will continue or that future regulation or legislation will not have such an effect.

The results of some of our hotels are significantly impacted by group contract business and other large customers, and the loss of such customers for any reason could harm our operating results.

Group contract business and other large customers, or large events, can significantly impact the results of operations of our hotels. These contracts and customers vary from hotel to hotel and change from time to time. Such contracts with large customers such as airlines and railroads are typically for a limited period of time after which they may be eligible for competitive bidding. The impact and timing of group business and large events are not always predictable and are often episodic in nature. The operating results for our hotels can fluctuate as a result of these factors, possibly in adverse ways, and these fluctuations can harm our overall operating results.

Our success depends on the value of our name, image and brand. If demand for our hotels decreases or the value of our name, image or brand diminishes, our business and operations would be harmed.

Our success depends, to a large extent, on our ability to shape and stimulate consumer tastes and demands by maintaining innovative, attractive and comfortable properties and services, as well as our ability to remain competitive in the areas of design and quality. If we are unable to anticipate and react to changing consumer tastes and demands in a timely manner, our results of operations and financial condition could be harmed.

Our business would be harmed if our public image or reputation were to be diminished by the operations of any of the hotels in our system. Our brand name and trademarks are integral to our marketing efforts. If the value of our name, image or brand were diminished, our business and operations would be harmed.

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The illiquidity of real estate investments and the lack of alternative uses of hotel properties could significantly limit our ability to respond to adverse changes in the performance of our hotels and harm our financial condition.

Real estate investments are relatively illiquid, and therefore our ability to promptly sell one or more of our hotels in response to changing economic, financial or investment conditions is limited. The real estate market, including the market for our hotels, is affected by general economic conditions, availability of financing, interest rates and other factors, including supply and demand, that are beyond our control. We may be unable to sell our hotels listed for sale and, even if we are able to sell the hotels, it may take us a long time to find willing purchasers, the sales may be on unfavorable terms or we may need to reduce sale prices to points that do not meet all of our objectives for the sales. We also may be required to expend funds to correct defects or to make improvements before a hotel can be sold. If we do not have funds available for such purposes, our ability to sell the hotel could be restricted or the price at which we can sell the hotel may be less than if these improvements were made.

In addition, it may be difficult or impossible to convert hotels to alternative uses if they become unprofitable due to competition, age of improvements, decreased demand or other factors. The conversion of a hotel to an alternative use would also generally require substantial capital expenditures.

This inability to respond promptly to changes in the performance of our hotels could adversely affect our financial condition and results of operations as well as our ability to service debt, including our debentures. In addition, sales of appreciated real property could generate material adverse tax consequences, which may make it disadvantageous for us to sell certain of our hotels.

We may be unable to sell our hotels that are currently listed for sale.

We have listed a number of our hotels for sale, including the Red Lion Hotel Denver Southeast in Aurora, Colorado, the Red Lion Colonial Hotel in Helena, Montana, the Red Lion Hotel Medford in Medford, Oregon and the Red Lion Inn Missoula in Missoula, Montana. Sales of one or more of these hotels may take longer than anticipated, may not occur at all, or may occur at price points that do not meet all of our objectives for the sales. In addition, the sale of these properties may negatively impact the value of the Red Lion brand or our ability to obtain new franchisees, particularly if the purchasers do not continue to flag the hotels with the Red Lion brand or, if they do continue with the Red Lion flag, do not maintain the hotels in a manner that meets brand standards or guest expectations.

We are subject to various obligations and restrictions under the leases governing our leased properties. In addition, we may not be able to renew these leases on favorable terms or at all.

Five of our hotels and our corporate offices are subject to land, facility or land and facility leases. In addition to the requirement to pay rent, the leases for these properties generally impose various maintenance and other obligations on us and may also require us to obtain the consent of the landlord before taking certain actions such as modifications to the properties. These lease provisions may limit our flexibility with the leased properties, delay modifications or other actions we may wish to take, or result in disputes with the landlords. In addition, the terms of the leases for three of our leased properties will expire in the period from 2018 to 2024. The lease on our corporate office space expires in 2012. There is no assurance that the landlords will be willing to extend the leases for these properties or our corporate offices and, even if they are willing to extend, it is possible that the lease costs will increase, which would adversely impact the hotel operations and our expenses.

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Risks associated with real estate ownership may adversely affect revenue or increase expenses.

We are subject to varying degrees of risk that generally arise from the ownership of real property. Revenue and cash flow from our hotels and other real estate may be adversely affected by, and costs may increase as a result of, changes beyond our control, including but not limited to:

• Changes in national, regional and local economic conditions;

• Changes in local real estate market conditions;

• Increases in interest rates, and other changes in the availability, cost and terms of financing and capital leases;

• Increases in property and other taxes;

• The impact of present or future environmental legislation;

• Adverse changes in other governmental regulations, insurance and zoning laws; and

• Condemnation or taking of properties by governments or related entities

These adverse conditions could potentially cause the terms of our borrowings to change unfavorably. In such circumstances, if we were in need of capital to repay indebtedness in accordance with its terms or otherwise, we could be required to sell one or more hotels at unattractive prices. Unfavorable changes in one or more of these conditions could also result in unanticipated expenses and higher operating costs, thereby reducing operating margins and otherwise adversely affecting our results of operations and financial condition.

The increasing use of third-party travel websites by consumers may adversely affect our profitability.

Some of our hotel rooms may be booked through third-party travel websites such as Priceline.com, Travelocity.com and Expedia.com. As internet bookings increase, these intermediaries may be able to obtain higher commissions, reduced room rates or other significant contract concessions from us. Moreover, some of these internet travel intermediaries are attempting to offer hotel rooms as a commodity, by increasing the importance of price and general indicators of quality (such as “three-star downtown hotel”) at the expense of brand identification. We believe that these internet intermediaries hope that consumers will eventually develop brand loyalties to their reservation systems. Although most of the business for our hotels is expected to be derived from traditional channels, if the amount of sales made through internet intermediaries increases significantly, our profitability may be adversely affected.

We have engaged an award-winning hotel website consultant to help us design and launch a new online presence where each of our hotels will have its own uniquely focused web identity with information tailored specifically to its region. Our goal with this investment is to increase the number of reservations received directly through our websites, since these are more profitable than those obtained through high commission or fee-based third-party channels. There can be no assurance that this investment will result in an increase of direct reservations through our websites, nor that such increase, if it occurs, will be sufficient to offset the cost of the investment.

Our hotels may be faced with labor disputes which would harm the operation of our hotels.

We rely heavily on our employees to provide high-quality personal service at our hotels. At certain of our owned and leased hotels, employees are covered by collective bargaining agreements, and attempts could be made in the future to unionize our employees at other locations. Any labor dispute or stoppage could harm our ability to provide high-quality personal services, which could reduce occupancy and room revenue, tarnish our reputation and harm our results of operations.

We may have disputes with the owners of the hotels that we manage or franchise.

The nature of our responsibilities under our franchise agreements or any hotel management agreements we may enter into in the future may, in some instances, be subject to interpretation and may give rise to

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disagreements. We seek to resolve any disagreements in order to develop and maintain positive relations with current and potential franchisees, hotel owners and joint venture partners. However, we may not always be able to do so. Failure to resolve such disagreements may result in franchisees leaving our system of hotels, or in litigation, arbitration or other legal actions.

Our business is seasonal in nature, and we are likely to experience fluctuations in our results of operations and financial condition.

Our business is seasonal in nature, with the period from May through October generally accounting for the greatest portion of our annual revenues. Therefore, our results for any quarter may not be indicative of the results that may be achieved for the full fiscal year. The seasonal nature of our business increases our vulnerability to risks during this period, including labor force shortages, cash flow problems, economic downturns and poor weather conditions. The adverse impact to our revenues would likely be greater as a result of our seasonal business.

Our properties are subject to risks relating to natural disasters, terrorist activity and war, and any such event could materially adversely affect our operating results without adequate insurance coverage or preparedness.

Our financial and operating performance may be adversely affected by acts of God, such as natural disasters, particularly in locations where we own or operate significant properties. We carry comprehensive liability, public area liability, fire, boiler and machinery, extended coverage and rental loss insurance for our properties. However, certain types of catastrophic losses, such as those from earthquake, volcanic activity, flood, terrorism and environmental hazards, may exceed or not be covered by our insurance coverage. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In that event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. Similarly, threatened or actual terrorist activity, war, epidemics, travel-related accidents, geopolitical uncertainty, international conflict and similar events that impact domestic and international travel have caused in the past, and may cause in the future, our results to differ materially from anticipated results. In addition, depending on the severity, a major incident or crisis may prevent operational continuity and consequently impact the value of our brand or the reputation of our business.

Disruption or malfunction in our information systems could adversely affect our business.

Our information technology systems are vulnerable to damage or interruption from:

• Earthquakes, fires, floods and other natural disasters;

• Power losses, computer system failures, internet and telecommunications or data network failures, operator negligence, improper operation by or supervision of employees, physical and electronic losses of data and similar events; and

• Computer viruses, penetration by individuals seeking to disrupt operations or misappropriate information, and other breaches of security.

We rely on our systems to perform functions critical to our ability to operate, including our central reservation system. Accordingly, an extended interruption in the systems’ function could significantly curtail, directly and indirectly, our ability to conduct our business and generate revenue.

If we fail to comply with privacy regulations, we could be subject to fines or other restrictions on our business.

We collect and maintain information relating to our guests for various business purposes, including credit card information and information on guest preferences that we use to enhance customer service and for

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marketing and promotional purposes. The collection and use of personal data are governed by privacy laws and regulations enacted in the U.S. and by various contracts under which we operate. Privacy regulation is an evolving area in which different jurisdictions may subject us to inconsistent compliance requirements. Compliance with applicable privacy regulations may increase our operating costs and/or adversely impact our ability to service our guests and market our products, properties and services to our guests. In addition, noncompliance with applicable privacy regulations, either by us or in some circumstances by third parties engaged by us, could result in fines or restrictions on our use or transfer of data.

Failure to maintain the security of internal or customer data could adversely affect us.

Our businesses require collection and retention of large volumes of internal and customer data, including credit card numbers and other personally identifiable information of our customers, which are entered into, processed by, summarized by and reported by our various information systems and those of our service providers. We also maintain personally identifiable information about our employees. The integrity and protection of that customer, employee and company data is critical to us. Our customers and employees expect that we will adequately protect their personal information, and the regulatory environment surrounding information security and privacy is increasingly demanding. A theft, loss or fraudulent use of customer, employee or company data could adversely impact our reputation and could result in significant remedial and other costs, fines and litigation.

Any failure to protect our trademarks could have a negative impact on the value of our brand names.

The success of our business depends in part upon our continued ability to use our trademarks, increase brand awareness and further develop our brand. We have registered various formulations of the following trademarks with the U.S. Patent and Trademark Office: Red Lion, WestCoast, Stay Comfortable and TicketsWest. We have also registered various formulations of the Red Lion trademark in Canada, Mexico, Australia, the European Union and a number of countries in Asia. We cannot be assured that the measures we have taken to protect our trademarks will be adequate to prevent imitation of our trademarks by others. The unauthorized reproduction of our trademarks could diminish the value of our brand and its market acceptance, competitive advantages or goodwill, which could adversely affect our business.

We are subject to environmental regulations.

Our operating costs may be affected by the obligation to pay for the cost of complying with existing and future environmental laws, ordinances and regulations. Under current federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in such property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In addition, the presence of contamination from hazardous or toxic substances, or the failure to remediate such contaminated property properly, may prevent us from selling the property or using it as collateral for a loan. Environmental laws also may impose restrictions on the manner in which a property may be used or transferred or in which businesses may be operated, and may impose remedial or compliance costs. The costs of defending against claims of liability or remediating contaminated property and the cost of complying with environmental laws could have an adverse effect on our results of operations and financial condition.

In connection with our acquisition of a hotel, a Phase I environmental assessment is conducted by a qualified independent environmental engineer. A Phase I environmental assessment involves an on-site inspection and research of historical usages of a property, databases of underground storage tanks and other matters to determine whether an environmental issue with respect to the property needs to be addressed. If the results of a Phase I environmental assessment reveal potential issues that warrant further investigation, a Phase II environmental assessment, which may include soil testing, ground water monitoring or borings to locate underground storage tanks, will be recommended. It is possible that Phase I and Phase II environmental

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assessments will not reveal all environmental liabilities or compliance concerns or that there will be material environmental liabilities or compliance concerns of which we will not be aware. Phase I environmental assessments have been performed on all properties owned and leased by us.

We have not performed Phase II environmental assessments on three of our owned properties for which Phase II assessments were recommended. For two of these properties, information later obtained convinced us that a Phase II assessment was unnecessary. With respect to the third property, we determined that any further investigation was not warranted for materiality reasons.

In March 2009, odors in the basement of our hotel property in Salt Lake City led to the detection of a release of petroleum from an adjacent gas station owned by Sinclair Marketing. Petroleum and constituents of petroleum were identified in sumps on the hotel property and in both soil and groundwater on the property. Since the initial detection of the petroleum release, Sinclair has taken steps to remediate the property by excavating contaminated soils and by pumping and treating contaminated groundwater. Sinclair, through its counsel, has agreed to complete any further remediation that may be necessary to clean up the property. Sinclair has also agreed to reimburse us for our costs, including attorneys’ fees, related to Sinclair’s remediation efforts, and has made periodic payments of those amounts. However, in the event that Sinclair does not satisfy its commitment to remediate the property in accordance with applicable State of Utah cleanup standards, we could be liable to the State of Utah for any remaining soil or groundwater contamination by virtue of our status as the owner of the property. The State of Utah has been involved in Sinclair’s cleanup efforts at the hotel property and on Sinclair’s adjacent property, through the Utah Department of Environmental Quality, the Division of Environmental Response and Remediation and an Assistant Attorney General representing those state agencies. On February 9, 2012, Sinclair received a “No Further Action” letter from the Utah Department of Environmental Quality. The letter states that although petroleum-contaminated soil and groundwater remain from the release, it is not currently considered a threat to human health and the environment, and therefore, no further remedial action is required. However, the letter notes that, if changes to these characteristics create a threat to human health or the environment, additional corrective action may be required.

At the request of the Montana Department of Environmental Quality (DEQ), Red Lion Hotels has implemented a Corrective Action Work Plan as a result of a historic petroleum release at our Kalispell property. The work plan consists of a utility corridor investigation, municipal water sampling, monitoring well drilling and installation, and quarterly groundwater monitoring. The purpose of the work plan is to provide additional documentation of the extent and magnitude of hydrocarbon contamination at the site. At this time, ten monitoring wells have been installed and the lateral extent of the subsurface petroleum contamination has been determined. The most recent quarterly groundwater monitoring report (August 11, 2011) indicates that contaminant concentrations are decreasing in all wells. The DEQ has requested that semi-annual groundwater monitoring continue for an additional year in order to evaluate concentration trends. As of March 1, 2012, DEQ has not notified us of any further required corrective action. The costs associated with this work are being reimbursed by the Montana Petroleum Tank Release Compensation Fund.

Other than as disclosed above, we have not been notified by any governmental authority and we have no other knowledge of any material noncompliance, material liability or material claim relating to hazardous or toxic substances or other environmental substances in connection with any of our properties. Nevertheless, there is no assurance that these properties do not have any environmental concerns associated with them. In addition, there is no assurance that we will not discover problems we are unaware of that currently exist, that future laws, ordinances or regulations will not impose any material environmental liability, or that the current environmental condition of our existing and future properties will not be affected by the condition of neighboring properties, such as the presence of leaking underground storage tanks, or by third parties unrelated to us.

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Failure to comply with the Sarbanes-Oxley Act could impact our business.

There can be no assurance that the periodic evaluation of our internal controls required by the Sarbanes-Oxley Act will not result in the identification of significant deficiencies or material weaknesses in our internal controls or that our auditors will be able to attest to the effectiveness of our internal control over financial reporting. Failure to comply may have consequences on our business including, but not limited to, increased risks of financial statement misstatements, SEC sanctions and negative capital market reactions.

We face risks relating to litigation.

At any given time, we are subject to claims and actions incidental to the operation of our business. The outcome of these proceedings cannot be predicted. If a plaintiff were successful in a claim against us, we could be faced with the payment of a material sum of money and we may not be insured for such a loss. If this were to occur, it could have an adverse effect on our financial condition.

In addition, our financial condition may be adversely impacted by legal or governmental proceedings brought by or on behalf of our employees or customers. In recent years, a number of hospitality companies have been subject to lawsuits, including class action lawsuits, alleging violations of federal and state law regarding workplace and employment matters, discrimination, accessibility and similar matters. A number of these lawsuits have resulted in the payment of substantial damages by the defendants. Similar lawsuits in the future may be instituted against us and we may incur material damages and expenses which could have an adverse effect on our results of operations and financial condition.

In addition, in recent years there has been increasing activity by patent holding companies (so-called patent “trolls”) that do not use technology but whose sole business is to enforce patents for monetary gain against companies in a wide variety of businesses or industries. These efforts typically involve proposing licenses in exchange for a substantial sum of money and may also include the threat or actual initiation of litigation for that purpose. Any such litigation can be quite costly to defend, even if infringement is unsubstantiated or speculative. We have been threatened with one such claim and two claims have actually been filed against us. Each claim related to separate technology, but we believe that each such technology is non-proprietary. One of the claims has been resolved, and the other is pending. If we are ultimately found to have violated a patent, our operations could be negatively impacted and/or we might be subject to substantial financial penalties, licensing fees and attorneys’ fees. It is not possible to predict the potential impact on our business and operations of any future claims of this type that may be asserted against us.

If any hotel acquisitions fail to perform in accordance with our expectations or if we are unable to effectively integrate new hotels into our operations, our results of operations and financial condition may suffer.

Based on our experience, newly acquired, developed or converted hotels typically begin with lower occupancy and room rates, thereby resulting in lower revenue. Any future expansion within our existing markets could adversely affect the financial performance of our hotels in those markets and, as a result, negatively impact our overall results of operations. Potential expansion into new markets may also present operating and marketing challenges that are different from those we currently encounter in our existing markets. Our inability to anticipate all of the changing demands that expanding operations will potentially impose on our management and management information and reservation systems, or our failure to quickly adapt our systems and procedures to any new markets, could result in lost revenue and increased expenses and otherwise have an adverse effect on our results of operations and financial condition.

We rely on our central reservation system for occupancy at our hotels and any failures in such system could negatively affect our revenues and cash flows.

The hospitality industry requires the use of technology and systems for property management, procurement, reservations, operation of customer loyalty programs, distribution and other purposes. These technologies can be

22

expected to change guests’ expectations, and there is the risk that advanced new technologies will be introduced requiring further investment capital. We maintain a hotel reservation system that allows us to manage our rooms inventory through various distribution channels, including our websites, and execute rate management strategies. As part of our marketing strategy, we encourage guests to book on our website, which guarantees the lowest rate available compared to third-party travel websites.

The development and maintenance of our central reservation system and other technologies may require significant capital. We have determined that certain updates to our website are necessary, and we are currently in the process of implementing these at an expected cost of over $600,000. There can be no assurances that, as various systems and technologies become outdated or new technology is required, we will be able to replace or introduce them as quickly as our competition or within budgeted costs and timeframes. Further, there can be no assurance that we will achieve the benefits that may have been anticipated from any new technology or system. If our systems fail to operate properly or achieve the anticipated benefits, or if we fail to keep up with technological or competitive advances, our revenues and cash flows could suffer.

Our central reservation system also includes a third-party operated call center that enables guest to make reservations on a 24/7 basis. Poor performance by the third party provider, disputes with the third party provider, increases in the costs of the agreement or inability to renew or extend the agreement under favorable terms could adversely impact the hotel operations and our expenses.

Joint venture arrangements we might enter into may not reflect solely our best interests and may subject these investments to increased risks.

We may in the future acquire additional interests in other properties through joint venture arrangements with other entities. Partnerships, joint ventures and other business structures involving our co-investment with third parties generally include some form of shared control over the operations of the business and create additional risks. Some of these acquisitions may be financed in whole or in part by loans under which we are jointly and severally liable for the entire loan amount along with the other joint venture partners. The terms of these joint venture arrangements may be more favorable to the other party or parties than to us. Although we actively seek to minimize such risks before investing in partnerships, joint ventures or similar structures, investing in a property through such arrangements may subject that investment to risks not present with a wholly owned property, including, among others, the following:

• The other owner(s) of the investment might become bankrupt;

• The other owner(s) may have economic or business interests or goals that are inconsistent with ours;

• The other owner(s) may be unable to make required payments on loans under which we are jointly and severally liable;

• The other owner(s) may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives, such as selling the property at a time when to do so would have adverse consequences to us;

• Actions by the other owner(s) might subject the property to liabilities in excess of those otherwise contemplated by us; and

• It may be difficult for us to sell our interest in the property at the time we deem a sale to be in our best interests.

Failure to retain senior management or other key employees could adversely affect our business.

We place substantial reliance on the lodging industry experience and the institutional knowledge of members of our senior management team. We compete for qualified personnel against companies with greater financial resources than ours, and the loss of the services of one or more of these individuals could hinder our ability to effectively manage our business. Finding suitable replacements for senior management and other key employees could be difficult, and there can be no assurance we will continue to be successful in retaining or attracting qualified personnel in the future. We generally do not carry key person insurance on members of our senior management team.

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The market price for our common stock may be volatile.

The stock market has experienced and may in the future experience extreme volatility, oftentimes unrelated to the operating performance of particular companies. Many factors could cause the market price of our common stock to rise or fall, including but not limited to:

• Changes in general economic conditions, such as the recent recession, and subsequent fluctuations in stock market prices and volumes;

• Changes in financial estimates, expectations of future financial performance or recommendations by analysts;

• Changes in market valuations of companies in the hospitality industry;

• Actual or anticipated variations in our quarterly results of operations;

• Issuances of additional common stock or other securities;

• Announcements by our shareholders disclosing acquisitions or sales of our common stock or expressing their views with respect to actions they believe should be taken by our company; and

• Announcements by us or our competitors of, or speculation with respect to, acquisitions, investments or strategic alliances.

Washington law and our governing corporate documents contain provisions that could deter takeover attempts.

Our company is incorporated in the state of Washington and subject to Washington state law. Some provisions of Washington state law could interfere with or restrict takeover bids or other change-in-control events affecting us. For example, one statutory provision prohibits us, except under specified circumstances, from engaging in any significant business transaction, such as a merger, with any shareholder who owns 10% or more of our common stock (which shareholder, under the statute, would be considered an “acquiring person”) for a period of five years following the time that such shareholder becomes an acquiring person.

The performance of our entertainment division is particularly subject to fluctuations in economic conditions.

Our entertainment division, which comprised 7.3% of our revenues from continuing operations in 2011, engages in event ticketing and the presentation of various entertainment productions. Our entertainment division is vulnerable to risks associated with general regional and economic conditions, significant competition and changing consumer trends, among others. The overall economy in the markets we serve has impacted the ticketing division through lower demand for concerts, events and sporting activities. Also, we face the risk that entertainment productions will not tour the regions in which we operate or that such productions will not choose us as a presenter or promoter.

If we are unable to locate lessees for our retail space at our mall, our revenues and cash flow may be adversely affected.

We own over 162,000 square feet of retail space in Kalispell, Montana that we lease to various businesses. Vacancies can occur when a lease terminates, the tenant’s business fails, or the tenant breaches its lease obligations. In addition, one of our major anchor tenants has the right to terminate its lease if other major tenants cease to be tenants of the mall. Leases might not be renewed upon expiration, we may be unable to find new tenants for the space, or the terms of new or renewal leases, including the cost of required renovations, might be less favorable to us than current lease terms. Delays or difficulties in attracting tenants and costs incurred in preparing for tenant occupancy could reduce cash flow, decrease the value of the property and jeopardize our ability to pay our expenses.

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Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Under the Red Lion name as of December 31, 2011, we owned 25 hotels, leased five, and had franchise arrangements with 18 hotels owned and operated by third parties. To support our owned, leased and franchised hotels, we provide all the services typical in our industry: marketing, sales, advertising, frequency program, revenue management, procurement, quality assurance, education and training, design and construction management. We maintain a central reservation call center with links to various travel agent global distribution systems and electronic distribution channels on the internet, including our branded website. The table below reflects our hotel properties and locations, total available rooms per hotel, as well as meeting space availability, as of December 31, 2011.

Property	Location	Total Available Rooms		Meeting Space (sq. ft.)
Red Lion Owned Hotels
Red Lion Hotel Eureka	Eureka, California		175		4,890
Red Lion Hotel Redding	Redding, California		192		6,800
Red Lion Hotel Denver Southeast(5)	Aurora, Colorado		478		25,000
Red Lion Hotel Boise Downtowner(1)	Boise, Idaho		182		8,600
Red Lion Hotel Pocatello	Pocatello, Idaho		150		13,000
Red Lion Templin’s Hotel on the River	Post Falls, Idaho		163		11,000
Red Lion Hotel Canyon Springs	Twin Falls, Idaho		112		5,085
Red Lion Colonial Hotel(5)	Helena, Montana		149		15,500
Red Lion Inn Bend North(1)	Bend, Oregon		75		2,000
Red Lion Hotel Coos Bay(1)	Coos Bay, Oregon		145		5,000
Red Lion Hotel Pendleton(1)	Pendleton, Oregon		170		9,769
Red Lion Hotel Salt Lake Downtown	Salt Lake City, Utah		393		12,000
Red Lion Hotel Columbia Center	Kennewick, Washington		162		9,700
Red Lion Hotel Olympia	Olympia, Washington		192		16,500
Red Lion Hotel Pasco	Pasco, Washington		279		17,240
Red Lion Hotel Port Angeles	Port Angeles, Washington		186		3,010
Red Lion Hotel Richland Hanford House	Richland, Washington		149		9,247
Red Lion Bellevue	Bellevue, Washington		181		5,700
Red Lion Hotel Kelso/Longview(1)	Kelso, Washington		161		8,670
Red Lion Hotel at the Park	Spokane, Washington		400		30,000
Red Lion Hotel Wenatchee(1)	Wenatchee, Washington		149		7,678
Red Lion Hotel Yakima Center	Yakima, Washington		156		11,000
Red Lion Kalispell Center	Kalispell, Montana		170		10,500
Owned Hotels (23 properties)			4,569		247,889
Other Owned Hotels
Red Lion Inn Missoula(1)(2)(5)	Missoula, Montana		76		640
Red Lion Hotel Medford(1)(2)(5)	Medford, Oregon		185		9,552
Other Owned Hotels (2 properties)			261		10,192
Red Lion Leased Hotels
Red Lion Hotel Eugene	Eugene, Oregon		137		5,600
Red Lion River Inn	Spokane, Washington		245		2,800
Red Lion Hotel Seattle Airport	Seattle, Washington		144		4,500
Red Lion Hotel Vancouver (at the Quay)	Vancouver, Washington		160		14,785
Red Lion Anaheim	Anaheim, California		308		5,000
Leased Hotels (5 properties)			994		32,685

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Property	Location	Total Available Rooms		Meeting Space (sq. ft.)
Red Lion Franchised Hotels
Red Lion Inn and Suites Victoria	Victoria, BC Canada		85		450
Red Lion Hotel Denver Central	Denver, Colorado		297		15,206
Red Lion Hotel Lewiston	Lewiston, Idaho		183		12,259
Red Lion Hotel & Casino Elko	Elko, Nevada		222		3,000
Red Lion Hotel Farmington	Farmington, New Mexico		192		10,000
Red Lion Hotel Gallup	Gallup, New Mexico		126		9,000
Red Lion Hotel Grants	Grants, New Mexico		126		9,000
Red Lion Inn & Suites McMinnville	McMinnville, Oregon		67		1,312
Red Lion Inn Portland Airport	Portland, Oregon		136		3,000
Red Lion Hotel Portland Convention Center	Portland, Oregon		174		6,000
Red Lion Hotel Salem	Salem, Oregon		148		10,000
Red Lion Hotel on the River — Jantzen Beach	Portland, Oregon		318		35,000
Red Lion Hotel on Fifth Avenue(3)	Seattle, Washington		297		13,800
Red Lion Hotel Tacoma	Tacoma, Washington		119		750
Red Lion Hotel Idaho Falls	Idaho Falls, Idaho		138		8,800
Red Lion Hotel Oakland International Airport	Oakland, California		189		4,400
Red Lion Hotel Sacramento at Arden Village(1)(4)	Sacramento, California		260		19,644
Red Lion Inn Rancho Cordova	Rancho Cordova, California		109		—
Franchised Hotels (18 properties)			3,186		161,621
Total — All Hotels (48 properties)			9,010		452,387

(1) These hotels were previously leased but acquired by the Company in November 2011.

(2) At December 31, 2011 these hotels were identified as discontinued operations.

(3) This hotel was previously owned by the Company but was sold in June 2011 and upon sale the purchaser entered into a franchise agreement.

(4) This hotel is leased to a franchisee and under that franchise agreement, signed in 2011, the number of available rooms was reduced from 376 in 2010 to 260 in 2011.

(5) Hotel listed for sale.

Owned and Leased Hotels

Owned hotels are those properties which we operate and manage and have ownership of the hotel facility, equipment, personal property, other structures and in most cases, the land. We recognize revenues and expenses on these properties, including depreciation where appropriate.

Leased hotels are properties we operate and manage where we may have ownership of some or all of the equipment and personal property on site, but where either the land and hotel facility or the underlying land is under an operating lease from a third party. We recognize revenues and expenses on these properties, including lease expense. These leases require us to pay fixed monthly rent and have expiration dates in 2016 and beyond. In addition, we are responsible for repairs and maintenance, operating expenses and management of operations. For additional information on leases, refer to Note 18 of Notes to Consolidated Financial Statements.

Franchised Hotels

Under our franchise agreements, we receive royalties for the use of the Red Lion brand name. We also make available certain services to those hotels including reservation systems, advertising and national sales, our guest loyalty program, revenue management tools, quality inspections and brand standards, as well as administer central services programs for the benefit of our system hotels and franchisees. We do not have management or operational responsibility for these hotels.

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At December 31, 2011, our system of hotels included 18 hotels under franchise agreements, representing a total of 3,186 rooms and 161,621 square feet of meeting space.

Discontinued Operations

During the fourth quarter of 2011, we listed for sale two of our owned properties in which we do not expect to maintain significant continuing involvement. The operations of these hotels have been classified as discontinued operations in accordance with generally accepted accounting principles and are separately disclosed on the consolidated statement of operations comparative for all periods presented. For additional information, see Note 7 of Notes to Consolidated Financial Statements.

Other Operations

In addition to the operations discussed above, we maintain a direct ownership interest in a retail mall in Kalispell, Montana, which is attached to our Red Lion hotel at that location. We also own a hotel in Sacramento, California that we lease to a franchisee.

Item 3. Legal Proceedings

At any given time, we are subject to claims and actions incident to the operation of our business. While the outcome of these proceedings cannot be predicted, it is the opinion of management that none of such proceedings, individually or in the aggregate, will have a material adverse effect on our business, financial condition, cash flows or results of operations. For additional information, refer to Note 13 of Notes to Consolidated Financial Statements.

Item 4. Mine Safety Disclosures

Not applicable.

Item 4A.    Executive Officers of the Registrant

Set forth below is information regarding our executive officers and certain key employees as of March 7, 2012:

Name	Age		Position
Jon E. Eliassen		65	President and Chief Executive Officer
George H. Schweitzer		56	Executive Vice President and Chief Operating Officer, Hotel Operations
Julie Shiflett		44	Executive Vice President, Chief Financial Officer
Harry G. Sladich		50	Executive Vice President of Sales and Marketing
Thomas L. McKeirnan		43	Senior Vice President, General Counsel and Secretary
Jack G. Lucas		59	Vice President and President, TicketsWest

Jon E. Eliassen.    Mr. Eliassen was appointed as our Interim President and Chief Executive Officer on January 13, 2010. He was appointed as our President and Chief Executive Officer on February 14, 2011, removing the interim status. He has been a director of the company since September 2003. Mr. Eliassen was President and CEO of the Spokane Area Economic Development Council from 2003 until 2007. Mr. Eliassen retired in 2003 from his position as Senior Vice President and Chief Financial Officer of Avista Corp., a

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publicly-traded diversified utility. Mr. Eliassen spent 33 years at Avista, including the last 16 years as its Chief Financial Officer. While at Avista, Mr. Eliassen was an active participant in development of a number of successful subsidiary company operations including technology related startups Itron, Avista Labs and Avista Advantage. Mr. Eliassen serves as Chairman of the Board of Directors of Itron Corporation, serves as a member of the Board of Directors of IT Lifeline, Inc, and is the principal of Terrapin Capital Group, LLC. Mr. Eliassen currently serves on the board of Innovate Washington. Mr. Eliassen’s corporate accomplishments are complemented by his extensive service to the community in roles which have included director and President of the Spokane Symphony Endowment Fund, director of The Heart Institute of Spokane, Washington State University Research Foundation, Washington Technology Center and Spokane Intercollegiate Research and Technology Institute and past director of numerous other organizations and energy industry associations.

George H. Schweitzer.    Mr. Schweitzer joined us in April 2008 as our Senior Vice President, Hotel Operations, and was named our Executive Vice President and Chief Operating Officer, Hotel Operations in November 2009. Prior to joining our company, Mr. Schweitzer had served since August 2006 as Partner and Executive Vice President of Business Development at Unifocus, a leading global provider of business intelligence applications and performance technology for the hospitality industry. Mr. Schweitzer founded and was President and CEO of LaborSage, Inc., a software and management consulting company focused on labor scheduling solutions for the hospitality industry, from 2001 to 2006, when it was acquired by Unifocus. Before entering the hospitality software industry, Mr. Schweitzer served as President and Chief Operating Officer of VenQuest Hotel Group in Irvine, California. Prior to VenQuest, Mr. Schweitzer held the position of Vice President Operations for Sunstone Hotels and Regional Vice President for Doubletree Hotels. Mr. Schweitzer has worked for over 30 years in the hospitality industry, including a period of nearly 20 years where he served in various positions, including Vice President — Operations, Regional Vice President and General Manager, of various Red Lion hotels.

Julie Shiflett.    Ms. Shiflett was appointed Executive Vice President, Chief Financial Officer effective September 1, 2011. Ms. Shiflett has been with Red Lion Hotels since October 2010 when she was hired under a contract to serve as Vice President of Finance. She is a principal of NW CFO, a financial consulting company she founded in 2008 which assists emerging and mid-market companies with activities including strategic planning, forecasting, and recapitalization. She served as Chief Financial Officer of Signature Genomic Laboratories in Spokane, Washington, in 2009 and 2010. Prior to that, Ms. Shiflett was Vice President and Chief Financial Officer of Columbia Paint and Coatings from 2006 to 2009 and Vice President of Finance and Administration of Riley Creek Lumber Company from 2001 until 2006. Her accounting career began at Coopers & Lybrand in Spokane. Ms. Shiflett also currently serves on the Board of Directors for an $8 billion financial institution, a chemical manufacturing company and a regional hospital.

Harry G. Sladich.    Mr. Sladich was appointed Executive Vice President of Sales and Marketing in May 2010. Mr. Sladich is a 34 year veteran of the hospitality industry with extensive experience in hotel sales and hotel operations as well as experience in destination marketing. Prior to his arrival at Red Lion, Mr. Sladich was President and Chief Executive Officer of the Spokane Regional Convention and Visitors Bureau and played a key role in building and selling the Washington State community’s image nationally, as well as internationally. Prior to the Spokane CVB, Mr. Sladich was Vice President of Sales and Marketing for Sterling Hospitality, hotel developers and operators of several franchises, including Holiday Inn Express, Hampton Inn and Quality Inn. Before working for Sterling Hospitality, Mr. Sladich was General Manager of Hotel Lusso, an upscale boutique hotel in Spokane, and was Vice-President of National Sales for Guestmark International (GMI), a national hotel marketing company based in Boston. Mr. Sladich has also worked for Sheraton Hotels in both hotel operations and food and beverage. Mr. Sladich started his career in 1977 in Spokane at the Travelodge River Inn, which is now the Red Lion River Inn. Washington State Governor Chris Gregoire appointed Mr. Sladich to two boards including the Motion Picture Competitiveness Program, WashingtonFilmWorks, and the Washington State Convention Center. He has also served on the board for the Western Association of Convention & Visitors Bureaus (WACVB), is past Chair for the Boys and Girls Club of Spokane County and is an Honorary Commander at Fairchild Air Force Base.

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Thomas L. McKeirnan.    Mr. McKeirnan has been our Senior Vice President, General Counsel and Secretary since February 2005. Prior to that he served as Vice President, General Counsel and Secretary from January 2004 through February 2005 and Vice President, Assistant General Counsel from July 2003 to January 2004. Prior to joining us, Mr. McKeirnan was a partner at the Spokane, Washington law firm of Paine Hamblen Coffin Brooke & Miller LLP from January 2002 until July 2003 and an associate attorney at the same firm from 1999 to 2001. Mr. McKeirnan was an associate attorney with the Seattle, Washington law firm of Riddell Williams P.S. from 1995 until 1999. Mr. McKeirnan’s private legal practice focused on corporate, transactional, real estate and securities law, with an emphasis on the hospitality industry. While in private practice, Mr. McKeirnan represented us as outside counsel on various strategic and transactional matters and also represented WestCoast Hotels, Inc. prior to our acquisition of that company.

Jack G. Lucas.    Mr. Lucas serves as Vice President of Red Lion Hotels Corporation and President of TicketsWest. He is in charge of overseeing all of the various departments within our entertainment division. He has been President of TicketsWest since February 2006 and Vice President of Red Lion Hotels Corporation since August 1998. Mr. Lucas has approximately 28 years of experience in the entertainment industry, and has been employed by us since 1987. Mr. Lucas previously spent 13 years on the management staff of the City of Spokane Entertainment Facilities, which included a 2,700-seat performing arts center, 30,000-seat stadium, 8,500-seat coliseum, and convention center. Mr. Lucas was awarded the 2004 International Ticketing Professional of the Year award from the International Ticketing Association.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(a) Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “RLH”. The following table sets forth for the periods indicated the high and low sale prices for our common stock on the NYSE:

	High		Low
2011
Fourth Quarter (ended December 31, 2011)	$	7.50	$	6.29
Third Quarter (ended September 30, 2011)	$	8.07	$	6.00
Second Quarter (ended June 30, 2011)	$	9.29	$	7.43
First Quarter (ended March 31, 2011)	$	8.79	$	7.35
2010
Fourth Quarter (ended December 31, 2010)	$	8.37	$	7.17
Third Quarter (ended September 30, 2010)	$	7.90	$	5.80
Second Quarter (ended June 30, 2010)	$	8.08	$	5.80
First Quarter (ended March 31, 2010)	$	7.31	$	4.52

(b) The closing sale price of the common stock on the NYSE on March 8, 2012 was $7.65, with 133 shareholders of record of the common stock.

(c) We did not pay any cash dividends on our common stock during the last two fiscal years. The board of directors periodically reviews our dividend policy and our longer-term objectives of maximizing shareholder value. Any determination to pay cash dividends in the future will be at the discretion of our board.

(d) The following table provides information as of December 31, 2011 on plans under which equity securities may be issued to employees, directors or consultants:

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	(a)		(b)		(c)
	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
Equity Compensation Plans Approved by Security Holders:
1998 Stock Incentive Plan(1)		80,460	$	5.84		—
2006 Stock Incentive Plan(2)		471,754	$	9.71		1,009,450
Equity Compensation Plans Not Approved by Security Holders		—		—		—
Total		552,214	$	8.53		1,009,450

(1) No further grants will be made under the 1998 Stock Incentive Plan.

(2) Includes 288,342 shares of outstanding restricted stock unit awards in the 2006 Stock Plan, that are not included in the calculation of the Weighted-Average Price column.

(e) The below graph assumes an investment of $100 in our common stock and depicts its price performance relative to the performance of the Russell 2000 Index and the Standard & Poor’s Hotels, Resorts & Cruise Lines Index, assuming a reinvestment of all dividends. The price performance on the graph is not necessarily indicative of future stock price performance.

* $100 invested on December 31, 2006 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.

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Item 6. Selected Financial Data

The following table sets forth our selected consolidated financial data as of and for the years ended December 31, 2011, 2010, 2009, 2008 and 2007. The selected consolidated statement of operations and balance sheet data are derived from our audited consolidated financial statements. The audited consolidated financial statements for certain of these periods are included elsewhere in this annual report. The selected consolidated financial data set forth below should be read in conjunction with, and are qualified in their entirety by, our consolidated financial statements and related notes, Management’s Discussion and Analysis of Financial Condition and Results of Operations and other financial information included elsewhere in this annual report and in our prior filings with the SEC.

	Year ended December 31,
	2011			2010			2009			2008			2007
	(In thousands, except per share data)
Consolidated Statement of Operations Data
Continuing Operations:
Total revenues	$	156,080		$	159,304		$	161,267		$	182,189		$	181,488
Goodwill impairment(2)		14,236			—			—			—			—
Asset impairment (2,3,4)		8,430			5,733			8,509			—			—
Gain on asset dispositions(2)		33,379			25			253			208			428
Restructuring expenses (4,5)		—			—			136			2,067			—
Operating expenses (1,2,3,4,5)		148,600			163,010			163,165			176,705			165,986
Operating income (loss) (2,3,4,5)		7,480			(3,706	)		(1,898	)		5,484			15,502
Net income (loss) from continuing operations (2,3,4,5)		(5,970	)		(7,850	)		(6,207	)		(1,678	)		4,971
Earnings (loss) per share attributable to Red Lion Hotels Corporation from continuing operations:
Basic (2,3,4,5,6)	$	(0.32	)	$	(0.43	)	$	(0.34	)	$	(0.09	)	$	0.26
Diluted (2,3,4,5,6)	$	(0.32	)	$	(0.43	)	$	(0.34	)	$	(0.09	)	$	0.25
Discontinued Operations:
Impairment or gain on the assets of the discontinued business units, net of income tax expense (benefit)(6)	$	(651	)	$	(38	)	$	(117	)	$	—		$	932
Income (loss) from operations of discontinued business units, net of income tax expense (benefit)		(441	)		(731	)		(340	)		29			247
Earnings (loss) per share from discontinued operations:
Basic(6)	$	(0.06	)	$	(0.04	)	$	(0.03	)	$	0.00		$	0.06
Diluted(6)	$	(0.06	)	$	(0.04	)	$	(0.03	)	$	0.00		$	0.06
Net Income (Loss) attributable to Red Lion Hotels Corporation	$	(7,148	)	$	(8,609	)	$	(6,663	)	$	(1,637	)	$	6,116
Earnings (loss) per share attributable to Red Lion Hotels Corporation
Basic (2,3,4,5,6)	$	(0.38	)	$	(0.47	)	$	(0.37	)	$	(0.09	)	$	0.32
Diluted (2,3,4,5,6)	$	(0.38	)	$	(0.47	)	$	(0.37	)	$	(0.09	)	$	0.31
Weighted Average Shares Outstanding:
Basic		19,053			18,485			18,106			18,234			19,134
Diluted		19,053			18,485			18,106			18,234			19,506

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	Year ended December 31,
	2011			2010			2009			2008			2007
	(In thousands, except per share data)
Non-GAAP Data
EBITDA (2,3,4,5,6)	$	25,139		$	16,444		$	18,724		$	25,762		$	34,699
EBITDA from continuing operations (2,3,4,5)		26,481			17,175			18,920			25,223			32,244
Consolidated Statement of Cash Flow Data
Net cash (used in) provided by operating activities	$	1,881		$	19,487		$	15,692		$	22,803		$	21,230
Net cash (used in) provided by investing activities		21,611			(10,428	)		(16,970	)		(53,754	)		(12,491	)
Net cash (used in) provided by financing activities		(25,523	)		(8,932	)		(13,059	)		34,129			(7,014	)
Consolidated Balance Sheet Data
Cash	$	1,981		$	4,012		$	3,881		$	18,216		$	15,026
Working capital(7)		(469	)		(48,347	)		(1,161	)		8,353			5,781
Assets held for sale		30,380			—			—			—			—
Property and equipment, net		232,589			272,030			285,601			298,059			260,228
Total assets		304,896			331,482			350,636			380,240			343,926
Total debt		70,496			95,152			106,322			119,331			83,220
Debentures due Red Lion Hotels Capital Trust		30,825			30,825			30,825			30,825			30,825
Liabilities of discontinued operations		—			—			29			60			88
Total liabilities		139,031			160,717			175,614			199,895			162,512
Total Red Lion Hotels Corporation stockholders’ equity		165,865			170,765			175,022			180,345			181,414

(1) Operating expenses include all direct segment expenses, depreciation and amortization, gain (loss) on asset disposals, hotel facility and land lease and undistributed corporate expenses.

(2) During the fourth quarter 2011, we recorded a $14.2 million impairment charge to our goodwill and a $6.2 million impairment charge related to two hotel properties. During the third quarter 2011, we recorded a $2.2 million impairment charge related to one hotel property. During the second quarter 2011, we recorded a net gain of $33.5 million from the sale of a hotel property.

(3) During 2010, we recorded a $5.7 million impairment charge related to the termination of a sublease agreement, as well as $1.2 million in costs resulting from the separation of our former President and Chief Executive Officer in January 2010.

(4) During 2009, we recorded an $8.5 million impairment charge related to one hotel property, as well as $0.1 million in restructuring charges.

(5) During 2008, we recorded $2.1 million in restructuring expenses, as well as $3.7 million in separation payments pertaining to the retirement of our former President and Chief Executive Officer in February 2008.

(6) In 2011, the balance includes a pre-tax impairment charge of $1.0 million on two hotel properties included in discontinued operations. In 2009, the balance includes an impairment charge of $0.2 million on one hotel property included in discontinued operations. In 2007, the balance includes a net gain on the sale of a commercial office complex of $1.2 million and a net loss of $0.3 million from the sale of a hotel property included in discontinued operations.

(7) Represents current assets less current liabilities, excluding assets held for sale.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is a non-GAAP measure that represents net income (loss) attributable to Red Lion Hotels Corporation before interest expense, income tax benefit (expense) and depreciation and amortization. We utilize EBITDA as a financial measure as management believes investors find it a useful tool to perform more meaningful comparisons of past, present and future operating results and as a means to evaluate the results of core, ongoing operations. We believe it is a complement to net income (loss) attributable to Red Lion Hotels Corporation and other financial performance

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measures. EBITDA is not intended to represent net income (loss) attributable to Red Lion Hotels Corporation as defined by generally accepted accounting principles in the United States (“GAAP”), and such information should not be considered as an alternative to net income (loss), cash flows from operations or any other measure of performance prescribed by GAAP.

We use EBITDA to measure our financial performance because we believe interest, taxes and depreciation and amortization bear little or no relationship to our operating performance. By excluding interest expense, EBITDA measures our financial performance irrespective of our capital structure or how we finance our properties and operations. We generally pay federal and state income taxes on a consolidated basis, taking into account how the applicable taxing laws apply to us in the aggregate. By excluding taxes on income, we believe EBITDA provides a basis for measuring the financial performance of our operations excluding factors that our hotels cannot control. By excluding depreciation and amortization expense, which can vary from hotel to hotel based on historical cost and other factors unrelated to the hotels’ financial performance, EBITDA measures the financial performance of our hotels without regard to their historical cost. For all of these reasons, we believe that EBITDA provides us and investors with information that is relevant and useful in evaluating our business.

However, because EBITDA excludes depreciation and amortization, it does not measure the capital we require to maintain or preserve our fixed assets. In addition, because EBITDA does not reflect interest expense, it does not take into account the total amount of interest we pay on outstanding debt nor does it show trends in interest costs due to changes in our borrowings or changes in interest rates. EBITDA, as defined by us, may not be comparable to EBITDA as reported by other companies that do not define EBITDA exactly as we define the term. Because we use EBITDA to evaluate our financial performance, we reconcile it to net income (loss) attributable to Red Lion Hotels Corporation, which is the most comparable financial measure calculated and presented in accordance with GAAP. EBITDA does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to operating income (loss) or net income (loss) determined in accordance with GAAP as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of liquidity.

The following is a reconciliation of EBITDA and EBITDA from continuing operations to net income (loss) attributable to Red Lion Hotels Corporation for the periods presented:

	Year ended December 31,
	2011			2010			2009			2008			2007
	(In thousands)
EBITDA from continuing operations	$	26,481		$	17,175		$	18,920		$	25,223		$	32,244
Income tax benefit (expense) — continuing operations		(5,514	)		4,520			3,815			1,173			(2,054	)
Interest expense — continuing operations		(8,372	)		(9,073	)		(8,503	)		(9,247	)		(9,172	)
Depreciation and amortization — continuing operations		(18,651	)		(20,462	)		(20,438	)		(18,815	)		(16,081	)
Net income (loss) attributable to Red Lion Hotels
Corporation from continuing operations		(6,056	)		(7,840	)		(6,206	)		(1,666	)		4,937
Income (loss) on discontinued operations, net of tax		(1,092	)		(769	)		(457	)		29			1,179
Net income (loss) attributable to Red Lion Hotels Corporation	$	(7,148	)	$	(8,609	)	$	(6,663	)	$	(1,637	)	$	6,116
EBITDA	$	25,139		$	16,444		$	18,724		$	25,762		$	34,699
Income tax benefit (expense)		(4,894	)		4,937			4,070			1,164			(2,697	)
Interest expense		(8,372	)		(9,073	)		(8,503	)		(9,247	)		(9,331	)
Depreciation and amortization		(19,021	)		(20,917	)		(20,954	)		(19,316	)		(16,555	)
Net income (loss) attributable to Red Lion Hotels Corporation	$	(7,148	)	$	(8,609	)	$	(6,663	)	$	(1,637	)	$	6,116

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

We are a NYSE-listed hospitality and leisure company (ticker symbols RLH and RLH-pa) primarily engaged in the ownership, operation and franchising of midscale, full, select and limited service hotels under our proprietary Red Lion brand. Established over 30 years ago, the Red Lion brand is regionally recognized and particularly well known in the western United States, where our hotels are located. The Red Lion brand is typically associated with mid-scale full and select service hotels.

As of December 31, 2011, our hotel system contained 48 hotels located in nine states and one Canadian province, with 9,010 rooms and 452,387 square feet of meeting space as provided below:

	Hotels		Total Available Rooms		Meeting Space (sq. ft.)
Red Lion Owned and Leased Hotels
Continuing Operations		28		5,563		280,574
Discontinued Operations		2		261		10,192
Red Lion Franchised Hotels		18		3,186		161,621
Total		48		9,010		452,387

We operate in three reportable segments:

• The hotels segment derives revenue primarily from guest room rentals and food and beverage operations at our owned and leased hotels.

• The franchise segment is engaged primarily in licensing the Red Lion brand to franchisees. This segment generates revenue from franchise fees that are typically based on a percent of room revenues and are charged to hotel owners in exchange for the use of our brand and access to our central services programs. These programs include the reservation system, guest loyalty program, national and regional sales, revenue management tools, access to quality inspections and advertising and brand standards. It has also historically reflected revenue from management fees charged to the owners of managed hotels. We have not managed any hotels for third parties since January 2008.

• The entertainment segment derives revenue primarily from promotion and presentation of entertainment productions and ticketing services.

Our remaining activities, which are primarily related to our ownership interest in a retail mall attached to one of our hotels and to other miscellaneous real estate investments, do not constitute a reportable segment and have been aggregated into “other”.

Results of Operations

Our reported numbers for the periods presented in this report reflect results of the Red Lion Hotel on Fifth Avenue in Seattle, WA (“Seattle property”) for the full years prior to 2011 but not the full year of 2011, as the sale of that property closed on June 14, 2011. In order to help investors distinguish changes from results of continuing operations versus changes due to the sale of the Seattle property, we will discuss operating results from continuing operations as reported and also discuss certain operating results and data for the periods included in this report on a comparable hotel basis. Comparable hotels are properties that are owned or leased by us for the entirety of the reporting periods being compared. Therefore, the Seattle property is excluded from the comparable hotel statistics.

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For the year ended December 31, 2011, our net loss was $7.1 million ($0.38 per share), which includes non-cash, pre-tax goodwill and asset impairment charges of $14.2 million and $8.4 million respectively and a $33.5 million pre-tax gain on the sale of a hotel. During the fourth quarter of 2011, we determined that the carrying amount of the hotel reporting unit exceeded its fair value, which was estimated based on a combined income and market approach. Accordingly, a goodwill impairment charge of $14.2 million was recognized in the hotel reporting unit. Further note, this goodwill did not have any tax basis, which results in a permanent difference between book and tax income and the unusual situation of having income tax expense for the year on a book loss.

During the third and fourth quarters of 2011, we recorded pre-tax asset impairment charges of $8.4 million in continuing operations and $1.0 million of pre-tax asset impairment charges in discontinued operations. Of that amount, $2.2 million relates to our Red Lion Colonial Hotel in Helena, Montana, $4.5 million relates to our Red Lion Hotel Denver Southeast in Aurora, Colorado and $1.7 million relates to our Red Lion Hotel Vancouver at the Quay in Vancouver, Washington. The hotels in Helena, Montana and Aurora, Colorado are both listed for sale and were written down to their estimated fair value less estimated costs to sell. The hotel in Vancouver, Washington is subject to a right of way acquisition by the state to build a replacement of a bridge, and we have determined the carrying value is not recoverable. The second quarter of 2011 included a pre-tax gain of $33.5 million generated by the sale of our Seattle property.

During 2010, we reported a net loss of $8.6 million ($0.47 per share), which includes a non-cash, pre-tax impairment charge of $5.7 million related to the termination of a franchise and sublease agreement. During the fourth quarter of 2010, we agreed to terminate the franchise and sublease agreement with the operator of the Red Lion Hotel Sacramento. We subsequently entered into an agreement with a new franchisee and subtenant. As a result of the original contract termination, we recognized an impairment charge of $5.7 million and a net credit adjustment of $1.5 million reflecting the recognition of deferred sublease income of $3.0 million partially offset by $1.5 million in expenses associated with uncollectible accounts and accrued expenses of the former subtenant. Also included in the 2010 net loss is $1.2 million of expense related to the separation of our former President and Chief Executive Officer.

During 2009, we reported a net loss of $6.7 million ($0.37 per share), which included a non-cash, pre-tax impairment charge of $8.5 million related to our Red Lion Hotel Denver Southeast as the Denver market experienced a substantial and sustained decline in demand for hotel rooms across all market segments.

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A summary of our consolidated statement of operations is as follows (in thousands, except per share data):

	Year Ended December 31,
	2011			2010			2009
Total revenue	$	156,080		$	159,304		$	161,267
Operating expenses		148,600			163,010			163,165
Operating income (loss)		7,480			(3,706	)		(1,898	)
Other income (expense):
Interest expense		(8,372	)		(9,073	)		(8,503	)
Other income, net		436			409			379
Income (loss) from continuing operations before income taxes		(456	)		(12,370	)		(10,022	)
Income tax (benefit) expense		5,514			(4,520	)		(3,815	)
Net income (loss) from continuing operations		(5,970	)		(7,850	)		(6,207	)
Income (loss) from discontinued operations, net of tax		(1,092	)		(769	)		(457	)
Net income (loss)	$	(7,062	)	$	(8,619	)	$	(6,664	)
Net income (loss) attributable to Red Lion Hotels Corporation	$	(7,148	)	$	(8,609	)	$	(6,663	)
Earnings (loss) per share — basic and diluted	$	(0.38	)	$	(0.47	)	$	(0.37	)
Non-GAAP data:
EBITDA	$	25,139		$	16,444		$	18,724
EBITDA from continuing operations	$	26,481		$	17,175		$	18,920

The following table (in thousands) details the impact to EBITDA from continuing operations of the $14.2 million goodwill and $8.4 million asset impairment charges as well as the $33.5 million gain on the sale of the Seattle property, all recorded for the year ended December 31, 2011. Also detailed is the impact of the $5.7 million impairment charge and a $1.5 million credit adjustment for the termination of a sublease and franchise agreement at our Red Lion Hotel Sacramento and a $1.2 million charge for CEO separation costs, all recorded for the year ended December 31, 2010. Finally, detailed is an impairment charge and restructuring expenses recorded for the year ended December 31, 2009.

	2011			2010			2009
Asset impairment (1,2,3)	$	(8,430	)	$	(5,733	)	$	(8,509	)
Goodwill impairment(1)		(14,236	)		—			—
Gain on asset disposition(1)		33,549			—			—
Franchise, sublease termination(2)		—			1,560			—
Separation costs(2)		—			(1,219	)		—
Restructuring expenses(3)		—			—			(136	)
Impact on EBITDA from continuing operations	$	10,883		$	(5,392	)	$	(8,645	)

(1) During the fourth quarter 2011, we recorded a $14.2 million impairment charge to our goodwill and a $6.2 million impairment charge related to two hotel properties. During the third quarter 2011, we recorded a $2.2 million impairment charge related to one hotel property. During the second quarter 2011, we recorded a net gain of $33.5 million from the sale of a hotel property.

(2) During the fourth quarter 2010, we recorded a $5.7 million impairment charge related to the termination of a sublease agreement. In addition, we accelerated the recognition of $3.0 million of deferred lease income associated with that contract and had additional adjustments in the amount of $1.5 million that were necessary to reflect uncollectible amounts and accrued expenses that partially offset the deferred lease income adjustment. During the first quarter 2010 we recorded $1.2 million in costs resulting from the separation of our former President and Chief Executive Officer.

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(3) During 2009, we recorded an $8.5 million impairment charge related to one hotel property, as well as $0.1 million in restructuring charges.

EBITDA represents net income (loss) attributable to Red Lion Hotels Corporation before interest expense, income tax expense (benefit) and depreciation and amortization. We utilize EBITDA as a financial measure because management believes that investors find it a useful tool to perform more meaningful comparisons of past, present and future operating results and as a means to evaluate the results of core, ongoing operations. We believe it is a complement to net income (loss) attributable to Red Lion Hotels Corporation and other financial performance measures. EBITDA is not intended to represent net income (loss) attributable to Red Lion Hotels Corporation as defined by generally accepted accounting principles in the United States (“GAAP”), and such information should not be considered as an alternative to net income (loss), cash flows from operations or any other measure of performance prescribed by GAAP.

We use EBITDA to measure our financial performance because we believe interest, taxes and depreciation and amortization bear little or no relationship to our operating performance. By excluding interest expense, EBITDA measures our financial performance irrespective of our capital structure or how we finance our properties and operations. We generally pay federal and state income taxes on a consolidated basis, taking into account how the applicable taxing laws apply to us in the aggregate. By excluding taxes on income, we believe EBITDA provides a basis for measuring the financial performance of our operations excluding factors that our hotels cannot control. By excluding depreciation and amortization expense, which can vary from hotel to hotel based on historical cost and other factors unrelated to the hotels’ financial performance, EBITDA measures the financial performance of our hotels without regard to their historical cost. For all of these reasons, we believe EBITDA provides us and investors with information that is relevant and useful in evaluating our business.

However, because EBITDA excludes depreciation and amortization, it does not measure the capital we require to maintain or preserve our fixed assets. In addition, because EBITDA does not reflect interest expense, it does not take into account the total amount of interest we pay on outstanding debt nor does it show trends in interest costs due to changes in our borrowings or changes in interest rates. EBITDA, as defined by us, may not be comparable to EBITDA as reported by other companies that do not define EBITDA exactly as we define the term. Because we use EBITDA to evaluate our financial performance, we reconcile it to net income (loss) attributable to Red Lion Hotels Corporation, which is the most comparable financial measure calculated and presented in accordance with GAAP. EBITDA does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to operating income (loss) or net income (loss) determined in accordance with GAAP as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of liquidity.

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The following is a reconciliation of EBITDA and EBITDA from continuing operations to net income (loss) attributable to Red Lion Hotels Corporation for the periods presented (in thousands):

	Year ended December 31,
	2011			2010			2009			2008			2007
	(In thousands)
EBITDA from continuing operations	$	26,481		$	17,175		$	18,920		$	25,223		$	32,244
Income tax benefit (expense) —continuing operations		(5,514	)		4,520			3,815			1,173			(2,054	)
Interest expense — continuing operations		(8,372	)		(9,073	)		(8,503	)		(9,247	)		(9,172	)
Depreciation and amortization —continuing operations		(18,651	)		(20,462	)		(20,438	)		(18,815	)		(16,081	)
Net income (loss) attributable to Red Lion Hotels Corporation from continuing operations		(6,056	)		(7,840	)		(6,206	)		(1,666	)		4,937
Income (loss) on discontinued operations, net of tax		(1,092	)		(769	)		(457	)		29			1,179
Net income (loss) attributable to Red Lion Hotels Corporation	$	(7,148	)	$	(8,609	)	$	(6,663	)	$	(1,637	)	$	6,116
EBITDA	$	25,139		$	16,444		$	18,724		$	25,762		$	34,699
Income tax benefit (expense)		(4,894	)		4,937			4,070			1,164			(2,697	)
Interest expense		(8,372	)		(9,073	)		(8,503	)		(9,247	)		(9,331	)
Depreciation and amortization		(19,021	)		(20,917	)		(20,954	)		(19,316	)		(16,555	)
Net income (loss) attributable to Red Lion Hotels Corporation	$	(7,148	)	$	(8,609	)	$	(6,663	)	$	(1,637	)	$	6,116

Revenue

A breakdown of revenues from continuing operations is as follows (in thousands, except for percentage changes):

Revenue From Continuing Operations

							2011 vs. 2010						2010 vs. 2009
	2011		2010		2009		$ Change			% Change			$ Change			% Change
Hotels:
Room revenue	$	100,735	$	104,356	$	98,717	$	(3,621	)		-3.5	%	$	5,639			5.7	%
Food and beverage revenue		33,731		35,249		40,354		(1,518	)		-4.3	%		(5,105	)		-12.7	%
Other hotel revenue		3,825		4,773		4,249		(948	)		-19.9	%		524			12.3	%
Total hotel segment revenue		138,291		144,378		143,320		(6,087	)		-4.2	%		1,058			0.7	%
Franchise revenue		3,955		3,209		3,616		746			23.2	%		(407	)		-11.3	%
Entertainment revenue		11,379		9,236		11,690		2,143			23.2	%		(2,454	)		-21.0	%
Other revenue		2,455		2,481		2,641		(26	)		-1.0	%		(160	)		-6.1	%
Total revenue	$	156,080	$	159,304	$	161,267	$	(3,224	)		-2.0	%	$	(1,963	)		-1.2	%

Our reported hotel segment numbers for the periods presented in this report reflect the results of our Seattle property for the full years 2009 and 2010, but not the full year 2011, as the sale of that property closed on June 14, 2011. In order to help investors distinguish changes in our results from continuing operations versus changes due to the sale of the Seattle property, we will discuss our operating results as reported and also on a comparable hotel basis to exclude the results of the Seattle property from the hotel segment.

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A breakdown of our comparable hotel revenues are as follows (in thousands, except for percentage changes):

Comparable Hotel Revenue From Continuing Operations

										2011 vs. 2010						2010 vs. 2009
	2011			2010			2009			$ Change			% Change			$ Change			% Change
Room revenue from continuing operations		100,735			104,356			98,717			(3,621	)					5,639
less: Room revenue from Seattle Fifth Avenue property		(4,379	)		(10,501	)		(9,931	)		6,122						(570	)
Comparable room revenue	$	96,356		$	93,855		$	88,786		$	2,501			2.7	%	$	5,069			5.7	%
Food and beverage revenue from continuing operations		33,731			35,249			40,354			(1,518	)					(5,105	)
less: Food and beverage revenue from Seattle Fifth Avenue property		(991	)		(2,280	)		(2,512	)		1,289						232
Comparable food and beverage revenue	$	32,740		$	32,969		$	37,842		$	(229	)		-0.7	%	$	(4,873	)		-12.9	%
Other hotels revenue from continuing operations		3,825			4,773			4,249			(948	)					524
less: Other hotels revenue from Seattle Fifth Avenue property		(617	)		(1,498	)		(1,545	)		881						47
Comparable other hotels revenue	$	3,208		$	3,275		$	2,704		$	(67	)		-2.0	%	$	571			21.1	%
Total hotel revenue from continuing operations		138,291			144,378			143,320			(6,087	)					1,058
less: Total hotel revenue from Seattle Fifth Avenue property		(5,987	)		(14,279	)		(13,988	)		8,292						(291	)
Comparable total hotels revenue	$	132,304		$	130,099		$	129,332		$	2,205			1.7	%	$	767			0.6	%

Comparable hotel revenue from continuing operations represents reported hotel segment revenue less the impact of the Seattle property’s revenue. We utilize comparable hotel revenue from continuing operations as a financial measure because management believes that investors find it a useful tool to perform more meaningful comparisons of past, present and future operating results and as a means to evaluate the results of core, ongoing operations. We believe it is a complement to reported revenue and other financial performance measures. Comparable hotel revenue from continuing operations is not intended to represent reported hotel revenue defined by generally accepted accounting principles in the United States (“GAAP”), and such information should not be considered as an alternative to reported hotel revenue or any other measure of performance prescribed by GAAP.

2011 Compared to 2010

Revenues in 2011 from the hotel segment decreased $6.1 million or 4.2% from 2010, resulting primarily from the sale of the Seattle property in the second quarter of 2011, which resulted in only a partial year of revenue in 2011 compared to a full year of revenue in 2010. On a comparable basis, excluding the results of the Seattle property, revenue from the hotel segment increased $2.2 million or 1.7% in 2011 compared to 2010. This comparable increase was primarily driven by a 120 basis point increase in occupancy, resulting from higher transient volume. Comparable food and beverage revenue decreased 0.7% primarily related to a decline in banquet business.

Revenue from our franchise segment increased $0.7 million or 23.2% resulting from the addition of new franchised hotels during the year, and also a rate holiday given in 2010 that did not recur in 2011. Revenue from our entertainment segment increased $2.1 million or 23.2% driven by a successful two week production in 2011 of the Broadway show Wicked. The increase from this production was partially offset by a decrease in revenue from the ticketing portion of this segment, which was negatively impacted by weak ticket demand for entertainment events in the markets we serve.

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2010 Compared to 2009

Revenues in 2010 from the hotel segment increased $1.1 million, or 0.7%, compared to 2009, resulting from a 5.7% increase in room revenue which was driven by higher-rated transient and preferred corporate guests and reduced room bookings from discount online travel agent (“OTA”) channels. Food and beverage revenue saw a 12.7% decrease in 2010 compared to 2009 reflecting the impact of our breakfast inclusive strategy and the decision to modify food and beverage offerings in select markets. On a comparable basis, excluding the results of the Seattle property, revenue from the hotel segment increased $0.8 million or 0.6% compared to 2009. The same drivers that impacted the hotel segment as reported, which are mentioned above, similarly impacted the comparable results.

Revenue from our franchise segment decreased $0.4 million, or 11.3%, in 2010 compared to 2009, due to a one time settlement received in 2009. Revenue from our entertainment segment decreased $2.5 million, or 21.0%, in 2010 compared to 2009 resulting primarily from the impact of one less “Best of Broadway” production in 2010. Other segment revenues, consisting primarily of the operations of a mall, were down $0.2 million to $2.5 million in 2010.

Operating Expenses

Operating expenses generally include direct operating expenses for each of the operating segments, depreciation and amortization, hotel facility and land lease expense, gain or loss on asset dispositions and undistributed corporate expenses. In 2011, operating expenses included a $14.2 million goodwill impairment charge. During our annual impairment testing, we determined that the carrying amount of the hotel reporting unit exceeded its fair value. Accordingly, a goodwill impairment charge of $14.2 million was recognized in the hotel reporting unit to impair all of the remaining goodwill associated with the hotel reporting unit. Also during 2011, we recorded pre-tax asset impairment charges of $8.4 million. Of that amount, $2.2 million relates to our Red Lion Colonial Hotel in Helena, Montana, $4.5 million relates to our Red Lion Hotel Denver Southeast in Aurora, Colorado and $1.7 million relates to our Red Lion Hotel Vancouver at the Quay in Vancouver, Washington. The hotels in Helena and Aurora are both listed for sale and were written down to their estimated fair value less estimated costs to sell. The hotel in Vancouver, Washington is subject to a right of way acquisition by the state in order to build a replacement of a bridge, thus we have determined that the carrying value is not recoverable. We also recorded a pre-tax gain of $33.5 million generated by the sale of our Seattle property, in the second quarter of 2011. In 2010, operating expenses included a $5.7 million asset impairment charge relating to the termination of a sublease and franchise agreement at our Red Lion Hotel Sacramento. In 2009, operating expenses included an $8.5 million asset impairment charge and a $0.1 million expense for restructuring. The table below provides a breakdown of our operating expenses, as well as direct margins by segment as reported for each of the three years in the period ended December 31, 2011:

	Year Ended December 31,
	2011			2010			2009
	(In thousands, except for percentages)
Operating Expenses From Continuing Operations
Hotels	$	111,498		$	112,934		$	109,356
Franchise		4,092			3,118			2,255
Entertainment		10,584			7,769			9,466
Other		1,733			1,598			2,075
Depreciation and amortization		18,651			20,462			20,438
Hotel facility and land lease		7,252			5,117			5,983
Goodwill impairment		14,236			—			—
Asset impairment		8,430			5,733			8,509
Gain on asset dispositions, net		(33,379	)		(25	)		(253	)
Separation costs		—			1,219			—
Undistributed corporate expenses		5,503			5,085			5,200
Restructuring expenses		—			—			136
Total operating expenses	$	148,600		$	163,010		$	163,165

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	Year Ended December 31,
	2011			2010			2009
	(In thousands, except for percentages)
Hotels revenue — continuing(1)	$	138,291		$	144,378		$	143,320
Direct margin(2)	$	26,793		$	31,444		$	33,964
Direct margin %		19.4	%		21.8	%		23.7	%
Franchise revenue	$	3,955		$	3,209		$	3,616
Direct margin(2)	$	(137	)	$	91		$	1,361
Direct margin %		-3.5	%		2.8	%		37.6	%
Entertainment revenue	$	11,379		$	9,236		$	11,690
Direct margin(2)	$	795		$	1,467		$	2,224
Direct margin %		7.0	%		15.9	%		19.0	%
Other revenue	$	2,455		$	2,481		$	2,641
Direct margin(2)	$	722		$	883		$	566
Direct margin %		29.4	%		35.6	%		21.4	%

(1) Excludes operations classified as discontinued.

(2) Revenues less direct operating expenses.

Our reported hotel segment numbers for the periods presented in this report reflect the results of our Seattle property for the full years 2009 and 2010, but not the full year 2011, as the sale of that property closed on June 14, 2011. In order to help investors distinguish changes in 2011 results from operations versus changes due to the sale of the Seattle property, we will discuss operating results as reported and also on a comparable hotel basis to exclude the results of the Seattle property.

A breakdown of our comparable hotel operating expenses from continuing operations and margin are as follows (in thousands, except for percentage changes):

	Year Ended December 31,
	2011			2010			2009
	(in thousands, except for percentage changes)
Hotel operating expenses from continuing operations		111,498			112,934			109,356
less: Hotel operating expenses from Seattle Fifth Avenue property		(4,639	)		(9,465	)		(9,042	)
Comparable hotel operating expenses	$	106,859		$	103,469		$	100,314
Hotel revenue from continuing operations		138,291			144,378			143,320
less: Hotel revenue from Seattle Fifth Avenue property		(5,987	)		(14,279	)		(13,988	)
Comparable hotel revenue	$	132,304		$	130,099		$	129,332
Hotel direct operating margin from continuing operations		26,793			31,444			33,964
less: Hotel direct operation margin from Seattle Fifth Avenue property		(1,348	)		(4,814	)		(4,946	)
Comparable hotel direct margin	$	25,445		$	26,630		$	29,018
Comparable direct margin %		19.2	%		20.5	%		22.4	%

Comparable hotel operating expenses from continuing operations represents reported hotel segment operating expenses less the impact of the Seattle property’s expense. We utilize comparable hotel operating expenses from continuing operations as a financial measure because management believes that investors find it a useful tool to perform more meaningful comparisons of past, present and future operating results and as a means to evaluate the results of core, ongoing operations. We believe it is a complement to reported operating expenses and other financial performance measures. Comparable hotel operating expenses from continuing operations is not intended to represent reported hotel operating expenses defined by generally accepted accounting principles in the United States (“GAAP”), and such information should not be considered as an alternative to reported hotel operating expenses or any other measure of performance prescribed by GAAP.

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2011 Compared to 2010

Direct hotel expenses as reported were $111.5 million in 2011 compared to $112.9 million in 2010. The sale of the Seattle property is the primary driver of the overall decline in hotel expenses because only a partial year of expenses incurred in 2011 compared to a full year of expenses in 2010. On a comparable basis, direct hotel expenses were $106.9 million compared to $103.5 million, representing a 3.3% increase. Rooms related expenses increased $1.6 million or 5.5% driven by labor, promotional and reservation costs. We also incurred additional expense related to sales, marketing, maintenance and energy costs during 2011. On a comparable basis, the segment recorded direct margin in 2011 of $25.4 million compared to $26.6 million in 2010.

Direct costs from the franchise segment increased $1.0 million in 2011 from 2010 primarily reflecting additional costs associated with the current subtenant and franchisee of our Sacramento property. Entertainment direct costs increased $2.8 million, or 36.2%, reflecting the impact of the costs associated with the successful production during 2011 of the Broadway play Wicked.

Depreciation and amortization expense declined by $1.8 million in 2011 compared to 2010. The primary drivers of the decline were the sale of the Seattle property in June 2011 and also the marketing of four additional properties for sale during the year. These properties were classified as assets held for sale and we ceased recording depreciation on them upon their classification to assets held for sale as required under generally accepted accounting principles.

Hotel facility and land lease costs increased $2.1 million to $7.3 million in 2011 compared to $5.1 million in 2010. This increase is primarily the result of 2010 expense including an accelerated recognition of deferred sublease income of $3.0 million partially offset by a write off of an uncollectible note receivable of $1.2 million, both associated with our Red Lion Hotel Sacramento sublease agreement, which was terminated in the fourth quarter of 2010. Additionally, we renewed our lease in Anaheim, California during the year at a contractually higher lease rate. Partially offsetting these increases were savings of approximately $0.7 million in the last two months of 2011 resulting from the termination of a lease with iStar Financial in which we acquired the leased properties.

During the fourth quarter of 2011, we recorded a $14.2 million goodwill impairment charge. During our annual impairment testing, we determined that the carrying amount of the hotel reporting unit exceeded its fair value. Accordingly, a goodwill impairment charge of $14.2 million was recognized in the hotel reporting unit to impair all of the remaining goodwill associated with the hotel reporting unit. Also during 2011, we recorded pre-tax asset impairment charges of $8.4 million. Of that amount, $2.2 million relates to our Red Lion Colonial Hotel in Helena, Montana, $4.5 million relates to our Red Lion Hotel Denver Southeast in Aurora, Colorado and $1.7 million relates to our Red Lion Hotel Vancouver at the Quay in Vancouver, Washington. The hotels in Helena and Aurora are both listed for sale and were written down to their estimated fair value less estimated costs to sell. The hotel in Vancouver, Washington is subject to a right of way acquisition by the state in order to build a replacement of a bridge, thus we have determined that the carrying value is not recoverable.

In 2011, the net gain on asset dispositions reflects the gain recognized on the sale of our Seattle property in the amount of $33.5 million. Additionally, this line includes the ongoing recognition of deferred gains on a previously sold hotel for which we entered into a long-term lease arrangement, offset by asset disposition losses throughout the year.

Undistributed corporate expenses include general and administrative charges such as corporate payroll, legal expenses, director and officers insurance, bank service charges, outside accountants and various other expenses. We consider these expenses to be “undistributed” because the costs are not directly related to our business segments and therefore are not further distributed. However, costs that can be identified to a particular segment are distributed, such as accounting, human resources and information technology, and are included in direct expenses of the segments to which they are allocated.

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2010 Compared to 2009

Direct hotel expenses in 2010 were $112.9 million compared to $109.4 million in 2009, representing a 3.2% increase. Rooms related expenses increased $4.0 million, offset by a food and beverage cost decrease of $3.0 million during the comparable periods, reflecting the impact of our breakfast inclusive sales strategy and the decision to modify food and beverage offerings in select markets. As part of our operational strategy, the hotel segment reported a 13.0%, or $1.4 million increase in expense related to sales personnel and technology expense in 2010. Overall, the segment recorded direct profit during 2010 of $31.4 million compared to $34.0 million in 2009. On a comparable basis, direct hotel expenses in 2010 were $103.5 million compared to $100.3 million in 2009, representing a 3.2% increase. Similar to above, the primary driver of the expense increase was the investment in sales and technology in 2010. The comparable direct margin recorded in the hotel segment in 2010 was $26.6 million compared to $29.0 million in the prior year.

Direct costs from the franchise segment increased $0.9 million in 2010 from 2009 reflecting additional costs associated with a former subtenant and franchisee of our Sacramento property. Entertainment direct costs decreased $1.7 million, or 17.9%, reflecting the impact of one less “Best of Broadway” production in 2010 compared to 2009.

Depreciation and amortization expense in 2010 of $20.5 million was essentially flat compared to 2009.

Hotel facility and land lease costs decreased $0.9 million to $5.1 million in 2010 compared to $6.0 million in 2009. This decrease was primarily the result of an accelerated recognition of deferred sublease income of $3.0 million partially offset by a write off of an uncollectible note receivable of $1.2 million, both associated with our Red Lion Hotel Sacramento sublease agreement with a former tenant.

During the fourth quarter of 2010, we recorded an impairment charge of $5.7 million related to the termination of a sublease and franchise agreement with the former operator of our Red Lion Hotel Sacramento. Due to this change in circumstances, a review of the carrying value of certain long-lived and intangible assets was conducted and it was determined that the carrying amount of those assets was not recoverable. The impairment charge recorded was equal to the amount by which the carrying amount exceeded the fair value of the assets. This compares to an impairment charge of $8.5 million recorded in 2009 related to the Red Lion Hotel Denver Southeast. Also during 2010, we recorded a $1.2 million charge for separation costs associated with the departure of our former President and Chief Executive Officer.

The net gain on asset dispositions reflects the ongoing recognition of deferred gains on a previously sold hotel for which we entered into a long-term lease arrangement, offset by asset disposition losses throughout the year.

Undistributed corporate expenses include general and administrative charges such as corporate payroll, legal expenses, director and officers insurance, bank service charges, outside accountants and various other expenses. We consider these expenses to be “undistributed” because the costs are not directly related to our business segments and therefore are not further distributed. However, costs that can be identified to a particular segment are distributed, such as accounting, human resources and information technology, and are included in direct expenses of the segments to which they are allocated.

Interest Expense

Interest expense for the year ended December 31, 2011 decreased $0.7 million to $8.4 million compared to $9.1 million recorded in 2010. The decline is primarily attributable to a decline in the principal amount of debt outstanding in 2011. Our average pre-tax interest rate on debt during 2011 was 7.0% compared to 6.8% in 2010.

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Interest expense for the year ended December 31, 2010 increased $0.6 million to $9.1 million compared to $8.5 million recorded in 2009 due to modest rate increases associated with loan amendments made early in 2010. Our average pre-tax interest rate on debt during 2010 was 6.8% compared to 6.2% in 2009.

Other Income

Other income primarily consists of interest income, which has been relatively flat at $0.4 million in 2011, 2010 and 2009.

Income Taxes

Our effective income tax rate with respect to income from continuing operations for 2011 was 244.5% as compared to (33.3%) and (35.5%) for 2010 and 2009, respectively. The increase in our rate is due primarily to the 2011 impairment of $14.2 million of book basis goodwill which is not deductible for tax purposes. Other items giving rise to a difference between our statutory U.S. federal tax rate of 34% and our effective rate include state taxes and incentive tax credits allowed under federal law. A valuation allowance against our deferred tax assets has not been established, as we believe it is more likely than not that these assets will be realized.

Discontinued Operations

During the year ended December 31, 2011, we concluded that we did not intend to maintain continuing involvement with two of our hotels listed for sale which are located in Medford, Oregon and Missoula, Montana. Accordingly, the operations of these hotels have been classified as discontinued operations in our statements of operations for all years presented. For the year ended December 31, 2010, we concluded that a leased hotel in Astoria, Oregon had reached the end of its useful life and the hotel was closed. Accordingly, the operations of that hotel have been classified as discontinued operations for all years presented. For additional information, see Note 7 of Notes to Consolidated Financial Statements.

Liquidity and Capital Resources

As of December 31, 2011 we had total long term debt maturing within one year of $3.3 million. Additionally, the outstanding balance under our revolving credit facility at December 31, 2011 of $0.8 million is included as a current liability.

Our current liabilities at December 31, 2011 exceeded our current assets, excluding assets held for sale, by $0.5 million. We are actively pursuing financing alternatives to address maturing liabilities, capital needs and to supplement working capital. Additionally, we can access up to $10 million on our current revolving credit facility to fund operating needs. As of March 8, 2012, the full $10 million on our revolving credit facility was available as we had no amount drawn on that date. While we continue to be in compliance with our debt covenants, and are working to generate higher positive cash flow from operations and to have adequate liquidity to fund our ongoing operating activities, there can be no assurance that we will be able to repay or refinance our debts when they mature, or invest in our hotels to remain competitive at our current rates.

On June 14, 2011, we completed a sale of our Red Lion Hotel on Fifth Avenue in Seattle, Washington for $71 million in cash and used $28 million of the proceeds to retire our revolving credit facility, which was scheduled to expire in September 2011. We also used $37 million of the proceeds to acquire a portfolio of 10 previously leased hotels from iStar Financial, Inc. in November 2011. As a result of this acquisition, contractual annual lease payment obligations of approximately $4.3 million have been eliminated.

On September 12, 2011, we expanded our existing term loan agreement with Wells Fargo Bank, National Association (“Wells Fargo”). The term loan, on which the outstanding principal was approximately $12 million, was increased to $30 million. The additional advance of approximately $18 million was used to pay off maturing debt aggregating $17.4 million and to pay expenses in connection with the transaction, including a $0.2 million

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commitment fee, resulting in net cash proceeds to us of approximately $0.4 million. Principal payments of $0.5 million are required on the loan on December 31, 2011 and on the last day of each calendar quarter thereafter. Additional principal payments will be required on the term loan if a property securing the facility is sold or we raise new equity. In the case of a property sale, the additional payment required will be the greater of (i) 50% of the net proceeds from the sale or (ii) 50% of the appraised market value of the property being sold. In the case of an equity issue, the additional payment required will be 50% of the net equity proceeds raised. The facility matures on March 31, 2013 and all remaining unpaid amounts will be due on that date.

Under the facility with Wells Fargo, in addition to the $30 million term loan, a revolving line of credit for up to $10 million (further modified on February 2, 2012, see below) for general corporate purposes became available on October 13, 2011 and all unpaid amounts will be due on March 31, 2013.

Interest during 2011 under the term loan and revolving line of credit was payable at our option (i) at a fluctuating rate 2% above a base rate in effect from time to time, or (ii) at a rate 4.5% above LIBOR (under one, three or six month terms).

Our obligations under the $40 million facility are (i) guaranteed by our subsidiaries Red Lion Hotels Limited Partnership (“RLHLP”), Red Lion Hotels Franchising, Inc., Red Lion Hotels Management, Inc. and Red Lion Hotels Holdings, Inc., (ii) secured by our accounts receivable and inventory, and (iii) further collateralized by our owned hotel properties in Bellevue, Spokane and Olympia, Washington, in Post Falls and Pocatello, Idaho, in Kalispell and Helena, Montana and in Aurora, Colorado. On November 2, 2011, we purchased 10 hotels formerly leased from iStar Financial Inc.; see Note 5 of Condensed Notes to Consolidated Financial Statements for further details. Subsequent to their purchase, we pledged our hotels in Bend and Coos Bay, Oregon, Boise, Idaho, Kelso and Wenatchee, Washington, and Sacramento, California as additional collateral for the facility.

The credit facility requires us to comply with customary affirmative and negative covenants, as well as financial covenants relating to leverage and to debt service coverage ratios and limitations of borrowing availability based on the operating results of collateral properties. It also includes customary events of default. We were in compliance with these covenants at December 31, 2011.

We are committed to keeping our properties well maintained and attractive to our customers in order to enhance our competitiveness within the industry and keep our hotels in the midscale category. This requires ongoing access to capital for replacement of outdated furnishings as well as for facility repair, modernization and renovation. Over the last three to four years, our levels of capital expenditures for these purposes have been lower than normal due to the general economic conditions impacting our industry. As a result, we will be required over the next 18 months to invest significant amounts in hotel maintenance in order to support the room rates that we have historically charged.

We announced a strategic listing for sale or the intent to sell some of our real estate assets in 2011. See Notes 5 and 6 of Notes to Consolidated Financial Statements for further detail. We may seek to raise additional funds for capital improvements, operating expenses, franchise or hotel expansion or other corporate needs through public or private financings, strategic relationships, sale of assets or other arrangements. We cannot assure that such funds, if needed, will be available on terms attractive to us, or at all. Furthermore, any additional equity financings may be dilutive to shareholders and debt financing, if available, may involve covenants that place substantial restrictions on our business. As mentioned above additional principal payments will be required on our term loan if a property securing that facility is sold or we raise new equity. In the case of a property sale, the additional payment required will be the greater of (i) 50% of the net proceeds from the sale, or (ii) 50% of the appraised market value of the property being sold. In the case of an equity issue, the additional payment required will be 50% of the net equity proceeds raised. Our failure to secure funding as and when needed could have a material adverse impact on our financial condition and our ability to pursue business strategies.

At December 31, 2011, outstanding debt was $101.3 million. That debt balance includes $29.5 million outstanding on the term loan mentioned above and $0.8 million outstanding on our line of credit. We also had

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$30.8 million in the form of trust preferred securities and a total of $40.2 million in nine fixed-rate notes collateralized by individual properties. Our average pre-tax interest rate on debt was 7.0% at December 31, 2011, of which 70.1% was fixed at an average rate of 7.9% and 29.9% was at an average variable rate of 4.8%. Our term loan matures in March 2013 and our fixed-rate notes mature in July 2013.

Of the $101.3 million in total debt obligations, two pools of cross securitized debt exist: (i) one consisting of five properties with total borrowings of $19.0 million; and (ii) a second consisting of four properties with total borrowings of $21.2 million. Each pool of securitized debt includes defeasance provisions for early repayment.

On February 2, 2012, we modified our existing credit facility with Wells Fargo, effective December 31, 2011, as follows: A financial covenant relating to loan commitment coverage was eliminated. In lieu thereof, we agreed that borrowings under the facility’s revolving line of credit which extends up to $10 million, may be limited based on a formula relating to the trailing twelve-month consolidated net income of the hotel properties collateralizing the facility. The financial covenant relating to debt service coverage ratio was eased. We were relieved of our obligation to offer our hotel in Medford, Oregon as additional security for the facility and for the period from January 1, 2012 through August 31, 2012 and the margins on the interest rate options under the term loan and revolving line of credit were increased (i) to 2.5% for borrowings accruing interest by reference to the facility’s base rate, and (ii) to 5% for borrowings accruing interest by reference to LIBOR. Thereafter, the margins will decrease to at most 2% and 4.5%, respectively, or to as low as 1% and 3.5%, respectively, if our senior leverage ratio decreases sufficiently. We paid a fee of $10,000 in connection with the modification of the facility.

Operating Activities

Net cash provided by operating activities totaled $1.9 million in 2011, a $17.6 million decrease from $19.5 million in 2010 and a $13.8 million decrease from 2009. Working capital changes, including changes to restricted cash, receivables, inventories, prepaid expenses, payables and accrued expenses and deferred income, were unfavorable in 2011 compared to 2010 by $13.1 million and favorable in 2010 compared to 2009 by $12.0 million. In 2011, we had a $1.7 million higher accounts receivable balance relating to the timing of collection of receivables in our entertainment segment. Additionally, we funded our January 3, 2012 payroll of approximately $1.7 million on December 30, 2011, resulting in a reduction in accrued payroll. The remaining variance was driven by the timing of vendor payments in 2011.

Investing Activities

Net cash provided by investing activities totaled $21.6 million in 2011 compared to net cash used in investing activities of $10.4 million in 2010 and $17.0 million used in 2009. In 2011, we sold one of our properties in Seattle, which provided $68.3 million after selling costs and we acquired a leased portfolio of assets, which used $37.5 million including closing costs. Additions to property and equipment used $8.8 million. Additions to property and equipment decreased $5.8 million in 2010 compared to 2009. During 2010, we spent $10.6 million on investments in maintenance, technology and hotel improvement projects. Of the $16.4 million of capital spent in 2009, $12.3 million was used for renovation activities.

Financing Activities

Net cash used in financing activities totaled $25.5 million in 2011 compared to $8.9 million in 2010. During 2011, we used proceeds from the sale of the Seattle property to retire our revolving credit facility which had a balance of $28 million. We also repaid $25.5 million of long-term debt, and had total borrowings of $28.9 million over the course of the year. Net cash used in financing activities totaled $8.9 million in 2010 compared to $13.1 million used in 2009. During 2010, we paid a net $8.0 million on our credit facility compared to net payment during 2009 of $10.0 million.

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At December 31, 2011, we had total debt obligations of $101.3 million, of which $40.2 million was under nine notes collateralized by individual hotels, all with fixed interest rates of 6.7%. These nine notes all mature in July 2013. Our average pre-tax interest rate on debt was 7.0% at December 31, 2011, compared to 6.8% at December 31, 2010. Included within outstanding debt are debentures due to the Red Lion Hotels Capital Trust of $30.8 million, which are uncollateralized and due to the trust in 2044 at a fixed rate of 9.5%.

On September 12, 2011, we expanded our existing term loan agreement with Wells Fargo. The term loan, on which the outstanding principal was approximately $12 million, was increased to $30 million. The additional advance of approximately $18 million was used to pay off maturing debt aggregating $17.4 million and to pay expenses in connection with the transaction, including a $0.2 million commitment fee, resulting in net cash proceeds to us of approximately $0.4 million. Principal payments of $0.5 million are required on the loan on December 31, 2011 and on the last day of each calendar quarter thereafter. Additional principal payments will be required on the term loan if a property securing the facility is sold or we raise new equity. In the case of a property sale, the additional payment required will be the greater of (i) 50% of the net proceeds from the sale or (ii) 50% of the appraised market value of the property being sold. In the case of an equity issue, the additional payment required will be 50% of the net equity proceeds raised. The facility matures on March 31, 2013 and all remaining unpaid amounts will be due on that date.

Net cash (used in) provided by financing activities during 2011 benefited from the exercise of stock options by employees resulting in proceeds to us of $0.9 million. During 2010, this category benefited from the exercise of stock options by employees including former executives resulting in proceeds to us of $2.5 million. No options were exercised during 2009.

Contractual Obligations

The following table summarizes our significant contractual obligations, including principal and estimated interest on debt, as of December 31, 2011 (in thousands):

	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Debt(1)	$	76,058	$	7,890	$	68,168	$	—	$	—
Operating and capital leases		26,307		5,000		7,850		6,000		7,457
Service agreements		1,035		655		380		—		—
Debentures due Red Lion Hotels Capital Trust(1)		125,021		2,928		5,857		5,857		110,379
Total contractual obligations(2)	$	228,421	$	16,473	$	82,255	$	11,857	$	117,836

(1) Including estimated interest payments and commitment fees over the life of the debt agreement.

(2) With regard to purchase obligations, we are not party to any material agreements to purchase goods or services that are enforceable or legally binding as to fixed or minimum quantities to be purchased or stated price terms.

In 2001, we assumed a master lease agreement with iStar Financial, Inc. for 17 hotel properties, including 12 which were part of the Red Lion acquisition. Subsequently, we entered into an agreement with Doubletree DTWC Corporation under which it subleased five of these hotel properties from us. During the second quarter of 2010, we amended the agreement to terminate the master lease as to the Astoria, Oregon property due to its closure. The master lease agreement required minimum monthly payments of $1.2 million plus contingent rents based on gross receipts from the remaining 16 hotels, of which approximately $0.8 million per month was paid by the sublease tenant.

On November 2, 2011, we signed an agreement to purchase for $37 million, 10 hotels formerly leased from iStar Financial Inc. The hotels purchased in the iStar agreement include: Red Lion Hotel Boise Downtowner; Red Lion Inn Missoula; Red Lion Inn Bend; Red Lion Hotel Coos Bay; Red Lion Hotel Eugene; Red Lion Hotel Medford; Red Lion Hotel Pendleton; Red Lion Hotel Kelso/Longview; Red Lion Hotel Wenatchee; and Red

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Lion Hotel Sacramento at Arden Village. The lease expense for these 10 hotels represented $4.3 million in annual payments which are no longer reflected in the table above. The Red Lion Hotel Vancouver at the Quay in Vancouver, Washington will remain leased under a restated lease with iStar as the future of the property rests with the progress of the Columbia River Crossing bridge project, which will result in the right of way acquisition of the hotel. We also assigned to an affiliate of iStar Financial Inc. the sublease described above with Doubletree DTWC Corporation whereby Doubletree DTWC Corporation was subleasing five additional properties from us.

In October 2007, we completed an acquisition of a 100-year (including extension periods) leasehold interest in a hotel in Anaheim, California for $8.3 million, including costs of acquisition. At our option, we are entitled to extend the lease for 19 additional terms of five years each, with increases in lease payments tied directly to the Consumer Price Index. We have exercised the first option to extend for an additional five year term beginning in May 2011 at $2.2 million per year. The amounts shown in the table above extend through April 2016 and reflect this five year extension.

In addition to the above mentioned obligations, we have leasehold interests at our properties in Eugene, Oregon, the Seattle Airport and Spokane, Washington as well as at our corporate headquarters location. These leases require us to pay fixed monthly rent and have expiration dates of 2012 and beyond. We also assumed an office lease used by guests contracted to stay at our Denver Southeast Hotel. As part of this contract business, we are reimbursed the entire lease expense amount. The expense of all of these leases has been included in the table above.

Off-balance Sheet Arrangements

As of December 31, 2011, we had no off-balance sheet arrangements, as defined by SEC regulations that have, or are reasonably likely to have, a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Other Matters

Franchise Contracts

At December 31, 2011, our system of hotels included 18 hotels under franchise agreements, representing a total of 3,186 rooms and 161,621 square feet of meeting space.

In June 2011, we sold our Seattle property and entered into a franchise agreement with the buyer who will continue to operate the property as a Red Lion hotel.

We opened the following franchised hotels in 2011: Red Lion Hotel Oakland International Airport in February 2011, Red Lion Inn Rancho Cordova in May 2011, Red Lion Hotel Farmington in September 2011, Red Lion Hotel Gallup in September 2011 and the Red Lion Hotel Grants in October 2011. We lost one franchised hotel in 2011 due to the bankruptcy of the property owner in Concord, California.

We have three franchise license agreements that expire in 2012, and one expiring in each of the years 2013, 2014 and 2015.

Seasonality

Our business is subject to seasonal fluctuations, with more revenues and profits realized from May through October than during the rest of the year. During 2011, revenues during the second and third quarters approximated 28.4% and 28.8%, respectively, of total revenues for the year, compared to revenues of 21.6% and 21.3% of total revenues during the first and fourth quarters respectively.

48

Inflation

The effect of inflation, as measured by fluctuations in the U.S. Consumer Price Index, has not had a material impact on our consolidated financial statements during the periods presented.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect: (i) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and (ii) the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates. We consider a critical accounting policy to be one that is both important to the portrayal of our financial condition and results of operations and requires management’s most subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our significant accounting policies are described in Note 2 of Notes to Consolidated Financial Statements; however, we have also identified our most critical accounting policies and estimates below. Management has discussed the development and selection of our critical accounting policies and estimates with the audit committee of our board of directors, and the audit committee has reviewed the disclosures presented below.

Revenue Recognition and Receivables

Revenue is generally recognized as services are provided. When we receive payment from customers before our services have been performed, the amount received is recorded as deferred revenue until the service has been completed. We recognize revenue from the following sources:

• Hotels — Room rental and food and beverage sales from owned and leased hotels. Revenues are recognized when our services have been performed, generally at the time of the hotel stay or guest’s visit to the restaurant. This treatment is consistent with others within our industry. Our revenues are significantly impacted by global, national and regional economic conditions affecting the travel and hospitality industry, as well as the relative market share of our hotels compared with our competitors.

• Franchise — Fees received in connection with the franchise of our brand names. Franchise revenues are recognized as earned in accordance with the contractual terms of the franchise agreements.

• Entertainment — Computerized event ticketing services and promotion of Broadway style shows and other special events. Where we act as an agent and receive a net fee or commission, it is recognized as revenue in the period the services are performed. When we are the promoter of an event and are at-risk for the production, revenues and expenses are recorded in the period of the event performance.

• Other — Primarily from rental income received from our direct ownership interest in a retail mall in Kalispell, Montana that is attached to our Red Lion hotel. We also own a hotel in Sacramento, California that we lease to a franchisee.

We review the ability to collect individual accounts receivable on a routine basis. We record an allowance for doubtful accounts based on specifically identified amounts that we believe to be uncollectible. A receivable is written off against the allowance for doubtful accounts if collection attempts fail.

Long-lived Assets

Property and equipment is stated at cost less accumulated depreciation. The assessment of long-lived assets for possible impairment requires us to make judgments regarding estimated future cash flows from the respective properties, which is dependent upon internal forecasts, estimation of the long-term rate of growth for our business, the useful life over which our cash flows will occur, the determination of real estate market values,

49

asset appraisals and, if available and appropriate, current estimated net sales proceeds from pending offers or net sales proceeds from previous, comparable transactions. If the expected undiscounted future cash flows are less than the net book value of the assets, the excess of the net book value over the estimated fair value is charged to current earnings as an asset impairment.

We review the recoverability of our long-lived assets as events or circumstances indicate that the carrying amount of an asset may not be recoverable. Changes to our plans, including a decision to sell, dispose of or change the intended use of an asset, could have a material impact on the carrying value of the asset.

During the year ended December 31, 2011, in accordance with the guidance for the impairment of long-lived assets, assets held and used with a carrying amount of $39.8 million were written down to their estimated fair value of $30.4 million, resulting in a non-cash impairment charge of $9.4 million for the year. This includes impairment of properties of continuing operations of $8.4 million and impairment of discontinued operations of $1.0 million. To break out the charge by property; $2.2 million was related to our Red Lion Colonial Hotel in Helena, Montana, $4.6 million was related to our Red Lion Hotel Denver Southeast in Aurora, Colorado, $1.7 million was related to our Red Lion Hotel Vancouver at the Quay in Vancouver, Washington, $0.6 million was related to our Red Lion Hotel Medford in Medford, Oregon and $0.4 million was related to our Red Lion Inn Missoula in Missoula, Montana. Four of these five properties are listed for sale and were thus adjusted to their estimated fair market values less costs to sell. Note that the properties in Medford and Missoula are classified as discontinued operations. The property in Vancouver, Washington is not held for sale, but it is subject to a right of way acquisition by the state of Washington to allow a replacement of a bridge to be built where the property now exists.

During the year ended December 31, 2010, in accordance with the guidance for the impairment of long-lived assets, assets held and used with a carrying amount of $4.1 million were written down to their estimated fair value of $0.4 million, resulting in a non-cash impairment charge of $3.7 million for the year. The full amount of $3.7 million was related to the termination of a sublease and franchise agreement with the operator of the Red Lion Hotel Sacramento.

During the year ended December 31, 2009, in accordance with the guidance for the impairment of long-lived assets, assets held and used with a carrying amount of $28.4 million were written down to their estimated fair value of $19.7 million, resulting in a non-cash impairment charge of $8.7 million. Of that amount, $8.5 million was related to our Red Lion Hotel Denver Southeast. The remaining $0.2 million impairment loss related to a second property in Astoria, Oregon, which is reported in discontinued operations.

To determine estimated fair value, we use Level 3 inputs for our discounted cash flow analyses. Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. Level 3 inputs used include growth rate, property-level pro forma financial information and remaining lives of the assets. Management bases these assumptions on historical data and experience and future operational expectations. For certain assets, we use recent asset appraisals or valuations performed by third-parties, which we deemed to be Level 3 inputs, to support our estimate of fair value.

Intangible Assets

Our intangible assets include brands and goodwill, which we do not amortize. Instead, we test for impairment annually or more frequently as events or circumstances indicate the carrying amount of an asset may not be recoverable. Our goodwill and other intangible asset impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit, subject to the same general assumptions discussed above for long-lived assets. At December 31, 2011 and 2010, our recorded goodwill and other intangible assets not subject to amortization were reported at $15.4 million and $34.9 million respectively.

50

During 2011, we disposed of goodwill associated with the sale of our Seattle property in the amount of $4.7 million, allocated and impaired $0.6 million of goodwill related to our property for sale in Helena, Montana and finally, during our annual impairment testing, we determined that the fair value of our hotel reporting segment was greater than its carrying value resulting in an impairment of all the remaining goodwill in the hotel segment of $14.2 million.

During 2010, in accordance with the guidance for the impairment of intangible assets, we recorded an impairment charge of $2.0 million related to the termination of a sublease agreement with the former subtenant of the Red Lion Hotel Sacramento. The lease contract intangible asset for that property was deemed fully impaired as of December 31, 2010 due to the termination of that sublease agreement and current market conditions becoming unfavorable to support the carrying value of the lease contract intangible.

The financial and credit market volatility directly impacts fair value measurement through our company’s estimated weighted average cost of capital used to determine discount rate, and through our common stock price that is used to determine market capitalization. During times of volatility, significant judgment must be applied to determine whether credit or stock price changes are a short-term move or a longer-term trend.

Our other intangible assets include marketing and lease contracts, the values of which are amortized on a straight-line basis over the weighted average life of the agreements.

New and Future Accounting Pronouncements

Intangibles-Goodwill and Other — In September 2011, the FASB released Accounting Standards Update No. 2011-08, “Intangibles — Goodwill and Other (Topic 350): Testing Goodwill for Impairment” (“ASU 2011-08”). Under the amendments in this Update, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. This standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. We will adopt this standard in 2012 and we do not believe it will have a material impact on the consolidated financial statements.

Amendments to Fair Value Measurement — In May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”) to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements, particularly for level 3 fair value measurements. ASU 2011-04 is effective for our fiscal year beginning on January 1, 2012 and must be applied prospectively. We do not expect the adoption of ASU 2011-04 to have a material impact on the consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

At December 31, 2011, $71.0 million of our outstanding debt was subject to currently fixed interest rates and was not exposed to market risk from rate changes. At December 31, 2011, we also had $0.8 million outstanding from our revolving credit facility at a floating interest rate of 5.25%, as well as $29.5 million outstanding on a term loan at an interest rate of 4.81%, based on a blend of fixed and variable rates.

On February 2, 2012, we modified our existing credit facility with Wells Fargo Bank, National Association, effective December 31, 2011, as follows: A financial covenant relating to loan commitment coverage was eliminated. In lieu thereof, we agreed that borrowings under the facility’s revolving line of credit may be limited

51

based on a formula relating to the trailing twelve-month consolidated net income of the hotel properties collateralizing the facility. The financial covenant relating to debt service coverage ratio was eased. We were relieved of our obligation to offer our hotel in Medford, Oregon as additional security for the facility and for the period from January 1, 2012 through August 31, 2012, the margins on the interest rate options under the term loan and revolving line of credit were increased (i) to 2.5% for borrowings accruing interest by reference to the facility’s base rate, and (ii) to 5% for borrowings accruing interest by reference to LIBOR. Thereafter, the margins will decrease to at most 2% and 4.5%, respectively, or to as low as 1% and 3.5%, respectively, if our senior leverage ratio decreases sufficiently. We paid a fee of $10,000 in connection with the modification of the facility.

Outside of these changes, we do not foresee any other changes of significance in our exposure to fluctuations in interest rates, although we will continue to manage our exposure to this risk by monitoring available financing alternatives.

The below table summarizes our debt obligations at December 31, 2011 on our consolidated balance sheet (in thousands):

	2012		2013		2014		2015		2016		Thereafter		Total			Fair Value
Total debt	$	4,118	$	66,378	$	—	$	—	$	—	$	—	$	70,496		$	70,658
Average interest rate														5.9	%
Debentures due Red Lion
Hotels Capital Trust	$	—	$	—	$	—	$	—	$	—	$	30,825	$	30,825		$	30,717
Interest rate														9.5	%

Item 8. Financial Statements and Supplementary Data

See Item 15 of this annual report for certain information with respect to the financial statements filed as a part hereof, including financial statements filed pursuant to the requirements of this Item 8.

The following table sets forth supplementary financial data (in thousands except per share amounts) for each quarter for the years ended December 31, 2011 and 2010, derived from our unaudited financial statements. The data set forth below should be read in conjunction with and is qualified in its entirety by reference to our consolidated financial statements.

	Year ended December 31,
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
2011 (unaudited)
Room revenue	$	20,875		$	28,181		$	32,225		$	19,454		$	100,735
Food and beverage revenue		7,659			8,948			8,361			8,763			33,731
Other hotel revenue		1,000			1,096			1,045			684			3,825
Total hotels segment revenue		29,534			38,225			41,631			28,901			138,291
Franchise revenue		707			945			1,218			1,085			3,955
Entertainment revenue		2,800			4,640			1,499			2,440			11,379
Other revenue		607			519			567			762			2,455
Total revenues	$	33,648		$	44,329		$	44,915		$	33,188		$	156,080
Operating income (loss) from continuing operations	$	(5,046	)	$	34,246		$	1,581		$	(23,301	)	$	7,480
Goodwill impairment(1)		—			—			—			14,236			14,236
Asset impairment(2)		—			—			2,156			6,274			8,430
Gain on asset disposition(3)		86			33,497			115			(319	)		33,379
Net income (loss) from continuing operations		(4,500	)		18,839			(151	)		(20,158	)		(5,970	)
Net income (loss) from discontinued operations		(271	)		(79	)		22			(764	)		(1,092	)
Less net income or loss attributable to noncontrolling interest		(10	)		112			(7	)		(9	)		86
Net income (loss) attributable to Red Lion Hotels Corporation	$	(4,761	)	$	18,648		$	(122	)	$	(20,913	)	$	(7,148	)
Earnings (loss) per share — basic and diluted	$	(0.25	)	$	0.97		$	(0.01	)	$	(1.09	)	$	(0.38	)

52

	Year ended December 31,
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
2010 (unaudited)
Room revenue	$	20,773		$	27,085		$	34,580		$	21,917		$	104,355
Food and beverage revenue		8,091			9,236			8,850			9,072			35,249
Other hotel revenue		928			1,229			1,422			1,195			4,774
Total hotels segment revenue		29,792			37,550			44,852			32,184			144,378
Franchise revenue		558			889			999			763			3,209
Entertainment revenue		2,478			2,340			2,048			2,370			9,236
Other revenue		645			594			575			667			2,481
Total revenues	$	33,473		$	41,373		$	48,474		$	35,984		$	159,304
Operating income (loss) from continuing operations	$	(4,302	)	$	2,456		$	6,848		$	(8,708	)	$	(3,706	)
Asset impairment(2)		—			—			—			5,733			5,733
Franchise, sublease termination(4)											(1,452	)		(1,452	)
Separation Costs(5)		1,219			—			—			—			1,219
Net income (loss) from continuing operations		(4,033	)		117			3,123			(7,057	)		(7,850	)
Net income (loss) from discontinued operations		(347	)		(180	)		(72	)		(170	)		(769	)
Less net income or loss attributable to noncontrolling interest		(11	)		2			7			(8	)		(10	)
Net income (loss) attributable to Red Lion Hotels Corporation	$	(4,368	)	$	(65	)	$	3,044		$	(7,220	)	$	(8,609	)
Earnings (loss) per share — basic and diluted	$	(0.24	)	$	—		$	0.16		$	(0.39	)	$	(0.47	)

(1) In the fourth quarter of 2011, we recorded an impairment charge to a portion of our goodwill asset related to hotel operations.

(2) During the fourth quarter of 2011, we recorded an asset impairment charge of $4.5 million on our asset held for sale, Red Lion Hotel Denver Southeast to reflect the estimated fair value of the hotel net of selling costs in addition during the quarter, we recorded an asset impairment charge of $1.7 million for our Red Lion Vancouver at the Quay property to reflect the fair value of the related assets due to an anticipated right of way acquisition by the State of Washington. During the third quarter of 2011, we recorded an asset impairment charge of $2.2 million on our asset held for sale, Red Lion Hotel in Helena, Montana to reflect the estimated fair value of the hotel net of selling costs. During the fourth quarter of 2010, we recorded a $5.7 million asset impairment charge related to the termination of a sublease and franchise agreement at our Red Lion Hotel Sacramento.

(3) During the second quarter of 2011, we recorded a $33.5 million gain on the sale of our Red Lion Hotel on Fifth Avenue in Seattle.

(4) During the fourth quarter of 2010, a sublease agreement was terminated for our Red Lion Hotel Sacramento. As a result we accelerated the recognition of $3.0 million of deferred lease income associated with the contract. Additional adjustments in the amount of $1.5 million were necessary to reflect uncollectible amounts and accrued expenses, which partially offset the deferred lease income adjustment.

(5) During the first quarter of 2010, we recorded $1.2 million in separation payments pertaining to the termination of our former President and Chief Executive Officer in January 2010.

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Financial Statements

The 2011 Consolidated Financial Statements of Red Lion Hotels Corporation are

presented on pages 55 to 86 of this annual report.

54

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Red Lion Hotels Corporation

Spokane, Washington

We have audited the accompanying consolidated balance sheets of Red Lion Hotels Corporation as of December 31, 2011 and 2010, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Red Lion Hotels Corporation at December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Red Lion Hotel Corporation’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 15, 2012, expressed an unqualified opinion thereon.

BDO USA, LLP

Spokane, Washington

March 15, 2012

55

RED LION HOTELS CORPORATION

CONSOLIDATED BALANCE SHEETS

December 31, 2011 and 2010

	2011		2010
	(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	1,981	$	4,012
Restricted cash		3,358		4,120
Accounts receivable, net		7,591		5,985
Inventories		1,346		1,328
Prepaid expenses and other		1,973		1,937
Deferred income taxes		4,291		—
Assets held for sale		30,380		—
Total current assets		50,920		17,382
Property and equipment, net		232,589		272,030
Goodwill		8,512		28,042
Intangible assets, net		6,992		7,984
Other assets, net		5,883		6,044
Total assets	$	304,896	$	331,482
LIABILITIES
Current liabilities:
Accounts payable	$	4,928	$	7,146
Accrued payroll and related benefits		2,103		4,367
Accrued interest payable		231		276
Advance deposits		380		487
Other accrued expenses		9,249		10,178
Revolving credit facility		844		18,000
Long-term debt, due within one year		3,274		25,275
Total current liabilities		21,009		65,729
Long-term debt, due after one year		66,378		51,877
Deferred income		4,643		4,859
Deferred income taxes		16,176		7,427
Debentures due Red Lion Hotels Capital Trust		30,825		30,825
Total liabilities		139,031		160,717
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Red Lion Hotels Corporation stockholders’ equity
Preferred stock — 5,000,000 shares authorized; $0.01 par value; no shares issued or outstanding		—		—
Common stock — 50,000,000 shares authorized; $0.01 par value; 19,172,670 and 18,869,254 shares issued and outstanding		192		189
Additional paid-in capital, common stock		149,027		146,834
Retained earnings		16,589		23,737
Total Red Lion Hotels Corporation stockholders’ equity		165,808		170,760
Noncontrolling interest		57		5
Total stockholders’ equity		165,865		170,765
Total liabilities and stockholders’ equity	$	304,896	$	331,482

The accompanying notes are an integral part of the consolidated financial statements.

56

RED LION HOTELS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2011, 2010 and 2009

	2011			2010			2009
	(In thousands, except per share data)
Revenue:
Hotels	$	138,291		$	144,378		$	143,320
Franchise		3,955			3,209			3,616
Entertainment		11,379			9,236			11,690
Other		2,455			2,481			2,641
Total revenues		156,080			159,304			161,267
Operating expenses:
Hotels		111,498			112,934			109,356
Franchise		4,092			3,118			2,255
Entertainment		10,584			7,769			9,466
Other		1,733			1,598			2,075
Depreciation and amortization		18,651			20,462			20,438
Hotel facility and land lease		7,252			5,117			5,983
Goodwill impairment		14,236			—			—
Asset impairment		8,430			5,733			8,509
Gain on asset dispositions, net		(33,379	)		(25	)		(253	)
Undistributed corporate expenses		5,503			6,304			5,200
Restructuring expenses		—			—			136
Total expenses		148,600			163,010			163,165
Operating income (loss)		7,480			(3,706	)		(1,898	)
Other income (expense):
Interest expense		(8,372	)		(9,073	)		(8,503	)
Other income, net		436			409			379
Income (loss) from continuing operations before income taxes		(456	)		(12,370	)		(10,022	)
Income tax (benefit) expense		5,514			(4,520	)		(3,815	)
Net income (loss) from continuing operations		(5,970	)		(7,850	)		(6,207	)
Discontinued operations:
Income (loss) from operations of discontinued business units, net of income tax (benefit) expense of $(250), $(397), and $(195) respectively		(441	)		(731	)		(340	)
Impairment of the assets of the discontinued business units, net of income tax (benefit) expense of $(370), $(20), and $(60) respectively		(651	)		(38	)		(117	)
Income (loss) from discontinued operations		(1,092	)		(769	)		(457	)
Net income (loss)		(7,062	)		(8,619	)		(6,664	)
Net income or loss attributable to noncontrolling interest		86			(10	)		(1	)
Net income (loss) attributable to Red Lion Hotels Corporation	$	(7,148	)	$	(8,609	)	$	(6,663	)
Earnings (loss) per share attributable to Red Lion Hotels Corporation
Basic and diluted
Net income (loss) from continuing operations	$	(0.32	)	$	(0.43	)	$	(0.34	)
Income (loss) from discontinued operations		(0.06	)		(0.04	)		(0.03	)
Net income (loss) attributable to Red Lion Hotels Corporation	$	(0.38	)	$	(0.47	)	$	(0.37	)
Weighted average shares — basic		19,053			18,485			18,106
Weighted average shares — diluted		19,053			18,485			18,106

The accompanying notes are an integral part of the consolidated financial statements.

57

RED LION HOTELS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Years Ended December 31, 2011, 2010 and 2009

	Red Lion Hotels Corporation Stockholders’ Equity									Equity Attributable to Noncontrolling Interest			Total Equity
	Common Stock
	Shares		Amount		Additional Paid-In Capital		Retained Earnings
	(In thousands, except share data)
Balances, January 1, 2009		17,977,205	$	180	$	141,137	$	39,009		$	19		$	180,345
Net income (loss)		—		—		—		(6,663	)		(4	)		(6,667	)
Stock issued under employee stock purchase plan		54,871		—		119		—			—			119
Stock based compensation		148,028		2		1,223		—			—			1,225
Balances, December 31, 2009		18,180,104		182		142,479		32,346			15			175,022
Net income (loss)		—		—		—		(8,609	)		(10	)		(8,619	)
Stock issued under employee stock purchase plan		32,162		—		130		—			—			130
Stock issued under option plan		429,528		4		2,482		—			—			2,486
Stock based compensation		227,460		3		1,743		—			—			1,746
Balances, December 31, 2010		18,869,254		189		146,834		23,737			5			170,765
Net income (loss)		—		—		—		(7,148	)		86			(7,062	)
Distributions to noncontrolling interest		—		—		—		—			(34	)		(34	)
Stock issued under employee stock purchase plan		22,382		—		129		—			—			129
Stock issued under option plan		163,035		2		874		—			—			876
Stock based compensation		117,999		1		1,106		—			—			1,107
Tax benefit associated with stock based plans		—		—		84		—			—			84
Balances, December 31, 2011		19,172,670	$	192	$	149,027	$	16,589		$	57		$	165,865

The accompanying notes are an integral part of the consolidated financial statements.

58

RED LION HOTELS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2011, 2010 and 2009

	2011			2010			2009
	(In thousands)
Operating activities:
Net income (loss)	$	(7,062	)	$	(8,619	)	$	(6,664	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		19,021			20,919			20,954
Gain on disposition of property, equipment and other assets, net		(33,379	)		(26	)		(243	)
Goodwill impairment		14,236			—			—
Asset impairment		9,449			5,792			8,686
Termination of sublease agreement, net		—			(2,109	)		—
Deferred income taxes		4,542			(5,168	)		(3,184	)
Equity in investments		52			48			(9	)
Stock based compensation expense		1,251			1,594			1,238
Provision for doubtful accounts		176			378			212
Change in current assets and liabilities:
Restricted cash		762			(319	)		89
Accounts receivable		(1,764	)		209			2,505
Inventories		(56	)		22			160
Prepaid expenses and other		(36	)		1,308			(432	)
Accounts payable		(2,218	)		1,067			(5,388	)
Accrued payroll and related benefits		(2,264	)		2,203			(2,798	)
Accrued interest payable		(45	)		(42	)		4
Deferred income		275			—			900
Other accrued expenses and advance deposits		(1,059	)		2,230			(338	)
Net cash (used in) provided by operating activities		1,881			19,487			15,692
Investing activities:
Purchases of property and equipment		(46,278	)		(10,615	)		(16,425	)
Liquor license purchase		—			—			(500	)
Proceeds from disposition of property and equipment		68,346			44			16
Advances to Red Lion Hotels Capital Trust		(27	)		(27	)		(27	)
Other, net		(430	)		170			(34	)
Net cash (used in) provided by investing activities		21,611			(10,428	)		(16,970	)

The accompanying notes are an integral part of the consolidated financial statements.

59

RED LION HOTELS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

For the Years Ended December 31, 2011, 2010 and 2009

	2011			2010			2009
	(In thousands)
Financing activities:
Borrowings on revolving credit facility		10,844			15,500			11,000
Borrowings on long-term debt		18,042			—			—
Repayment of revolving credit facility		—			(23,500	)		(21,000	)
Retirement of revolving credit facility		(28,000	)		—			—
Repayment of long-term debt		(25,542	)		(3,170	)		(3,009	)
Common stock redeemed		(144	)		(86	)		(13	)
Proceeds from issuance of common stock under employee stock purchase plan		129			130			119
Proceeds from stock option exercises		876			2,486			—
Distributions to noncontrolling interest		(34	)		—			(3	)
Additions to deferred financing costs		(1,694	)		(292	)		(153	)
Net cash (used in) provided by financing activities		(25,523	)		(8,932	)		(13,059	)
Change in cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents		(2,031	)		127			(14,337	)
Cash and cash equivalents at beginning of period		4,012			3,885			18,222
Cash and cash equivalents at end of period	$	1,981		$	4,012		$	3,885
Supplemental disclosure of cash flow information:
Cash paid during periods for:
Interest on long-term debt	$	8,418		$	9,115		$	8,955
Income taxes	$	415		$	—		$	—
Cash received during periods for:
Income taxes	$	—		$	672		$	296
Noncash operating investing and financing activities:
Reclassification of property and other assets to assets held for sale	$	30,380		$	—		$	—
Reclassification of intangible assets to property and equipment	$	953		$	—		$	—
Conversion of accounts receivable to note receivable	$	—		$	377		$	771
Tax benefit associated with stock based plans	$	(84	)	$	—			—
Bonuses to employees paid in stock	$	—		$	237		$	126

The accompanying notes are an integral part of the consolidated financial statements.

60

RED LION HOTELS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization

Red Lion Hotels Corporation (“RLH,” “Red Lion” or the “Company”) is a NYSE-listed hospitality and leisure company (ticker symbols RLH and RLH-pa) primarily engaged in the ownership, operation and franchising of midscale full, select and limited service hotels under the Red Lion brand. As of December 31, 2011, the Red Lion system of hotels was comprised of 48 hotels located in nine states and one Canadian province, with 9,010 rooms and 452,387 square feet of meeting space. As of that date, the Company operated 30 hotels, of which 25 are wholly-owned and five are leased, and franchised 18 hotels predominantly owned and operated by various third-party franchisees.

The Company is also engaged in entertainment operations, which derive revenues from promotion and presentation of entertainment productions and ticketing services under the operations of WestCoast Entertainment and TicketsWest. The ticketing service offers ticketing inventory management systems, call center services, and outlet/electronic channel distribution for event locations. The Company also maintains a direct ownership interest in a retail mall that is attached to one of its hotels and owns a hotel which is leased to a franchisee.

The Company was incorporated in the state of Washington in April 1978, and until 1999 operated hotels under various brand names including Cavanaughs Hotels. In 1999, the Company acquired WestCoast Hotels, Inc., and rebranded its Cavanaughs hotels to the WestCoast brand, changing the Company’s name to WestCoast Hospitality Corporation. In 2001, the Company acquired Red Lion Hotels, Inc. In September 2005, after rebranding most of its WestCoast hotels to the Red Lion brand, the Company changed its name to Red Lion Hotels Corporation. The financial statements encompass the accounts of Red Lion Hotels Corporation and all of its consolidated subsidiaries, including its 100% ownership of Red Lion Hotels Holdings, Inc., and Red Lion Hotels Franchising, Inc., and its more than 99% ownership of Red Lion Hotels Limited Partnership (“RLHLP”) further discussed in Note 14. The less than 1% noncontrolling interest in RLHLP has been classified as a component of equity separate from equity of Red Lion Hotels Corporation.

The financial statements include an equity method investment in a 19.9% owned real estate venture. In addition, the Company holds a 3% common interest in Red Lion Hotels Capital Trust (the “Trust”) that is considered a variable interest entity. The Company is not the primary beneficiary of the Trust; thus, it is treated as an equity method investment. As more fully discussed in Note 2, the consolidated financial statements include all of the activities of the Company’s cooperative marketing fund, a variable interest entity. The Company is the primary beneficiary of this variable interest entity.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements have been prepared by Red Lion pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with generally accepted accounting principles in the United States of America (“GAAP”), and include all accounts and wholly and majority-owned subsidiaries’ accounts. All significant inter-company and inter-segment transactions and accounts have been eliminated upon consolidation. Certain amounts disclosed in prior period statements have been reclassified to conform to the current period presentation.

61

RED LION HOTELS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Cash and Cash Equivalents

All highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents. At times, cash balances at banks and other financial institutions may be in excess of federal insurance limits.

Restricted Cash

In accordance with the Company’s various borrowing arrangements, at December 31, 2011 and 2010, cash of approximately $3.4 million and $4.1 million, respectively, was held in escrow for the future payment of insurance, property taxes, repairs and furniture and fixtures.

Allowance for Doubtful Accounts

The ability to collect individual accounts receivable is reviewed on a routine basis. An allowance for doubtful accounts is recorded based on specifically identified amounts believed to be uncollectible. If actual collection experience changes, revisions to the allowance may be required and if all attempts to collect a receivable fail, it is recorded against the allowance. The estimate of the allowance for doubtful accounts is impacted by, among other things, national and regional economic conditions.

The following schedule summarizes the activity in the allowance account for trade accounts receivable for the past three years for continuing operations:

	Year ended December 31,
	2011			2010			2009
	(In thousands)
Allowance for doubtful accounts, continuing operations
Balance, beginning of year	$	539		$	592		$	522
Additions to allowance		176			376			225
Write-offs, net of recoveries		(286	)		(429	)		(155	)
Balance, end of year	$	429		$	539		$	592

Inventories

Inventories consist primarily of food and beverage products held for sale at the company operated restaurants and guest supplies. Inventories are valued at the lower of cost, determined on a first-in, first-out basis, or net realizable value.

Property and Equipment

Property and equipment are stated at cost. The cost of improvements that extend the life of property and equipment is capitalized. Repairs and maintenance charges are expensed as incurred.

Depreciation is provided using the straight-line method over the estimated useful life of each asset, which ranges as follows:

Buildings	25 to 39 years
Equipment	2 to 15 years
Furniture and fixtures	5 to 15 years
Landscaping and improvements	15 years

62

RED LION HOTELS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Valuation of Definite Lived Intangibles and Long-Lived Assets

The Company tests definite lived intangibles and long-lived asset groups for recoverability when changes in circumstances indicate the carrying value may not be recoverable, for example, when there are material adverse changes in projected revenues or expenses, significant underperformance relative to historical or projected operating results, or significant negative industry or economic trends. The Company also performs a test for recoverability when management has committed to a plan to sell or otherwise dispose of an asset group and the plan is expected to be completed within a year. The Company evaluates recoverability of an asset group by comparing its carrying value to the future net undiscounted cash flows the Company expects will be generated by the asset group. If the comparison indicates that the carrying value of an asset group is not recoverable, the Company recognizes an impairment loss for the excess of carrying value over the estimated fair value. When the Company recognizes an impairment loss for assets to be held and used, it depreciates the adjusted carrying amount of those assets over their remaining useful life.

The Company bases its calculations of the estimated fair value of a definite lived intangible asset or asset group on the income approach or the market approach. The assumptions and methodology it utilizes for the income approach are the same as those described in the “Valuation of Goodwill” caption. For the market approach, the Company uses analyses based primarily on market comparables, recent appraisals and assumptions about market capitalization rates, growth rates, and inflation.

For information on impairment losses recorded in 2011, 2010 and 2009 associated with definite lived intangibles and long-lived assets, see Note 5, Note 6 and Note 8.

Valuation of Goodwill and Indefinite Lived Intangible Assets

The Company assesses goodwill of its segments for potential impairments annually, or during the year if an event or other circumstance indicates that it may not be able to recover the carrying amount of the asset. For purposes of goodwill impairment testing, the Company has determined that the individual segments where goodwill is recorded constitute reporting units as defined in the literature.

In the first step of evaluating goodwill for impairment the Company compares the estimated fair value of the reporting unit with its carrying value. If the estimated fair value of the reporting unit exceeds its carrying amount, no further analysis is needed.

If the estimated fair value of the reporting unit is less than its carrying amount, the Company proceeds to the second step of the test to calculate the implied fair value of the reporting unit goodwill in order to determine whether any impairment is required. The Company calculates the implied fair value of the reporting unit goodwill by allocating the estimated fair value of the reporting unit to all of the assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination. If the carrying value of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, the Company recognizes an impairment loss for that excess amount. In allocating the estimated fair value of the reporting unit to all of the assets and liabilities of the reporting unit, the Company uses industry and market data, recent appraisals and knowledge of the industry and past experiences.

The Company bases its calculation of the estimated fair value of a reporting unit on a combined income and market approach. For the income approach, the Company uses discounted cash flow models that include, among

63

RED LION HOTELS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

others, the following assumptions: projections of revenues and expenses and related cash flows based on assumed long-term growth rates and demand trends; expected future investments to grow new units; and estimated discount rates. The Company bases these assumptions on historical data and experience, third-party appraisals, industry projections, micro and macro general economic condition projections, and its own expectations. For the market approach, the Company uses analyses based primarily on market comparables and assumptions about market capitalization rates, growth rates, and inflation.

For information on goodwill impairment charges, see Note 8.

Assets Held for Sale

The Company considers properties to be assets held for sale when all of the following criteria are met:

• management commits to a plan to sell a property;

• it is unlikely that the disposal plan will be significantly modified or discontinued;

• the property is available for immediate sale in its present condition;

• actions required to complete the sale of the property have been initiated;

• sale of the property is probable and the Company expects the completed sale will occur within one year; and

• the property is actively being marketed for sale at a price that is reasonable given its current market value.

Upon designation as an asset held for sale, the Company records the carrying value of each property at the lower of its carrying value or its estimated fair value, less estimated costs to sell, and ceases depreciation.

For information on the assets classified as held for sale, see Note 6.

Other Assets

Other assets primarily include deferred loan fees, straight-line rental income, long-term notes receivable and equity method and cost method investments discussed in Note 1. Deferred loan fees are amortized using the effective interest method over the term of the related loan agreement, and totaled $0.7 million, $0.6 million and $0.5 million at December 31, 2011, 2010 and 2009 respectively.

Cost method investments are carried at their original purchase price. Equity method investments are carried at cost, adjusted for the Company’s proportionate share of earnings and any investment disbursements. At both December 31, 2011 and 2010, the Company had a $0.3 million note receivable that bore interest at 7.05% related to its 19.9% owned investment in the Company’s corporate office building.

Fair Value Measurements

Applicable accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The Company measures its assets and liabilities using inputs from the following three levels of the fair value hierarchy:

• Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

• Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that

64

RED LION HOTELS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

• Level 3 includes unobservable inputs that reflect assumptions about what factors market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.

Deferred Income

During the year ended December 31, 2011, the Company entered into an agreement with a new tenant of the Red Lion Hotel Sacramento at Arden Village. The Company received $0.3 million in consideration that will be amortized over the lease period as deferred lease revenue. During the year ended December 31, 2011, the Company recognized $23,000 in deferred lease income. In connection with the initial sublease of the hotel, as well as an amendment to that agreement entered into during the second quarter of 2009, the Company received $3.9 million in consideration that was being amortized over the sublease period as deferred lease revenue by the previous subtenant. During the year ended December 31, 2010, that sublease agreement was terminated. As a result, the Company recognized the remaining deferred lease revenue of $3.0 million. Deferred lease revenue recognized for the year ended December 31, 2009 was $0.3 million.

In 2003, the Company sold a hotel to an unrelated party in a sale-operating leaseback transaction. The pre-tax gain on the transaction of approximately $7.0 million was deferred and is being amortized into income over the period of the lease term, which expires in November 2018 and is renewable for three, five-year terms at the Company’s option. During 2011, 2010 and 2009, the Company recognized income of approximately $0.5 million each year for the amortization of the deferred gain. The remaining balance at December 31, 2011, was $3.2 million.

Income Taxes

Deferred tax assets and liabilities and income tax expenses and benefits are recorded for the expected future income tax consequences of events that have been recognized in the consolidated financial statements. Deferred tax assets and liabilities are determined based on the temporary differences between the carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. Certain wholly or partially-owned entities, including RLHLP, do not directly pay income taxes. Instead, their taxable income either flows through to the Company or to the other respective owners of the entities.

The Company recognizes the financial statement effect of a tax position when, based on the technical merits of the uncertain tax position, it is more likely than not to be sustained on a review by taxing authorities. These estimates are based on judgments made from information currently available to the Company. The Company reviews these estimates and makes changes to recorded amounts of uncertain tax positions as facts and circumstances warrant. For additional information about income taxes, see Note 16.

A valuation allowance against the deferred tax assets has not been established as the Company believes it’s more likely than not that these assets will be realized.

65

RED LION HOTELS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenue Recognition and Receivables

Revenue is generally recognized as services are provided. When payments from customers are received before services have been performed, the amount received is recorded as deferred revenue until the service has been completed. The Company recognizes revenue from the following sources:

• Hotels — Room rental and food and beverage sales from owned and leased hotels. Revenues are recognized when services have been performed, generally at the time of the hotel stay or guest’s visit to the restaurant.

• Franchise — Fees received in connection with the franchise and marketing of the Red Lion brand name as well as termination fees. Franchise revenues are recognized as earned in accordance with the contractual terms of the franchise agreements, while termination fees are recorded as revenues as if the agreements were terminated at that date when the provisions of the franchise agreements provide for receipt of incentive fees upon termination.

• Entertainment — Computerized event ticketing services and promotion of Broadway-style shows and other special events. Where the Company acts as an agent and receives a net fee or commission, it is recognized as revenue in the period the services are performed. When the Company is the promoter of an event and is at-risk for the production, revenues and expenses are recorded in the period of the event performance.

• Other — Primarily from rental income received from the Company’s direct ownership interest in a retail mall in Kalispell, Montana that is attached to a hotel property. The Company also owns a hotel in Sacramento, California that it leases to a franchisee.

Advertising and Promotion

Costs associated with advertising and promotional efforts are generally expensed as incurred. During the years ended December 31, 2011, 2010 and 2009, the Company incurred approximately $3.5 million, $3.4 million and $2.3 million, respectively, in advertising expense from continuing operations. These amounts include advertising and promotion spent by the Red Lion Central Program Fund discussed below.

Central Program Fund

In 2002, the Company established the Central Program Fund (“CPF”) in accordance with the Company’s various domestic franchise agreements. The CPF acts as an agent in providing services to its members, the hotels owned and leased by the Company and its franchisees. These services include advertising, frequent guest program administration, reservation services, national sales promotions and brand and revenue management services intended to increase sales and enhance the reputation of the Red Lion brand. CPF contributions by company owned and managed hotels and those made by the franchisees, based on the individual franchise agreements, and are up to 4.5% of room revenue. The Company can elect to contribute additional funds to the CPF in order to accelerate brand awareness or increase marketing and advertising expense to grow the brand, among other things. Activities of the CPF are conducted as a service, not as an operation or business venture.

Basic and Diluted Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing income (loss) by the weighted-average number of shares outstanding during the period. Diluted earnings (loss) per share gives effect to all dilutive potential shares that are outstanding during the period and includes outstanding stock options and other outstanding employee equity grants, as well as the effect of minority interests related to operating partnership units of RLHLP (“OP Units”), by increasing the weighted-average number of shares outstanding by their effect. When the Company reports a net loss during the period, basic and diluted earnings (loss) per share are the same.

66

RED LION HOTELS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could materially differ from those estimates.

New and Future Accounting Pronouncements

Intangibles-Goodwill and Other — In September 2011, the FASB released Accounting Standards Update No. 2011-08, “Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment”, (“ASU 2011-08”). Under ASU 2011-08, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. This standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company will adopt this standard in 2012 and it does not believe that it will have a material impact on the consolidated financial statements.

Amendments to Fair Value Measurement — In May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”) to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements, particularly for level 3 fair value measurements. ASU 2011-04 is effective for the Company’s fiscal year beginning on January 1, 2012 and must be applied prospectively. The Company does not expect the adoption of ASU 2011-04 to have a material impact on the consolidated financial statements.

3. Liquidity, Financial Condition and Risks of Refinancing Debt

As of December 31, 2011 the Company had total long term debt maturing within one year of $3.3 million. Additionally, the outstanding balance under the revolving credit facility at December 31, 2011 of $0.8 million is included as a current liability.

The Company’s current liabilities at December 31, 2011 exceeded its current assets, excluding assets held for sale, by $0.5 million. The Company is actively pursuing financing alternatives to address maturing liabilities and to supplement working capital. Additionally, the Company can access up to $10 million on its current revolving credit facility to fund operating needs. As of March 8, 2012, the full $10 million on the revolving credit facility was available as the Company had no amount drawn on that date. While the Company continues to be in compliance with its debt covenants, to generate positive cash flow from operations and to have adequate liquidity to fund its ongoing operating activities, there can be no assurance that it will be able to repay or refinance its debts when they mature or invest in its hotels to remain competitive at its current rates.

On June 14, 2011, the Company completed a sale of its Red Lion Hotel on Fifth Avenue in Seattle, Washington for $71 million in cash and used $28 million of the proceeds to retire its previous revolving credit facility, which was scheduled to expire in September 2011. The Company used additional proceeds of $37 million to acquire a portfolio of 10 previously leased hotels from iStar Financial, Inc. in November 2011. As a result of this acquisition, contractual annual lease payment obligations of approximately $4.3 million have been eliminated.

67

RED LION HOTELS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company announced a strategic listing for sale or the intent to sell some of its real estate assets in 2011. See Notes 5 and 6. The Company may seek to raise additional funds through public or private financings, strategic relationships, sales of assets or other arrangements. The Company cannot assure that such funds, if needed, will be available on terms attractive to it, or at all. Furthermore, any additional equity financings may be dilutive to shareholders and debt financing, if available, may involve covenants that place substantial restrictions on its business. Additional principal payments will be required on the Company’s term loan if a property securing that facility is sold or the Company raises new equity. In the case of a property sale, the additional payment required will be the greater of (i) 50% of the net proceeds from the sale, or (ii) 50% of the appraised market value of the property being sold. In the case of an equity issue, the additional payment required will be 50% of the net equity proceeds raised. Refer to Note 10 for further discussion. The Company’s failure to secure funding as and when needed could have a material adverse impact on its financial condition and its ability to pursue business strategies

4. Business Segments

As of December 31, 2011, the Company had three operating segments — hotels, franchise and entertainment. The “other” segment consists primarily of a retail mall, a hotel property leased to a franchisee and miscellaneous revenues and expenses, cash and cash equivalents, certain receivables and certain property and equipment which are not specifically associated with an operating segment. Management reviews and evaluates the operating segments exclusive of interest expense and income taxes; therefore, it has not been allocated to the segments. All balances have been presented after the elimination of inter-segment and intra-segment revenues and expenses. Selected information with respect to continuing operations is as provided below (in thousands).

	Year ended December 31,
	2011			2010			2009
Revenues:
Hotels	$	138,291		$	144,378		$	143,320
Franchise		3,955			3,209			3,616
Entertainment		11,379			9,236			11,690
Other		2,455			2,481			2,641
	$	156,080		$	159,304		$	161,267
Operating income (loss):
Hotels	$	15,222		$	7,487		$	2,238
Franchise		(1,040	)		(4,895	)		1,006
Entertainment		478			1,115			1,802
Other		(7,180	)		(7,413	)		(6,944	)
	$	7,480		$	(3,706	)	$	(1,898	)
Capital expenditures:
Hotels(1,3)	$	33,849		$	9,427		$	14,658
Franchise		106			481			986
Entertainment		459			188			44
Other(1)		12,817			513			731
	$	47,231		$	10,609		$	16,419
Depreciation and amortization:
Hotels	$	15,826		$	17,368		$	17,225
Franchise		135			749			620
Entertainment		300			352			421
Other		2,390			1,993			2,172
	$	18,651		$	20,462		$	20,438

68

RED LION HOTELS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	December 31,
	2011		2010
Identifiable assets:
Hotels(2)	$	249,672	$	292,436
Franchise		8,933		9,811
Entertainment		6,541		5,115
Other		39,750		24,120
	$	304,896	$	331,482

(1) Includes the asset acquisition of ten hotels, which were formerly leased, in the fourth quarter of 2011 for $37 million plus acquisition costs. One of ten hotels is currently leased to a third party.

(2) Includes the identifiable assets of discontinued operations held for sale.

(3) Includes $1.0 million of a noncash reclassification of intangible assets to property and equipment.

5. Property and Equipment

Property and equipment used in continuing operations is summarized as follows (in thousands):

	December 31, 2011			December 31, 2010
Buildings and equipment	$	247,809		$	301,766
Furniture and fixtures		41,896			47,316
Landscaping and land improvements		8,129			9,821
		297,834			358,903
Less accumulated depreciation and amortization		(138,272	)		(153,373	)
		159,562			205,530
Land		71,264			63,581
Construction in progress		1,763			2,919
	$	232,589		$	272,030

December 2011 amounts in the table above exclude $30.3 million for the property and equipment of The Red Lion Hotel Denver Southeast in Aurora, Colorado (“Denver Southeast”), The Red Lion Colonial Hotel in Helena, Montana (“Helena property”), The Red Lion Hotel Medford in Medford, Oregon (“Medford property”) and The Red Lion Inn Missoula in Missoula, Montana (“Missoula property”), which are all classified as assets held for sale at December 31, 2011. See Notes 6 and 7.

On November 2, 2011, the Company purchased the assets of ten hotels formerly leased by the Company from a subsidiary of iStar Financial, Inc. for $37 million plus acquisition costs. The purchase price was funded with cash proceeds received from the sale of the Red Lion Hotel on Fifth Avenue, $32 million of which was paid through a tax deferred exchange. See Note 6 for further detail. The hotels purchased include: Red Lion Hotel Boise Downtowner, Red Lion Inn Missoula, Red Lion Inn Bend, Red Lion Hotel Coos Bay, Red Lion Hotel Eugene, Red Lion Hotel Medford, Red Lion Hotel Pendleton, Red Lion Hotel Kelso/Longview, Red Lion Hotel Wenatchee, and Red Lion Hotel Sacramento at Arden Village.

During the year ended December 31, 2011, assets held and used with a carrying value of $1.7 million were fully impaired. This related to The Red Lion Hotel Vancouver at the Quay which is subject to a right of way acquisition by the state of Washington to allow a replacement of a bridge to be built where the property now

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exists. The Company will continue to operate the hotel until this occurs, thus it is not appropriate to classify the operating results of this hotel as discontinued operations.

During the year ended December 31, 2010, assets held and used with a carrying amount of $4.1 million were written down to their estimated fair value of $0.4 million, resulting in a non-cash impairment charge of $3.7 million. This impairment related to the termination of a sublease and franchise agreement with the former operator of the Red Lion Hotel Sacramento.

During the year ended December 31, 2009, assets held and used with a carrying amount of $28.4 million were written down to their fair value of $19.9 million, resulting in a non-cash impairment charge of $8.5 million. The full amount of the impairment related to Denver Southeast.

As discussed in Note 2, the Company used Level 3 inputs for its impairment analyses, including growth rate, property-level pro forma financial information and remaining lives of the assets. Management bases these assumptions on historical data and experience and future operational expectations. For certain assets, recent asset appraisals or valuations performed by third parties were used, which were also deemed to be Level 3 inputs. The following tables show impairment losses recorded for the years ended December 31, 2011, 2010 and 2009 (in thousands):

Description	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Loss
Long-lived assets held and used	$	—	$	—	$	—	$	—	$	(1,719	)

Description	December 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Loss
Long-lived assets held and used	$	429	$	—	$	—	$	429	$	(3,695	)

Description	December 31, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Loss
Long-lived assets held and used	$	19,500	$	—	$	—	$	19,500	$	(8,509	)

6. Assets Held for Sale

See Note 2 for the criteria used by the Company to classify an asset as held for sale. Upon designation as an asset held for sale, the Company records the asset at the lower of its carrying value, which includes allocable goodwill, or its estimated fair value, less estimated costs to sell, and the Company stops recording depreciation expense. The operations of a property held for sale prior to the sale date are recorded in discontinued operations unless the Company will have continuing involvement after the sale in which case their operations remain part of continuing operations.

During 2011, the Company determined that three of its hotel properties, the Seattle property, the Helena property, and Denver Southeast met the criteria to be classified as assets held for sale, but did not meet the

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criteria for treatment as discontinued operations as the Company anticipates that it will maintain significant continuing involvement either through a management or franchise agreement. During the second quarter the Company completed the sale of the Seattle property to a third party for $71 million. The Company entered into a franchise license agreement with the buyers of the property, so discontinued operations treatment was not appropriate. The Company recognized a pretax gain on the sale of $33.5 million. Approximately $6.1 million of the taxable gain attributable to the sale of the property was deferred in a tax deferred exchange, as discussed in Note 5.

During the fourth quarter of 2011, the Company additionally listed for sale the Medford and Missoula properties. Both properties are non-core assets in which the Company does not expect to maintain significant continuing involvement. Accordingly, the operations of these properties have been classified as discontinued operations in the Company’s consolidated statements of operations for all years presented. The property and equipment of these properties has been classified as held for sale in the consolidated balance sheet as of December 31, 2011. Refer to Note 7 for further detail.

The Company plans to sell the above discussed properties within one year. The property and equipment classified as assets held for sale on the consolidated balance sheet as of December 31, 2011 are detailed in the table below.

	2011
Buildings and equipment	$	24,739
Furniture and fixtures		4,781
Landscaping and land improvements		1,461
		30,981
Less accumulated depreciation and amortization		(11,149	)
		19,832
Land		10,458
Construction in progress		90
Assets held for sale	$	30,380

During 2011, the Company lowered the selling price of the Helena property to $7.9 million. Therefore, the carrying value of $9.8 million was written down to its estimated fair value less estimated costs to sell of $0.3 million, resulting in a non-cash impairment charge during the year of $2.2 million. Included in the carrying amount of $9.8 million was $0.6 million of goodwill allocated to the property which was also impaired. Additionally, long-lived assets of the Denver property with a carrying amount of $21.0 million were written down to their estimated fair value of $17.0 million less estimated costs to sell of $0.5 million, resulting in a non-cash impairment charge during the year of $4.5 million on this property.

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As shown in the table below (in thousands), the Company used Level 3 inputs for its analysis. These inputs reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset based on the best information available in the circumstances.

Description	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Loss
Long-lived assets held for sale	$	24,172	$	—	$	—	$	24,172	$	(6,125	)
Goodwill of assets held for sale		—		—		—		—		(586	)
Long-lived assets held for sale	$	24,172	$	—	$	—	$	24,172	$	(6,711	)

7. Discontinued Operations

During 2011, the Company listed for sale the Medford and Missoula properties which were formerly leased but were purchased in November 2011, as discussed in Note 5. Both properties are non-core assets in which the Company does not expect to maintain significant continuing involvement after they are sold. Accordingly, the operations of these properties have been classified as discontinued operations in the Company’s consolidated statements of operations for all years presented. The property and equipment of these hotels is classified as held for sale on the consolidated balance sheet as of December 31, 2011 since the Company plans to sell these properties within one year.

During the fourth quarter of 2010, the Company concluded that one of its leased hotels in Astoria, Oregon had reached the end of its useful life. Accordingly, the operations of this hotel have been classified as discontinued operations in the Company’s financial statements. The Company has segregated the operating results of this hotel from continuing operations in the consolidated statements of operations for 2010 and 2009.

The following table summarizes the assets and liabilities of discontinued operations included in the consolidated balance sheets as of December 31, 2011 and December 31, 2010 (in thousands):

	2011		2010
ASSETS
Cash and cash equivalents	$	46	$	40
Accounts receivable, net		36		31
Inventories		39		33
Prepaid expenses and other		23		22
Total current assets	$	144	$	126
Property and equipment, net(1)		6,208		2,176
Intangible assets, net		—		213
Total assets	$	6,352	$	2,515
LIABILITIES
Accounts payable	$	23	$	21
Accrued payroll and related benefits		77		85
Advance deposits		9		11
Other accrued expenses		135		125
Current liabilities	$	244	$	242

(1) Property and equipment of $6.2 million included in assets held for sale on the consolidated balance sheet as of December 31, 2011.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes results of discontinued operations for the periods indicated (in thousands):

	For the Year Ended December 31,
	2011			2010			2009
Revenues	$	3,791		$	4,190		$	6,059
Operating expenses		(3,507	)		(4,003	)		(5,086	)
Hotel facility and land lease		(607	)		(858	)		(992	)
Depreciation and amortization		(368	)		(457	)		(516	)
Income tax benefit		250			397			195
Loss from operations of discontinued business units		(441	)		(731	)		(340	)
Impairment of the assets of the discontinued business units		(1,021	)		(58	)		(177	)
Income tax benefit		370			20			60
Loss on impairment of the assets of the discontinued business units		(651	)		(38	)		(117	)
Loss from discontinued operations	$	(1,092	)	$	(769	)	$	(457	)

Long-lived assets of the Medford and Missoula properties with a carrying amount of $7.2 million were written down to their fair value of $6.4 million less estimated costs to sell of $0.2 million, resulting in a non-cash impairment charge taken during the year of $1.0 million reflected above.

As shown in the table below (in thousands), the Company used Level 3 inputs for the impairment analysis of these two properties. These inputs reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset based on the best information available in the circumstances.

Description	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Loss
Long-lived assets of discontinued business units held for sale	$	6,208	$	—	$	—	$	6,208	$	(1,020	)

8. Goodwill and Intangible Assets

Goodwill represents the excess of the estimated fair value of the net assets acquired during business combinations over the net tangible and identifiable intangible assets acquired. Goodwill was recorded in prior years in connection with the acquisitions of hotels, franchises and entertainment businesses. The Red Lion brand name is an identifiable, indefinite lived intangible asset that represents the separable legal right to a trade name and associated trademarks acquired in a business combination the Company entered into in 2001. Goodwill and the brand name are not amortized, but are subject to an impairment assessment annually.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes the cost and accumulated amortization of goodwill and other intangible assets (in thousands):

	December 31, 2011						December 31, 2010
	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization			Net
Goodwill	$	8,512		n/a	$	8,512	$	28,042		n/a		$	28,042
Intangible assets
Brand name	$	6,878		n/a	$	6,878	$	6,878		n/a		$	6,878
Lease contracts(1)		—		—		—		1,417		(425	)		992
Trademarks		114		n/a		114		114		n/a			114
Total intangible assets	$	6,992	$	—	$	6,992	$	8,409	$	(425	)	$	7,984

(1) On November 2, 2011, the Company purchased 10 hotels which were formerly leased. The lease contract value transferred with the purchase of the related assets and was reclassified as a long-lived asset.

Amortization expense related to intangible assets was approximately $39,000, $176,000 and $178,000 during the years ended December 31, 2011, 2010 and 2009, respectively. All amortized intangible assets on the consolidated balance sheets on December 31, 2011, have now been fully amortized.

Goodwill and other intangible assets attributable to each of the Company’s business segments at December 31, 2011 and 2010 were as follows (in thousands):

	December 31,
	2011				2010
	Goodwill		Other Intangibles		Goodwill		Other Intangibles
Hotels	$	—	$	4,639	$	19,530	$	5,631
Franchise		5,351		2,347		5,351		2,347
Entertainment		3,161		6		3,161		6
Total	$	8,512	$	6,992	$	28,042	$	7,984

At the Company’s measurement date of October 1, 2011, it determined that the carrying amount of the hotel reporting unit exceeded its fair value, which was estimated based on a combined income and market approach. Accordingly, a goodwill impairment charge of $14.2 million was recognized in the hotel reporting unit. Prior to this impairment, $4.7 million of goodwill had been allocated to the sale of the Company’s Seattle property and $0.6 million of goodwill allocated to the Helena property had been impaired as part of the fair value assessment and decision to sell this property. There were no other impairments of goodwill or intangible assets during 2011. The table below shows the impact of this impairment (in thousands):

Description	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Loss
Goodwill	$	8,512	$	—	$	—	$	8,512	$	(14,236	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

See Note 2 for a discussion of the Company’s accounting policy on goodwill.

In December 2010, there was an event that caused the Company to review its lease contract intangible asset balance for potential impairment. A sublease agreement at the Company’s Red Lion Hotel Sacramento was terminated, thus eliminating $1.4 million of annual sublease income. The Company signed an agreement on February 22, 2011 with another subtenant, however for an initial minimum amount of $0.4 million in annual sublease income. After analysis, the Company concluded that the full amount of the lease contract intangible asset was not recoverable and recorded a $2.0 million impairment charge. There were no other impairments of intangible assets recorded in 2010. The table below shows the impact of this impairment (in thousands):

Description	December 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Loss
Lease contract intangible asset	$	—	$	—	$	—	$	—	$	(2,039	)

9. Other Investments

Aggregate investments recorded as noncurrent assets on the consolidated balance sheets totaled $1.1 million and $1.2 million, respectively, as of December 31, 2011 and 2010. During 2011, the Company recorded a loss from investments of $52,000, compared to a loss of $48,000 and income of $16,000, respectively in 2010 and 2009.

The Company owns a 19.9% partnership interest in its corporate office building as discussed in Note 1. The Company’s investment balance was approximately $0.8 million as December 31, 2011 and 2010. Summarized unaudited financial information with respect to the office building, on a 100% basis, is as follows (in thousands):

	December 31,
	2011		2010
Current assets	$	134	$	224
Total assets	$	11,131	$	11,510
Current liabilities	$	129	$	120
Total liabilities	$	8,485	$	8,828
Total equity	$	2,645	$	2,681
Revenues	$	1,588	$	1,532
Net income	$	203	$	149

The Company maintains a 3% common security interest in the Red Lion Hotels Capital Trust (“the Trust”), as discussed in Note 12, which represents all of the common ownership of the Trust. The Trust is considered a variable interest entity and the Company is not considered its primary beneficiary. At December 31, 2011 and 2010, the Company’s equity method investment in the Trust had a balance of $0.3 million and $0.4 million, respectively, after adjusting for trust earnings and operating expenses.

10. Credit Facility

During the second quarter of 2011 the Company retired its prior credit facility using a portion of the proceeds from the sale of the Seattle property, which secured the facility. The facility had an expiration date in September 2011.

On September 12, 2011, the Company expanded its existing term loan agreement with Wells Fargo. The term loan, the outstanding principal on which was approximately $12.0 million, was increased to $30 million.

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The additional advance of approximately $18.0 million was used to pay off maturing debt aggregating $17.4 million and to pay expenses in connection with the transaction, including a $0.2 million commitment fee, resulting in net cash proceeds to the Company of approximately $0.4 million. Principal payments of $0.5 million are required on the loan on December 31, 2011 and on the last day of each calendar quarter thereafter. Additional principal payments will be required on the term loan if a property securing the facility is sold or the Company raises new equity. In the case of a property sale, the additional payment required will be the greater of (i) 50% of the net proceeds from the sale, or (ii) 50% of the appraised market value of the property being sold. In the case of an equity issue, the additional payment required will be 50% of the net equity proceeds raised. Any outstanding amounts are due on March 31, 2013.

Under the facility with Wells Fargo, in addition to the $30 million term loan revolving line of credit for up to $10 million for general corporate purposes became available on October 13, 2011.

Interest during 2011 under the term loan and revolving line of credit was payable at the Company’s option (i) at a fluctuating rate 2% above a base rate in effect from time to time, or (ii) at a rate 4.5% above LIBOR (under one, three or six month terms). The interest rate on the outstanding balance at December 31, 2011 was 4.8% on the term loan and 5.25% on the revolving line of credit.

The Company’s obligations under the $40 million facility are (i) guaranteed by its subsidiaries RLHLP, Red Lion Hotels Franchising, Inc., Red Lion Hotels Management, Inc. and Red Lion Hotels Holdings, Inc., (ii) secured by its accounts receivable and inventory, and (iii) further collateralized by its owned hotel properties in Bellevue, Spokane and Olympia, Washington, in Post Falls and Pocatello, Idaho, in Kalispell and Helena, Montana and in Aurora, Colorado. On November 2, 2011, we purchased 10 hotels formerly leased from iStar Financial Inc., see Note 5 for further details. Subsequent to their purchase, the Company pledged its hotels in Bend and Coos Bay, Oregon, Boise, Idaho, Kelso and Wenatchee, Washington, and Sacramento, California as additional collateral for the facility.

The credit facility requires the Company to comply with customary affirmative and negative covenants, as well as financial covenants relating to leverage and to debt service coverage ratios and limitations of borrowing availability based on the operating results of collateral properties. It also includes customary events of default. The Company was in compliance with these covenants at December 31, 2011.

As of December 31, 2011 the outstanding balance on the term loan was $29.5 million. Additionally, the outstanding balance under the revolving credit facility at December 31, 2011 was $0.8 million and is included as a current liability.

On February 2, 2012, the Company modified the facility with Wells Fargo, effective December 31, 2011, as follows: A financial covenant relating to loan commitment coverage was eliminated. In lieu thereof, the Company agreed that borrowings under the facility’s revolving line of credit may be limited based on a formula relating to the trailing twelve-month consolidated net income of the hotel properties collateralizing the facility. The financial covenant relating to debt service coverage ratio was liberalized. The Company was relieved of its obligation to offer the hotel in Medford, Oregon as additional security for the facility and for the period from January 1, 2012 through August 31, 2012, the margins on the interest rate options under the term loan and revolving line of credit were increased (i) to 2.5% for borrowings accruing interest by reference to the facility’s base rate, and (ii) to 5% for borrowings accruing interest by reference to LIBOR. Thereafter, the margins will decrease to at most 2% and 4.5%, respectively, or to as low as 1% and 3.5%, respectively, if the senior leverage ratio decreases sufficiently. The Company paid a fee of $10,000 in connection with the modification of the facility.

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RED LION HOTELS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Contractual maturities for the term loan and revolving line of credit outstanding at December 31, 2011, are summarized by year as follows (in thousands):

Year Ending December 31,	Amount
2012	$	2,844
2013		27,500
	$	30,344

11. Long-Term Debt

In addition to the credit facility discussed in Note 10 and the debentures discussed in Note 12, the Company has long-term debt consisting of mortgage notes payable and notes and contracts payable, collateralized by real property, equipment and the assignment of certain rental income. A summary of long-term debt as of December 31, 2011 and 2010, monthly installment and interest amounts, if applicable, interest rate and maturity date is as provided in the below table (in thousands, except monthly payment amounts).

	Outstanding December  31,						Last Applicable Monthly Installment		Last Applicable Interest Rate			Type		Maturity/ Balloon Payment Due	Security
	2011			2010
Notes Payable(1)	$	—		$	12,425		$	93,269		4.00	%		Variable	September 2013	Real Property
Notes Payable		—			11,822			108,797		8.08	%		Fixed	September 2011	Real Property
Notes Payable		8,607			8,863			70,839		6.70	%		Fixed	July 2013	Real Property
Notes Payable		7,604			7,830			62,586		6.70	%		Fixed	July 2013	Real Property
Notes Payable		—			5,742			52,844		8.08	%		Fixed	September 2011	Real Property
Notes Payable		5,014			5,163			41,265		6.70	%		Fixed	July 2013	Real Property
Notes Payable		—			5,111			46,695		8.00	%		Fixed	October 2011	Real Property
Notes Payable		4,262			4,388			35,076		6.70	%		Fixed	July 2013	Real Property
Notes Payable		4,136			4,263			34,353		6.70	%		Fixed	July 2013	Real Property
Notes Payable		3,426			3,528			28,198		6.70	%		Fixed	July 2013	Real Property
Notes Payable		2,507			2,581			20,633		6.70	%		Fixed	July 2013	Real Property
Notes Payable		2,507			2,581			20,633		6.70	%		Fixed	July 2013	Real Property
Notes Payable		2,089			2,151			17,194		6.70	%		Fixed	July 2013	Real Property
Industrial revenue bonds payable		—			704			66,560		5.90	%		Fixed	October 2011	Real Property
Total long-term debt		40,152			77,152
Due within one year		(1,274	)		(25,275	)
Long-term debt due after one year	$	38,878		$	51,877

(1) Interest rate based on Prime rate

During 2011, the Company retired $22.2 million in notes payable that matured in September and October, 2011. In addition, the industrial revenue bonds were paid in full in October 2011.

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RED LION HOTELS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Contractual maturities for long-term debt outstanding at December 31, 2011, excluding the $30.3 million outstanding under the term loan and revolving line of credit discussed in Note 10 and the debentures of the Red Lion Hotels Capital Trust discussed in Note 12, are summarized by year as follows (in thousands):

Year Ending December 31,	Amount
2012	$	1,274
2013		38,878
	$	40,152

12. Debentures of Red Lion Hotels Capital Trust

Together with the Trust, the Company completed a public offering of $46.0 million of trust preferred securities in 2004. The securities are listed on the New York Stock Exchange and entitle holders to cumulative cash distributions at a 9.5% annual rate with maturity in February 2044. The cost of the offering totaled $2.3 million, which the Trust paid through an advance by the Company. The advance to the Trust is included with other noncurrent assets on the consolidated balance sheets.

The Company borrowed all of the proceeds from the offering, including the Company’s original 3% trust common investment of $1.4 million, on the same day through 9.5% debentures that are included as a long-term liability on the consolidated balance sheets. The debentures mature in 2044 and their payment terms mirror the distribution terms of the trust securities. The debenture agreement required the mandatory redemption of 35% of the then-outstanding trust securities at 105% of issued value if the Company completed an offering of common shares with gross proceeds of greater than $50 million. In accordance therewith and in connection with a common stock offering in May 2006, the Company repaid approximately $16.6 million of the debentures due the Trust. The Trust then redeemed 35% of the outstanding trust preferred securities and trust common securities at a price of $26.25 per share, a 5% premium over the issued value of the securities. Of the $16.6 million, approximately $0.5 million was received back by the Company for its trust common securities and was reflected as a reduction of its investment in the Trust. At December 31, 2011 and 2010, debentures due the Trust totaled $30.8 million.

13. Commitments and Contingencies

At any given time the Company is subject to claims and actions incidental to the operations of its business. During the second quarter of 2010, a federal court ruled in favor of the Company in a lawsuit the Company filed against the owner of a former franchised hotel. The court awarded the Company approximately $0.6 million in damages, which will accrue interest at 18% per annum pending the defendant’s appeal. During 2011 and 2010 the Company incurred approximately $0.1 and $0.3 million, respectively, in legal expense in connection with this matter. The Company is actively pursuing this action and cannot at this time reasonably predict the ultimate outcome of the proceedings. The Company has not recorded a receivable for this contingent gain. The Company does not expect that any sums it may receive or have to pay in connection with this or any other legal proceeding would have a materially adverse effect on its consolidated financial position or net cash flows.

14. Stockholders’ Equity

The Company is authorized to issue 50 million common shares, par value $0.01 per share, and five million shares of preferred stock, par value $0.01 per share. As of December 31, 2011, there were 19,172,670 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding. The board of directors has the authority, without action by the shareholders, to designate and issue preferred stock in one or

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more series and to designate the rights, preferences and privileges of each series, which may be greater than the rights of the common stock.

Each holder of common stock is entitled to one vote for each share held on all matters to be voted upon by the shareholders with no cumulative voting rights. Holders of common stock are entitled to receive ratably the dividends, if any, that are declared from time to time by the board of directors out of funds legally available for that purpose. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that the Company may designate in the future.

Stock Incentive Plans

As approved by the shareholders of the Company, the 1998 Stock Incentive Plan and the 2006 Stock Incentive Plan, as amended , authorize the grant or issuance of various option or other awards including restricted stock grants and other stock-based compensation. The 2006 plan allows awards covering up to two million shares, subject to adjustments for stock splits, stock dividends and similar events. The 1998 plan allows awards covering up to 1.4 million shares, although as a condition to the approval of the 2006 plan, the Company no longer grants or issues awards under the 1998 plan. The compensation committee of the board of directors administers the 2006 plan and establishes to whom awards are granted and the type and terms and conditions, including the exercise period, of the awards. As of December 31, 2011, there were 1,009,450 shares of common stock available for issuance pursuant to future stock option grants or other awards under the 2006 plan.

Stock based compensation expense reflects the fair value of stock based awards measured at grant date, including an estimated forfeiture rate, and is recognized over the relevant service period. Stock-based compensation expense related to these awards during 2011, 2010 and 2009 for employees was approximately $0.7 million, $1.1 million and $1.2 million, respectively.

Stock-based compensation expense recorded in 2010 includes $0.5 million of expense recorded upon the termination of the Company’s former President and Chief Executive Officer in January 2010.

In addition to the awards mentioned above, during the years ended December 31, 2011, 2010 and 2009; 68,618, 78,873 and 86,625 shares of common stock, respectively, were issued in aggregate to non-management directors as compensation for service. During the years ended December 31, 2011, 2010 and 2009, the Company recognized compensation expense of approximately $0.5 million, $0.5 million and $0.4 million, respectively, upon issuance.

Stock Options

Stock options issued are valued based upon the Black-Scholes option pricing model and the Company recognizes this value as an expense over the periods in which the options vest. Use of the Black-Scholes option-pricing model requires that the Company make certain assumptions, including expected volatility, forfeiture rate, risk-free interest rate, expected dividend yield and expected life of the options, based on historical experience. Volatility is based on historical information with terms consistent with the expected life of the option. The risk free interest rate is based on the quoted daily treasury yield curve rate at the time of grant, with terms consistent with the expected life of the option. No stock options were granted during 2011 or 2009.

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RED LION HOTELS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During 2010, the following weighted average assumptions were used for stock options granted:

	2010
Options granted		5,864
Weighted-average grant date fair value of options granted	$	7.10
Dividend yield		0	%
Expected volatility		61	%
Forfeiture rate		2	%
Risk free interest rates		3.36	%
Expected option lives		4 years

A summary of stock option activity for the year ended December 31, 2011, is as follows:

	Number of Shares			Weighted Average Exercise Price
Balance, January 1, 2011		478,047		$	7.62
Options granted		—		$	—
Options exercised		(163,035	)	$	5.37
Options forfeited		(51,140	)	$	10.08
Balance, December 31, 2011		263,872		$	8.53
Exercisable, December 31, 2011		228,341		$	8.53

Additional information regarding stock options outstanding and exercisable as of December 31, 2011, is presented below. Total unrecognized stock-based compensation expense related to non-vested stock options, as of December 31, 2011, was approximately $32,000 before the impact of income taxes and is expected to be recognized in 2012.

Range of Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Expiration Date		Weighted Average Exercise Price		Aggregate Intrinsic Value (1)		Number Exercisable		Weighted Average Exercise Price		Aggregate Intrinsic Value (1)
									(in thousands)						(in thousands)
$5.10 — $5.98		60,460		2.05		2013-2014	$	5.31	$	98,243		60,460	$	5.31	$	98,243
$7.10 — $7.80		25,864		4.62		2012-2020		7.38		—		21,467		7.44		—
$8.74 — $8.80		129,734		6.34		2018		8.76		—		98,600		8.76		—
$12.21 — $13.00		47,814		5.13		2016-2017		12.61		—		47,814		12.61		—
		263,872		4.97		2012-2020	$	8.53	$	98,243		228,341	$	8.53	$	98,243

(1) The aggregate intrinsic value is before applicable income taxes and represents the amount option recipients would have received if all options had been available to be exercised on the last trading day of 2011, or December 31, 2011, based upon the Company’s closing stock price of $6.93.

Restricted Stock Units, Shares Issued as Compensation

During 2011, 2010 and 2009, the Company granted 168,398, 165,439 and 213,282 unvested restricted stock units, respectively, to executive officers and other key employees, the majority of which vest 25% each year for

80

RED LION HOTELS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

four years on each anniversary of the grant date. While all of the shares are considered granted, they are not considered issued or outstanding until vested. Since the Company began issuing restricted stock units, approximately 15.2% of total restricted stock units granted have been forfeited.

A summary of restricted stock unit activity for the year ended December 31, 2011, is as follows:

	Number of Shares			Weighted Average Grant Date Fair Value
Balance, January 1, 2011		220,816		$	6.40
Granted		168,398		$	7.97
Vested		(67,588	)	$	5.43
Forfeited		(33,284	)	$	7.04
Balance, December 31, 2011		288,342		$	7.23

67,588 shares of common stock were issued to employees in 2011 as their restricted stock units vested. Under the terms of the 2006 plan and upon issuance, the Company authorized a net settlement of distributable shares to employees after consideration of individual employees’ tax withholding obligations, at the election of each employee. During 2011, the Company repurchased 18,207 shares at a weighted average of $7.92 per share to cover the participants’ tax liability.

During 2011, 2010 and 2009, the Company recognized approximately $0.6 million, $0.8 million and $0.3 million, respectively, in compensation expense related to these grants, and expects to record an additional $1.6 million in compensation expense over the remaining vesting periods.

Employee Stock Purchase Plan

In 2008, the Company adopted a new employee stock purchase plan (“ESPP”) upon expiration of its previous plan. Under the ESPP, 300,000 shares of common stock are authorized for purchase by eligible employees at a discount through payroll deductions. No employee may purchase more than $25,000 worth of shares, or more than 10,000 total shares, in any calendar year. As allowed under the ESPP, a participant may elect to withdraw from the plan, effective for the purchase period in progress at the time of the election with all accumulated payroll deductions returned to the participant at the time of withdrawal. During 2011, 2010 and 2009, 22,382, 32,162 and 54,871 shares, respectively, were issued, and approximately $15,000, $20,000 and $22,000 was recorded in compensation expense related to the discount associated with the plan.

Non-controlling Interest and Operating Partnership Units

As discussed in Note 1, the Company is a general partner of RLHLP and at December 31, 2011, held more than a 99% interest in that entity. Partners who hold operating partnership units (“OP Units”) have the right to put those units to RLHLP, in which event either (i) RLHLP must redeem the units for cash, or (ii) the Company, as general partner, may elect to acquire the OP Units for cash or in exchange for a like number of shares of its common stock. At December 31, 2011 and 2010, 44,837 OP Units held by unaffiliated limited partners remained outstanding. In February, 2012 these 44,837 OP Units were acquired by the Company in exchange for common stock. See Note 21.

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RED LION HOTELS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

15. Earnings (Loss) Per Share

The following table presents a reconciliation of the numerators and denominators used in the basic and diluted earnings (loss) per common share computations for the years ended December 31, 2011, 2010 and 2009 (in thousands, except per share amounts):

	Year ended December 31,
	2011			2010			2009
Numerator — basic and diluted:
Net income (loss) from continuing operations	$	(5,970	)	$	(7,850	)	$	(6,207	)
Less net income or loss attributable to noncontrolling interest		86			(10	)		(1	)
Net Income (loss) from discontinued operations		(1,092	)		(769	)		(457	)
Net income (loss) attributable to Red Lion Hotels Corporation	$	(7,148	)	$	(8,609	)	$	(6,663	)
Denominator:
Weighted average shares — basic		19,053			18,485			18,106
Weighted average shares — diluted		19,053			18,485			18,106
Earnings (loss) per share attributable to Red Lion Hotels Corporation:
Basic and Diluted
Net Income (loss) from continuing operations	$	(0.32	)	$	(0.43	)	$	(0.34	)
Less net income or loss attributable to noncontrolling interest	$	—		$	—		$	—
Net Income (loss) from discontinued operations	$	(0.06	)	$	(0.04	)	$	(0.03	)
Net income (loss) attributable to Red Lion Hotels Corporation	$	(0.38	)	$	(0.47	)	$	(0.37	)

At December 31, 2011, 2010 and 2009, the effect of converting the 44,837 outstanding OP Units during those periods was considered antidilutive due to reported net losses attributable to Red Lion Hotels Corporation and excluded from the above calculations.

At December 31, 2011, 2010 and 2009 there were; 263,872, 478,047 and 1,194,460 options to purchase common shares, respectively, outstanding. All of the options to purchase common shares were considered antidilutive and excluded from the above calculations due to reported net losses attributable to Red Lion Hotels Corporation in all years.

At December 31, 2011, 2010 and 2009, all 288,342, 220,816 and 239,318 outstanding but unvested restricted stock units, respectively, were considered antidilutive due to reported net losses attributable to Red Lion Hotels Corporation.

16. Income Taxes

Major components of the income tax (benefit) expense for the years ended December 31, 2011, 2010 and 2009, are as follows (in thousands):

	December 31,
	2011		2010			2009
Current:
Federal (benefit) expense	$	349	$	179		$	(886	)
State (benefit) expense		87		32			—
Deferred (benefit) expense		4,458		(5,148	)		(3,184	)
Income tax (benefit) expense attributable to Red Lion Hotels Corporation		4,894		(4,937	)		(4,070	)
Less: tax benefit of discontinued operations		620		417			255
Income tax (benefit) expense from continuing operations	$	5,514	$	(4,520	)	$	(3,815	)

82

RED LION HOTELS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The income tax (benefit) expense shown in the consolidated statements of operations differs from the amounts calculated using the federal statutory rate applied to income before income taxes as follows (in thousands, except percentages):

	December 31,
	2011						2010						2009
	Amount			%			Amount			%			Amount			%
(Benefit) provision at federal statutory rate	$	(767	)		-34.0	%	$	(4,605	)		-34.0	%	$	(3,649	)		-34.0	%
State tax (benefit) expense		228			10.0	%		(200	)		-1.5	%		(371	)		-3.4	%
Effect of tax credits		(357	)		-15.8	%		(422	)		-3.1	%		(343	)		-3.2	%
Fixed asset basis difference		(791	)		-35.0	%		—			0.0	%		—			0.0	%
Non-deductible goodwill		6,640			294.4	%		—			0.0	%		—			0.0	%
Other		(59	)		-2.6	%		290			2.2	%		293			2.7	%
Income tax (benefit) expense attributable to Red Lion Hotels Corporation		4,894			217.0	%		(4,937	)		-36.4	%		(4,070	)		-37.9	%
Less: tax benefit of discontinued operations		620			27.5	%		417			3.1	%		255			2.4	%
Income tax (benefit) expense from continuing operations	$	5,514			244.5	%	$	(4,520	)		-33.3	%	$	(3,815	)		-35.5	%

Significant components of the net deferred tax assets and liabilities at December 31, 2011 and 2010, are as follows (in thousands):

	December 31,
	2011				2010
	Assets		Liabilities		Assets		Liabilities
Property and equipment	$	—	$	14,895	$	—	$	13,514
Brand name		—		2,484		—		2,491
Other intangible assets		120		—		124		—
Gain on sale leaseback		1,586		—		1,760		—
Tax credit carryforwards		2,687		—		3,311		—
Federal net operating losses		—		—		1,566		—
Impact of CPF consolidation		—		—		1,038		—
Other		1,101		—		779		—
Total	$	5,494	$	17,379	$	8,578	$	16,005

At December 31, 2011 and 2010, the Company had federal gross operating loss carryforwards of approximately $-0- and $4.9 million, respectively; state gross operating loss carryforwards of approximately $3.2 million and $5.4 million, respectively; and federal and state tax credit carryforwards of approximately $2.7 million and $3.3 million. The state net operating loss carryforwards will expire beginning in 2016; the federal credits will begin to expire in 2025; and the state credits will carry forward indefinitely. A valuation allowance against the deferred tax assets has not been established as the Company believes it’s more likely than not that these assets will be realized.

The Company recognizes the financial statement effect of a tax position when, based on the technical merits of the uncertain tax position, it is more likely than not to be sustained on a review by taxing authorities. These estimates are based on judgments made with currently available information. The Company reviews these estimates and makes changes to recorded amounts of uncertain tax positions as facts and circumstances warrant. The Company has no material uncertain tax positions at December 31, 2011 and 2010, and does not anticipate a significant change in any unrecognized tax benefits over the next twelve months. Accordingly, the Company has not provided for any unrecognized tax benefits or related interest and penalties. The Company accounts for penalties and interest related to

83

RED LION HOTELS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

unrecognized tax benefits as a component of income tax expense. With limited exception, the Company is no longer subject to U.S. federal, state and local income tax examinations by taxing authorities for years prior to 2005.

17. Operating Lease Income

The Company leases commercial retail and office space to various tenants over terms ranging through 2047. The leases generally provide for fixed minimum monthly rent as well as tenants’ payments for their pro rata share of taxes and insurance and common area maintenance and expenses. Rental income for the years ended December 31, 2011, 2010 and 2009 from continuing operations was approximately $2.8 million, $3.0 million and $3.5 million, respectively, which included contingent rents of approximately $0.3 million, $0.2 million and $0.2 million, respectively. Future minimum lease income under existing non-cancelable leases as of December 31, 2011, is anticipated to be as follows (in thousands):

Year Ended December 31,
2012	$	2,310
2013		1,548
2014		1,384
2015		1,228
2016		1,171
Thereafter		4,565
Total	$	12,206

18. Operating Lease Commitments

Total future minimum payments due under all current term operating leases at December 31, 2011, were as indicated below (in thousands). Total rent expense from continuing operations, net of sublease income under the leases for the years ended December 31, 2011, 2010, and 2009 was $8.6 million, $6.5 million, and $7.4 million, respectively, which included $7.3 million, $5.1 million, and $6.0 million of hotel facility and land lease expense, as presented on the consolidated statements of operations.

Year Ended December 31,
2012	$	4,870
2013		4,093
2014		3,751
2015		3,727
2016		2,273
Thereafter		7,457
Total	$	26,171

In 2001, the Company assumed a master lease agreement with iStar Financial, Inc. (“iStar”) for 17 hotel properties, including 12 which were part of the Red Lion acquisition. Subsequently, the Company entered into an agreement with Doubletree DTWC Corporation under which it subleased five of these hotel properties from the Company. During the second quarter of 2010, the Company amended the agreement to terminate the master lease as to the Astoria, Oregon property due to its closure. The master lease agreement required minimum monthly payments of $1.2 million plus contingent rents based on gross receipts from the remaining 16 hotels, of which approximately $0.8 million per month was paid by the sublease tenant.

84

RED LION HOTELS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On November 2, 2011, the Company signed an agreement to purchase for $37 million, the assets of 10 hotels formerly leased by the Company from iStar. The hotels purchased in the iStar agreement include: Red Lion Hotel Boise Downtowner; Red Lion Inn Missoula; Red Lion Inn Bend; Red Lion Hotel Coos Bay; Red Lion Hotel Eugene; Red Lion Hotel Medford; Red Lion Hotel Pendleton; Red Lion Hotel Kelso/Longview; Red Lion Hotel Wenatchee; and Red Lion Hotel Sacramento at Arden Village. The lease expense for these 10 hotels represented $4.3 million in annual payments which are no longer reflected in the table above. The Red Lion Hotel Vancouver at the Quay in Washington will remain leased under a new lease with iStar as the future of the property rests with the progress of the Columbia River Crossing bridge project, which will result in the right of way acquisition of the hotel. The Company also assigned to an affiliate of iStar the sublease described above with Doubletree DTWC Corporation whereby Doubletree DTWC Corporation was subleasing five additional properties from the Company.

In October 2007, the Company completed an acquisition of a 100-year (including extension periods) leasehold interest in a hotel in Anaheim, California for $8.3 million, including costs of acquisition. At the Company’s option, it is entitled to extend the lease for 19 additional terms of five years each, with increases in lease payments tied directly to the Consumer Price Index. The Company exercised its first option to extend for an additional five year term beginning in May 2011 at $2.2 million per year. The amounts shown in the table above extend through April 2016 and reflect this five year extension.

In addition to the above mentioned obligations, the Company has leasehold interests at properties in Eugene, Oregon, the Seattle Airport and Spokane, Washington as well as its corporate headquarters location. These leases require the Company to pay fixed monthly rent and have expiration dates of 2012 and beyond. The Company also assumed an office lease used by guests contracted to stay at its Denver Southeast Hotel. As part of this contract business, the Company is reimbursed the entire lease expense amount. The expense of all of these leases has been included in the table above.

19. Related-Party Transactions

The Company conducted various business transactions in which the counterparty was considered a related party due to the relationships between the Company and the counterparty’s officers, directors and/or equity owners. The nature of the transactions was limited to performing certain management and administrative functions for the related entities, commissions for real estate sales and leased office space. The total aggregate value of these transactions in 2011, 2010 and 2009 was $0.7 million, $0.4 million and $0.4 million, respectively.

During 2011 and 2010, the Company held certain cash and investment accounts in, and had a note payable to a bank whose chairman and chief executive officer is a member of the Company’s board of directors. At December 31, 2011 and 2010, total cash and investments held were approximately $0.1 million and $0.05 million, respectively. The note payable was paid in full in October, 2011. Net interest expense of $0.02 million, $0.06 million and $0.1 million, respectively, related to this note payable was recorded during 2011, 2010 and 2009.

20. Fair Value of Financial Instruments

Estimated fair values of financial instruments are as indicated below (in thousands). The carrying amounts for cash and cash equivalents, current investments, accounts receivable and current liabilities are reasonable estimates of their fair values. The fair value of long-term debt is estimated based on the discounted value of contractual cash flows using the estimated rates currently offered for debt with similar remaining maturities. The debentures are valued at the closing price on December 31, 2011, of the underlying trust preferred securities, as

85

RED LION HOTELS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

discussed in Note 12, on the New York Stock Exchange, plus the face value of the debenture amount representing the trust common securities held by the Company.

	December 31,
	2011				2010
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents and restricted cash	$	5,339	$	5,339	$	8,132	$	8,132
Accounts receivable	$	7,591	$	7,591	$	5,985	$	5,985
Financial liabilities:
Current liabilities, excluding debt	$	16,891	$	16,891	$	22,454	$	22,454
Total debt	$	70,496	$	70,658	$	95,152	$	95,400
Debentures	$	30,825	$	30,717	$	30,825	$	31,279

The fair values provided above are not necessarily indicative of the amounts the Company or the debt holders could realize in a current market exchange. In addition, potential income tax ramifications related to the realization of gains and losses that would be incurred in an actual sale or settlement have not been taken into consideration.

21. Subsequent Events

On February 2, 2012, the Company modified its existing credit facility with Wells Fargo Bank, effective December 31, 2011, as follows: A financial covenant relating to loan commitment coverage was eliminated. In lieu thereof, the Company agreed that borrowings under the facility’s revolving line of credit extending up to $10 million may be limited based on a formula relating to the trailing twelve-month consolidated net income of the hotel properties collateralizing the facility. The financial covenant relating to debt service coverage ratio was eased. The Company was relieved of its obligation to offer the hotel in Medford, Oregon as additional security for the facility and for the period from January 1, 2012 through August 31, 2012, the margins on the interest rate options under the term loan and revolving line of credit were increased (i) to 2.5% for borrowings accruing interest by reference to the facility’s base rate, and (ii) to 5% for borrowings accruing interest by reference to LIBOR. Thereafter, the margins will decrease to at most 2% and 4.5%, respectively, or to as low as 1% and 3.5%, respectively, if the senior leverage ratio decreases sufficiently. The Company paid a fee of $10,000 in connection with the modification of the facility. See Notes 3 and 10.

During February 2012, the Company elected to issue 44,837 shares of its common stock in exchange for a like number of OP Units that then certain limited partners put to RLHLP. Partners who hold OP Units have the right to put those units to RLHLP, in which event either (i) RLHLP must redeem the units for cash, or (ii) as general partner, the Company may elect to acquire the OP Units for cash or in exchange for a like number of shares of its common stock. RLHLP remains in existence as a limited partnership because there are 70,842.51 OP Units help by North River Drive Company, a wholly owned subsidiary of Red Lion Hotels Corporation. However, on a consolidated basis, RLHLP is now wholly owned by the Company.

86

Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

None.

Item 9A.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of December 31, 2011, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective to ensure that material information required to be disclosed by us in the reports filed or submitted by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within time periods specified in Securities and Exchange Commission rules and forms.

There were no changes in internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), during the fourth fiscal quarter of 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over our financial reporting, which is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.

Because of its inherent limitations, any system of internal controls over financial reporting, no matter how well designed, may not prevent or detect misstatements due to the possibility that a control can be circumvented or overridden or that misstatements due to error or fraud may occur that are not detected. Also, because of changes in conditions, internal control effectiveness may vary over time.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2011, using criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and concluded that we have maintained effective internal control over financial reporting as of December 31, 2011, based on these criteria.

Our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2011, has been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in its report which is included herein.

There have been no changes in our internal control over financial reporting (as defined in Exchange Act rules 13a-15(f)) during our fourth fiscal quarter of 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

87

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Red Lion Hotels Corporation

Spokane, Washington

We have audited Red Lion Hotels Corporation’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Red Lion Hotels Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, “Management’s Annual Report on Internal Control Over Financial Reporting”. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Red Lion Hotels Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Red Lion Hotels Corporation as of December 31, 2011 and 2010, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2011, and our report dated March 15, 2012, expressed an unqualified opinion thereon.

BDO USA, LLP

Spokane, Washington

March 15, 2012

88

Item 9B. Other Information

Not applicable.

PART III

Item 10. Directors and Executive Officers and Corporate Governance

A portion of the information required by this item will be contained in, and is incorporated by reference from, the definitive proxy statement for our 2012 Annual Meeting of Shareholders under the captions “Proposal 1: Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance.” This proxy statement will be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2011 pursuant to Regulation 14A under the Securities Exchange Act of 1934. Pursuant to Item 401(b) of Regulation S-K, information about our executive officers is reported under the caption “Executive Officers of the Registrant” in Item 4A of Part I of this Annual Report on Form 10-K.

We make available free of charge on our website (www.redlion.com) the charters of all of the standing committees of our board of directors (including those of the audit, nominating and corporate governance and compensation committees), the code of business conduct and ethics for our directors, officers and employees, and our corporate governance guidelines. We will furnish copies of these documents to any shareholder upon written request sent to our General Counsel, 201 W. North River Drive, Suite 100, Spokane, Washington 99201-2293.

Item 11. Executive Compensation

The information required by this item will be contained in, and is incorporated by reference from, the definitive proxy statement for our 2012 Annual Meeting of Shareholders under the captions “Compensation Discussion and Analysis,” “Executive Compensation” and “Director Compensation.”

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

A portion of the information required by this item will be contained in, and is incorporated by reference from, the definitive proxy statement for our 2012 Annual Meeting of Shareholders under the captions “Security Ownership of Certain Beneficial Owners and Management.”

See Item 5 of this Annual Report on Form 10-K for information regarding our equity compensation plans.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item will be contained in, and is incorporated by reference from, the definitive proxy statement for our 2012 Annual Meeting of Shareholders under the captions “Certain Relationships and Related Transactions,” and “Corporate Governance — Director Independence.”

Item 14. Principal Accountant Fees and Services

The information required by this item will be contained in, and is incorporated by reference from, the definitive proxy statement for our 2012 Annual Meeting of Shareholders under the caption “Principal Accountant Fees and Services.”

89

PART IV

Item 15. Exhibits and Financial Statement Schedules

List of documents filed as part of this report:

1. Index to Red Lion Hotels Corporation financial statements:

		Page
a.	Consolidated Balance Sheets		56
b.	Consolidated Statements of Operations		57
c.	Consolidated Statements of Changes in Stockholders’ Equity		58
d.	Consolidated Statements of Cash Flows		59
e.	Notes to Consolidated Financial Statements		61

2. Index to financial statement schedules:

All schedules for which provisions are made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable or the information is contained in the Financial Statements and therefore has been omitted.

3. Index to exhibits:

Exhibit Number	Description
3.1(1)	Amended and Restated Articles of Incorporation.
3.2(1)	Amended and Restated By-Laws
4.1(2)	Specimen Common Stock Certificate
4.2(3)	Certificate of Trust of Red Lion Hotels Capital Trust
4.3(3)	Declaration of Trust of Red Lion Hotels Capital Trust
4.4(4)	Amended and Restated Declaration of Trust of Red Lion Hotels Capital Trust
4.5(4)	Indenture for 9.5% Junior Subordinated Debentures Due February 24, 2044
4.6(4)	Form of Certificate for 9.5% Trust Preferred Securities (Liquidation Amount of $25 per Trust Preferred Security) of Red Lion Hotels Capital Trust (included in Exhibit 4.5 as Exhibit A-1)
4.7(4)	Form of 9.5% Junior Subordinated Debenture Due February 24, 2044 (included in Exhibit 4.6 as Exhibit A)
4.8(4)	Trust Preferred Securities Guarantee Agreement dated February 24, 2004
4.9(4)	Trust Common Securities Guarantee Agreement dated February 24, 2004
	Executive Compensation Plans and Agreements
10.1(5)	1998 Stock Incentive Plan
10.2(6)	Form of Restricted Stock Award Agreement for the 1998 Stock Incentive Plan
10.3(7)	Form of Notice of Grant of Stock Options and Option Agreement for the 1998 Stock Incentive Plan
10.4(8)	2006 Stock Incentive Plan
10.5(9)	Form of Restricted Stock Unit Agreement -- Notice of Grant for the 2006 Stock Incentive Plan

90

Exhibit Number	Description
10.6(10)	Form of Notice of Grant of Stock Options and Option Agreement for the 2006 Stock Incentive Plan
10.7(11)	2008 Employee Stock Purchase Plan
10.8(12)	First Amendment to 2008 Employee Stock Purchase Plan
10.9(13)	Executive Officers Variable Pay Plan Effective January 1, 2005
10.10	Summary Sheet for Director Compensation
10.11(14)	Executive Employment Agreement dated April 22, 2008 between the Registrant and Thomas L. McKeirnan
10.12(14)	Executive Employment Agreement dated June 5, 2008 between the Registrant and George H. Schweitzer
10.13(15)	Employment offer letter to Harry Sladich dated March 17, 2010.
10.14(15)	Employment offer letter to Dan Jackson dated October 26, 2010.
10.15	Employment offer letter to Julie Shiflett dated August 31, 2011
	Other Material Contracts
10.16(16)	Promissory Note dated effective as of June 27, 2003, in the original principal amount of $5,100,000 issued by WHC807, LLC, a Delaware limited liability company indirectly controlled by the Registrant (“WHC807”), to Column Financial, Inc. (“Column”) (the “WHC807 Promissory Note”). Nine other Delaware limited liability companies indirectly controlled by the Registrant (the “Other LLCs”) simultaneously issued nine separate Promissory Notes to Column in an aggregate original principal amount of $50,100,000 and otherwise on terms and conditions substantially similar to those of the WHC807 Promissory Note (these Promissory Notes and their respective issuers and principal amounts are identified in Exhibit D to the Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing filed as Exhibit 10.44).
10.17(16)	Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing dated effective as of June 27, 2003, with WHC807 as grantor and Column as beneficiary (the “WHC807 Deed of Trust”). Each of the Other LLCs simultaneously executed a separate Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing as grantor with Column as beneficiary and otherwise on terms and conditions substantially similar to those of the WHC807 Deed of Trust (these nine other documents and their respective grantors and the respective parcels of real property encumbered thereby are identified in Exhibit E to the WHC807 Deed of Trust).
10.18(16)	Indemnity and Guaranty Agreement dated effective as of June 27, 2003, between the Registrant and Column with respect to the WHC807 Promissory Note and the WHC807 Deed of Trust. The Registrant and Column have entered into nine separate Indemnity and Guaranty Agreements on substantially similar terms and conditions with respect to the Other LLCs’ Promissory Notes and Deeds of Trust, Assignments of Leases and Rents, Security Agreements and Fixture Filings referred to in Exhibits 10.43 and 10.44, respectively.
10.19(17)	Credit Agreement dated September 13, 2006 among the Registrant, Credit Agricole Corporate and Investment Bank (formerly Calyon New York Branch), Sole Lead Arranger and Administrative Agent, KeyBank National Association, Documentation Agent, CIBC, Inc., Union Bank of California, N.A. and Wells Fargo Bank, N.A.

91

Exhibit Number	Description
10.20(18)	First Amendment dated February 8, 2010 to Credit Agreement among the Registrant, Credit Agricole Corporate and Investment Bank, Sole Lead Arranger and Administrative Agent, KeyBank National Association, Documentation Agent, CIBC, Inc., Union Bank, N.A. and Wells Fargo Bank, National Association
10.21(19)	Second Amendment dated January 10, 2011 to Credit Agreement among the Registrant, Credit Agricole Corporate and Investment Bank, Sole Lead Arranger and Administrative Agent, KeyBank National Association, Documentation Agent, CIBC, Inc., Union Bank, N.A. and Wells Fargo Bank, National Association
10.22(20)	Third Amendment to Credit Agreement and Amendment to Other Loan Documents dated March 25, 2011 among the Registrant, WHC809, LLC, and KeyBank National Association
10.23(21)	Agreement to Purchase Hotel between WHC809, LLC and LCP Seattle, LLC
10.24(22)	Amended and Restated Credit Agreement dated as of September 12, 2011 between the Registrant and Wells Fargo Bank, National Association
10.25(23)	First Amendment dated January 31, 2012 to Amended And Restated Credit Agreement between the Registrant and Wells Fargo Bank, National Association
10.26(22)	Term Note dated January 31, 2012 for $30,000,000 payable by the Registrant to Wells Fargo Bank, National Association
10.27(23)	First Modification to Promissory Note (Term Note) dated January 31, 2012
10.28(22)	Revolving Line of Credit Note dated January 31, 2012 for $10,000,000 payable by the Registrant to Wells Fargo Bank, National Association
10.29(23)	First Modification to Promissory Note (Revolving Line of Credit Note) dated January 31, 2012
10.30	Agreement to Purchase Eight Hotels and Assume Leases dated November 2, 2011 between WHC 809, LLC and RLH Partnership, L.P.
21	List of Subsidiaries of Red Lion Hotels Corporation
23	Consent of BDO USA, LLP
24	Powers of Attorney (included on signature page)
31.1	Certification of principal executive officer pursuant to Exchange Act Rule 13a-14(a)
31.2	Certification of principal financial officer pursuant to Exchange Act Rule 13a-14(a)
32.1	Certification of principal executive officer pursuant to Exchange Act Rule 13a-14(b)
32.2	Certification of principal financial officer pursuant to Exchange Act Rule 13a-14(b)
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

(1) Previously filed with the Securities and Exchange Commission as an exhibit to the Form 8-K filed by us on May 25, 2011.

(2) Previously filed with the Securities and Exchange Commission as an exhibit to the Form S-3/A filed by us on May 15, 2006.

92

(3) Previously filed with the Securities and Exchange Commission as an exhibit to the Form S-1 filed by us on November 4, 2003.

(4) Previously filed with the Securities and Exchange Commission as an exhibit to the Form 8-K filed by us on March 19, 2004.

(5) Previously filed with the Securities and Exchange Commission as an exhibit to the Form 10-Q filed by us on May 15, 2001.

(6) Previously filed with the Securities and Exchange Commission as an exhibit to the Form S-1 filed by us on January 20, 1998.

(7) Previously filed with the Securities and Exchange Commission as an exhibit the Form 8-K filed by us on November 15, 2005.

(8) Previously filed with the Securities and Exchange Commission as an appendix to the Schedule 14A filed by us on April 20, 2006.

(9) Previously filed with the Securities and Exchange Commission as an exhibit to the Form 8-K filed by us on November 22, 2006.

(10) Previously filed with the Securities and Exchange Commission as an exhibit to the Form 10-Q filed by us on August 14, 2006.

(11) Previously filed with the Securities and Exchange Commission as an appendix to the Schedule 14A filed by us on April 22, 2008.

(12) Previously filed with the Securities and Exchange Commission as an exhibit to the Form 10-K filed by us on March 11, 2010.

(13) Previously filed with the Securities and Exchange Commission as an exhibit to the Form 8-K filed by us on March 23, 2005.

(14) Previously filed with the Securities and Exchange Commission as an exhibit to the Form 10-Q filed by us on August 7, 2008.

(15) Previously filed with the Securities and Exchange Commission as an exhibit to the Form 10-Q filed by us on May 9, 2011.

(16) Previously filed with the Securities and Exchange Commission as an exhibit to the Form 10-Q filed by us on August 14, 2003.

(17) Previously filed with the Securities and Exchange Commission as an exhibit to the Form 8-K filed by us on September 18, 2006.

(18) Previously filed with the Securities and Exchange Commission as an exhibit to the Form 8-K filed by us on February 9, 2010.

(19) Previously filed with the Securities and Exchange Commission as an exhibit to the Form 8-K filed by us on January 13, 2011.

(20) Previously filed with the Securities and Exchange Commission as an exhibit to the Form 8-K filed by us on March 30, 2011.

(21) Previously filed with the Securities and Exchange Commission as an exhibit to the Form 10-Q filed by us on August 8, 2011.

(22) Previously filed with the Securities and Exchange Commission as an exhibit to the Form 10-Q filed by us on November 8, 2011.

(23) Previously filed with the Securities and Exchange Commission as an exhibit to the Form 8-K filed by us on February 7, 2012.

93

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

RED LION HOTELS CORPORATION Registrant
By	/s/     JON E. ELIASSEN
	Jon E. Eliassen
	President and Chief Executive Officer

Date: March 15, 2012

POWERS OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints Jon E. Eliassen and Julie Shiflett and each of them severally, such person’s true and lawful attorneys-in-fact and agents, with full power to act without the other and with full power of substitution and resubstitution, to execute in the name and on behalf of such person, individually and in each capacity stated below, any and all amendments to this report, and any and all other instruments necessary or incidental in connection herewith, and to file the same with the Securities and Exchange Commission.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/S/    JON E. ELIASSEN Jon E. Eliassen	President, Chief Executive Officer and Director (Principal Executive Officer)	March 15, 2012
/S/    JULIE SHIFLETT Julie Shiflett	Executive Vice President, Chief Financial Officer (Principal Financial Officer)	March 15, 2012
/S/    SANDRA J. HEFFERNAN Sandra J. Heffernan	Vice President, Corporate Controller (Principal Accounting Officer)	March 15, 2012
/S/    DONALD K. BARBIERI Donald K. Barbieri	Chairman of the Board of Directors	March 15, 2012
/S/    RICHARD L. BARBIERI Richard L. Barbieri	Director	March 15, 2012
/S/    RYLAND P. DAVIS Ryland P. Davis	Director	March 15, 2012
/S/    RAYMOND R. BRANDSTROM Raymond R. Brandstrom	Director	March 15, 2012
/S/    PETER F. STANTON Peter F. Stanton	Director	March 15, 2012
/S/    RONALD R. TAYLOR Ronald R. Taylor	Director	March 15, 2012
/S/    MELVIN L. KEATING Melvin L. Keating	Director	March 15, 2012

94

EX-10.10

Exhibit 10.10

Summary Sheet for Director Compensation

March 14, 2012

The Company pays its Chairman of the Board an annual retainer of $70,000. It also pays or reimburses him for the cost of office space that has a rental value of approximately $13,000 per year and provides coverage to him and his domestic partner under the Company’s self-insured medical, dental and vision plan. The Company pays each of its other non-employee directors an annual retainer of $30,000. The chair of the Audit Committee receives an additional annual fee of $20,000. The chairs of each of the Compensation Committee and the Nominating and Corporate Governance Committee receive an additional annual fee of $15,000. Non-chair members of these committees receive an additional $5,000 annual fee for each committee on which they serve.

All director fees are payable in advance in equal quarterly installments and are currently paid via shares of the Company’s common stock based on the closing market price on the regularly scheduled quarterly payment date.

In addition to annual fees, each non-employee director is entitled to receive, at or following each annual meeting of the Company’s shareholders, a grant of stock of the Company valued at $25,000.

In line with the Company’s operating strategy, and as with all salaried employees including senior management, the Company’s directors have accepted since the second quarter of 2009 a 5% reduction in the amount of the fees and stock grants described above.

In addition to fees and stock grants, it is the Company’s policy to reimburse directors for their out-of-pocket expenses incurred in connection with their service on the Board and its committees.

EX-10.15

Exhibit 10.15

August 31, 2011

Ms. Julie Shiflett

Dear Julie:

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

Your appointment as an executive officer of Red Lion Hotels Corporation would be subject to formal appointment by our Board of Directors. After appointment, and so long as you are an executive officer, the details of your hire, your compensation and of any acquisitions and dispositions of stock of Red Lion would be subject to Securities Exchange Commission reporting rules.

The following outlines the employment package for your position.

START DATE: Thursday September 1, 2011

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

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

BONUS: In addition to your base salary, you may be eligible to earn a bonus if you are actively employed throughout the applicable bonus period, and if you meet the other requirements outlined in the Variable Pay Plan (“VPP”), as may be amended from time to time. Bonus targets and goals for achievement of bonuses by executive officers are set by the Compensation Committee of the Board of Directors. For reference purposes, the target bonus for 2011 for the CFO position was 30% of base salary.

EQUITY GRANT: Within 30 days after your hire, you will receive restricted stock units (“RSUs”) equivalent to 50% of your annual salary. These RSUs will be subject to the approval of the Compensation Committee of the Board of Directors and the Company’s 2006 Stock Incentive Plan and will vest on the one (1) year anniversary of the date of issuance, provided that you are still employed by the Company at that time.

You will also be eligible to receive additional issuances from time to time of equity incentives granted by the Compensation Committee of the Board of Directors. For reference purposes, in May of each of the last two calendar years, the Compensation Committee approved equity awards equal in value to 40% of the Chief Financial Officer’s base salary, in each case in the form of RSUs vesting over four years.

ANNUAL PERFORMANCE EVALUATION: Performance evaluations are generally conducted annually on or about February 1^st of each year. Red Lion may increase your salary based upon the annual performance evaluation or other facts. Any wage increase may be pro-rated based on the date you began working in this position.

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

• Medical and Dental insurance eligible the first of the month following your hire date

• Employee Assistance Program (EAP)

• Long Term Disability insurance coverage starting the first of the month following your hire date

• Flexible Spending Account – Section 125 Medical Reimbursement and Dependent Care accounts eligible within 30 days of your hire date for the following 1^st of the month effective date

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

• Paid vacation. You will be eligible for 4 weeks paid vacation each year of your employment. Within your first year of employment, this allowed vacation time does not apply to the RLH Vacation Policy. As such, in your first year of service, these approved but unearned vacation hours will not be entered into our payroll system until requested and taken. Should your employment with RLH end before you have earned vacation hours under our normal vacation policy, this approved but unearned vacation will not be paid out at separation nor will it be subject to any rollover consideration. Following your one year anniversary your vacation hours will be subject to the RLH vacation policy, as detailed in the RLH benefits handbook.

• Paid sick leave

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

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

• 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 hire date

• Direct Deposit

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

• Voluntary Term Life and AD&D Insurance coverage eligible the first of the month following your hire date

• Continuing education reimbursement

• Gold status Alaska airlines, if available

• Discounted 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

If the Company terminates your employment without Cause (defined below) prior to September 1, 2013, the Company will, (i) pay you a lump sum payment equal to your earned but unpaid bonus under the VPP for the prior fiscal year, (ii) pay you a lump sum payment equal to your target bonus under the VPP for the fiscal year in which the termination occurs prorated for the portion of the year elapsed at the time of the termination, and (iii) pay you a lump sum payment equal to the Executive’s total cash compensation for the previous fiscal year (but not less than $250,000). In addition, if the Company terminates your employment without Cause prior to September 1, 2013, (i) the Company shall accelerate vesting on any portion of any equity grant previously made to you under the Company’s 2006 Stock Incentive Plan, or any successor plan, that would otherwise have vested within twelve (12) months after the date of your termination; and (ii), all Company imposed restrictions on any restricted stock issued to you shall be terminated upon the termination of your employment and all restricted stock awarded to you but not yet issued shall be promptly issued.

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

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

“Constructive Termination” shall be deemed to occur if (A) without your consent, (i) there is a significant reduction in your overall scope of duties, authorities and responsibilities (it being understood that a new position within a larger combined company is not a constructive termination if it is in the same area of operations and involves similar scope of management responsibility notwithstanding that you may not retain as senior a position overall within the larger combined company as your prior position within the Company), (ii)

you are required to relocate your place of employment, other than a relocation within 40 miles of Spokane, Washington, or (iii) there is a reduction of more than 20% of your base salary or target bonus (other than any such reduction consistent with a general reduction of pay across the Company’s or its successor’s executive staff as a group, as an economic or strategic measure due to poor financial performance by the Company) and (B) within the thirty (30) day period immediately following such material adverse change or reduction, you elect to terminate your employment voluntarily.

As used herein, the term “Change of Control” means the occurrence of any one of the following events: any merger or consolidation involving the acquisition of 50% or more of the combined voting power of the outstanding securities of the Company by an investor group, adoption of a sale or liquidation plan of substantially all of the assets of the Company or other similar transaction or series of transactions involving the Company, or the acquisition of 50% or more of the combined voting power of the outstanding securities of the Company by an investor group.

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. Your membership on Boards of Directors and your ownership in CFO Outsourcing, LLC (dba NWCFO) are considered exempted activities as long as they do not involve any material conflict of interest with the interests of RLH.

NONSOLICITATION: You agree that during your employment the Company and for a period of twelve months thereafter 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.

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.

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

Sincerely,

/s/ Jon E. Eliassen

Jon E. Eliassen

President and Chief Executive Officer

Red Lion Hotels Corporation

Accepted this 31^st day of August, 2011

/s/ Julie Shiflett

Employee Signature

EX-10.30

Exhibit 10.30

EXECUTION COPY

AGREEMENT TO PURCHASE EIGHT HOTELS AND ASSUME LEASES

THIS AGREEMENT to Purchase Eight Hotels and Assume Leases is made this 2^nd day of November, 2011 (the “Effective Date”) by and between RLH PARTNERSHIP, L.P., a Delaware limited partnership (the “Seller”), and WHC 809, LLC, a Delaware limited liability company (“Purchaser”).

RECITALS

A. Seller currently leases sixteen (16) hotels (the “Master Lease Hotels”) to an affiliate of Purchaser, Red Lion Hotels Holdings, Inc., formerly known as Red Lion Hotels Inc. (“Tenant”), under the term of that certain Lease between Seller as landlord and Tenant as tenant, dated August 1, 1995 (as amended from time to time, the “Master Lease”).

B. Seller is:

(1) the fee owner of nine (9) of the Master Lease Hotels, seven (7) of which (listed on Exhibit A-1) it wishes to sell to Purchaser, (the “Seven Sale Properties”), and two (2) of which (listed on Exhibit A-2) which it wishes to sell to Tenant (the “Two Sale Properties”, and, together with the Seven Sale Properties, the “Sale Properties”);

(2) the tenant under a real estate lease for one (1) of the Master Lease Hotels and the tenant under a real estate lease for land adjacent to one of the Sale Properties, both of which are listed on Exhibit B (the “Ground Leased Properties”) and both of which it wishes to assign to Purchaser, and in connection with which Seller will sell to Purchaser all of its interests in Property related to the Ground Leased Properties;

(3) the landlord (or sublandlord) under leases for five (5) of the Master Lease Hotels, which are leased by Seller to Tenant and subleased by Tenant, as sublandlord, to Doubletree DTWC Corporation as assigned to HLT Operate DTWC LLC (“Subtenant”), which are listed on Exhibit C (the “Hilton Portfolio Properties”), in which Tenant wishes to assign its entire interest including its interest as tenant under the Master Lease and its interest as sublandlord under the Sublease (as defined herein) to SFI DT Holdings LLC, a Delaware limited liability company, an Affiliate of Seller (“Sublease Assignee”); and

(4) the tenant under a ground lease from the Port of Vancouver, Washington for the Master Lease Hotel described on Exhibit D, which Seller subleases to Tenant (the “Vancouver Property”), for which Seller and Tenant intend to enter into an amended and restated sublease.

C. Seller and Tenant also wish to enter into an amendment to the Master Lease, which will, among other things, confirm termination of the Master Lease with regard to the Sale Properties and Ground Leased Properties, and split the Master Lease as to the remaining Master Lease Hotels into a Master Lease with regard to the Vancouver Property in the form of an amended and restated sublease for the Vancouver Property and continue the Master Lease as to the Hilton Portfolio Properties, with Sublease Assignee as the tenant in place of the Tenant with respect to the Hilton Portfolio Properties.

AGREEMENTS

NOW, THEREFORE, in consideration of the foregoing premises and the respective representations, warranties, agreements, covenants and conditions herein contained, and other good and valuable consideration, Seller and Purchaser agree as follows:

ARTICLE I

DEFINITIONS AND REFERENCES

Section 1.01 Definitions. As used herein, the following terms shall have the respective meanings indicated below:

Affiliate: With respect to a specific entity, any natural person or any firm, corporation, partnership, association, trust or other entity which, directly or indirectly, controls, or is under common control with, the subject entity, and with respect to any specific entity or person, any firm, corporation, partnership, association, trust or other entity which is controlled by the subject entity or person. For purposes hereof, the term “control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any such entity or the power to veto major policy decision of any such entity, whether through the ownership of voting securities, by contract, or otherwise. For the avoidance of doubt, Purchaser, Guarantor and Tenant are Affiliates of each other.

Agreement: This Agreement to Purchase Eight Hotels and Assume Leases, including the Exhibits attached hereto.

Agreement to Purchase Two Hotels: The Agreement to Purchase Two Hotels in the form attached as Exhibit A-3.

Assignment and Assumption of Leases: The Assignment and Assumption of Leases in the form attached as Exhibit E, to be entered into at Closing between Tenant and the Sublease Assignee with respect to the Hilton Portfolio Properties.

Assumed Liabilities: As defined in Section 3.02(a).

Bill of Sale: As defined in 7.01(b).

CERCLA: As defined in Section 19.03.

Closing: As defined in Section 6.01.

Closing Date: As defined in Section 6.01.

Deeds: As defined in Section 7.01(a).

Deed of Trust: Any deed of trust, mortgage, security instrument or other agreement constituting a lien on the Seller’s interest in the Real Property.

2

Documents: To the extent lawfully assignable without penalty or breach, reproducible copies of all plans, specifications, drawings, blueprints, surveys, environmental reports, soil studies, engineering reports and other documents which Seller has in its possession or control, or has a right to, as the same relate to the Property, including, but not limited to those relating to any prior or ongoing construction or rehabilitation of the Property.

Effective Date: The day and year first above written in the first paragraph of this Agreement prior to the Recitals.

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

Fixtures and Tangible Personal Property: All interests, if any, the Seller may have in fixtures, furniture, furnishings, fittings, equipment, cars, trucks, machinery, apparatus, signage, appliances, draperies, carpeting, and other articles of tangible personal property now located on the Real Property or exclusively used or usable in connection with the operations or any part of the Real Property, subject to such depletions, resupplies, substitutions and replacements as shall occur and be made in the normal course of business expressly excluding, however: (i) equipment and property leased pursuant to Hotel Contracts; (ii) property owned by Purchaser, Tenant or their Affiliates (and those claiming by, through or under any of them); (iii) property owned by third parties furnishing goods or services to the Property; and (iv) Improvements.

Fourth Amendment to Lease: The Fourth Amendment to Lease in the form attached as Exhibit F.

Ground Leases: The leases listed on Exhibit B.

Ground Lease Assignment: The Assignment and Assumption of Ground Leases in the form attached as Exhibit G.

Ground Leased Properties: As defined in the Recitals.

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Guarantor: Red Lion Hotels Corporation.

Guaranty of Lease Obligations: The Guaranty of Lease Obligations dated September 15, 1998 among Promus Hotels, Inc., Tenant and Seller and Guaranty of Lease Obligations dated September 15, 1998 among Promus Hotel Corporation, Tenant and Seller.

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

Hotel Contracts: To the extent lawfully assignable without penalty or breach, any agreements in the name of the Seller (and all rights of Seller relating thereto) relating solely to the Real Property, including service, maintenance, purchase orders, leases and other contracts or agreements, equipment leases capitalized for accounting purposes, and any amendments thereto, with respect to the ownership, maintenance, operation, provisioning, or equipping of the Real Property, or any of the Property, as well as written warranties and guaranties relating thereto, if any, including, but not limited to, those relating to heating and cooling equipment and/or mechanical equipment, provided they are listed in a schedule to the Assignment and Assumption Agreement.

Indemnity and Reimbursement Agreement. The Indemnity and Reimbursement Agreement (iStar Lease) dated December 31, 2001, by Red Lion Hotels, Inc., West Coast Hospitality Corporation, Doubletree Corporation, Promus Hotels, Inc. and Doubletree DTWC Corporation.

Improvements: The Seller’s interest in the buildings, structures (surface and sub-surface) and other improvements, including such fixtures as shall constitute real property, located on the Land.

Land: The parcels of real estate on which any of the Seven Sale Properties and Ground Leased Properties are located, as described in Exhibit H.

Legal Requirements: All laws, statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions, rules, regulations, permits, licenses, authorizations, directions and requirements of all governments and governmental authorities having jurisdiction over the Sale Properties, and the operation thereof.

Master Lease: As defined in the Recitals.

New York Style Closing: As defined in Section 6.02.

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Obligations: All payments required to be made and all representations, warranties, covenants, agreements and commitments required to be performed under the provisions of this Agreement by Seller or Purchaser, as applicable.

Permits: To the extent lawfully assignable without penalty or breach, all interests of the Seller in any licenses, franchises and permits, certificates of occupancy, authorizations and approvals used in or relating to the ownership, occupancy or operation of any part of the Real Property, including, without limitation, those necessary for the sale and on-premises consumption of food, liquor and other alcoholic beverages.

Permitted Exceptions: All of the following: (1) the Space Leases; (2) the Ground Leases, and (3) any liens, encumbrances, restrictions, exceptions and other matters (a) in existence on August 1, 1995, (b) that have been approved by Purchaser and Seller prior to the date hereof, (c) that are approved as matters in accordance with the terms of Article IV to which title to the Real Property may be subject on the Closing Date, (d) that arise out of the act or omission of Purchaser or its Affiliates or those claiming by, through or under Purchaser or its Affiliates, (e) that are the responsibility of Purchaser or its Affiliates under the Master Lease or (f) matters that would be disclosed by a survey of the Real Property. For the avoidance of doubt, the Permitted Exceptions include the lien in favor of the County of Sacramento recorded as Book 20090826, Page 0781 of Official Records of Sacramento County, California and the claim for lien in favor of Joseph M. Perez recorded as Book 20110302, Page 0665, Official Records of Sacramento County, California (and any statutory lien related thereto).

Personal Property: All of the Property other than the Real Property.

Property: All right, title and interest of Seller in: (i) The Real Property; (ii) the Fixtures and Tangible Personal Property; (iii) Hotel Contracts and Space Leases; (iv) the Permits; and (v) the Documents, provided, however, that Property shall not include the Retained Liabilities.

Purchaser: As defined in the preamble.

Purchaser’s Conditions: As defined in Section 9.02.

Purchaser’s Knowledge and Known to Purchaser: The current actual knowledge of the individuals listed on Exhibit I.

Purchase Price: As defined in Section 3.01.

Reaffirmation of Guarantees: The Reaffirmation of Guarantees in the form attached as Exhibit J.

Real Property: The Land together with the Improvements located on the Land. For the avoidance of doubt, the Real Property does not include the Two Sale Properties.

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Red Lion Guaranty: The Guaranty by Guarantor in the form of Exhibit K.

Related Agreements: As defined in Section 2.02.

Restated Vancouver Sublease: The amended and restated sublease of the Vancouver Property in the form of the Restated Vancouver Sublease attached as Exhibit L.

Retained Liabilities: As defined in Section 3.02(b).

Sale Properties: As defined in the Recitals.

Seller: As defined in the preamble.

Seller’s Conditions: As defined in Section 9.01.

Seller’s Knowledge and Known to Seller: The current actual knowledge of the individuals listed on Exhibit M.

Space Leases: All leases, licenses, concessions and other occupancy agreements, and any amendments thereto in effect on the date hereof as described on a schedule to the Assignment and Assumption Agreement, whether or not of record, for the use or occupancy of any portion of the Real Property.

Space Lessee: Any person or entity entitled to occupancy of any portion of the Real Property under a Space Lease.

Sublease: That certain Sublease dated December 31, 2001 between Tenant and Subtenant relating to the Hilton Portfolio Properties.

Sublease Properties: The property subleased to Subtenant pursuant to the Sublease.

Subtenant: As defined in the recitals.

Tenant: As defined in the recitals.

Termination Date: As defined in Section 10.01(b).

Third Party Consents: As defined in Section 4.02.

Title Clearance Date: The date the Title Commitment is issued.

Title Commitment: As defined in Section 4.01.

Title Company: First American Title Insurance Company, Seattle National Title Office.

Title Defect: A material lien, claim, charge, security interest or encumbrance relating to any of the Real Property other than a Permitted Exception. If the Title Document or a survey discloses any encroachments or defects which do not have a material adverse effect on the Property, such encroachment or defect shall not be considered a Title Defect.

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Title Documents: As defined in Section 6.03.

Title Policy: As defined in Section 6.03(a).

Violation: Any condition with respect to the Property which constitutes a violation of any Legal Requirements.

Section 1.02 References. Except as otherwise specifically indicated, all references to Section and Subsection numbers refer to Sections and Subsections of this Agreement, and all references to Exhibits refer to the Exhibits attached hereto. The words “hereby,” “hereof,” “herein,” “hereto,” “hereunder,” “hereinafter,” and words of similar import refer to this Agreement as a whole and not to any particular Section or Subsection hereof. The word “hereafter” shall mean after, and the term “heretofore” shall mean before, the date of this Agreement. Captions used herein are for convenience only and shall not be used to construe the meaning of any part of this Agreement. Time shall refer to the (standard or daylight savings) time in effect in the State of Washington unless otherwise specified.

ARTICLE II

SALE AND PURCHASE

Section 2.01 Sale and Purchase. Seller hereby agrees to sell to Purchaser, and Purchaser hereby agrees to purchase from Seller, the Property on the terms and subject to the conditions of this Agreement.

Section 2.02 Related Agreements. At the Closing of the purchase of the Seven Sale Properties, the Purchaser and Seller also agree to execute and deliver the following documents and to obtain the signature of their respective Affiliates (as applicable) to each of them, in order to document the simultaneous closing of the related transactions (the “Related Agreements”):

(a) the Agreement to Purchase Two Hotels;

(b) the Assignment and Assumption of Leases;

(c) the Restated Vancouver Sublease;

(d) the Fourth Amendment to Lease;

(e) the Ground Lease Assignments;

(f) Reaffirmation of Guarantees; and

(g) Red Lion Guaranty.

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ARTICLE III

PURCHASE PRICE

Section 3.01 Purchase Price; Allocation Thereof. The purchase price (“Purchase Price”) for the Property to be paid by Purchaser to Seller hereunder shall be thirty two million one thousand dollars ($32,001,000). The Purchase Price for the Property shall be allocated in accordance with the values reasonably attributable to the Land and Improvements as set forth on Schedule 3.01. Such allocation shall be binding on the Seller and Purchaser for all purposes including the reporting of gain or loss and determination of basis for income tax purposes, and each of the parties hereto agrees that it or they will file a statement setting forth such allocation with its or their federal income tax returns and will also file such further information or take such further actions as may be necessary to comply with Treasury Regulations that have been promulgated pursuant to Section 1060 of the Internal Revenue Code of 1986, as amended.

Section 3.02 Assumption of Liabilities; Retained Liabilities.

(a) Except as otherwise provided in (b) from and after the Closing Date, Purchaser shall be responsible for all obligations and liabilities with respect to the Property or operation of the Sale Properties that first arise after the Closing Date (the “Assumed Liabilities”).

(b) Purchaser shall have no liability or obligation for the following (“Retained Liabilities”): (i) federal, state and local income, franchise, or other taxes of Seller except to the extent such items are the responsibility of the Tenant under the Master Lease as in effect on the date hereof; (ii) any liability the existence of which would constitute a breach of any of Seller’s representations or warranties contained in Article V; and (iii) all liabilities of Seller under the Master Lease that arise prior to or on the Closing Date.

Section 3.03 Indemnity and Reimbursement Agreement. Neither Seller nor Sublease Assignee shall assume or become liable under the Indemnity and Reimbursement Agreement.

ARTICLE IV

TITLE INSURANCE AND THIRD PARTY CONSENTS

Section 4.01 Title.

(a) The Purchaser and Seller have each approved a title commitment for the Real Property (the “Title Commitment”) issued by the Title Company reflecting title to each parcel of the Real Property.

(b) If after the Title Clearance Date any updates to the Title Commitment disclose a Title Defect caused by or resulting from claims against the Seller, Purchaser shall have the right to make additional title objections within three (3) days after receipt of such updated Title Commitment. Any such Title Defect not objected to by Purchaser

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within such three (3) day period shall also be deemed a Permitted Exception. Seller shall have two (2) business days after receipt of Purchaser’s additional title exception to satisfy (or cause the title insurer to remove or “endorse over”) such Title Defect (but shall be under no affirmative obligation to do so), and if Seller fails to satisfy (or cause the title insurer to remove or “endorse over”) such Title Defect within such two (2) business day period, then, at the option of Purchaser, evidenced by written notice to Seller, Purchaser may: (i) terminate this Agreement and receive a refund of the Earnest Money Deposit whereupon the parties hereto shall have no further rights, obligations or liabilities with respect to each other hereunder; or (ii) elect to close and receive the Property required herein from Seller subject to such Title Defect and without reduction of the Purchase Price. Except as expressly provided herein, If Purchaser fails to exercise any of the two (2) options set forth in this Section 4, Purchaser shall be deemed to have elected to proceed under choice (ii) above.

Section 4.02 Third Party Consents. Purchaser has obtained the consents of the ground lessors for the Ground Lease Properties, on terms approved by Seller. Purchaser and Seller believe these assets to be the only third party consents required to effectively transfer the Property to Purchaser (the “Third Party Consents”). Purchaser agrees to cause its Affiliate, Red Lion Hotels Corporation, to execute and deliver, on or before the Closing, a guarantee in favor of ground lessor of the applicable Ground Lease in the form attached to the applicable Third Party Consent. Delivery of the Third Party Consents shall be a condition to Closing, in accordance with Section 9.02(c).

ARTICLE V

REPRESENTATIONS AND WARRANTIES

Section 5.01 Representations and Warranties of Seller. Tenant currently operates the Real Property, the Two Sale Properties and the Vancouver Property under the Master Lease, and by virtue of Purchaser’s affiliation with Tenant, Purchaser is familiar with the Property and has agreed to accept a limited number of representations and warranties from Seller in this Agreement. Seller hereby represents and warrants the following to Purchaser:

(a) Due Organization, etc. Seller and Sublease Assignee are validly existing and are in good standing in the State of Delaware. This Agreement and the Related Agreements have been duly authorized by all requisite action on the part of Seller and Sublease Assignee. The execution and delivery of this Agreement and the Related Agreements, and, subject to obtaining the Third Party Consents, the consummation of the transactions contemplated hereby do not require the consent or approval of any governmental authority, nor, subject to obtaining the Third Party Consents, shall such execution and delivery result in a breach or violation of any Legal Requirement, or, subject to obtaining the Third Party Consents, constitute a default (or an event which with notice and passage of time or both will constitute a default) under any contract or agreement to which Seller or Sublease Assignee is a party or by which it or the Property is bound.

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(b) Condemnation. As of the Effective Date, other than the potential condemnation of the Vancouver Property and any other pending condemnation or other proceedings Known to Purchaser, Seller has not received any written notice of any pending condemnation of the Property or other proceedings in eminent domain regarding the Property that Seller has not provided to Purchaser or its Affiliates.

(c) Violations of Law. As of the Effective Date, other than such notices as may be Known to Purchaser, Seller has not received any written notice of any violation of any applicable law or regulation with respect to the Property that Seller has not provided for Purchaser or its Affiliates.

(d) Litigation. As of the Effective Date, other than the potential condemnation of the Vancouver Property and other than any other proceedings Known to Purchaser, Seller has not been served with any filing in any material litigation, arbitration or administrative proceeding with respect to the Property in which Seller, or any Affiliate of Seller is named a party that Seller has not disclosed to Purchaser or its Affiliates.

(e) Options. Seller has not granted any option or right of first refusal or first opportunity or right to purchase the Property to any party, other than Purchaser under this Agreement or to Tenant pursuant to the Master Lease.

(f) Title to Property. Seller’s interest in the Real Property is not subject to the lien of any security interest on Seller’s interest in the Property to secure an obligation of Seller or its Affiliates for money borrowed; (b) the Seller’s interest in Real Property is not subject to the lien of any judgment, tax assessment or other obligation incurred by Seller that is not a Permitted Exception; and (c) the Seller’s interest in Real Property is not subject to any liens created on or after the “Commencement Date” (as defined in the Master Lease) which have been created by or resulted from any acts of the Seller undertaken without the consent of the Tenant which is not a Permitted Exception.

Except as specifically set forth herein, Seller has not made and does not make or give any warranties or representations.

Section 5.02 Representations and Warranties of Purchaser. Purchaser hereby represents and warrants the following to Seller:

(a) Due Organization, etc. Purchaser, Tenant and Guarantor are each validly existing and in good standing in the state of their formation. This Agreement and the Related Agreements have been duly authorized by all requisite action on the part of Purchaser, Tenant and Guarantor. The execution and delivery of this Agreement and the Related Agreements, and the consummation of the transaction contemplated thereby, do not require the consent or approval of any governmental authority, nor shall such execution and delivery result in a breach or violation of any Legal Requirement or, subject to obtaining the Third Party Consents, constitute a default (or any event which with notice and passage of time or both will constitute a default) under any contract or agreement by which Purchaser or an Affiliate is a party or by which it, its Affiliates or the Property is bound.

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(b) Condemnation. As of the Effective Date, other than the potential condemnation of the Vancouver Property, and any other pending or other proceedings Known to Seller, Purchaser and its Affiliates have not received any written notice of any pending condemnation of the Property or other proceedings in eminent domain regarding the Property that Purchaser has not provided to Seller.

(c) Options and Sublease. Neither the Purchaser nor any of its Affiliates have granted any option or right of first refusal or first opportunity or right of first refusal to purchase the Tenant’s interest in the Master Lease or Sublease. Purchaser has provided Tenant with a true and complete copy of the Sublease. The Sublease and Reimbursement and Indemnity Agreement are the only agreements between Tenant and Subtenant regarding the premises subleased pursuant to the Sublease and the Tenant has not entered into any other subleases of the Sublease Property. The Sublease has not been amended, modified or terminated. Tenant at the Closing will be the tenant under the Master Lease and sublessor under the Sublease free and clear of liens, claims and assignments. Tenant is not in default under the Sublease and, to Purchaser’s Knowledge, the Subtenant is not in default under the Sublease. Tenant has not collected rent under the Sublease more than one (1) month in advance.

(d) ERISA. Purchaser and its Affiliates are not an employee benefit plan (a “Plan”) subject to ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”), assets of a Plan are not being used to acquire the Property, Purchaser and its Affiliates are not a “party in interest” (as that term is defined in Section 3(14) of ERISA) with respect to any Plan that is an investor in Seller, and Purchaser’s acquisition of the Property will not constitute or result in a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.

(e) Prohibited Persons and Transactions. Neither Purchaser nor any of its Affiliates, is, nor will they become, a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and will not engage in any dealings or transactions or be otherwise associated with such persons or entities.

Purchaser is not relying on any warranty or representation made by any person acting on Seller’s behalf as to the physical condition, past or future income, expenses or operations of the Property or any other matter or thing affecting or relating to the Property, except as contained in this Agreement.

Section 5.03 Survival. Subject to the temporal and monetary limitations set forth in Article XV, the representations and warranties set forth in this Article V are made as of the Effective Date and are remade as of the Closing Date (unless they specifically relate to the Effective Date) and shall not be deemed to be merged into or waived by the instruments of Closing, but shall survive the Closing for a period of one (1) year (the “Survival Period”),

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provided, however, Purchaser will not bring a claim against Seller with respect to Section 5.01(f) unless Purchaser makes a claim against the title insurer and the title insurer denies coverage therefor or fails to pay the claim (and Purchaser will not permit the title insurer to be subrogated to Purchaser’s rights under this Agreement or any other documents delivered by Seller pursuant to this Agreement with respect to Section 5.01(f)). Each party shall have the right to bring an action against the applicable party on the breach of a representation or warranty or covenant made to such party hereunder or in the documents delivered by Seller at the Closing, but only if the party bringing the action for breach first learns of the breach after Closing and brings an action against for breach by the other party not later than final day of the Survival Period. In no event shall any party be liable to any other party for incidental, consequential, or punitive damages as a result of the breach of any or all representations or warranties set forth in this Agreement.

ARTICLE VI

CLOSING MATTERS

Section 6.01 Closing. The closing of the transaction contemplated hereby (the “Closing”) shall take place at the offices of the Title Company not later than 5:00 PM, Seattle Washington time on the Effective Date (the date of the Closing is sometimes referred to herein as the “Closing Date”).

Section 6.02 New York Style Closing. This transaction shall be closed by means of a so-called “New York Style Closing,” with the concurrent delivery of the documents of title, the Related Agreements, transfer of interests, delivery of the Title Policy and the payment of the Purchase Price.

Section 6.03 Title Commitment and Title Policy.

(a) The Title Commitment shall be the basis for “Title Policy”. The Title Commitment and the Title Policy are sometimes referred to as the “Title Documents”.

(b) Removal of Liens, etc. On the Closing Date, Seller shall pay-off any underlying obligation secured by a deed of trust, mortgage or other security interest securing an obligation of the Seller that is not a Permitted Exception. In addition, if on the Closing Date there shall be any Title Defect which is an obligation to pay money, a portion of the Purchase Price shall be used to satisfy the same, provided Seller shall simultaneously either deliver to Purchaser at Closing instruments, in recordable form, sufficient to satisfy such Title Defect of record, together with the cost of recording or filing said instrument provided, however, in lieu thereof, the Seller may cause the Title Insurer to “endorse over” such Title Defect (and may use and a portion of the Purchase Price to effect such endorsement).

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ARTICLE VII

CLOSING DELIVERIES

Section 7.01 Seller’s Deliveries. At Closing, Seller shall deliver, or cause to be delivered to Purchaser, the following, each of which shall be in form and substance acceptable to counsel for Purchaser and executed by Seller:

(a) Recordable limited warranty deeds for the Seven Sale Properties (other than the Ground Leased Properties) in the form attached as Exhibit 7.01(a) from Seller to Purchaser, or its designee, subject only to the Permitted Exceptions (the “Deed”);

(b) Quitclaim Bills of Sale substantially in the form attached hereto as Exhibit 7.01(b) transferring to Purchaser all of Seller’s right, title and interest in and to each and every item of Fixtures and Tangible Personal Property and Documents to be transferred hereunder (subject only to Permitted Exceptions) for each of the Seven Sale Properties and Ground Leased Properties;

(c) Quitclaim Contract Assignment and Assumption Agreements in the form attached hereto as Exhibit 7.01(c) for each of the Seven Sale Properties and Ground Leased Properties of all of Seller’s right, title and interest in the Hotel Contracts, Space Leases and Permits;

(d) The Assignment and Assumption of Leases;

(e) The Restated Vancouver Sublease;

(f) Fourth Amendment to Lease;

(g) The Ground Lease Assignments;

(h) A FIRPTA Certificate in the form attached hereto as Exhibit 7.01(h);

(i) The Red Lion Guaranty;

(j) The Agreement to Purchase Two Hotels;

(k) If required by the Title Company, such documents, if any, as may be reasonably required by the Title Company, on forms customarily used by the Title Company in order to issue an owner’s policy of title insurance subject only to the Permitted Exceptions in accordance with the requirements for the New York Style Closing except Seller shall not be required to certify or indemnify with regard to any Permitted Exception;

(l) Evidence of the existence, organization and authority of Seller and Sublease Assignee and of the authority of the persons executing documents on behalf of the Seller and Sublease Assignee reasonably satisfactory to the Title Company and Purchaser; and

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(m) Cancellations or terminations of any and all deeds of trust, mortgages, or other security instruments of record creating or evidencing a consensual monetary lien or security interest in any of the Property created by Seller or in favor of Seller.

Section 7.02 Purchaser’s Deliveries. At Closing, Purchaser shall deliver, or cause to be delivered to Seller, the following, each of which shall be in form and substance acceptable to counsel for Seller and executed by Purchaser or its affiliates:

(a) The Purchase Price required to be paid pursuant to Section 3.01 hereof;

(b) The Agreement to Purchase Two Hotels;

(c) The Assignment and Assumption of Leases;

(d) The Restated Vancouver Sublease;

(e) The Fourth Amendment to Lease;

(f) The Ground Lease Assignments;

(g) The Red Lion Guaranty; and

(h) Evidence of the existence, organization and authority of Purchaser, Tenant and Guarantor and of the authority of the persons executing documents on behalf of the Purchaser, Tenant and Guarantor reasonably satisfactory to the Title Company and Seller.

Section 7.03 Concurrent Transactions. All documents or other deliveries required to be made by Purchaser or Seller at Closing, and all transactions required to be consummated concurrently with Closing, including the transactions described in the Related Agreements, shall be deemed to have been delivered and to have been consummated simultaneously with all other transactions and all other deliveries, and no delivery shall be deemed to have been made, and no transaction shall be deemed to have been consummated, until all deliveries required by Purchaser, or its designee, and Seller shall have been made, and all concurrent or other transactions shall have been consummated.

Section 7.04 Further Assurances. Seller will cooperate with Purchaser in arranging, at no cost or liability to Seller, for the transfer to Purchaser of any assignable Seller’s interest, if any, in Permits or Hotel Contracts. Seller and Purchaser will, at the Closing, or at any time or from time to time thereafter, upon request of either party, execute such additional instruments, documents or certificates as either party deems reasonably necessary in order to convey, assign and transfer the Property to Purchaser, hereunder.

Section 7.05 Possession. Exclusive possession of the Property shall be delivered at Closing subject only to the Ground Leases, the Space Leases and any other Permitted Exceptions.

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ARTICLE VIII

PRORATIONS

Section 8.01 Rent. The Purchaser shall cause the Tenant to continue to pay rent due under the Master Lease for the Master Lease Hotels through the Closing Date and, to the extent not paid as of the Closing Date, will be credited to Seller. Percentage Rent shall be paid as determined in accordance with the Master Lease and prorated for any partial year. The provisions of this section will survive the Closing. No other prorations shall be required. However, to the extent that any security or other deposits are on deposit with the ground lessors under the Ground Leases, Seller shall be entitled to a credit for the amount of such deposit.

ARTICLE IX

CONDITIONS TO OBLIGATIONS

Section 9.01 Conditions to Seller’s Obligations. The obligation of Seller to close the transaction and deliver the documents and instruments required hereunder shall be subject to satisfaction in full of the following conditions (“Seller’s Conditions”) on or before the Closing Date:

(a) The representations and warranties of Purchaser shall be true and correct in all material respects on the Closing Date.

(b) Purchaser shall have completed all the deliveries and actions required to be made by Purchaser under Section 7.02 and elsewhere in this Agreement.

(c) The Third Party Consents shall have been obtained.

(d) There shall not then be any pending or, to Seller’s Knowledge, threatened litigation which, if determined adversely, would restrain the consummation of any of the transactions referred to herein, or declare illegal, invalid or nonbinding any of the covenants or Obligations of the parties herein.

(e) All parties (other than Seller) to the Reaffirmation of Guarantees shall have executed and delivered that document to Seller.

(f) Purchaser shall have delivered the Red Lion Guaranty.

(g) The Subtenant shall have executed and delivered the Assignment and Assumption of Lease.

(h) Purchaser shall have performed all obligations to be performed by it on or prior to the Closing Date in all material respects.

(i) The “Closing” (as defined in the Agreement to Purchase Two Hotels) has occurred;

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Seller’s Conditions are solely for the benefit of Seller and may be waived only by Seller. Any such waiver or waivers shall be in writing and shall be delivered to Purchaser. Seller shall not act or fail to act for the purpose of permitting or causing any of Seller’s Conditions to fail.

Section 9.02 Conditions to Purchaser’s Obligations. The obligation of Purchaser to make payment of the Purchase Price and other sums provided for herein and to close the transactions contemplated hereby is subject to satisfaction in full of each of the following conditions (“Purchaser’s Conditions”) on or before the Closing Date:

(a) The representations and warranties of Seller shall be true and accurate in all material respects on the Closing Date.

(b) Seller shall have completed all the deliveries required to be made by Seller under Section 7.01 and elsewhere in this Agreement.

(c) The Third Party Consents shall have been obtained.

(d) There shall not then be any pending, or to Purchaser’s Knowledge, threatened litigation which, if determined adversely, would restrain the consummation of any of the transactions referred to herein, or declare illegal, invalid or nonbinding any of the covenants or Obligations of the parties herein.

(e) All parties (other than Tenant and its Affiliates) to the Reaffirmation of Guarantees shall have executed and delivered that document to Purchaser.

(f) Title Company shall be committed to issue the Title Policy to Purchaser subject only to the Permitted Exceptions.

(g) The “Closing” (as defined in the Agreement to Purchase Two Hotels) has occurred.

Purchaser’s Conditions are solely for the benefit of Purchaser and may be waived only by Purchaser. Any such waiver or waivers shall be in writing and shall be delivered to Seller. Purchaser shall not act or fail to act for the purpose of permitting or causing any of Purchaser’s Conditions to fail.

Section 9.03 Remedies. In the event that Purchaser defaults in the obligations under this Agreement and Closing does not occur, Seller shall be entitled to retain the earnest money deposit as liquidated damages in accordance with Section 10. In the event that Seller defaults in its obligations under this Agreement prior to Closing, Purchaser shall be entitled to an order of specific performance to compel Seller to comply with its obligations hereunder and if Purchaser does not obtain such an order or elects not to seek it, Purchaser shall be entitled to reimbursement from Seller for the actual, reasonable third party costs paid to persons or entities not affiliated with the Purchaser or Tenant incurred by Purchaser in connection with negotiation and preparation of this Agreement and Related Agreements, in an amount (when aggregated with amounts payable by Seller pursuant to Section 9.03 of the Agreement to Purchase Two Hotels) not to exceed two hundred thousand dollars ($200,000). IF THE TRANSACTION CLOSES, THE PARTIES’ EXCLUSIVE REMEDIES SHALL BE IN ACCORDANCE WITH ARTICLE

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XV. IN NO EVENT SHALL THE DIRECT OR INDIRECT PARTNERS, SHAREHOLDERS, MEMBERS, OWNER, OR AFFILIATES, ANY OFFICER, DIRECTOR, EMPLOYEE OR AGENT OF EITHER PURCHASER OR SELLER, OR ANY AFFILIATE OR CONTROLLING PERSON THEREOF HAVE ANY LIABILITY FOR ANY CLAIM, CAUSE OF ACTION OR OTHER LIABILITY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE PROPERTY, WHETHER BASED ON CONTRACT, COMMON LAW, STATUTE, EQUITY OR OTHERWISE EXCEPT TO THE EXTENT ANY SUCH PERSON OR ENTITY IS OBLIGATED THEREFORE PURSUANT TO THE RELATED AGREEMENTS. THE PRECEDING SENTENCE SHALL SURVIVE THE CLOSING.

Section 9.04 No Extension. Nothing contained in this Agreement shall require Purchaser or Seller to postpone the Closing Date.

ARTICLE X

[RESERVED]

ARTICLE XI

TERMINATION

Section 11.01 Termination. This Agreement may be terminated and the transactions contemplated hereby terminated at any time prior to the Closing Date:

(a) by written agreement of the Seller and the Purchaser;

(b) by either the Purchaser or the Seller if: (i) the Closing Date has not occurred on or before October 31, 2011 (the “Termination Date”)); provided, that the right to terminate this Agreement under this clause 10.1(b) shall not be available to any party whose failure to fulfill any obligation hereunder has been the cause of, or resulted in, the failure of the Closing Date to occur on or before the Termination Date and such action or failure constitutes a material breach of this Agreement; (ii) there shall be a final nonappealable order of a governmental entity in effect preventing consummation of the transactions contemplated hereunder; or (iii) there shall be any law enacted, promulgated or issued or deemed applicable to the transactions contemplated hereunder by any Governmental Entity that would make any such transaction illegal;

(c) by the Purchaser if it is not in material breach of its obligations under this Agreement and there has been a material breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of the Seller provided, that if such breach is curable by the Seller prior to the Termination Date following the Seller’s receipt of written notice from the Purchaser of such breach, it being understood that the Purchaser may not terminate this Agreement pursuant to this Section 10.01(c) if such breach by the Seller is cured within such fifteen (15) day period so that the conditions would then be satisfied; or

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(d) by the Seller if it is not in material breach of its obligations under this Agreement and there has been a breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of the Purchaser provided, that if such breach is curable by the Purchaser prior to the Termination Date following the Purchaser’s receipt of written notice from the Seller, it being understood that the Seller may not terminate this Agreement pursuant to this Section 10.01(d) if such breach by the Purchaser is cured within such fifteen (15) day period so that the conditions would then be satisfied.

Section 11.02 Effect of Termination. Any termination of this Agreement under Section 10.01 will be effective immediately upon the delivery of written notice by the terminating party to the other parties hereto. In the event of the termination of this Agreement as provided in Section 10.01, this Agreement shall be of no further force or effect, except nothing herein shall relieve any party from liability for any willful breach of this Agreement.

Section 11.03 Effect of Termination of Agreement to Purchase Two Hotels. If the Agreement to Purchase Two Hotels is terminated, this Agreement shall be automatically terminated without any further action of the parties.

ARTICLE XII

ACTIONS AND OPERATIONS PENDING CLOSING

Section 12.01 Actions and Operations Pending Closing. Seller and Purchaser agree that after the date hereof and until the Closing Date:

(a) The Master Lease will remain in full force and effect.

(b) The Sublease will remain in full force and effect.

(c) Seller will not enter into any new material contract or Space Lease or create any Title Defect, or, other than pursuant to, or by virtue of, this Agreement, the Related Agreements or the Third Party Consents, cancel, modify or renew any existing material contract or Space Lease relating to the Seven Sale Properties and Ground Leased Properties, without the prior written consent of Purchaser, which consent shall not be unreasonably withheld, conditioned or delayed.

(d) Seller shall notify Purchaser promptly if Seller becomes aware of any transaction or occurrence prior to the Closing Date which would make any of the representations or warranties of Seller contained in Section 5.01 not true in any material respect.

(e) Seller will not dispose of any of the Property, except in the ordinary course of business and in accordance with this Agreement or as required under the Master Lease.

(f) Purchaser will not terminate, modify or amend the Sublease or consent to or waive any material action or omission by Subtenant under the Sublease.

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ARTICLE XIII

CASUALTIES AND TAKINGS

Section 13.01 Damage or Destruction: Condemnation. In the event of any casualty loss, damage or destruction prior to the Closing, or any condemnation of all or a part of the Real Property, Seller and Purchaser shall remain obligated under this Agreement and all proceeds of Insurance Policies or condemnation awards shall be assigned to Purchaser at Closing, and there shall be no other compensation or reduction in price therefor, provided, however, that the respective rights of the parties to proceeds from the condemnation of the Vancouver Property shall be governed by the terms of the Restated Vancouver Sublease in the event this Transaction closes. Seller and Purchaser express and waive the provisions of California Civil Code Section 1662 and hereby agree that the provisions of this Agreement shall govern the parties’ obligations in the event of any damage or destruction to the Real Property or the taking of all or any of the Real Property.

ARTICLE XIV

COVENANTS AND ACKNOWLEDGEMENTS

Section 14.01 Bulk Sales. Seller and Purchaser agree that no bulk sales filings or notices shall be required as condition to Closing.

Section 14.02 Hart-Scott-Rodino. Seller and Purchaser agree that The Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. §18(a) et. seq., as amended does not apply to the sale and transactions contemplated in this Agreement.

ARTICLE XV

INDEMNIFICATION

Section 15.01 Seller’s Indemnification. Seller hereby agrees to indemnify, hold harmless and defend Purchaser from and against any and all loss, damage (other than consequential or punitive damages), claim, cost and expense and any other liability whatsoever, including, without limitation, reasonable accountants’ and attorneys’ fees, charges and costs, incurred by Purchaser by reason of (a) Seller’s breach of any representations or warranties or covenants of Seller contained in this Agreement, and (b) without limiting the generality of the foregoing, Seller’s failure to duly perform and discharge Retained Liabilities or perform the obligations of Seller under Related Documents, provided Seller shall have no duty indemnify Purchaser for any losses arising hereunder until Purchaser has suffered losses by reason of all such breaches (when aggregated with losses under Section 15.01 of the Agreement to Purchase Two Hotels) in excess of Fifty Thousand Dollars ($50,000.00) aggregate deductible (after which point the Seller will be obligated only to indemnify the Purchaser from and against further such losses) or thereafter to the extent the losses (when aggregated with losses under Section 15.01 of the Agreement to Purchase Two Hotels) the Purchaser has suffered by reason of all such breaches up to an aggregate cap equal to Seven Hundred Fifty Thousand Dollars ($750,000.00) (after which point the Seller will have no obligation to indemnify the Purchaser from and against

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further losses). This indemnity shall terminate and be of no force and effect except with respect to actions brought by Purchaser against Seller for claims made pursuant to Section 15.03) not later than the final day of the Survival Period. The indemnification provided for in this Section 15.01 shall from and after the Closing be the Purchaser’s sole remedy for any matters referred to herein.

Section 15.02 Purchaser’s Indemnification. Purchaser hereby agrees to indemnify, hold harmless and defend Seller from and against any and all loss, damage, claim, cost and expense and any other liability whatsoever, including, without limitation, reasonable accountants’ and attorneys’ fees, charges and costs incurred by Seller by reason of (a) Purchaser’s breach of any representations, warranties and covenants of Purchaser contained in this Agreement which survive the Closing, and (b) without limiting the generality of the foregoing, Purchaser’s failure to duly perform the obligations of Purchaser under Related Documents, provided Purchaser shall have no duty indemnify Seller for any losses arising hereunder until Seller has suffered losses by reason of all such breaches (when aggregated with losses under the first sentence of Section 15.02 of the Agreement to Purchase Two Hotels) in excess of Fifty Thousand Dollars ($50,000.00) aggregate deductible (after which point the Purchaser will be obligated only to indemnify the Seller from and against further such losses) or thereafter to the extent the losses (when aggregated with losses under the first sentence of Section 15.02 of the Agreement to Purchase Two Hotels) the Seller has suffered by reason of all such breaches up to an aggregate cap equal to Seven Hundred Fifty Thousand Dollars ($750,000.00) (after which point the Purchaser will have no obligation to indemnify the Seller from and against further losses). This indemnity shall terminate and be of no force and effect except with respect to actions brought by Seller for claims made pursuant to Section 15.03 against Purchaser not later than the final day of the Survival Period. The indemnification provided for in this Section 15.02 shall from and after the Closing be the Seller’s sole remedy for any matters referred to in this Section 15.02 except as provided in the following sentence and without limitation of the Restated Vancouver Sublease and Red Lion Guaranty. Notwithstanding the foregoing temporal and monetary limitations, Purchaser hereby agrees to indemnify, hold harmless and defend Seller from and against any and all loss, damage, claim, cost, claims, actions, causes of action, suits, litigation and expense and any other liability whatsoever, including, without limitation, reasonable accountants’ and attorneys’ fees, charges and costs incurred by Seller (collectively, “Property Claims”) by reason of (a) operation, ownership or use of the Sale Properties from and after Closing or (b) any death, injury or damage to persons or property at the Sale Properties from and after the Closing provided, however, that the Property Claims are asserted, instituted or initiated by a Person that is not Seller or an Affiliate of the Seller.

Section 15.03 Third Party Claims. If a claim by a third party is made against either of the indemnified parties, and if either of the indemnified parties intends to seek indemnity with respect thereto under this Article XV, such indemnified party shall promptly notify Purchaser or Seller, as the case may be, of such claim. The indemnifying party shall have thirty (30) days after receipt of the above-mentioned notice to undertake, conduct and control, through counsel of its own choosing (subject to the consent of the indemnified party, such consent not to be unreasonably withheld or delayed) and at its expense, the settlement or defense therefor, and the indemnified party shall cooperate with it in connection therewith; provided that: (a) the indemnifying party shall not thereby permit to exist any lien, encumbrance or other adverse

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charge upon any asset of any indemnified party; (b) the indemnifying party shall permit the indemnified party to participate in such settlement or defense through counsel chosen by the indemnified party, provided that the fees and expenses of such counsel shall be borne by the indemnified party; and (c) the indemnifying party shall agree promptly to reimburse the indemnified party for the full amount of any loss resulting from such claim and all related expenses incurred by the indemnified party within the limits of this Section 15. So long as the indemnifying party is reasonably contesting any such claim in good faith, the indemnified party shall not pay or settle any such claim. Notwithstanding the foregoing, the indemnified party shall have the right to pay or settle any such claim, provided that in such event they shall waive any right to indemnity therefor by the indemnifying party unless the indemnifying party shall have expressly consented to such payment or settlement. If the indemnifying party does not notify the indemnified party within thirty days after receipt of the indemnified party’s notice of a claim of indemnity hereunder that it elects to undertake the defense thereof, the indemnified party shall have the right to contest, settle or compromise the claim in the exercise of its exclusive discretion at the expense of the indemnifying party.

Section 15.04 Survival. The provisions of this Article XV shall survive the Closing.

ARTICLE XVI

NOTICES

Section 16.01 Notices. Except as otherwise provided in this Agreement, all notices, demands, requests, consents, approvals and other communications (herein collectively called “Notices”) required or permitted to be given hereunder, or which are to be given with respect to this Agreement, shall be in writing and shall be personally delivered or sent by overnight express courier, prepaid for next business day morning delivery, addressed to the party to be so notified as follows:

If intended for Seller, to:	RLH Partnership, L.P.
	c/o iStar Financial Inc.
	One Sansome Street
	San Francisco, California 94104
	Attention: Erich Stiger
	With copies to:
	iStar Financial Inc.
	1114 Avenue of the Americas
	New York, New York 10036
	Attention: General Counsel
	Katten Muchin Rosenman LLP
	525 West Monroe Street
	Chicago, IL 60661-3693
	Attention: Kenneth M. Jacobson

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If intended for Purchaser, to:	WHC 809 LLC
	W. 201 North River Drive
	Spokane, WA 99201
	Attention: General Counsel
With copies to:	Davis Wright Tremaine LLP
	1201 Third Avenue, Suite 2200
	Seattle, WA 98101-3045
	Attention: Bruce Bjerke

Notice mailed by regular, registered or certified mail shall not be permitted. Notice personally delivered shall be deemed received when delivered. Notice sent by overnight express courier for next business day morning delivery shall be deemed received by the addressee the next business day after delivery thereof to the overnight courier upon proof of delivery by the overnight express courier. Either party may at any time change the address for notice to such party by mailing a Notice as aforesaid. Counsel may give any notices on behalf of its client.

ARTICLE XVII

ADDITIONAL COVENANTS

Section 17.01 Additional Covenants. In addition, the parties agree as follows:

(a) Expenses. Seller shall be responsible for title insurance premiums for the Title Policy (not to exceed forty three thousand five hundred dollars ($43,500) (“Premium Limit”), and Purchaser shall be responsible for the cost of any endorsements (including extended coverage endorsements) provided herein in excess of the premium for the Title Policy without endorsements and any premium cost in excess of the Premium Limit. Recording fees for the release (or endorsement over) of any Title Defect shall be paid by the Seller and transfer or analogous taxes imposed on the transfer of the Sale Properties shall be allocated as follows: (i) with respect the Sale Properties located in the State of Washington, fifty percent (50%) to Seller and fifty percent (50%) to Purchaser; and (ii) with respect to the remaining Sale Properties, one hundred percent (100%) to Seller. The personal property components of the Property are owned by Tenant so no transfer of title to those assets will result from this transaction and no transfer tax is due. The fees and expenses of Seller’s designated representatives, accountants and attorneys shall be borne by Seller, and the fees and expenses of Purchaser’s designated representatives, accountants and attorneys shall be borne by Purchaser. If this Agreement is terminated due to the default of a party, then the defaulting party shall pay any fees or charges due to any escrow agent, including, without limitation, any escrow cancellation fees or charges and any fees or charges due to the Title Company for preparation and/or cancellation of the Title Commitment. The Purchaser and Seller will equally divide the escrow closing fee and the New York Style Closing fee of the Title Company.

(b) Brokerage. Seller and Purchaser each hereby represent and warrant to the other that neither has dealt with any broker or finder in connection with the transaction

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contemplated hereby. Each of Seller and Purchaser hereby agrees to indemnify, defend and hold the other harmless against and from any and all manner of claims, liabilities, loss, damage, attorneys’ fees and expenses, incurred by either party and arising out of, or resulting from, any claim by any broker or finder in contravention of its representation and warranty herein contained.

(c) Access to Records After Closing. Where there is a legitimate purpose or if there is a tax audit, other governmental inquiry, or litigation or prospective litigation to which Seller or Purchaser is, or may become, a party, making necessary Seller’s access to such records of Purchaser or making necessary Purchaser’s access to such records of Seller, each party, as the case may be, will allow representatives of the other party access to such records during regular business hours at such party’s place of business for the sole purpose of obtaining information for use as aforesaid. Each party agrees to indemnify, hold harmless and defend the other party at all times from and after the date of this Agreement, from and against any and all loss, damage, claim, cost and expense and any other liability whatsoever, including, without limitation, reasonable accountants’ and attorneys’ fees, charges and costs, incurred by either party by reason of the other party’s failure to provide access to the records described above.

(d) Construction. This Agreement shall not be construed more strictly against one party than against the other, merely by virtue of the fact that it may have been prepared primarily by counsel for one of the parties, it being recognized that both Purchaser and Seller have contributed substantially and materially to the preparation of this Agreement.

(e) Public Statement. Prior to the Closing, neither party shall make a press release or public statement or announcement concerning this Agreement or the transactions contemplated herein, without the prior written consent of the other party, except as may be required by law. Seller acknowledges that Purchaser’s parent, Red Lion Hotels Corporation, is a publicly traded company and Purchaser acknowledges that Seller’s parent, iStar Financial Inc., is a publicly traded company and this Agreement and any Exhibits thereto may be disclosed and filed in accordance with law as Seller determines in its sole and absolute discretion.

ARTICLE XVIII

MISCELLANEOUS

Section 18.01 Successors and Assigns. This Agreement shall be binding upon the heirs, executors, administrators, and successors and assigns of Seller and Purchaser; provided, however, Purchaser shall not assign Purchaser’s rights and obligations hereunder to any party other than an Affiliate of Purchaser without the prior written consent of Seller, which consent may be withheld by Seller in its sole discretion. Any such assignment in violation of this provision shall be void. If Seller consents to an assignment, the assignment will not be effective against Seller until Purchaser delivers to Seller a fully extended copy of the assignment instrument, which instrument must be satisfactory to Seller in both form and substance and pursuant to which the assignee assumes and agrees to perform for the benefit of Seller the

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obligations of Purchaser under this Agreement, and pursuant to which the assignee makes the warranties and representations required of Purchaser under this Agreement; provided, however, that no such assignment shall relieve the assignor from primary liability for its obligations under this Agreement.

Section 18.02 Entire Agreement. This Agreement contains all of the covenants, conditions and agreements between the parties and shall supersede all prior correspondence, agreements and understandings, both oral and written.

Section 18.03 Attorney’s Fees. Should either party employ attorneys to enforce any of the provisions hereof or to protect its interest in any manner arising under this Agreement, or to recover damages for breach of this Agreement, or to enforce any judgment relating to this Agreement and the transaction contemplated hereby, the prevailing party shall be entitled to reasonable attorneys’ fees and court costs.

Section 18.04 Governing Law. This Agreement shall be governed in all respects by and construed in accordance with the laws of the State of California.

Section 18.05 Further Assurances. Seller or Purchaser shall promptly perform, execute and deliver or cause to be performed, executed and/or delivered at or after Closing any and all acts, deeds and assurances as either party or the Escrow Agent may reasonably require in order to carry out the intent and purpose of this Agreement.

Section 18.06 Amendment. This Agreement cannot be changed, amended, supplemented or terminated orally.

Section 18.07 Counterparts. This Agreement may be executed in one (1) or more counterparts, and all the counterparts shall constitute but one and the same agreement, notwithstanding that all parties hereto are not signatory to the same or original counterpart. This Agreement may be executed and delivered by telecopy, pdf or similar electronic transmittal which shall be deemed an original if sent in accordance with the terms of Section 17.01 regarding Notices.

Section 18.08 Nonwaiver. Unless otherwise expressly provided herein, no waiver by Seller or Purchaser of any provision hereof shall be deemed to have been made if such waiver is made orally. No delay or omission in the exercise of any right or remedy accruing to Seller or Purchaser upon any breach under this Agreement shall impair such right or remedy or be construed as a waiver of any such breach theretofore or thereafter occurring. The waiver by Seller or Purchaser of any breach of any term, covenant or condition herein stated shall not be deemed to be a waiver of any other term, covenant or condition. All rights or remedies afforded to Seller or Purchaser hereunder or by law shall be cumulative and not alternative, and the exercise of one right or remedy shall not bar other rights or remedies allowed herein or by law.

Section 18.09 Captions. Paragraph titles or captions contained herein are inserted as a matter of convenience and for reference, and in no way define, limit, extent or describe the scope of this Agreement.

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Section 18.10 Exhibits. All Exhibits attached hereto shall be incorporated herein by reference as if set out herein in full.

Section 18.11 Time. Time is of the essence in the performance of this Agreement.

Section 18.12 Recordation. Prior to the Closing Date, there shall be no recordation of either this Agreement or any memorandum hereof, or any affidavit pertaining hereto, and any such recordation of this Agreement or memorandum or affidavit by either party without the prior written consent of the other party.

Section 18.13 No Third Party Beneficiary. The provisions of this Agreement and of the documents to be executed and delivered at Closing are and will be for the benefit of Seller and Purchaser only and are not for the benefit of any third party, and accordingly, no third party shall have the right to enforce the provisions of this Agreement or of the documents to be executed and delivered at Closing.

Section 18.14 Reporting Person. Purchaser and Seller hereby designate First American Title Insurance Company as the “reporting person” pursuant to the provisions of Section 6045(e) of the Internal Revenue Code of 1986, as amended.

Section 18.15 Natural Hazard Disclosure Waiver. Purchaser hereby knowingly, voluntarily and intentionally waives its right to disclosure by Seller of natural hazards found in Natural Hazard Disclosure Act, California Government Code Sections 8589.3, 8589.4, and 51183.5, California Public Resources Code Sections 2621.9, 2694, and 4136, and California Civil Code Sections 1102.6 and 1103.2, and any successor law. This waiver is a material inducement to Seller’s decision to enter into this Agreement and the calculation of the Purchase Price, and Purchaser acknowledges that Seller would not have entered into this Agreement but for this waiver. The terms and provisions of this Section 18.15 shall survive the Closing of this Agreement.

Section 18.16 Disclaimers. Purchaser acknowledges and agrees that the disclaimers and other agreements set forth herein are an integral part of this Agreement and that Seller would not have agreed to sell the Property to Purchaser for the Purchase Price without the disclaimers and other agreements set forth above.

ARTICLE XIX

DISCLAIMERS, RELEASE AND INDEMNITY

Section 19.01 Disclaimers By Seller. Except as expressly set forth in this Agreement (including without limitation Article V), it is understood and agreed that Seller and Seller’s agents or employees have not at any time made and are not now making, and they specifically disclaim, any warranties, representations or guaranties of any kind or character, express or implied, with respect to the Property, including, but not limited to, warranties, representations or guaranties as to (a) matters of title (other than as expressly contained in the deeds), (b) environmental matters relating to the Property or any portion thereof, including, without limitation, the presence of hazardous materials in, on, under or in the vicinity of the Property, (c) geological conditions, including, without limitation, subsidence, subsurface conditions, water

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table, underground water reservoirs, limitations regarding the withdrawal of water, and geologic faults and the resulting damage of past and/or future faulting, (d) whether, and to the extent to which the Property or any portion thereof is affected by any stream (surface or underground), body of water, wetlands, flood prone area, flood plain, floodway or special flood hazard, (e) drainage, (f) soil conditions, including the existence of instability, past soil repairs, soil additions or conditions of soil fill, or susceptibility to landslides, or the sufficiency of any undershoring, (g) the presence of endangered species or any environmentally sensitive or protected areas, (h) zoning or building entitlements to which the Property or any portion thereof may be subject, (i) the availability of any utilities to the Property or any portion thereof including, without limitation, water, sewage, gas and electric, (j) usages of adjoining property, (k) access to the Property or any portion thereof, (l) the value, compliance with the plans and specifications, size, location, age, use, design, quality, description, suitability, structural integrity, operation, title to, or physical or financial condition of the Property or any portion thereof, or any income, expenses, charges, liens, encumbrances, rights or claims on or affecting or pertaining to the Property or any part thereof, (m) the condition or use of the Property or compliance of the Property with any or all past, present or future federal, state or local ordinances, rules, regulations or laws, building, fire or zoning ordinances, codes or other similar laws, (n) the existence or non-existence of underground storage tanks, surface impoundments, or landfills, (o) any other matter affecting the stability and integrity of the Property, (p) the potential for further development of the Property, (q) the merchantability of the Property or fitness of the Property for any particular purpose, (r) tax consequences, (s) the ability to obtain consents from the ground lessors of the Ground Leased Properties, or (t) any other matter or thing with respect to the Property.

Section 19.02 Sale “As Is, Where Is”. Purchaser acknowledges and agrees that upon Closing, Seller shall sell and convey to Purchaser and Purchaser shall accept the Property “AS IS, WHERE IS, WITH ALL FAULTS,” except to the extent expressly provided otherwise in this Agreement and any document executed by Seller and delivered to Purchaser at Closing. Except as expressly set forth in this Agreement, Purchaser has not relied and will not rely on, and Seller has not made and is not liable for or bound by, any express or implied warranties, guarantees, statements, representations or information pertaining to the Property or relating thereto made or furnished by Seller, or any property manager, real estate broker, agent or third party representing or purporting to represent Seller, to whomever made or given, directly or indirectly, orally or in writing. Purchaser represents that it is a knowledgeable, experienced and sophisticated purchaser of real estate and that, except as expressly set forth in this Agreement, it is relying solely on its own expertise and that of Purchaser’s consultants in purchasing the Property and shall make an independent verification of the accuracy of any documents and information provided by Seller. Purchaser will conduct such inspections and investigations of the Property as Purchaser deems necessary, including, but not limited to, the physical and environmental conditions thereof, and shall rely upon same. Purchaser acknowledges that Seller has afforded Purchaser a full opportunity to conduct such investigations of the Property as Purchaser deemed necessary to satisfy itself as to the condition of the Property and the existence or non-existence or curative action to be taken with respect to any Hazardous Materials on or discharged from the Property, and will rely solely upon same and not upon any information provided by or on behalf of Seller or its agents or employees with respect thereto, other than such representations, warranties and covenants of Seller as are expressly set forth in this Agreement. Upon Closing, Purchaser shall assume the risk that adverse matters, including, but not limited to,

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adverse physical or construction defects or adverse environmental, health or safety conditions, may not have been revealed by Purchaser’s inspections and investigations. Purchaser hereby represents and warrants to Seller that: (a) Purchaser is represented by legal counsel in connection with the transaction contemplated by this Agreement; and (b) Purchaser is purchasing the Property for business, commercial, investment or other similar purpose and not for use as Purchaser’s residence. Purchaser waives any and all rights or remedies it may have or be entitled to, deriving from disparity in size or from any significant disparate bargaining position in relation to Seller.

Section 19.03 Seller Released from Liability. Purchaser acknowledges that, by virtue of its affiliation with Tenant, it has had ample opportunity to inspect the Property and observe its physical characteristics and existing conditions and the opportunity to conduct such investigation and study on and of the Property and adjacent areas as Purchaser deems necessary, and except as otherwise provided in this Agreement, Purchaser hereby FOREVER RELEASES AND DISCHARGES Seller from all responsibility and liability, including without limitation, liabilities and responsibilities relating to the physical, environmental or legal compliance status of the Property, whether arising before or after the Effective Date, and liabilities under the Comprehensive Environmental Response, Compensation and Liability Act Of 1980 (42 U.S.C. Sections 9601 et seq.), as amended (“CERCLA”), regarding the condition, valuation, salability or utility of the Property, or their suitability for any purpose whatsoever (including, but not limited to, with respect to the presence in the soil, air, structures and surface and subsurface waters, of Hazardous Materials or other materials or substances that have been or may in the future be determined to be toxic, hazardous, undesirable or subject to regulation and that may need to be specially treated, handled and/or removed from the Property under current or future federal, state and local laws, regulations or guidelines, and any structural and geologic conditions, subsurface soil and water conditions and solid and hazardous waste and Hazardous Materials on, under, adjacent to or otherwise affecting the Property). Purchaser further hereby WAIVES (and by Closing this transaction will be deemed to have WAIVED) any and all objections and complaints (including, but not limited to, federal, state and local statutory and common law based actions, and any private right of action under any federal, state or local laws, regulations or guidelines to which the Property are or may be subject, including, but not limited to, CERCLA) concerning the physical characteristics and any existing conditions of the Property, including, without limitation, the lessor’s obligations under the Lease relating to the physical, environmental or legal compliance status of the Property, whether arising before or after the Effective Date. Purchaser further hereby assumes the risk of changes in applicable laws and regulations relating to past, present and future environmental conditions on the Property and the risk that adverse physical characteristics and conditions, including, without limitation, the presence of hazardous materials or other contaminants, may not have been revealed by its investigation.

Section 19.04 Survival. The terms and conditions of this Article XIX shall expressly survive the Closing, not merge with the provisions of any closing documents and shall be deemed to be incorporated into the Deeds.

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ARTICLE XX

1031 EXCHANGE

Section 20.01 1031 Exchange. Provided that Purchaser gives Seller reasonable advance notice that Purchaser intends to acquire the Property as part of an exchange transaction meeting the requirements of Section 1031 of the Internal Revenue Code, Seller shall reasonably cooperate with Purchaser in effecting such an exchange transaction, provided that (A) such cooperation shall be at no cost, expense or liability to Seller, (B) notwithstanding any assignment of this Agreement by Purchaser in connection with such exchange or the conveyance of the Property to a party other than Purchaser, Purchaser shall not be released from its obligations under the Agreement and shall remain liable for all of its obligations hereunder, (C) Red Lion Hotels Corporation shall not be released from its obligations under the Red Lion Guaranty, and (D) the completion of such exchange transaction shall not be a condition to Purchaser’s obligation to close timely hereunder.

[Signatures appear on next page]

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IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement to be executed, all as of the day and year first above written.

SELLER:
RLH PARTNERSHIP, L.P.
By: Red Lion GP, Inc., a Delaware corporation, its general partner
By:	/s/ Erich Stiger
Name:	Erich Stiger
Title:	Senior Vice President
PURCHASER:
WHC 809, LLC, a Delaware limited liability company
By:	/s/ Thomas L. McKeirnan
Its:	Senior Vice President

LIST OF EXHIBITS:

Exhibit A-1	Seven Sale Properties
Exhibit A-2	Two Sale Properties
Exhibit A-3	Agreement to Purchase Two Hotels
Exhibit B	Ground Leased Properties and Ground Leases
Exhibit C	Hilton Portfolio Properties
Exhibit D	Vancouver Property
Exhibit E	Assignment and Assumption of Leases
Exhibit F	Fourth Amendment to Lease
Exhibit G	Assignment and Assumption of Ground Leases
Exhibit H	Land
Exhibit I	Purchaser Knowledge Parties
Exhibit J	Reaffirmation of Guarantees
Exhibit K	Red Lion Guaranty
Exhibit L	Restated Vancouver Sublease
Exhibit M	Seller Knowledge Parties
Schedule 3.01	Purchase Price Allocation
Exhibit 7.01(a)	Form of Warranty Deeds for the Sale Properties
Exhibit 7.01(b)	Form of Bill of Sale
Exhibit 7.01(c)	Quitclaim Contract Assignment
Exhibit 7.01(h)	FIRPTA Certificate

EXHIBIT A-1

Bend

1415 NE Third Street

Bend, Deschutes County, Oregon 97701

Boise

1800 Fairview Avenue

Boise, Ada County, Idaho 83702

Coos Bay

1313 North Bayshore Drive

Coos Bay, Coos County, Oregon 97420

Longview

510 Kelso Drive

Kelso, Cowlitz County, Washington 98626

Pendleton

304 SE Nye Avenue

Pendleton, Umatilla County, Oregon 97801

Wenatchee

1255 North Wenatchee Avenue

Wenatchee, Chelan County, Washington 98801

Sacramento

1401 Arden Way

Sacramento, Sacramento County, California 95815

EXHIBIT A-2

Missoula

700 West Broadway

Missoula, Missoula County, Montana 59802

Medford

200 North Riverside Avenue

Medford, Jackson County, Oregon 97501

EXHIBIT A-3

AGREEMENT TO PURCHASE TWO HOTELS

THIS AGREEMENT TO PURCHASE TWO HOTELS is made this              day of             , 2011 (the “Effective Date”) by and between RLH PARTNERSHIP, L.P., a Delaware limited partnership (the “Seller”), and RED LION HOTELS HOLDINGS, INC. (formerly known as Red Lion Hotels, Inc. (“Purchaser”).

RECITALS

A. Seller currently leases sixteen (16) hotels (the “Master Lease Hotels”) to a Purchaser, under the term of that certain Lease between Seller as landlord and Purchaser as tenant, dated August 1, 1995 (as amended from time to time, the “Master Lease”).

B. Seller is:

(1) the fee owner of nine (9) of the Master Lease Hotels, Seven (7) of which (listed on Exhibit A-1) it wishes to sell to an affiliate of Purchaser, WHC809, LLC (“WHC”) (the “Seven Sale Properties”); and two (2) of which (listed on Exhibit A-2) it wishes to sell to Purchaser (the “Two Sale Properties” and, together with the Seven Sale Properties, the “Sale Properties”).

(2) the tenant under a real estate lease for one (1) of the Master Lease Hotels and the tenant under a real estate lease for land adjacent to one of the Sale Properties, both of which are listed on Exhibit B (the “Ground Leased Properties”) and both of which it wishes to assign to Purchaser, and in connection with which Seller will sell to Purchaser all of its interests in Property relating to the Ground Leased Properties;

(3) the landlord (or sublandlord) under leases for five (5) of the Master Lease Hotels, which are leased by Seller to Purchaser and subleased by Purchaser, as sublandlord, to Doubletree DTWC Corporation as assigned to HLT Operate DTWC LLC (formerly known as HLT DTWC Corporation) (“Subtenant”), which are listed on Exhibit C (the “Hilton Portfolio Properties”), in which Purchaser wishes to assign its entire interest including its interest as tenant under the Master Lease and its interest as sublandlord under the Sublease (as defined herein) to SFI DT Holdings LLC, a Delaware limited liability company, an Affiliate of Seller (“Sublease Assignee”); and

(4) the tenant under a ground lease from the Port of Vancouver, Washington for the Master Lease Hotel described on Exhibit D, which Seller subleases to Purchaser (the “Vancouver Property”), for which Seller and Purchaser intend to enter into an amended and restated sublease.

C. Seller and Purchaser also wish to enter into an amendment to the Master Lease, which will, among other things, confirm termination of the Master Lease with regard to the Sale Properties and Ground Leased Properties, and split the Master Lease as to the remaining Master

Lease Hotels into a Master Lease with regard to the Vancouver Property in the form of an amended and restated sublease for the Vancouver Property and continue the Master Lease as to the Hilton Portfolio Properties, with Sublease Assignee as the tenant in place of the Purchaser with respect to the Hilton Portfolio Properties.

AGREEMENTS

NOW, THEREFORE, in consideration of the foregoing premises and the respective representations, warranties, agreements, covenants and conditions herein contained, and other good and valuable consideration, Seller and Purchaser agree as follows:

ARTICLE I

DEFINITIONS AND REFERENCES

Section 1.01 Definitions. As used herein, the following terms shall have the respective meanings indicated below:

Affiliate: With respect to a specific entity, any natural person or any firm, corporation, partnership, association, trust or other entity which, directly or indirectly, controls, or is under common control with, the subject entity, and with respect to any specific entity or person, any firm, corporation, partnership, association, trust or other entity which is controlled by the subject entity or person. For purposes hereof, the term “control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any such entity or the power to veto major policy decision of any such entity, whether through the ownership of voting securities, by contract, or otherwise. For the avoidance of doubt, WHC, Purchaser and Guarantor are Affiliates of each other.

Agreement: This Agreement to Purchase Two Hotels, including the Exhibits attached hereto.

Agreement to Purchase Eight Hotels: The Agreement to Purchase Eight Hotels and Assume Leases in the form attached as Exhibit A-3.

Assignment and Assumption of Leases: The Assignment and Assumption of Leases in the form attached as Exhibit E, to be entered into at Closing between Purchaser and the Sublease Assignee with respect to the Hilton Portfolio Properties.

Assumed Liabilities: As defined in Section 3.02(a).

Bill of Sale: As defined in 7.01(b).

CERCLA: As defined in Section 19.03.

Closing: As defined in Section 6.01.

Closing Date: As defined in Section 6.01.

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Deeds: As defined in Section 7.01(a).

Deed of Trust: Any deed of trust, mortgage, security instrument or other agreement constituting a lien on the Seller’s interest in the Real Property.

Documents: To the extent lawfully assignable without penalty or breach, reproducible copies of all plans, specifications, drawings, blueprints, surveys, environmental reports, soil studies, engineering reports and other documents which Seller has in its possession or control, or has a right to, as the same relate to the Property, including, but not limited to those relating to any prior or ongoing construction or rehabilitation of the Property.

Effective Date: The day and year first above written in the first paragraph of this Agreement prior to the Recitals.

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

Fixtures and Tangible Personal Property: All interests, if any, the Seller may have in fixtures, furniture, furnishings, fittings, equipment, cars, trucks, machinery, apparatus, signage, appliances, draperies, carpeting, and other articles of tangible personal property now located on the Real Property or exclusively used or usable in connection with the operations or any part of the Real Property, subject to such depletions, resupplies, substitutions and replacements as shall occur and be made in the normal course of business expressly excluding, however: (i) equipment and property leased pursuant to Hotel Contracts; (ii) property owned by Purchaser, WHC or their Affiliates (and those claiming by, through or under any of them); (iii) property owned by third parties furnishing goods or services to the Property; and (iv) Improvements.

Fourth Amendment to Lease: The Fourth Amendment to Lease in the form attached as Exhibit F.

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Ground Leases: The leases listed on Exhibit B.

Ground Lease Assignment: The Assignment and Assumption of Ground Leases in the form attached as Exhibit G.

Ground Leased Properties: The Real Property, if any, leased pursuant to the Ground Leases.

Guaranty of Lease Obligations: The Guaranty of Lease Obligations dated September 15, 1998 among Promus Hotels, Inc., Purchaser and Seller and Guaranty of Lease Obligations dated September 15, 1998 among Promus Hotel Corporation, Purchaser and Seller.

Guarantor: Red Lion Hotels Corporation.

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

Hotel Contracts: To the extent lawfully assignable without penalty or breach, any agreements in the name of the Seller (and all rights of Seller relating thereto) relating solely to the Real Property, including service, maintenance, purchase orders, leases and other contracts or agreements, equipment leases capitalized for accounting purposes, and any amendments thereto, with respect to the ownership, maintenance, operation, provisioning, or equipping of the Real Property, or any of the Property, as well as written warranties and guaranties relating thereto, if any, including, but not limited to, those relating to heating and cooling equipment and/or mechanical equipment, provided they are listed in a schedule to the Assignment and Assumption Agreement.

Indemnity and Reimbursement Agreement. The Indemnity and Reimbursement Agreement (iStar Lease) dated December 31, 2001, by Red Lion Hotels, Inc., West Coast Hospitality Corporation, Doubletree Corporation, Promus Hotels, Inc. and Doubletree DTWC Corporation.

Improvements: The Seller’s interest in the buildings, structures (surface and sub-surface) and other improvements, including such fixtures as shall constitute real property, located on the Land.

Land: The parcels of real estate on which any of the Two Sale Properties are located, as described in Exhibit H.

Legal Requirements: All laws, statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions, rules, regulations, permits, licenses, authorizations, directions and requirements of all governments and governmental authorities having jurisdiction over the Sale Properties, and the operation thereof.

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Master Lease: As defined in the Recitals.

New York Style Closing: As defined in Section 6.02.

Obligations: All payments required to be made and all representations, warranties, covenants, agreements and commitments required to be performed under the provisions of this Agreement by Seller or Purchaser, as applicable.

Permits: To the extent lawfully assignable without penalty or breach, all interests of the Seller in any licenses, franchises and permits, certificates of occupancy, authorizations and approvals used in or relating to the ownership, occupancy or operation of any part of the Real Property, including, without limitation, those necessary for the sale and on-premises consumption of food, liquor and other alcoholic beverages.^/

Permitted Exceptions: All of the following: (1) the Space Leases; (2) the Ground Leases, and (3) any liens, encumbrances, restrictions, exceptions and other matters (a) in existence on August 1, 1995, (b) that have been approved by Purchaser and Seller prior to the date hereof, (c) that are approved as matters in accordance with the terms of Article IV to which title to the Real Property may be subject on the Closing Date, (d) that arise out of the act or omission of Purchaser or its Affiliates or those claiming by, through or under Purchaser or its Affiliates, (e) that are the responsibility of Purchaser or its Affiliates under the Master Lease or (f) matters that would be disclosed by a survey of the Real Property.

Personal Property: All of the Property other than the Real Property.

Property: All right, title and interest of Seller in: (i) The Real Property; (ii) the Fixtures and Tangible Personal Property; (iii) Hotel Contracts and Space Leases; (iv) the Permits; and (v) the Documents, provided, however, that Property shall not include the Retained Liabilities.

Purchaser: As defined in the preamble.

Purchaser’s Conditions: As defined in Section 9.02.

Purchaser’s Knowledge and Known to Purchaser: The current actual knowledge of the individuals listed on Exhibit I.

Purchase Price: As defined in Section 3.01.

Reaffirmation of Guarantees: The Reaffirmation of Guarantees in the form attached as Exhibit J.

Real Property: The Land together with the Improvements located on the Land. For the avoidance of doubt, the Real Property does not include the Ground Leased Property or the Seven Sale Properties.

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Red Lion Guaranty: The Guaranty by Guarantor in the form of Exhibit K.

Related Agreements: As defined in Section 2.02.

Restated Vancouver Sublease: The amended and restated sublease of the Vancouver Property in the form of the Restated Vancouver Sublease attached as Exhibit L.

Retained Liabilities: As defined in Section 3.02(b).

Sale Properties: As defined in the Recitals.

Seller: As defined in the preamble.

Seller’s Conditions: As defined in Section 9.01.

Seller’s Knowledge and Known to Seller: The current actual knowledge of the individuals listed on Exhibit M.

Space Leases: All leases, licenses, concessions and other occupancy agreements, and any amendments thereto in effect on the date hereof as described on a schedule to the Assignment and Assumption Agreement, whether or not of record, for the use or occupancy of any portion of the Real Property.

Space Lessee: Any person or entity entitled to occupancy of any portion of the Real Property under a Space Lease.

Sublease: That certain Sublease dated December 31, 2001 between Purchaser and Subtenant relating to the Hilton Portfolio Properties.

Sublease Properties: The property subleased to Subtenant pursuant to the Sublease.

Subtenant: As defined in the recitals.

Termination Date: As defined in Section 10.01(b).

Third Party Consents: As defined in Section 4.02.

Title Clearance Date: The date the Title Commitment is issued.

Title Commitment: As defined in Section 4.01.

Title Company: First American Title Insurance Company, Seattle National Title Office.

Title Defect: A material lien, claim, charge, security interest or encumbrance relating to any of the Real Property other than a Permitted Exception. If the Title Document or a survey discloses any encroachments or defects which do not have a material adverse effect on the Property, such encroachment or defect shall not be considered a Title Defect.

Title Documents: As defined in Section 6.03.

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Title Policy: As defined in Section 6.03(a).

Violation: Any condition with respect to the Property which constitutes a violation of any Legal Requirements.

WHC: As defined in the recitals.

Section 1.02 References. Except as otherwise specifically indicated, all references to Section and Subsection numbers refer to Sections and Subsections of this Agreement, and all references to Exhibits refer to the Exhibits attached hereto. The words “hereby,” “hereof,” “herein,” “hereto,” “hereunder,” “hereinafter,” and words of similar import refer to this Agreement as a whole and not to any particular Section or Subsection hereof. The word “hereafter” shall mean after, and the term “heretofore” shall mean before, the date of this Agreement. Captions used herein are for convenience only and shall not be used to construe the meaning of any part of this Agreement. Time shall refer to the (standard or daylight savings) time in effect in the State of Washington unless otherwise specified.

ARTICLE II

SALE AND PURCHASE

Section 2.01 Sale and Purchase. Seller hereby agrees to sell to Purchaser, and Purchaser hereby agrees to purchase from Seller, the Property on the terms and subject to the conditions of this Agreement.

Section 2.02 Related Agreements. At the Closing of the purchase of the Two Sale Properties, the Purchaser and Seller also agree to execute and deliver the following documents and to obtain the signature of their respective Affiliates (as applicable) to each of them, in order to document the simultaneous closing of the related transactions (the “Related Agreements”):

(a) the Agreement to Purchase Seven Hotels;

(b) the Assignment and Assumption of Leases;

(c) the Restated Vancouver Sublease;

(d) the Fourth Amendment to Lease;

(e) the Ground Lease Assignments;

(f) Reaffirmation of Guarantees; and

(g) Red Lion Guaranty.

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ARTICLE III

PURCHASE PRICE

Section 3.01 Purchase Price; Allocation Thereof. The purchase price (“Purchase Price”) for the Property to be paid by Purchaser to Seller hereunder shall be four million nine hundred ninety-nine thousand dollars ($4,999,000). The Purchase Price for the Property shall be allocated in accordance with the values reasonably attributable to the Land and Improvements as set forth on Schedule 3.01. Such allocation shall be binding on the Seller and Purchaser for all purposes including the reporting of gain or loss and determination of basis for income tax purposes, and each of the parties hereto agrees that it or they will file a statement setting forth such allocation with its or their federal income tax returns and will also file such further information or take such further actions as may be necessary to comply with Treasury Regulations that have been promulgated pursuant to Section 1060 of the Internal Revenue Code of 1986, as amended.

Section 3.02 Assumption of Liabilities; Retained Liabilities.

(a) Except as otherwise provided in (b) from and after the Closing Date, Purchaser shall be responsible for all obligations and liabilities with respect to the Property or operation of the Sale Properties that first arise after the Closing Date (the “Assumed Liabilities”).

(b) Purchaser shall have no liability or obligation for the following (“Retained Liabilities”): (i) federal, state and local income, franchise, or other taxes of Seller except to the extent such items are the responsibility of the Purchaser under the Master Lease as in effect on the date hereof; (ii) any liability the existence of which would constitute a breach of any of Seller’s representations or warranties contained in Article V; and (iii) all liabilities of Seller under the Master Lease that arise prior to or on the Closing Date.

Section 3.03 Indemnity and Reimbursement Agreement. Neither Seller nor Sublease Assignee shall assume or become liable under the Indemnity and Reimbursement Agreement.

ARTICLE IV

TITLE INSURANCE

AND THIRD PARTY CONSENTS

Section 4.01 Title.

(a) The Purchaser and Seller have each approved a title commitment for the Real Property (the “Title Commitment”) issued by the Title Company reflecting title to each parcel of the Real Property.

(b) If after the Title Clearance Date any updates to the Title Commitment disclose a Title Defect caused by or resulting from claims against the Seller, Purchaser shall have the right to make additional title objections within three (3) days after receipt

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of such updated Title Commitment. Any such Title Defect not objected to by Purchaser within such three (3) day period shall also be deemed a Permitted Exception. Seller shall have two (2) business days after receipt of Purchaser’s additional title exception to satisfy (or cause the title insurer to remove or “endorse over”) such Title Defect (but shall be under no affirmative obligation to do so), and if Seller fails to satisfy (or cause the title insurer to remove or “endorse over”) such Title Defect within such two (2) business day period, then, at the option of Purchaser, evidenced by written notice to Seller, Purchaser may: (i) terminate this Agreement and receive a refund of the Earnest Money Deposit whereupon the parties hereto shall have no further rights, obligations or liabilities with respect to each other hereunder; or (ii) elect to close and receive the Property required herein from Seller subject to such Title Defect and without reduction of the Purchase Price. Except as expressly provided herein, If Purchaser fails to exercise any of the two (2) options set forth in this Section 4, Purchaser shall be deemed to have elected to proceed under choice (ii) above.

Section 4.02 Third Party Consents. Purchaser has obtained the consents of the ground lessors for the Ground Leased Properties, on the terms approved by Seller. Purchaser and Seller believe those consents to be the only third party consents required to effectively transfer the Property to Purchaser (the “Third Party Consents”). Purchaser agrees to cause its Affiliate, Red Lion Hotels Corporation, to execute and deliver, on or before the Closing, a guarantee in favor of ground lessor of the applicable Ground Lease in the form attached to the applicable Third Party Consent. Delivery of the Third Party Consents shall be a condition to Closing, in accordance with Section 9.02(c).

ARTICLE V

REPRESENTATIONS AND WARRANTIES

Section 5.01 Representations and Warranties of Seller. Purchaser currently operates the Real Property, Ground Leased Properties and Vancouver Property under the Master Lease, and accordingly is familiar with the Property and has agreed to accept a limited number of representations and warranties from Seller in this Agreement. Seller hereby represents and warrants the following to Purchaser:

(a) Due Organization, etc. Seller is validly existing and is in good standing in the State of Delaware. This Agreement has been duly authorized by all requisite action on the part of Seller. The execution and delivery of this Agreement, and, subject to obtaining the Third Party Consents, the consummation of the transactions contemplated hereby do not require the consent or approval of any governmental authority, nor, subject to obtaining the Third Party Consents, shall such execution and delivery result in a breach or violation of any Legal Requirement, or, subject to obtaining the Third Party Consents, constitute a default (or an event which with notice and passage of time or both will constitute a default) under any contract or agreement to which Seller is a party or by which it or the Property is bound.

(b) Condemnation. As of the Effective Date, other than the potential condemnation of the Vancouver Property and any other pending condemnation or other

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proceedings Known to Purchaser, Seller has not received any written notice of any pending condemnation of the Property or other proceedings in eminent domain regarding the Property that Seller has not provided to Purchaser or its Affiliates.

(c) Violations of Law. As of the Effective Date, other than such notices as may be Known to Purchaser, Seller has not received any written notice of any violation of any applicable law or regulation with respect to the Property that Seller has not provided for Purchaser or its Affiliates.

(d) Litigation. As of the Effective Date, other than the potential condemnation of the Vancouver Property and other than any other proceedings Known to Purchaser, Seller has not been served with any filing in any material litigation, arbitration or administrative proceeding with respect to the Property in which Seller, or any Affiliate of Seller is named a party that Seller has not disclosed to Purchaser.

(e) Options. Seller has not granted any option or right of first refusal or first opportunity or right to purchase the Property to any party, other than Purchaser under this Agreement or to Purchaser pursuant to the Master Lease.

(f) Title to Property. Seller’s interest in the Real Property is not subject to the lien of any security interest on Seller’s interest in the Property to secure an obligation of Seller or its Affiliates for money borrowed; (b) the Seller’s interest in Real Property is not subject to the lien of any judgment, tax assessment or other obligation incurred by Seller that is not a Permitted Exception; and (c) the Seller’s interest in Real Property is not subject to any liens created on or after the “Commencement Date” (as defined in the Master Lease) which have been created by or resulted from any acts of the Seller undertaken without the consent of the Purchaser which is not a Permitted Exception.

Except as specifically set forth herein, Seller has not made and does not make or give any warranties or representations.

Section 5.02 Representations and Warranties of Purchaser. Purchaser hereby represents and warrants the following to Seller:

(a) Due Organization, etc. Purchaser, WHC and Guarantor are validly existing and are in good standing in the state of their formation. This Agreement has been duly authorized by all requisite action on the part of Purchaser, WHC and Guarantor. The execution and delivery of this Agreement and the Related Agreements, and the consummation of the transaction contemplated thereby, do not require the consent or approval of any governmental authority, nor shall such execution and delivery result in a breach or violation of any Legal Requirement or, subject to obtaining the Third Party Consents, constitute a default (or any event which with notice and passage of time or both will constitute a default) under any contract or agreement by which Purchaser or an Affiliate of Purchaser is a party or by which it, its Affiliates or the Property is bound.

(b) Condemnation. As of the Effective Date, other than the potential condemnation of the Vancouver Property, and any other pending or other proceedings Known to Seller, Purchaser and its affiliates have not received any written notice of any pending condemnation of the Property or other proceedings in eminent domain regarding the Property that Purchaser has not provided to Seller.

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(c) Options and Sublease. Neither the Purchaser nor any of its Affiliates have granted any option or right of first refusal or first opportunity or right of first refusal to purchase the Purchaser’s interest in the Master Lease or Sublease. Purchaser has provided Purchaser with a true and complete copy of the Sublease. The Sublease and Reimbursement and Indemnity Agreement are the only agreements between Purchaser and Subtenant regarding the premises subleased pursuant to the Sublease and the Purchaser has not entered into any other subleases of the Sublease Property. The Sublease has not been amended, modified or terminated. Purchaser at the Closing will be the tenant under the Master Lease and sublessor under the Sublease free and clear of liens, claims and assignments. Purchaser is not in default under the Sublease and, to Purchaser’s Knowledge, the Subtenant is not in default under the Sublease. Purchaser has not collected rent under the Sublease more than one (1) month in advance.

(d) ERISA. Purchaser and its Affiliates are not an employee benefit plan (a “Plan”) subject to ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”), assets of a Plan are not being used to acquire the Property, Purchaser and its Affiliates are not a “party in interest” (as that term is defined in Section 3(14) of ERISA) with respect to any Plan that is an investor in Seller, and Purchaser’s acquisition of the Property will not constitute or result in a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.

(e) Prohibited Persons and Transactions. Neither Purchaser nor any of its Affiliates, is, nor will they become, a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and will not engage in any dealings or transactions or be otherwise associated with such persons or entities.

Purchaser is not relying on any warranty or representation made by any person acting on Seller’s behalf as to the physical condition, past or future income, expenses or operations of the Property or any other matter or thing affecting or relating to the Property, except as contained in this Agreement.

Section 5.03 Survival. Subject to the temporal and monetary limitations set forth in Article XV, the representations and warranties set forth in this Article V are made as of the Effective Date and are remade as of the Closing Date (unless they specifically relate to the Effective Date) and shall not be deemed to be merged into or waived by the instruments of Closing, but shall survive the Closing for a period of one (1) year (the “Survival Period”), provided, however, Purchaser will not bring a claim against Seller with respect to Section 5.01(f) unless Purchaser makes a claim against the title insurer and the title insurer denies coverage or fails to pay the claim (and Purchaser will not permit the title insurer to be subrogated to

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Purchaser’s rights under this Agreement or any other documents delivered by Purchaser pursuant to this Agreement with respect to Section 5.01(f)). Each party shall have the right to bring an action against the applicable party on the breach of a representation or warranty or covenant made to such party hereunder or in the documents delivered by Seller at the Closing, but only if the party bringing the action for breach first learns of the breach after Closing and brings an action against for breach by the other party not later than final day of the Survival Period. In no event shall any party be liable to any other party for incidental, consequential, or punitive damages as a result of the breach of any or all representations or warranties set forth in this Agreement.

ARTICLE VI

CLOSING MATTERS

Section 6.01 Closing. The closing of the transaction contemplated hereby (the “Closing”) shall take place at the offices of the Title Company not later than 5:00 PM, Seattle, Washington time on the Effective Date (the date of the Closing is sometimes referred to herein as the “Closing Date”).

Section 6.02 New York Style Closing. This transaction shall be closed by means of a so-called “New York Style Closing,” with the concurrent delivery of the documents of title, the Related Agreements, transfer of interests, delivery of the Title Policy and the payment of the Purchase Price.

Section 6.03 Title Commitment and Title Policy.

(a) The Title Commitment shall be the basis for “Title Policy”. The Title Commitment and the Title Policy are sometimes referred to as the “Title Documents”.

(b) Removal of Liens, etc. On the Closing Date, Seller shall pay-off any underlying obligation secured by a deed of trust, mortgage or other security interest securing an obligation of the Seller that is not a Permitted Exception. In addition, if on the Closing Date there shall be any Title Defect which is an obligation to pay money, a portion of the Purchase Price shall be used to satisfy the same, provided Seller shall simultaneously either deliver to Purchaser at Closing instruments, in recordable form, sufficient to satisfy such Title Defect of record, together with the cost of recording or filing said instrument provided, however, in lieu thereof, the Seller may cause the Title Insurer to “endorse over” such Title Defect (and may use and a portion of the Purchase Price to effect such endorsement).

ARTICLE VII

CLOSING DELIVERIES

Section 7.01 Seller’s Deliveries. At Closing, Seller shall deliver, or cause to be delivered to Purchaser, the following, each of which shall be in form and substance acceptable to counsel for Purchaser and executed by Seller:

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(a) Recordable limited warranty deeds for the Real Property in the form attached as Exhibit 7.01(a) from Seller to Purchaser, or its designee, subject only to the Permitted Exceptions (the “Deed”);

(b) Quitclaim Bills of Sale substantially in the form attached hereto as Exhibit 7.01(b) transferring to Purchaser all of Seller’s right, title and interest in and to each and every item of Fixtures and Tangible Personal Property and Documents to be transferred hereunder (subject only to Permitted Exceptions) for each of the Two Sale Properties;

(c) Quitclaim Contract Assignment and Assumption Agreements in the form attached hereto as Exhibit 7.01(c) for each of the Two Sale Properties of all of Seller’s right, title and interest in the Hotel Contracts, Space Leases and Permits;

(d) The Assignment and Assumption of Leases;

(e) The Restated Vancouver Sublease;

(f) Fourth Amendment to Lease;

(g) The Ground Lease Assignments (by delivery to WHC pursuant to the Agreement to Purchase Seven Hotels);

(h) A FIRPTA Certificate in the form attached hereto as Exhibit 7.01(h);

(i) The Red Lion Guaranty;

(j) The Agreement to Purchase Seven Hotels;

(k) If required by the Title Company, such documents, if any, as may be reasonably required by the Title Company, on forms customarily used by the Title Company in order to issue an owner’s policy of title insurance subject only to the Permitted Exceptions in accordance with the requirements for the New York Style Closing except Seller shall not be required to certify or indemnify with regard to any Permitted Exception;

(l) Evidence of the existence, organization and authority of Seller and of the authority of the persons executing documents on behalf of the Seller reasonably satisfactory to the Title Company and Purchaser; and

(m) Cancellations or terminations of any and all deeds of trust, mortgages, or other security instruments of record creating or evidencing a consensual monetary lien or security interest in any of the Property created by Seller or in favor of Seller.

Section 7.02 Purchaser’s Deliveries. At Closing, Purchaser shall deliver, or cause to be delivered to Seller, the following, each of which shall be in form and substance acceptable to counsel for Seller and executed by Purchaser or its affiliate:

(a) The Purchase Price required to be paid pursuant to Section 3.01 hereof;

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(b) The Agreement to Purchase Seven Hotels;

(c) The Assignment and Assumption of Leases;

(d) The Restated Vancouver Sublease;

(e) The Fourth Amendment to Lease;

(f) The Ground Lease Assignments;

(g) The Red Lion Guaranty; and

(h) Evidence of the existence, organization and authority of Purchaser, WHC and Guarantor and of the authority of the persons executing documents on behalf of the Purchaser, WHC and Guarantor reasonably satisfactory to the Title Company and Seller.

Section 7.03 Concurrent Transactions. All documents or other deliveries required to be made by Purchaser or Seller at Closing, and all transactions required to be consummated concurrently with Closing, including the transactions described in the Related Agreements, shall be deemed to have been delivered and to have been consummated simultaneously with all other transactions and all other deliveries, and no delivery shall be deemed to have been made, and no transaction shall be deemed to have been consummated, until all deliveries required by Purchaser, or its designee, and Seller shall have been made, and all concurrent or other transactions shall have been consummated.

Section 7.04 Further Assurances. Seller will cooperate with Purchaser in arranging, at no cost or liability to Seller, for the transfer to Purchaser of any assignable Seller’s interest, if any, in Permits or Hotel Contracts. Seller and Purchaser will, at the Closing, or at any time or from time to time thereafter, upon request of either party, execute such additional instruments, documents or certificates as either party deems reasonably necessary in order to convey, assign and transfer the Property to Purchaser, hereunder.

Section 7.05 Possession. Exclusive possession of the Property shall be delivered at Closing subject only to the Space Lease and the other Permitted Exceptions.

ARTICLE VIII

PRORATIONS

Section 8.01 Rent. The Purchaser shall continue to pay rent due under the Master Lease through the Closing Date and, to the extent not paid as of the Closing Date, will be credited to Seller. Percentage Rent shall be paid as determined in accordance with the Master Lease and prorated for any partial year. The provisions of this section will survive the Closing. No other prorations shall be required. However, to the extent that any security or other deposits are on deposit with the ground lessors under the Ground Leases, Seller shall be entitled to a credit for the amount of such deposit.

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ARTICLE IX

CONDITIONS TO OBLIGATIONS

Section 9.01 Conditions to Seller’s Obligations. The obligation of Seller to close the transaction and deliver the documents and instruments required hereunder shall be subject to satisfaction in full of the following conditions (“Seller’s Conditions”) on or before the Closing Date:

(a) The representations and warranties of Purchaser shall be true and correct in all material respects on the Closing Date.

(b) Purchaser shall have completed all the deliveries and actions required to be made by Purchaser under Section 7.02 and elsewhere in this Agreement.

(c) The Third Party Consents shall have been obtained.

(d) There shall not then be any pending or, to Seller’s Knowledge, threatened litigation which, if determined adversely, would restrain the consummation of any of the transactions referred to herein, or declare illegal, invalid or nonbinding any of the covenants or Obligations of the parties herein.

(e) All parties (other than Seller) to the Reaffirmation of Guarantees shall have executed and delivered that document to Seller.

(f) Purchaser shall have delivered the Red Lion Guaranty.

(g) The Subtenant shall have executed and delivered the Assignment and Assumption of Lease.

(h) Purchaser shall have performed all obligations to be performed by it on or prior to the Closing Date in all material respects.

(i) The “Closing” (as defined in the Agreement to Purchase Seven Hotels) has occurred.

Seller’s Conditions are solely for the benefit of Seller and may be waived only by Seller. Any such waiver or waivers shall be in writing and shall be delivered to Purchaser. Seller shall not act or fail to act for the purpose of permitting or causing any of Seller’s Conditions to fail.

Section 9.02 Conditions to Purchaser’s Obligations. The obligation of Purchaser to make payment of the Purchase Price and other sums provided for herein and to close the transactions contemplated hereby is subject to satisfaction in full of each of the following conditions (“Purchaser’s Conditions”) on or before the Closing Date:

(a) The representations and warranties of Seller shall be true and accurate in all material respects on the Closing Date.

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(b) Seller shall have completed all the deliveries required to be made by Seller under Section 7.01 and elsewhere in this Agreement.

(c) The Third Party Consents shall have been obtained.

(d) There shall not then be any pending, or to Purchaser’s Knowledge, threatened litigation which, if determined adversely, would restrain the consummation of any of the transactions referred to herein, or declare illegal, invalid or nonbinding any of the covenants or Obligations of the parties herein.

(e) All parties (other than Purchaser or its Affiliates) to the Reaffirmation of Guarantees shall have executed and delivered that document to Purchaser.

(f) Title Company shall, be committed to issue the Title Policy to Purchaser subject only to the Permitted Exceptions.

(g) The “Closing” (as defined in the Agreement to Purchase Seven Hotels) has occurred.

Purchaser’s Conditions are solely for the benefit of Purchaser and may be waived only by Purchaser. Any such waiver or waivers shall be in writing and shall be delivered to Seller. Purchaser shall not act or fail to act for the purpose of permitting or causing any of Purchaser’s Conditions to fail.

Section 9.03 Remedies. In the event that Purchaser defaults in the obligations under this Agreement and Closing does not occur, Seller shall be entitled to retain the earnest money deposit as liquidated damages in accordance with Section 10. In the event that Seller defaults in its obligations under this Agreement prior to Closing, Purchaser shall be entitled to an order of specific performance to compel Seller to comply with its obligations hereunder and if Purchaser does not obtain such an order or elects not to seek it, Purchaser shall be entitled to reimbursement from Seller for the actual, reasonable third party costs paid to persons or entities not affiliated with the Purchaser or WHC incurred by Purchaser in connection with negotiation and preparation of this Agreement and Related Agreements, in an amount (when aggregated with amounts payable by Seller pursuant to Section 9.03 of the Agreement to Purchase Seven Hotels) not to exceed two hundred thousand dollars ($200,000). IF THE TRANSACTION CLOSES, THE PARTIES’ EXCLUSIVE REMEDIES SHALL BE IN ACCORDANCE WITH ARTICLE XV. IN NO EVENT SHALL THE DIRECT OR INDIRECT PARTNERS, SHAREHOLDERS, MEMBERS, OWNER, OR AFFILIATES, ANY OFFICER, DIRECTOR, EMPLOYEE OR AGENT OF EITHER PURCHASER OR SELLER, OR ANY AFFILIATE OR CONTROLLING PERSON THEREOF HAVE ANY LIABILITY FOR ANY CLAIM, CAUSE OF ACTION OR OTHER LIABILITY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE PROPERTY, WHETHER BASED ON CONTRACT, COMMON LAW, STATUTE, EQUITY OR OTHERWISE EXCEPT TO THE EXTENT ANY SUCH PERSON OR ENTITY IS OBLIGATED THEREFORE PURSUANT TO THE RELATED AGREEMENTS. THE PRECEDING SENTENCE SHALL SURVIVE THE CLOSING.

Section 9.04 No Extension. Nothing contained in this Agreement shall require Purchaser or Seller to postpone the Closing Date.

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ARTICLE X

[RESERVED]

ARTICLE XI

TERMINATION

Section 11.01 Termination. This Agreement may be terminated and the transactions contemplated hereby terminated at any time prior to the Closing Date:

(a) by written agreement of the Seller and the Purchaser;

(b) by either the Purchaser or the Seller if: (i) the Closing Date has not occurred on or before October 31, 2011 (the “Termination Date”)); provided, that the right to terminate this Agreement under this clause 10.1(b) shall not be available to any party whose failure to fulfill any obligation hereunder has been the cause of, or resulted in, the failure of the Closing Date to occur on or before the Termination Date and such action or failure constitutes a material breach of this Agreement; (ii) there shall be a final nonappealable order of a governmental entity in effect preventing consummation of the transactions contemplated hereunder; or (iii) there shall be any law enacted, promulgated or issued or deemed applicable to the transactions contemplated hereunder by any Governmental Entity that would make any such transaction illegal;

(c) by the Purchaser if it is not in material breach of its obligations under this Agreement and there has been a material breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of the Seller provided, that if such breach is curable by the Seller prior to the Termination Date following the Seller’s receipt of written notice from the Purchaser of such breach, it being understood that the Purchaser may not terminate this Agreement pursuant to this Section 10.01(c) if such breach by the Seller is cured within such fifteen (15) day period so that the conditions would then be satisfied; or

(d) by the Seller if it is not in material breach of its obligations under this Agreement and there has been a breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of the Purchaser provided, that if such breach is curable by the Purchaser prior to the Termination Date following the Purchaser’s receipt of written notice from the Seller, it being understood that the Seller may not terminate this Agreement pursuant to this Section 10.01(d) if such breach by the Purchaser is cured within such fifteen (15) day period so that the conditions would then be satisfied.

Section 11.02 Effect of Termination. Any termination of this Agreement under Section 10.01 will be effective immediately upon the delivery of written notice by the terminating party to the other parties hereto. In the event of the termination of this Agreement as provided in Section 10.01, this Agreement shall be of no further force or effect, except nothing herein shall relieve any party from liability for any willful breach of this Agreement.

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Section 11.03 Effect of Termination of Agreement to Purchase Seven Hotels. If the Agreement to Purchase Seven Hotels is terminated, this Agreement shall be automatically terminated without any further action of the parties.

ARTICLE XII

ACTIONS AND OPERATIONS PENDING CLOSING

Section 12.01 Actions and Operations Pending Closing. Seller and Purchaser agree that after the date hereof and until the Closing Date:

(a) The Master Lease will remain in full force and effect.

(b) The Sublease will remain in full force and effect.

(c) Seller will not enter into any new material contract or Space Lease or create any Title Defect, or, other than pursuant to, or by virtue of, this Agreement, the Related Agreements or the Third Party Consents, cancel, modify or renew any existing material contract or Space Lease relating to the Two Sale Properties, without the prior written consent of Purchaser, which consent shall not be unreasonably withheld, conditioned or delayed.

(d) Seller shall notify Purchaser promptly if Seller becomes aware of any transaction or occurrence prior to the Closing Date which would make any of the representations or warranties of Seller contained in Section 5.01 not true in any material respect.

(e) Seller will not dispose of any of the Property, except in the ordinary course of business and in accordance with this Agreement or as required under the Master Lease.

(f) Purchaser will not terminate, modify or amend the Sublease or consent to or waive any material action or omission by Subtenant under the Sublease.

ARTICLE XIII

CASUALTIES AND TAKINGS

Section 13.01 Damage or Destruction: Condemnation. In the event of any casualty loss, damage or destruction prior to the Closing, or any condemnation of all or a part of the Real Property, Seller and Purchaser shall remain obligated under this Agreement and all proceeds of Insurance Policies or condemnation awards shall be assigned to Purchaser at Closing, and there shall be no other compensation or reduction in price therefor, provided, however, that the respective rights of the parties to proceeds from the condemnation of the Vancouver Property shall be governed by the terms of the Restated Vancouver Sublease in the event this Transaction

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closes. Seller and Purchaser express and waive the provisions of California Civil Code Section 1662 and hereby agree that the provisions of this Agreement shall govern the parties’ obligations in the event of any damage or destruction to the Real Property or the taking of all or any of the Real Property.

ARTICLE XIV

COVENANTS AND ACKNOWLEDGEMENTS

Section 14.01 Bulk Sales. Seller and Purchaser agree that no bulk sales filings or notices shall be required as condition to Closing.

Section 14.02 Hart-Scott-Rodino. Seller and Purchaser agree that The Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. §18(a) et. seq., as amended does not apply to the sale and transactions contemplated in this Agreement.

ARTICLE XV

INDEMNIFICATION

Section 15.01 Seller’s Indemnification. Seller hereby agrees to indemnify, hold harmless and defend Purchaser from and against any and all loss, damage (other than consequential or punitive damages), claim, cost and expense and any other liability whatsoever, including, without limitation, reasonable accountants’ and attorneys’ fees, charges and costs, incurred by Purchaser by reason of (a) Seller’s breach of any representations or warranties or covenants of Seller contained in this Agreement, and (b) without limiting the generality of the foregoing, Seller’s failure to duly perform and discharge Retained Liabilities or perform the obligations of Seller under Related Documents, provided Seller shall have no duty indemnify Purchaser for any losses arising hereunder until Purchaser has suffered losses by reason of all such breaches (when aggregated with losses under Section 15.01 of the Agreement to Purchase Seven Hotels) in excess of Fifty Thousand Dollars ($50,000.00) aggregate deductible (after which point the Seller will be obligated only to indemnify the Purchaser from and against further such losses) or thereafter to the extent the losses (when aggregated with losses under Section 15.01 of the Agreement to Purchase Seven Hotels) the Purchaser has suffered by reason of all such breaches up to an aggregate cap equal to Seven Hundred Fifty Thousand Dollars ($750,000.00) (after which point the Seller will have no obligation to indemnify the Purchaser from and against further losses). This indemnity shall terminate and be of no force and effect except with respect to actions brought by Purchaser against Seller for claims made pursuant to Section 15.03) not later than the final day of the Survival Period. The indemnification provided for in this Section 15.01 shall from and after the Closing be the Purchaser’s sole remedy for any matters referred to in this Section 15.01.

Section 15.02 Purchaser’s Indemnification. Purchaser hereby agrees to indemnify, hold harmless and defend Seller from and against any and all loss, damage, claim, cost and expense and any other liability whatsoever, including, without limitation, reasonable accountants’ and attorneys’ fees, charges and costs incurred by Seller by reason of (a) Purchaser’s breach of any representations, warranties and covenants of Purchaser contained

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in this Agreement which survive the Closing, and (b) without limiting the generality of the foregoing, Purchaser’s failure to duly perform the obligations of Purchaser under Related Documents, provided Purchaser shall have no duty indemnify Seller for any losses arising hereunder until Seller has suffered losses by reason of all such breaches (when aggregated with losses under the first sentence of Section 15.02 of the Agreement to Purchase Seven Hotels) in excess of Fifty Thousand Dollars ($50,000.00) aggregate deductible (after which point the Purchaser will be obligated only to indemnify the Seller from and against further such loses) or thereafter to the extent the losses (when aggregated with losses under the first sentence of Section 15.02 of the Agreement to Purchase Seven Hotels) the Seller has suffered by reason of all such breaches up to an aggregate cap equal to Seven Hundred Fifty Thousand Dollars ($750,000.00) (after which point the Purchaser will have no obligation to indemnify the Seller from and against further losses). This indemnity shall terminate and be of no force and effect except with respect to actions brought by Seller for claims made pursuant to Section 15.03 against Purchaser not later than the final day of the Survival Period. The indemnification provided for in this Section 15.02 shall from and after the Closing be the Seller’s sole remedy for any matters referred to herein except as provided in the following sentence and without limitation of the Restated Vancouver Sublease and Red Lion Guaranty. Notwithstanding the foregoing temporal and monetary limitations, Purchaser hereby agrees to indemnify, hold harmless and defend Seller from and against any and all loss, damage, claim, cost, claims, actions, causes of action, suits, litigation and expense and any other liability whatsoever, including, without limitation, reasonable accountants’ and attorneys’ fees, charges and costs incurred by Seller (collectively, “Property Claims”) by reason of (a) operation, ownership or use of the Sale Properties from and after Closing or (b) any death, injury or damage to persons or property at the Sale Properties from and after the Closing provided, however, that the Property Claims are asserted, instituted or initiated by a Person that is not Seller or an Affiliate of the Seller.

Section 15.03 Third Party Claims. If a claim by a third party is made against either of the indemnified parties, and if either of the indemnified parties intends to seek indemnity with respect thereto under this Article XV, such indemnified party shall promptly notify Purchaser or Seller, as the case may be, of such claim. The indemnifying party shall have thirty (30) days after receipt of the above-mentioned notice to undertake, conduct and control, through counsel of its own choosing (subject to the consent of the indemnified party, such consent not to be unreasonably withheld or delayed) and at its expense, the settlement or defense therefor, and the indemnified party shall cooperate with it in connection therewith; provided that: (a) the indemnifying party shall not thereby permit to exist any lien, encumbrance or other adverse charge upon any asset of any indemnified party; (b) the indemnifying party shall permit the indemnified party to participate in such settlement or defense through counsel chosen by the indemnified party, provided that the fees and expenses of such counsel shall be borne by the indemnified party; and (c) the indemnifying party shall agree promptly to reimburse the indemnified party for the full amount of any loss resulting from such claim and all related expenses incurred by the indemnified party within the limits of this Section 15. So long as the indemnifying party is reasonably contesting any such claim in good faith, the indemnified party shall not pay or settle any such claim. Notwithstanding the foregoing, the indemnified party shall have the right to pay or settle any such claim, provided that in such event they shall waive any right to indemnity therefor by the indemnifying party unless the indemnifying party shall have expressly consented to such payment or settlement. If the indemnifying party does not

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notify the indemnified party within thirty days after receipt of the indemnified party’s notice of a claim of indemnity hereunder that it elects to undertake the defense thereof, the indemnified party shall have the right to contest, settle or compromise the claim in the exercise of its exclusive discretion at the expense of the indemnifying party.

Section 15.04 Survival. The provisions of this Article XV shall survive the Closing.

ARTICLE XVI

NOTICES

Section 16.01 Notices. Except as otherwise provided in this Agreement, all notices, demands, requests, consents, approvals and other communications (herein collectively called “Notices”) required or permitted to be given hereunder, or which are to be given with respect to this Agreement, shall be in writing and shall be personally delivered or sent by overnight express courier, prepaid for next business day morning delivery, addressed to the party to be so notified as follows:

If intended for Seller, to:	RLH Partnership, L.P. c/o iStar Financial Inc. One Sansome Street San Francisco, California 94104 Attention: Erich Stiger
	With copies to:
	iStar Financial Inc. 1114 Avenue of the Americas New York, New York 10036 Attention: General Counsel
	Katten Muchin Rosenman LLP 525 West Monroe Street Chicago, IL 60661-3693 Attention: Kenneth M. Jacobson
If intended for Purchaser, to:	Red Lion Hotels Holdings Corporation W. 201 North River Drive Spokane, WA 99201 Attention: General Counsel
With copies to:	Davis Wright Tremaine LLP 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 Attention: Bruce Bjerke

Notice mailed by regular, registered or certified mail shall not be permitted. Notice personally delivered shall be deemed received when delivered. Notice sent by overnight express

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courier for next business day morning delivery shall be deemed received by the addressee the next business day after delivery thereof to the overnight courier upon proof of delivery by the overnight express courier. Either party may at any time change the address for notice to such party by mailing a Notice as aforesaid. Counsel may give any notices on behalf of its client.

ARTICLE XVII

ADDITIONAL COVENANTS

Section 17.01 Additional Covenants. In addition, the parties agree as follows:

(a) Expenses. Seller shall be responsible for title insurance premiums for the Title Policy (not to exceed nine thousand five hundred dollars ($9,500) (“Premium Limit”), and Purchaser shall be responsible for the cost of any endorsements (including extended coverage endorsements) provided herein in excess of the premium for the Title Policy without endorsements and any premium cost in excess of the Premium Limit. Recording fees for the release (or endorsement over) of any Title Defect shall be paid by the Seller and transfer or analogous taxes imposed on the transfer of the Sale Properties shall be allocated as follows: (i) with respect the Sale Properties located in the State of Washington, fifty percent (50%) to Seller and fifty percent (50%) to Purchaser; and (ii) with respect to the remaining Sale Properties, one hundred percent (100%) to Seller. The personal property components of the Property are owned by Purchaser so no transfer of title to those assets will result from this transaction and no transfer tax is due. The fees and expenses of Seller’s designated representatives, accountants and attorneys shall be borne by Seller, and the fees and expenses of Purchaser’s designated representatives, accountants and attorneys shall be borne by Purchaser. If this Agreement is terminated due to the default of a party, then the defaulting party shall pay any fees or charges due to any escrow agent, including, without limitation, any escrow cancellation fees or charges and any fees or charges due to the Title Company for preparation and/or cancellation of the Title Commitment. The Purchaser and Seller shall equally divide the escrow fee and New York Style Closing fee of the Title Company.

(b) Brokerage. Seller and Purchaser each hereby represent and warrant to the other that neither has dealt with any broker or finder in connection with the transaction contemplated hereby. Each of Seller and Purchaser hereby agrees to indemnify, defend and hold the other harmless against and from any and all manner of claims, liabilities, loss, damage, attorneys’ fees and expenses, incurred by either party and arising out of, or resulting from, any claim by any broker or finder in contravention of its representation and warranty herein contained.

(c) Access to Records After Closing. Where there is a legitimate purpose or if there is a tax audit, other governmental inquiry, or litigation or prospective litigation to which Seller or Purchaser is, or may become, a party, making necessary Seller’s access to such records of Purchaser or making necessary Purchaser’s access to such records of Seller, each party, as the case may be, will allow representatives of the other party access to such records during regular business hours at such party’s place of business for the sole purpose of obtaining information for use as aforesaid. Each party agrees to

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indemnify, hold harmless and defend the other party at all times from and after the date of this Agreement, from and against any and all loss, damage, claim, cost and expense and any other liability whatsoever, including, without limitation, reasonable accountants’ and attorneys’ fees, charges and costs, incurred by either party by reason of the other party’s failure to provide access to the records described above.

(d) Construction. This Agreement shall not be construed more strictly against one party than against the other, merely by virtue of the fact that it may have been prepared primarily by counsel for one of the parties, it being recognized that both Purchaser and Seller have contributed substantially and materially to the preparation of this Agreement.

(e) Public Statement. Prior to the Closing, neither party shall make a press release or public statement or announcement concerning this Agreement or the transactions contemplated herein, without the prior written consent of the other party, except as may be required by law. Seller acknowledges that Purchaser’s parent, Red Lion Hotels Corporation, is a publicly traded company and Purchaser acknowledges that Seller’s parent, iStar Financial Inc., is a publicly traded company and this Agreement and any Exhibits thereto may be disclosed and filed in accordance with law as Seller determines in its sole and absolute discretion.

ARTICLE XVIII

MISCELLANEOUS

Section 18.01 Successors and Assigns. This Agreement shall be binding upon the heirs, executors, administrators, and successors and assigns of Seller and Purchaser; provided, however, Purchaser shall not assign Purchaser’s rights and obligations hereunder to any party other than an Affiliate of Purchaser without the prior written consent of Seller, which consent may be withheld by Seller in its sole discretion. Any such assignment in violation of this provision shall be void. If Seller consents to an assignment, the assignment will not be effective against Seller until Purchaser delivers to Seller a fully extended copy of the assignment instrument, which instrument must be satisfactory to Seller in both form and substance and pursuant to which the assignee assumes and agrees to perform for the benefit of Seller the obligations of Purchaser under this Agreement, and pursuant to which the assignee makes the warranties and representations required of Purchaser under this Agreement; provided, however, that no such assignment shall relieve the assignor from primary liability for its obligations under this Agreement.

Section 18.02 Entire Agreement. This Agreement contains all of the covenants, conditions and agreements between the parties and shall supersede all prior correspondence, agreements and understandings, both oral and written.

Section 18.03 Attorney’s Fees. Should either party employ attorneys to enforce any of the provisions hereof or to protect its interest in any manner arising under this Agreement, or to recover damages for breach of this Agreement, or to enforce any judgment relating to this Agreement and the transaction contemplated hereby, the prevailing party shall be entitled to reasonable attorneys’ fees and court costs.

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Section 18.04 Governing Law. This Agreement shall be governed in all respects by and construed in accordance with the laws of the State of California.

Section 18.05 Further Assurances. Seller or Purchaser shall promptly perform, execute and deliver or cause to be performed, executed and/or delivered at or after Closing any and all acts, deeds and assurances as either party or the Escrow Agent may reasonably require in order to carry out the intent and purpose of this Agreement.

Section 18.06 Amendment. This Agreement cannot be changed, amended, supplemented or terminated orally.

Section 18.07 Counterparts. This Agreement may be executed in one (1) or more counterparts, and all the counterparts shall constitute but one and the same agreement, notwithstanding that all parties hereto are not signatory to the same or original counterpart. This Agreement may be executed and delivered by telecopy, pdf or similar electronic transmittal which shall be deemed an original if sent in accordance with the terms of Section 17.01 regarding Notices.

Section 18.08 Nonwaiver. Unless otherwise expressly provided herein, no waiver by Seller or Purchaser of any provision hereof shall be deemed to have been made if such waiver is made orally. No delay or omission in the exercise of any right or remedy accruing to Seller or Purchaser upon any breach under this Agreement shall impair such right or remedy or be construed as a waiver of any such breach theretofore or thereafter occurring. The waiver by Seller or Purchaser of any breach of any term, covenant or condition herein stated shall not be deemed to be a waiver of any other term, covenant or condition. All rights or remedies afforded to Seller or Purchaser hereunder or by law shall be cumulative and not alternative, and the exercise of one right or remedy shall not bar other rights or remedies allowed herein or by law.

Section 18.09 Captions. Paragraph titles or captions contained herein are inserted as a matter of convenience and for reference, and in no way define, limit, extent or describe the scope of this Agreement.

Section 18.10 Exhibits. All Exhibits attached hereto shall be incorporated herein by reference as if set out herein in full.

Section 18.11 Time. Time is of the essence in the performance of this Agreement.

Section 18.12 Recordation. Prior to the Closing Date, there shall be no recordation of either this Agreement or any memorandum hereof, or any affidavit pertaining hereto, and any such recordation of this Agreement or memorandum or affidavit by either party without the prior written consent of the other party.

Section 18.13 No Third Party Beneficiary. The provisions of this Agreement and of the documents to be executed and delivered at Closing are and will be for the benefit of Seller and Purchaser only and are not for the benefit of any third party, and accordingly, no third party shall have the right to enforce the provisions of this Agreement or of the documents to be executed and delivered at Closing.

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Section 18.14 Reporting Person. Purchaser and Seller hereby designate First American Title Insurance Company as the “reporting person” pursuant to the provisions of Section 6045(e) of the Internal Revenue Code of 1986, as amended.

Section 18.15 Natural Hazard Disclosure Waiver. Purchaser hereby knowingly, voluntarily and intentionally waives its right to disclosure by Seller of natural hazards found in Natural Hazard Disclosure Act, California Government Code Sections 8589.3, 8589.4, and 51183.5, California Public Resources Code Sections 2621.9, 2694, and 4136, and California Civil Code Sections 1102.6 and 1103.2, and any successor law. This waiver is a material inducement to Seller’s decision to enter into this Agreement and the calculation of the Purchase Price, and Purchaser acknowledges that Seller would not have entered into this Agreement but for this waiver. The terms and provisions of this Section 18.15 shall survive the Closing of this Agreement.

Section 18.16 Disclaimers. Purchaser acknowledges and agrees that the disclaimers and other agreements set forth herein are an integral part of this Agreement and that Seller would not have agreed to sell the Property to Purchaser for the Purchase Price without the disclaimers and other agreements set forth above.

ARTICLE XIX

DISCLAIMERS, RELEASE AND INDEMNITY

Section 19.01 Disclaimers By Seller. Except as expressly set forth in this Agreement (including without limitation Article V), it is understood and agreed that Seller and Seller’s agents or employees have not at any time made and are not now making, and they specifically disclaim, any warranties, representations or guaranties of any kind or character, express or implied, with respect to the Property, including, but not limited to, warranties, representations or guaranties as to (a) matters of title (other than as expressly contained in the deeds), (b) environmental matters relating to the Property or any portion thereof, including, without limitation, the presence of hazardous materials in, on, under or in the vicinity of the Property, (c) geological conditions, including, without limitation, subsidence, subsurface conditions, water table, underground water reservoirs, limitations regarding the withdrawal of water, and geologic faults and the resulting damage of past and/or future faulting, (d) whether, and to the extent to which the Property or any portion thereof is affected by any stream (surface or underground), body of water, wetlands, flood prone area, flood plain, floodway or special flood hazard, (e) drainage, (f) soil conditions, including the existence of instability, past soil repairs, soil additions or conditions of soil fill, or susceptibility to landslides, or the sufficiency of any undershoring, (g) the presence of endangered species or any environmentally sensitive or protected areas, (h) zoning or building entitlements to which the Property or any portion thereof may be subject, (i) the availability of any utilities to the Property or any portion thereof including, without limitation, water, sewage, gas and electric, (j) usages of adjoining property, (k) access to the Property or any portion thereof, (l) the value, compliance with the plans and specifications, size, location, age, use, design, quality, description, suitability, structural integrity,

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operation, title to, or physical or financial condition of the Property or any portion thereof, or any income, expenses, charges, liens, encumbrances, rights or claims on or affecting or pertaining to the Property or any part thereof, (m) the condition or use of the Property or compliance of the Property with any or all past, present or future federal, state or local ordinances, rules, regulations or laws, building, fire or zoning ordinances, codes or other similar laws, (n) the existence or non-existence of underground storage tanks, surface impoundments, or landfills, (o) any other matter affecting the stability and integrity of the Property, (p) the potential for further development of the Property, (q) the merchantability of the Property or fitness of the Property for any particular purpose, (r) tax consequences, (s) the ability to obtain consents from the ground lessors of the Ground Leased Properties, or (t) any other matter or thing with respect to the Property.

Section 19.02 Sale “As Is, Where Is”. Purchaser acknowledges and agrees that upon Closing, Seller shall sell and convey to Purchaser and Purchaser shall accept the Property “AS IS, WHERE IS, WITH ALL FAULTS,” except to the extent expressly provided otherwise in this Agreement and any document executed by Seller and delivered to Purchaser at Closing. Except as expressly set forth in this Agreement, Purchaser has not relied and will not rely on, and Seller has not made and is not liable for or bound by, any express or implied warranties, guarantees, statements, representations or information pertaining to the Property or relating thereto made or furnished by Seller, or any property manager, real estate broker, agent or third party representing or purporting to represent Seller, to whomever made or given, directly or indirectly, orally or in writing. Purchaser represents that it is a knowledgeable, experienced and sophisticated purchaser of real estate and that, except as expressly set forth in this Agreement, it is relying solely on its own expertise and that of Purchaser’s consultants in purchasing the Property and shall make an independent verification of the accuracy of any documents and information provided by Seller. Purchaser will conduct such inspections and investigations of the Property as Purchaser deems necessary, including, but not limited to, the physical and environmental conditions thereof, and shall rely upon same. Purchaser acknowledges that Seller has afforded Purchaser a full opportunity to conduct such investigations of the Property as Purchaser deemed necessary to satisfy itself as to the condition of the Property and the existence or non-existence or curative action to be taken with respect to any Hazardous Materials on or discharged from the Property, and will rely solely upon same and not upon any information provided by or on behalf of Seller or its agents or employees with respect thereto, other than such representations, warranties and covenants of Seller as are expressly set forth in this Agreement. Upon Closing, Purchaser shall assume the risk that adverse matters, including, but not limited to, adverse physical or construction defects or adverse environmental, health or safety conditions, may not have been revealed by Purchaser’s inspections and investigations. Purchaser hereby represents and warrants to Seller that: (a) Purchaser is represented by legal counsel in connection with the transaction contemplated by this Agreement; and (b) Purchaser is purchasing the Property for business, commercial, investment or other similar purpose and not for use as Purchaser’s residence. Purchaser waives any and all rights or remedies it may have or be entitled to, deriving from disparity in size or from any significant disparate bargaining position in relation to Seller.

Section 19.03 Seller Released from Liability. Purchaser acknowledges that it has had ample opportunity as tenant under the Master Lease to inspect the Property and observe its physical characteristics and existing conditions and the opportunity to conduct such investigation

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and study on and of the Property and adjacent areas as Purchaser deems necessary, and except as otherwise provided in this Agreement, Purchaser hereby FOREVER RELEASES AND DISCHARGES Seller from all responsibility and liability, including without limitation, liabilities and responsibilities relating to the physical, environmental or legal compliance status of the Property, whether arising before or after the Effective Date, and liabilities under the Comprehensive Environmental Response, Compensation and Liability Act Of 1980 (42 U.S.C. Sections 9601 et seq.), as amended (“CERCLA”), regarding the condition, valuation, salability or utility of the Property, or their suitability for any purpose whatsoever (including, but not limited to, with respect to the presence in the soil, air, structures and surface and subsurface waters, of Hazardous Materials or other materials or substances that have been or may in the future be determined to be toxic, hazardous, undesirable or subject to regulation and that may need to be specially treated, handled and/or removed from the Property under current or future federal, state and local laws, regulations or guidelines, and any structural and geologic conditions, subsurface soil and water conditions and solid and hazardous waste and Hazardous Materials on, under, adjacent to or otherwise affecting the Property). Purchaser further hereby WAIVES (and by Closing this transaction will be deemed to have WAIVED) any and all objections and complaints (including, but not limited to, federal, state and local statutory and common law based actions, and any private right of action under any federal, state or local laws, regulations or guidelines to which the Property are or may be subject, including, but not limited to, CERCLA) concerning the physical characteristics and any existing conditions of the Property, including, without limitation, the lessor’s obligations under the Lease relating to the physical, environmental or legal compliance status of the Property, whether arising before or after the Effective Date. Purchaser further hereby assumes the risk of changes in applicable laws and regulations relating to past, present and future environmental conditions on the Property and the risk that adverse physical characteristics and conditions, including, without limitation, the presence of hazardous materials or other contaminants, may not have been revealed by its investigation.

Section 19.04 Survival. The terms and conditions of this Article XIX shall expressly survive the Closing, not merge with the provisions of any closing documents and shall be deemed to be incorporated into the Deeds.

ARTICLE XX

1031 EXCHANGE

Section 20.01 1031 Exchange. Provided that Purchaser gives Seller reasonable advance notice that Purchaser intends to acquire the Property as part of an exchange transaction meeting the requirements of Section 1031 of the Internal Revenue Code, Seller shall reasonably cooperate with Purchaser in effecting such an exchange transaction, provided that (A) such cooperation shall be at no cost, expense or liability to Seller, (B) notwithstanding any assignment of this Agreement by Purchaser in connection with such exchange or the conveyance of the Property to a party other than Purchaser, Purchaser shall not be released from its obligations under the Agreement and shall remain liable for all of its obligations hereunder, (C) Red Lion Hotels Corporation shall not be released from its obligations under the Red Lion Guaranty, and (D) the completion of such exchange transaction shall not be a condition to Purchaser’s obligation to close timely hereunder.

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IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement to be executed, all as of the day and year first above written.

SELLER:

RLH PARTNERSHIP, L.P.

By: Red Lion GP, Inc., a Delaware corporation, its general partner

By:

Name:

Title:

PURCHASER:

RED LION HOTELS HOLDINGS, INC, a Delaware corporation

By:

Its:

LIST OF EXHIBITS:

Exhibit A-1	Seven Sale Properties
Exhibit A-2	Two Sale Properties
Exhibit A-3	Agreement to Purchase Eight Hotels
Exhibit B	Ground Leased Properties and Ground Leases
Exhibit C	Hilton Portfolio Properties
Exhibit D	Vancouver Property
Exhibit E	Assignment and Assumption of Leases
Exhibit F	Fourth Amendment to Lease
Exhibit G	Assignment and Assumption of Ground Leases
Exhibit H	Land
Exhibit I	Purchaser Knowledge Parties
Exhibit J	Reaffirmation of Guarantees
Exhibit K	Red Lion Guaranty
Exhibit L	Restated Vancouver Sublease
Exhibit M	Seller Knowledge Parties
Schedule 3.01	Purchase Price Allocation
Exhibit 7.01(a)	Form of Warranty Deeds for the Sale Properties
Exhibit 7.01(b)	Form of Bill of Sale
Exhibit 7.01(c)	Quitclaim Contract Assignment
Exhibit 7.01(h)	FIRPTA Certificate

EXHIBIT B

Eugene

205 Coburg Road

Eugene, Lane County, Oregon 97401

Boise

1800 Fairview Avenue

Boise, Ada County, Idaho 83702

EXHIBIT C

Doubletree Seattle Airport

18740 International Boulevard

Seattle, WA 98188

Hilton Salt Lake City Center

255 South West Temple

Salt Lake City, UT 84101

Doubletree San Diego – Mission Valley

7450 Hazard Center Drive

San Diego, CA 92108

Doubletree Durango

501 Camino Del Rio

Durango, CO 81301

Doubletree Sonoma Wine County

One Doubletree Drive

Rohnert Park, CA 94928

EXHIBIT D

Red Lion Hotel Vancouver at the Quay

100 Columbia Street,

Vancouver, WA 98660

EXHIBIT E

Assignment and Assumption of Leases

This ASSIGNMENT AND ASSUMPTION OF LEASES (this “Assignment”) is effective as of the          day of                 , 2011 (“Effective Date”), by and between RLH PARTNERSHIP, L.P., a Delaware limited partnership (“Landlord”), RED LION HOTELS HOLDINGS, INC. (previously known as Red Lion Hotels Inc.) a Delaware corporation (“Assignor”), SFI DT HOLDINGS LLC, a Delaware limited liability company (“Assignee”), and Doubletree DWTC Corporation, a Delaware corporation, and as assigned to HLT Operate DTWC LLC, a Delaware limited liability company (formerly known as HLT Operate DTWC Corporation) (“Sublessee”).

For and in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Assignment. Assignor hereby assigns, transfers, sets over, conveys and delivers unto Assignee, its successors and assigns, all of Assignor’s right, title and interest in and to (i) that certain Lease dated August 1, 1995 by and between Landlord and Assignor, as amended by a First Amendment, Second Amendment Third Amendment and Fourth Amendment of even date between Landlord and Assignor (the “Master Lease”) insofar as the Master Lease applies to the hotels commonly known as the DoubleTree SeaTac, Hilton Salt Lake City Center, DoubleTree San Diego-Mission Valley, DoubleTree Durango and the DoubleTree Sonoma Wine County (the “Hilton Portfolio Properties”) and legally described on Exhibit A attached hereto and (ii) that certain Sublease Agreement dated December 31, 2001 by and between Assignor and Sublessee pertaining to the Hilton Portfolio Properties (the “Sublease”) and Assignee hereby accepts the foregoing assignment. For the avoidance of doubt, Assignor is not assigning and Assignee is not accepting or assuming the “Indemnity Agreement” (as hereinafter defined).

2. Assumption. Assignee hereby assumes the covenants, agreements and obligations of Assignor relating solely to the Hilton Portfolio Properties which first accrue under the Master Lease and the Sublease from and after the Effective Date and does not assume any such covenants, agreements and obligations accruing prior to the Effective Date.

3. Release of Rights and Obligations. From and after the Effective Date, Assignor shall have no further rights in or obligations to the extent accruing, from and after the Effective Date, under the Sublease but is not released from any of its obligations to Sublessee under the Sublease accruing prior to the Effective Date. Notwithstanding anything contained herein to the contrary, Assignor shall remain responsible for: (a) rent due under the Master Lease for 2011 for the Hilton Portfolio Properties, (b) certain indemnity obligations as provided in Section 5 of that certain Fourth Amendment to Lease between Landlord and Assignor of even date and (c) all obligations of Assignor to Sublessee under the Sublease accruing prior to the Effective Date.

4. Reaffirmation of Guaranties. Assignor and Sublessee hereby acknowledge that (a) the Indemnity and Reimbursement Agreement between Red Lion Hotels, Inc., Red Lion Hotels Corporation (formerly known as West Coast Hospitality Corporation), Double Tree Corporation, Promus Hotels, Inc. and Doubletree DTWC Corporation dated December 31, 2001

(the “Indemnity Agreement”), remains in full force and effect and is not affected by the Assignment. Assignor and Sublessee hereby acknowledge that the Guaranty of Lease Obligations dated September 15, 1998 among Promus Hotels, Inc., Red Lion Hotels, Inc. and Landlord and Guaranty of Lease Obligations dated September 15, 1998 among Promus Hotel Corporation, Red Lion Hotels, Inc. and Landlord (collectively, the “Guarantees”) remain in full force and effect and are not affected by this Assignment. Assignor has provided to Landlord a Reaffirmation of Guarantees, executed by the parties to the Guarantees.

5. Representations and Warranties of Assignor. Assignor hereby represents and warrants that:

(a) The Sublease is in full force and effect and the Assignor is not in breach of the obligations under the Sublease. The Sublease is the only sublease under the Master Lease. Assignor has provided to Assignee a true and complete copy of the Sublease.

(b) Assignor has not assigned any of its rights under the Sublease or Master Lease to anyone which remain in effect. Assignor’s interest in the Master Lease and Sublease is not subject to any lien or security interest granted by Assignor or arising in violation of the Master Lease or judgment, tax assessment or other obligation incurred by Assignor.

6. Representations and Warranties of Sublessee. Sublessee hereby represents and warrants that:

(a) The Sublease has not been modified and is in full force and effect;

(b) “Sublease Base Rent” (as defined in the Sublease) has been paid in full through September 30, 2011 and “Sublease Percentage Rent” (as defined in the Sublease) has not been paid for 2011;

(c) To the Sublessee’s knowledge, Assignor is not in default in the performance or observance of its obligations under the Sublease; and

(d) To the Sublessee’s knowledge, no event has occurred which with the giving of notice or the passage of time, would constitute a default by Assignor under the Sublease.

7. Rent. “Sublease Base Rent” (as defined in the Sublease) shall be prorated as of the date hereof. To the extent Rent for month in which the Effective Date is received by either Assignor or Assignee following the Effective Date, the recipient shall promptly pay to the non-recipient, such non-recipient’s pro rata share of such rent. “Sublease Percentage Rent” (as defined in the Sublease) for year 2011 shall, to the extent paid by Sublessee, be prorated (with a proration adjustment of the Effective Date) between the Assignor and Assignee promptly after Assignee’s or Assignee’s receipt thereof. Sublessee shall make all future payments of rent and other amounts payable under the Sublease to Assignee, as contemplated by Section 14 hereof, and shall have no obligation to see to the proper allocation of any such payments between Assignor and Assignee.

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8. Cooperation; Further Assurance. In the event that Assignor is a party to any contracts, permits or licenses relating to the Hilton Portfolio Properties, Assignor hereby quitclaims all of its rights in them to Assignee and shall cooperate with Assignee to accomplish the transfer of such rights to Assignee. Assignor shall provide Assignee with reasonable access to its books and records relating to the Sublease and Assignee shall be permitted to inspect and retain copies of such books and records. Assignor and Assignee shall promptly perform, execute and deliver or cause to be performed, executed and/or any and all acts, deeds and assurances as either party may reasonably require in order to carry out the intent and purpose of this Assignment.

9. Binding Effect. This Assignment shall be binding upon and shall inure to the benefit of the parties thereto and their respective successors and assigns.

10. Governing Law. This Assignment shall be governed by and interpreted in accordance with the laws of the State of California.

11. Execution in Counterparts. This Assignment may be executed in counterparts, each of which shall constitute an original and all of which together shall be deemed a single document.

12. Landlord Consent. By its execution of this Assignment, Landlord consents to the assignment of the Master Lease and Assignor’s interests under the Sublease to Assignee.

13. Continuation of Master Lease. Landlord and Tenant agree and intend that the Master Lease remain in full force and effect. Effective as of the Effective Date, Assignee is the “Sublessor” (as defined in the Sublease).

14. Rent and Notices. It is agreed that from and after the Effective Date:

(a) All Sublease Base Rent, Sublease Percentage Rent and other sums owing from time to time to “Sublessor” (as defined in the Sublease) shall be paid by the wire transfer of good immediately available federal funds to the account designated by the Sublessor from time to time and in the absence of such designation to the following account:

Wire Instructions

JPMorgan Chase

ABA No.: 021000021

Acct. No.: 230-337171

Ref: Hilton

(b) All notices to be given to the Sublessor under the Sublease or to the “Tenant” (as defined in the Master Lease) shall be sent to Assignee at the following address (or such other address as may from time to time be specified pursuant to the Master Lease or Sublease, as applicable):

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SFI DT Holdings LLC

c/o iStar Financial Inc.

One Sansome Street

San Francisco, California 94104

Attention: Asset Management – SFI DT Holdings LLC

Telephone: 415-391-4300

Facsimile: 415-391-6259

with a copy to:

iStar Financial Inc.

1114 Avenue of the Americas

New York, New York 10036

Attention: COO and Legal Department – SFI DT Holdings LLC]

Telephone: 212-930-9400

Facsimile: 212-930-9494

with a copy to:

iStar Financial Inc.

3480 Preston Ridge Road, Suite 575

Alpharetta, Georgia 30005

Attention: Director of Lease Administration – SFI DT Holdings LLC

Telephone: 678-297-0100

Facsimile: 678-297-0101

15. Indemnity. Assignor hereby agrees to defend, indemnify and hold Assignee harmless from and against all liabilities, obligations, claims, damages, penalties and causes of action or judgments of any nature whatsoever to the extent caused by, arising out of or related to any breach of its obligations to Sublessee under the Sublease prior to the Effective Date.

16. Non-recourse. It is agreed that the liability of Landlord under this Assignment is subject to, and limited by, the terms and provisions of Section 22.24 of the Master Lease

17. Recording. The parties agree that this Assignment shall not be recorded in any public records, but that Assignee may record a memorandum in the form attached hereto as Attachment A.

[Signatures are set forth on the following page.]

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The parties hereto have executed this Assignment as of the date first written above.

LANDLORD:	RLH PARTNERSHIP, L.P.
	By:	Red Lion GP, Inc., its sole general partner
		By:
		Name:
		Title:
ASSIGNOR:	RED LION HOTELS HOLDINGS, INC.
	By:
	Name:
	Title:
ASSIGNEE:	SFI DT HOLDINGS LLC, a Delaware limited liability company
	By:
	Name:
	Title:
SUBLESSEE:	HLT OPERATE DTWC LLC, a Delaware limited liability company
	By:
	Name:
	Title:

5

STATE OF	)
	) ss.
COUNTY OF	)

On this          day of                     , 2011, before me, a Notary Public in and for the State of                     , personally appeared                     , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed this instrument, on oath stated that he was authorized to execute the instrument, and acknowledged it as the                      of RLH PARTNERSHIP, L.P., to be the free and voluntary act and deed of said limited partnership for the uses and purposes mentioned in the instrument.

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

NOTARY PUBLIC in and for the State of

                    , residing at

My appointment expires

Print Name

STATE OF	)
	) ss.
COUNTY OF	)

On this          day of                     , 2011, before me, a Notary Public in and for the State of                     , personally appeared                     , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed this instrument, on oath stated that he was authorized to execute the instrument, and acknowledged it as the                      of RED LION HOTELS HOLDINGS, INC., to be the free and voluntary act and deed of said corporation for the uses and purposes mentioned in the instrument.

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

NOTARY PUBLIC in and for the State of

                    , residing at

My appointment expires

Print Name

6

STATE OF	)
	) ss.
COUNTY OF	)

On this          day of                     , 2011, before me, a Notary Public in and for the State of                     , personally appeared                     , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed this instrument, on oath stated that he was authorized to execute the instrument, and acknowledged it as the                      of                     , to be the free and voluntary act and deed of said [corporation] for the uses and purposes mentioned in the instrument.

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

NOTARY PUBLIC in and for the State of

                    , residing at

My appointment expires

Print Name

STATE OF	)
	) ss.
COUNTY OF	)

On this          day of                     , 2011, before me, a Notary Public in and for the State of                     , personally appeared                     , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed this instrument, on oath stated that he was authorized to execute the instrument, and acknowledged it as the                     of HLT OPERATE DTWC LLC, to be the free and voluntary act and deed of said corporation for the uses and purposes mentioned in the instrument.

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

NOTARY PUBLIC in and for the State of

                    , residing at

My appointment expires

Print Name

7

ATTACHMENT A

Memorandum of Lease

EXHIBIT F

FOURTH AMENDMENT TO LEASE

This FOURTH AMENDMENT TO LEASE (this “Amendment”) amends that certain lease between RLH PARTNERSHIP, L.P., a Delaware limited partnership (“Landlord”), and RED LION HOTELS HOLDINGS, INC. (formerly known as Red Lion Hotels Inc.) a Delaware corporation (“Red Lion”) dated August 1, 1995 as amended by a First Amendment, Second Amendment and Third Amendment (the “Lease”), effective                     , 2011 (the “Effective Date”).

WHEREAS, under the terms of the Lease, Landlord initially leased to Red Lion seventeen (17) hotels located in California, Colorado, Idaho, Montana, Oregon, Utah and Washington (the “Hotels”); and

WHEREAS, one of the Hotels which is located in Astoria, Oregon is no longer subject to the Lease, and was removed from the Lease by Agreement dated May 21, 2010; and

WHEREAS, concurrently with the execution and delivery of this Amendment, Red Lion and an Affiliate of Red Lion are purchasing ten (10) of the Hotels which are listed on Exhibit A (the “Sale Properties”) under the terms of an Agreement to Purchase Eight Hotels and Assume Leases between Landlord and Red Lion of even date and an Agreement to Purchase Two Hotels between Landlord and an affiliate of Red Lion of even date (the “Purchase Agreements”); and

WHEREAS, concurrently with the execution and delivery of this Amendment, all of the interests in and obligations of Red Lion with respect to five (5) of the Hotels listed on Exhibit B (the “Hilton Portfolio Properties”) are being assigned to an Affiliate of Landlord under the terms of an Assignment and Assumption of Leases between Red Lion and an affiliate of Landlord (the “Sublease Assignee”) of even date (the “Lease Assignment”); and

WHEREAS, Landlord and Red Lion, concurrently with the execution and delivery of this Amendment, have agreed to enter into an amended and restated sublease for one of the Hotels, which is located in Vancouver, Washington (the “Vancouver Property”) between Landlord and Red Lion of even date herewith (the “Restated Vancouver Sublease”); and

WHEREAS, capitalized terms in this Amendment which are not defined herein shall have the meanings defined in the Lease; and

WHEREAS, Landlord and Red Lion desire to amend the Lease and memorialize certain agreements.

NOW, THEREFORE, Landlord and Red Lion hereby agree as follows:

1. Lease Split and Sale Properties. Effective as of the Effective Date, the Lease shall: (a) terminate in accordance with Section 16.1 of the Lease with respect to the Hotels collectively comprising the Sale Properties, and from and after the Effective Date, Landlord shall not lease the Sale Properties to Red Lion and Red Lion shall not lease the Sale Properties from Landlord; and (b) be split into (i) a restated sublease for the Vancouver Property which shall be amended and restated as contemplated in Section 2, and (ii) a lease for the Hilton Portfolio Properties, which shall be assigned as contemplated by Section 3. The Lease, without giving effect to the terms and provisions of this Amendment, is sometimes referred to herein as the “Pre-Closing Lease.”

2. Vancouver Properties. From and after the Effective Date, the Lease will no longer apply to the Vancouver Property except to the extent amended and restated in the Restated Vancouver Sublease.

3. Lease Assignment. Effective as of the Effective Date, Sublease Assignee shall assume the obligations of Red Lion under the Lease with respect to the Hotels constituting the Hilton Portfolio Properties to the extent accruing from and after the Effective Date under the terms of the Lease Assignment. Effective as of the Effective Date, Red Lion shall no longer be the Tenant under the Lease and Sublease Assignee shall henceforth be the Tenant.

4. Remaining Red Lion Obligations. From and after the Effective Date, it is agreed that except as provided in the Lease Assignment and the Restated Vancouver Sublease, Landlord shall not be entitled to assert any claim against Red Lion arising under or in connection with the Lease except with respect to: (1) rent due for 2011; and (2) Red Lion’s indemnification obligations under Section 5 of this Amendment.

5. Indemnification by Red Lion. In addition to the indemnification rights of Landlord under the Lease Assignment and the Restated Vancouver Sublease, Landlord shall be entitled to the benefit of the following indemnification provisions after the Effective Date with respect to the Hotels, but (1) only with respect to claims asserted against “Indemnified Parties” (as hereinafter defined) by persons or entities that are not Landlord or Affiliates of Landlord; and (2) only if the events, facts, conditions or circumstances upon which the claim is made occurred or existed prior to the Effective Date:

(a) Red Lion shall pay, protect, indemnify, defend, save and hold harmless, Landlord, Landlord’s constituent partners, any ground lessor, and any Affiliate, partner, member, manager, trustee, officer, director, employee, agent or shareholder or other holder of any beneficial interest in any of them (collectively, the “Indemnified Parties” and, individually, an “Indemnified Party”), from and against all liabilities, obligations, claims, damages (including, without limitation, punitive damages), penalties and causes of action or judgments of any nature whatsoever, whether foreseen or unforeseen, howsoever and whensoever caused including, without limitation, if caused prior to the “Commencement Date” (as defined in the Pre-Closing Lease), without regard to the form of action and whether based on strict or statutory liability, gross negligence, negligence (including the negligence of any Indemnified Party) or any other theory of recovery at law or in equity, and all reasonable and documented costs and expenses (including reasonable attorneys’ fees costs of experts, and other legal costs and expenses), imposed upon or incurred or asserted against any of the Indemnified Parties by reason of or in connection with:

i. Any matter pertaining to the leasing, use, non-use, occupancy, operation, management, condition, design, construction, maintenance, repair or restoration of any of the Hotels or on the “Premises” (as defined in the Pre-Closing Lease), or the employment of any persons at the Hotels or on the Hotels in each case whether by Red Lion or otherwise;

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

iii. Any violation by Red Lion (or any employees, agents, invitees, guests, sublessees, concessionaires, or licensees of Red Lion) of any provision of the Lease, any contract or agreement to which Red Lion (or any sublessee, concessionaire, or licensee of Red Lion) is a party, any violation or alleged violation of any “Legal Requirement” (as defined in the Pre-Closing Lease) (including anti-discrimination laws) or any “Insurance Requirement” (as defined in the Pre-Closing Lease); and

iv. Any contest undertaking by or on behalf of Red Lion with respect to any Legal Requirement, insurance requirement, tax imposition or otherwise, regardless of whether the same is permitted pursuant to the terms hereof, except in each case to the extent the same directly result from the gross negligence or willful misconduct by an Indemnified Party.

(b) Red Lion shall pay, protect, indemnify, defend, save and hold harmless the Indemnified Parties and each of them, from and against all liabilities, obligations, claims (including, without limitation, claims by third parties alleging violation of or liability under any “Environmental Law” (as defined in the Pre-Closing Lease)), damages (including, without limitation, punitive damages and damages to nature resources), penalties and causes of action or judgments of any nature whatsoever, both foreseen and unforeseen, howsoever and whensoever caused including, without limitation, if caused prior to the Commencement Date, without regard to the form of action and whether based on strict or statutory liability, gross negligence, negligence (including the negligence of any Indemnified Party or their agents), or any other theory of recovery at law or in equity, and all reasonable and documented costs and expenses (including reasonable attorneys’ fees, costs of experts, and other legal costs and expenses), imposed upon or incurred by or asserted against any of the Indemnified Parties by reason of or in connection with:

i. Red Lion’s failure to perform its duties and obligations as set forth in Article XII of the Pre-Closing Lease.

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

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

3

6. Defense of Indemnified Parties. Promptly after receipt by an Indemnified Party of notice of the commencement or assertion against it of any claim, action, or proceeding covered under Section 5, such Indemnified Party shall, if a claim in respect thereof is to be made against Red Lion under this Section 6, notify Red Lion thereof; but the omission so to notify Red Lion shall not relieve Red Lion from any liability which it may have to such Indemnified Party under this Section 6, except to the extent that Red Lion shall have been prejudiced by such failure. Provided that representation by counsel selected by Red Lion will not, in Indemnified Party’s reasonable judgment (which judgment may be based on, without limitation, due consideration of any obligations such Indemnified party may have to indemnify other parties in connection with the same matter, including requirements as to right of contest, time to indemnification and undertaking of defense of such other parties), prejudice Indemnified Party in any manner, Red Lion, at its sole cost and expense, shall have the right by counsel reasonably satisfactory to the indemnified Party, to contest, resist and defend any claim, action or proceeding with respect to which it shall have received the Notice described in the preceding sentence; provided, however, that Red Lion may not compromise or otherwise dispose of the same without the prior written approval of the Indemnified Party, such approval not to be unreasonably withheld, conditioned, or delayed so long as the Indemnified Party receives a full release with respect to the claim, action or proceeding. If in Indemnified Party’s judgment, representation by counsel selected by Red Lion will prejudice Indemnified Party in any manner, such Indemnified party shall have the right to retain its own counsel and defend such action. If Red Lion shall have assumed responsibility for such contest and defense, Red Lion shall not be obligated to pay any attorneys’ fees or other legal costs incurred by or on behalf of the Indemnified Party. Notwithstanding the foregoing, each Indemnified Party shall, at Red Lion’s request and expense, cooperate with Red Lion, at no cost or expense to the Indemnified party, in the defense of any such claim, action or proceeding.

7. Successors and Assigns. This Amendment shall be binding upon the heirs, executors, administrators, and successors and assigns of Landlord and Red Lion; provided, however, Red Lion shall not assign Red Lion’s rights and obligations hereunder. Any such assignment in violation of this provision shall be void.

8. Further Assurances. Landlord and Red Lion shall promptly perform, execute and deliver or cause to be performed, executed and/or delivered at or after the Effective Date any and all acts, deeds and assurances as either party may reasonably require in order to carry out the intent and purpose of this Amendment.

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9. Amendment. This Amendment cannot be changed, amended, supplemented or terminated orally.

10. Counterparts. This Amendment may be executed in one (1) or more counterparts, and all the counterparts shall constitute but one and the same agreement, notwithstanding that all parties hereto are not signatory to the same or original counterpart. This Amendment may be executed and delivered by telecopy, pdf or similar electronic transmittal.

11. Nonwaiver. Unless otherwise expressly provided herein, no waiver by Landlord or Red Lion of any provision hereof shall be deemed to have been made if such waiver is made orally. No delay or omission in the exercise of any right or remedy accruing to Landlord or Red Lion upon any breach under this Amendment shall impair such right or remedy or be construed as a waiver of any such breach theretofore or thereafter occurring. The waiver by Landlord or Red Lion of any breach of any term, covenant or condition herein stated shall not be deemed to be a waiver of any other term, covenant or condition. All rights or remedies afforded to Landlord or Red Lion hereunder or by law shall be cumulative and not alternative, and the exercise of one right or remedy shall not bar other rights or remedies allowed herein or by law. Landlord executes and delivers this Amendment in its own capacity and in its capacity as Landlord. Red Lion executes and delivers this Amendment in its own capacity and in its capacity as Tenant.

12. Captions. Paragraph titles or captions contained herein are inserted as a matter of convenience and for reference, and in no way define, limit, extent or describe the scope of this Amendment.

13. Estoppel. Red Lion certifies that it has no knowledge of any defaults by Landlord under the Lease and Landlord certifies that it has no knowledge of any default by Red Lion under the Lease except (a) Landlord’s assertion that Red Lion failed to provide all of the required insurance in respect of the Hotel located in Sacramento, California (“Insurance Default”) and (b) failure to maintain all of the Hotels in accordance with requirements of the Lease (“Maintenance Defaults,” and, together with the “Insurance Default,” the “Lease Defaults”), but, without waiving rights to indemnification under Section 5 of this Amendment or the provisions the Restated Vancouver Lease or any other of Red Lion’s obligations under the Restated Vancouver Sublease, Landlord waives the Lease Defaults,

14. Purchase Agreements. Nothing contained in this Assignment modifies the rights and obligations of the parties to the Purchase Agreements pursuant to Article XV of each of the Purchase Agreements.

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15. Non-recourse. The liability of Landlord under this Amendment is subject to, and limited by, the terms and provisions of Section 22.24 of the Lease.

LANDLORD:	RLH PARTNERSHIP, L.P., a Delaware limited partnership
	By:	RED LION GP, INC., a Delaware corporation, its general partner
	By:
	Name:
	Its:
RED LION:	RED LION HOTELS HOLDINGS, INC., a Delaware corporation (f/k/a Red Lion Hotels Inc.)
	By:
	Name:
	Title:

6

Exhibit A

Bend

1415 NE Third Street

Bend, Deschutes County, Oregon 97701

Boise

1800 Fairview Avenue

Boise, Ada County, Idaho 83702

Coos Bay

1313 North Bayshore Drive

Coos Bay, Coos County, Oregon 97420

Longview

510 Kelso Drive

Kelso, Cowlitz County, Washington 98626

Pendleton

304 SE Nye Avenue

Pendleton, Umatilla County, Oregon 97801

Wenatchee

1255 North Wenatchee Avenue

Wenatchee, Chelan County, Washington 98801

Sacramento

1401 Arden Way

Sacramento, Sacramento County, California 95815

Missoula

700 West Broadway

Missoula, Missoula County, Montana 59802

Medford

200 North Riverside Avenue

Medford, Jackson County, Oregon 97501

Eugene

205 Coburg Road

Eugene, Lane County, Oregon 97401

7

Exhibit B

Doubletree Seattle Airport

18740 International Boulevard

Seattle, WA 98188

Hilton Salt Lake City Center

255 South West Temple

Salt Lake City, UT 84101

Doubletree San Diego â Mission Valley

7450 Hazard Center Drive

San Diego, CA 92108

Doubletree Durango

501 Camino Del Rio

Durango, CO 81301

Doubletree Sonoma Wine County

One Doubletree Drive

Rohnert Park, CA 9492

8

EXHIBIT G

ASSIGNMENT AND ASSUMPTION AGREEMENT

This Assignment and Assumption Agreement, dated as of                  , 2011 (the “Agreement”), is by and between RLH Partnership, L.P., a Delaware limited partnership (“RLH Partnership”) and WHC809, LLC, a Delaware limited liability company (“Purchaser”). Capitalized terms not defined herein shall have the meaning assigned to them in the Lease (as defined below).

RECITALS

A. WHEREAS, by unrecorded Lease dated March 1, 1963 (the “Lease”) between William G. Hewitt, a married man, and Pearle Hewitt, a single person, Lessors, and John Green and Beverley Green, husband and wife, Lessees, Lessors leased to Lessees certain real property described in the Lease. The real property, including its present improvements to which the Lease now applies is described in Exhibit A attached hereto and is hereinafter referred to as “Eugene.” A Memorandum of the Lease was recorded April 9, 1965 as Reception No. 98820, Deed Records of Lane County, Oregon. The Lessees’ interest in the Lease was assigned by Assignment of Lease dated November 18, 1964 and then acquired by RLA Holding Company, Inc. by merger. The Lease was modified by Lease as Modified dated April 10, 1965, Supplement to Lease as Modified dated October, 1968, Second Supplement to Lease as Modified dated June 26, 1970, Third Supplement to Lease as Modified dated March 1, 1983, Fourth Supplement to Lease as Modified dated December 14, 1983; Fifth Supplement to Lease as Modified dated November 13, 1984; and Sixth Supplement to Lease as Modified dated December 1, 1987. The Lessees’ interest in the Lease was assigned to Red Lion, a California limited partnership, by Assignment of Lease dated December 23, 1987 and recorded in Lane County Official Records on December 23, 1987 as Reception No. 8755362 and by Consent dated December 9, 1987, William G. Hewitt, Trustee, as successor in interest to William G. Hewitt and Pearle A. Hewitt consented to the Assignment. By Letter Agreement dated December 11, 1992, the parties agreed upon rental to be paid for the period ending February 28, 1998. By Assignment and Assumption Agreement dated August 1, 1995 and recorded in Lane County Official Records on August 2, 1995 under Recorder’s Reception No. 9542405, Red Lion assigned its interest in and to the Lease to RLH Partnership, L.P., a Delaware limited partnership (“RLH Partnership”), which document was recorded in Lane County Official Records on August 2, 1995 under Reception No. 9542405. By Guaranty of Lease dated as of August 1, 1995, Red Lion Hotels, Inc., a Delaware corporation, unconditionally and irrevocably guaranteed the prompt payment by RLH Partnership, L.P. of all rental and other sums payable by Lessee under the terms of the Lease and the faithful and punctual performance of all other terms, covenants and conditions of the Lease to be kept and performed by the Lessee. By Consent and Acknowledgment dated July 11, 1995, William G. Hewitt, Trustee, consented to the Assignment and Assumption. By Sixth Supplement to Lease (misnumbered) dated October 31, 1997, William G. Hewitt, Trustee as Lessor and the Lessee entered into agreement for the payment of rent as reflected therein. By Assignment of Lease Agreement dated effective January 1, 1999 William G. Hewitt, Trustee of the Hewitt-Murphy Trust, William G. Hewitt and Pearle Hewitt Murphy assigned to Thunderbird Properties, LLC, an Oregon Limited Liability Company (“Lessor”), all of Lessor’s interest in the Lease as defined therein. By Oregon Statutory Warranty Deeds Dated December 22, 1998 and recorded

January 4, 1999, at Reception Number 99000396, the assignors named in the preceding sentence conveyed all right, title and interest of the grantors in the Property to Thunderbird Properties, LLC. By Seventh Supplement to Lease as Modified dated November 1, 2002, the parties agreed upon rent for the period beginning March 1, 2003 and ending February 29, 2008. The Lease was subsequently modified by the Eighth Supplement to Lease as Modified, dated November 14, 2007. The foregoing are herein collectively referred to as the “Lease.”

B. WHEREAS, Margaret J. Hewett, the Manager of Thunderbird Properties, LLC, is authorized to act on behalf of Lessor.

C. WHEREAS, Eugene is subleased by RLH Partnership to Red Lion Hotels Holdings, Inc., a Delaware corporation (formerly known as Red Lion Hotels, Inc.) (“Holdings”).

D. WHEREAS, RLH Partnership intends to assign, transfer and convey to Purchaser, which is an affiliate of Holdings, all of its interests, rights, duties and obligations under the Lease and Purchaser intends to assume all of RLH Partnership’s interests, rights, duties and obligations under the Lease in each case, pursuant to this Agreement.

NOW, THEREFORE, in consideration of completion of an IRC 1031 Tax-Deferred Exchange by Purchaser and other mutual covenants and promises set forth herein, and other good and valuable consideration the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:

1. Assignment. RLH Partnership hereby assigns, grants, conveys and transfers to Purchaser all of RLH Partnership’s interests, rights, duties and obligations under the Lease as if Purchaser was originally named as lessee under the Lease.

2. Assumption. Purchaser hereby assumes all of RLH Partnership’s interests, rights, duties and obligations under the Lease, as if Purchaser originally was named as lessee under the Lease.

3. Release. Purchaser acknowledges that upon execution of this Agreement, RLH Partnership, and the current and any successor general or limited partners of RLH Partnership shall be released from any and all duties and obligations under the Lease and shall have no personal liability for the performance of any of the obligations assumed by Holdings pursuant to this Agreement.

4. Miscellaneous. This Agreement shall be binding upon and inure to the benefit of Purchaser and its successors and assigns.

[Signature Page to Follow]

IN WITNESS WHEREOF, the parties hereto have executed this Assignment and Assumption Agreement as of the date first above written.

PURCHASER:
WHC809, LLC, a Delaware limited liability company
By:
	Name:
	Title:

STATE OF	)
	)	ss
COUNTY OF	)

On                                     , 2011 before me,                                      personally appeared                                     , personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacity and that by their signatures on the instrument these persons, or the entity upon behalf of which these persons acted, executed the instrument.

WITNESS my hand and official seal.

 Notary Public, in and for the state

of

Residing at

My Appointment Expires:

(print name)

[RLH Partnership Signature Page to Follow]

RLH PARTNERSHIP:
RLH Partnership, L.P., a Delaware limited partnership
By:	Red Lion G.P., Inc., a Delaware corporation general partner
By:

Name:

Title:

STATE OF	)
	)	ss
COUNTY OF	)

On                         , 2011 before me,                                                   personally appeared                                                      , personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacity and that by their signatures on the instrument these persons, or the entity upon behalf of which these persons acted, executed the instrument.

WITNESS my hand and official seal.

Notary Public, in and for the state

of                                      , Residing at

My Appointment Expires:

(print name)

Exhibit A

Legal Description

A parcel of land lying within Section 29, Township 17 South, Range 3 West of the Willamette Meridian, in Lane County, Oregon: Beginning at the concrete monument designated as Station “A” in County Survey Number 1781, said survey being filed in Volume 5, Page 41 of County Surveys for Lane County, Oregon, said Station “A” being East 13.34 chains of the Southeast corner of the Charles W. Young Donation Lane Claim No. 53, Township 17 South, Range 3 West of the Willamette Meridian, according to said survey; thence South 0°10’20” East, 957.88 feet along the West line of said survey to the North line of the Eugene-Springfield Highway; thence North 77°37’30” West, 620.02 feet along the North line of said highway; thence North 1°31’ West 68.07 feet along the North line of said highway to a point on the Southeasterly line of Coburg Road; thence North 55°29’21” East 340.90 feet along the Southeasterly line of Coburg Road to a point; thence South 35°03’40” East 205.36 feet; thence North 35°03’40” West 4.31 feet; thence North 48°03’290” East 50.29 feet to the TRUE POINT OF BEGINNING, all in the City of Eugene, Lane County, Oregon.

ALSO: Beginning at a point on the Easterly right of way line of County Road No. 431, said point being 1142.75 feet North and 181.36 feet West of the Southwest corner of County Survey No. 1781 in Section 29, Township 17 South, Range 3 West of the Willamette Meridian; running thence South 34°32’ East 204.26 feet to the true point of beginning; thence South 55°28’ West 180 feet; thence South 34°32’ East 30 feet; thence North 55°28’ East 180 feet; thence North 34°32’ West 30 feet to the true point of beginning, in Lane County, Oregon.

85

EXHIBIT H

Legal Description of Seven Sale Properties

and Ground Leased Properties

Bend-North, Oregon

EXHIBIT A

PROPERTY DESCRIPTION

(Property: Bend-North, OR)

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

NOTE: Property address is: 1415 NE 3rd Street, Bend, OR 97701

Boise Downtowner

Idaho

EXHIBIT A

PROPERTY DESCRIPTION

(Property: Boise, ID)

The land is situated in the State of Idaho, County of Ada, and is described as follows:

PARCEL A:

PARCEL I:

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

Beginning at the intersection of the Easterly boundary of 22nd Street and Northerly boundary of Fairview Avenue, being the Southwest corner of Block 41 of FAIRVIEW ADDITION, said point being THE TRUE POINT OF BEGINNING; thence

North 0°00’00” East 350.16 feet along the Easterly boundary of said 22nd street to a point on the Southerly boundary of Main Street; thence

North 89°59’20” East 157.99(8) feet along the said Southerly boundary of Main Street to a point; thence

South 89°50’40” East 157.98(151.50) feet along the said Southerly boundary of Main Street to a point; thence

South 54°50’40” East 57.50 feet along the said Southerly boundary of Main Street to a point; thence

South 1°57’20” West 192.00 feet to a point, said point being the Southeast corner of said Lot 14 in Block 9 of said McCARTY’S SECOND ADDITION; thence

North 88°02’40” West 230.08 feet to a point; thence

South 2°53’20” West 136.32 feet to a point on the Northerly boundary of said Fairview Avenue; thence

North 88°13’50” West 113.20 feet along the said Northerly boundary of said Fairview Avenue to the POINT OF BEGINNING.

PARCEL II:

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

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

Commencing at the Northwest corner of said Lot 10, said point being the TRUE POINT OF BEGINNING; thence

South 88°02’40” East 20.00 feet along the Northerly boundary of said Lot 10 to a point; thence

South 46°57’20” West 28.28 feet to a point on the Westerly boundary of said Lot 10; thence

North 1°57‘20” East 20.00 feet along the said Westerly boundary of said Lot 10 to the POINT OF BEGINNING.

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

Beginning at a lead plug and tack marking the Northwest corner of Lot 2 of Block 40 of FAIRVIEW ADDITION, a subdivision, according to the official plat thereof, filed in Book 2 of Plats at Page 73, Official Records; thence

South 0°00’00” West 350.16 feet along the Westerly boundaries of said Lot 2 of Block 40 of FAIRVIEW ADDITION, Block 40-A CITIZEN’S RIGHT-OF-WAY, a subdivision, according to the official plat thereof, filed in Book 7 of Plats at Page 341, and Block 41 of said FAIRVIEW ADDITION, which is also the Easterly right-of-way line 22nd Street, to a point marking, the Southwest corner of the said Block 41 of FAIRVIEW ADDITION; thence

South 88°13’50” East 190.58 feet along the Southerly boundary of the said Block 41 of FAIRVIEW ADDITION, Block 40-A of Citizens Right-of-Way, the adjacent alley to the said Lot 10 of Block 9, McCARTY’S SECOND ADDITION, all of Lot 10 and a portion of Lot 9 of Block 9 of McCARTY’S SECOND ADDITION, which is also the Northerly right-of-way line of Fairview Avenue, to a point, also said point being the REAL POINT OF BEGINNING; thence continuing

South 88°13’50” East 30.0 feat along the said Southerly boundaries of Lots 10 and 9 of Block 9 of McCARTY’S SECOND ADDITION to a point; thence

North 1°57’20” East 99.95 feet along a line 25.00 feet Westerly of and parallel with the Easterly boundary of the said Lot 9 of Block 9 of McCARTY’S second ADDITION to a iron pin; thence

North 46°57’20” East 28.28 feet to an iron pin on the Northerly boundary line of the said Lot 9 of Block 9 of McCARTY’S SECOND ADDITION; thence

North 88°02’40” West 50.00 feet along the said Northerly boundary of Lot 9 and the Northerly boundary of the said Lot 10 of Block 9 of McCARTY’S SECOND ADDITION to a iron pin; thence

2

South 1°57’20” West 120.05 feet along line 5.00 feet Westerly of and parallel with Easterly boundary of the said Lot 10 of Block 9 of McCARTY’S SECOND ADDITION to THE REAL POINT OF BEGINNING.

PARCEL III:

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

PARCEL IV:

Lots 15 and 16 of Block 9 of McCARTY’S SECOND ADDITION, according to the official plat thereof, filed in Book 2 of Plats at Page 85, Official Records of Ada County, Idaho and that portion of 18th Street, now vacated, described as follows:

Beginning at the Northeast corner of said Lot 16; thence West 100 feet; thence

North 69.88 feet; thence

Southeast 119.28 feet; thence

South 4.86 feet to THE POINT OF BEGINNING.

PARCEL V:

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

Beginning at a lead plug and tack marking the Northwest corner of Lot 2 of Block 40 of FAIRVIEW ADDITION, a subdivision, according to the official plat thereof, filed in Book 2 of Plats at Page 73, Official Records; thence

South 0°00’00” West 350.16 feet along the Westerly boundaries of said Lot 2 of Block 40 of FAIRVIEW ADDITION, Block 40-A CITIZEN’S RIGHT-OF-WAY, a subdivision, according to the official plat thereof, filed in Book 7 of Plats at Page 341, and Block 41 of said FAIRVIEW ADDITION, which is also the

3

Easterly right-of-way line 22nd Street, to a point marking the Southwest corner of the said Block 41 of FAIRVIEW ADDITION; thence

South 88°13’50” East 145.58 feet along the Southerly boundaries of said Block 41 of FAIRVIEW ADDITION and Block 40-A of CITIZENS RIGHT-OF-WAY and adjacent alley to said Lot 10 of Block 9 OF McCARTY’S SECOND ADDITION which is also the Northerly right-of-way line of FAIRVIEW AVENUE, to a point marking the Southwest corner of the said Lot 10 of Block 9 of McCARTY’S SECOND ADDITION, also said point being the REAL POINT OF BEGINNING; thence

North 1°57’20” East 100.20 feet along the Westerly boundary of the said Lot 10 of Block 9 of McCARTY’S SECOND ADDITION to an iron pin; thence

North 46°57’20” East 26.28 feet to an iron pin on the Northerly boundary of the said Lot 10 of Block 9 of McCARTY’S SECOND ADDITION; thence

South 88°02’40” East 25.00 feet along the said Northerly boundary of the said Lot 10 of Block 9 of McCARTY’S SECOND ADDITION to an iron pin; thence

North 1°57’20” East 16.0 feet along a line Westerly of and parallel with the Westerly boundary extended of the said Lot 9 in Block 9 or McCARTY’S SECOND ADDITION to an iron pin on the Northerly boundary of the said 16-foot alley; thence

North 88°02’40” West 75.16 feet along the said Northerly boundary of the said 16-foot alley to an iron pin on the Westerly

boundary of the said McCARTY’S SECOND ADDITION; thence

South 2°53’20” West 136.32 feet along the said Westerly boundary of McCARTY’S SECOND ADDITION, which is also the Westerly boundary of the said adjacent alley to Lot 10 of Block 9 of McCARTY’S SECOND ADDITION, to a point marking the Southwest corner of the said adjacent alley to Lot 10 of Block 9 of McCARTY’S SECOND ADDITION; thence

South 88°13’50” East 32.38 feet along the said Southerly boundary of the adjacent alley to Lot 10 of Block 9 of McCARTY’S SECOND ADDITION to the REAL POINT OF BEGINNING.

PARCEL VI:

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

PARCEL B:

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

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

Beginning at the Northeast corner of Lot 18 in Block 9 of said McCARTY’S SECOND ADDITION; thence

4

Southerly along the Easterly boundary line of said Lot 18 a distance of 12.2 feet to a point that bears

North 87°54’04” West, 58.74 feet from Station 80456.72 of Boise, One Way Couplet, Project No. U-3021 (21) Highway Survey; thence Northwesterly along a 140.50 foot radius curve left 35.94 feet to a point that bears

South 35°10’41” West 42.38 feet from Station 79462.58 of said Highway Survey; thence Northerly 3.0 feet, more or less, to a point in the Northeasterly line of said Lot 18 that bears

South 35°10’41” West 40.00 feet from Station 79460.90 of said Highway Survey; thence Southeasterly along the Northeasterly line of said Lot 18 to the PLACE OF BEGINNING.

AND

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

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

Beginning at the East corner of Lot 19 in Block 9 of said MCCARTY’S SECOND ADDITION; thence

Westerly along the South boundary line of said Lot 19, a distance of 95.44 feet to the Southwest corner thereof; thence

North 62°17’36” East 23.12 feet to a point that bears North 87°54’04” West 38.67 feet from Station 80194.74 of Boise, One- Way Couplet, Project No. U-3021 (21) Highway Survey; thence

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Northwesterly along a 140.50 foot radius curve left 55.10 feet to a point in the Westerly line of said Lot 19 that bears

North 87°54’04” West, 58.74 feet from Station 80+56.73 of said Highway Survey; thence

Northerly along said Westerly line 12.7 feet, to the Northwesterly corner of said Lot 19; thence

Southeasterly along the Northeasterly boundary line of said Lot 19 to the REAL POINT OF BEGINNING.

6

Coos Bay, Oregon

EXHIBIT A

PROPERTY DESCRIPTION

(Property: Coos Bay, OR)

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

More particularly described as follows:

Beginning at the Southwest corner of Block 35, Nasburg’s Addition to Coos Bay; thence 00° 00’ 20” West a distance of 171.17 feet; thence North 60° 30’ 00” East a distance of 591.96 feet to a point located on the Westerly line of U.S. Highway 101; thence along said Westerly line along a curve to the left having a radius of 1949.86 feet and a central angle of 1° 36’ 18” a distance of 54.62 feet (whose long chord bears South 40° 18’ 48” East 54.62 feet); thence along a spiral curve to the left having a centerline length of 300.00 feet and an S value of 4° 30’ (whose long chord bears South 42° 24’ 10” East 303.05 feet); thence South 43° 54’ 35” East a distance of 241.83 feet to the beginning of a curve; thence along a curve to the right having a radius of 13.50 feet and a central angle of 133° 54’ 00” a distance of 31.54 feet (whose long chord bears South 23° 02’ 25” West 24.84 feet); thence South 89° 59’ 25” West a distance of 471.94 feet; thence North 00° 01’ 40” East a distance of 99.97 feet; thence South 89° 59’ 25” West a distance of 242.89 feet, thence South 00° 04’ 35” West a distance of 99.97 feet; thence South 89° 59’ 25” West a distance of 197.97 feet to the point of beginning.

Eugene, Oregon

EXHIBIT A

PROPERTY DESCRIPTION

(Property: Eugene, OR)

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

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

Kelso, Washington

EXHIBIT A

PROPERTY DESCRIPTION

(Property: Kelso, WA)

IN THE COUNTY OF COWLITZ, STATE OF WASHINGTON

PARCEL A:

A tract of land in Sections 26 and 35, Township 8 North, Range 2 West of the Willamette Meridian, lying Easterly of the Easterly right of way line of Frontage Road No. 1, as proposed, and lying Westerly of the center line of the existing drainage slough, being more particularly described as follows:

BEGINNING at a point on the line between Sections 26 and 35, where the same intersects the center line of said drainage slough, said point being North 88° 57’ West a distance of 1,889.02 feet from the Southeast corner of Section 26;

thence South 37° 38’ East along the center line of said drainage slough a distance of 415.51 feet;

thence North 88° 57’ West parallel with the section line between Sections 26 and 35, a distance of 645.63 feet, more or less, to the Easterly right of way line of proposed Frontage Road No. 1;

thence North 8°16’ East along the Easterly right of way of said proposed Frontage Road a distance of 280.31 feet to a point that is North 88° 04’ East a distance of 127.60 feet from a concrete post set to mark the Easterly right of way of existing Interstate Highway No. 5 at Engineer’s Station 510+00;

thence continuing North 8° 16’ East along the Easterly line of the proposed Frontage Road a distance of 360.19 feet to the point of curvature of a curve to the right;

thence along said curve having a radius of 400.00 feet, through a central angle of 3° 36’ 54”, an arc distance of 25.24 feet to a point that is a distance of 216.55 feet North 88° 04’ East from the Easterly right of way line of present Interstate Highway No. 5;

thence North 88° 04’ East a distance of 208.98 feet to the center line of the aforementioned slough;

thence along the center line of said slough South 18° 45’ West a distance of 78.60 feet;

thence South 17° 39’ East a distance of 230.80 feet;

thence South 37° 38’ East along the center line of said slough a distance of 68.37 feet to the point of beginning.

TOGETHER WITH an easement for ingress and egress, 25 feet in width, lying South of and abutting the Westerly extension of the North line of the above described tract, and extending from the Easterly right of way line of Primary State Highway No. 1 to the Westerly line of said premises.

TOGETHER WITH a non-exclusive right of way and easement over the following:

A tract of land in Section 26, Township 8 North, Range 2 West of the Willamette Meridian, described as follows:

BEGINNING at a point on the Easterly right of way line of Primary State Highway No. 1 North 1° 56’ West a distance of 314.1 feet and West 2389.6 feet from the Southeast corner of Section 26;

thence along said right of way North 1° 56’ West a distance of 28.7 feet to a point at right angles to center line Station 514+07.5 of said highway;

thence along said right of way North 3° 51’ 30” West a distance of 195.8 feet to a point on a radial line from center line station 516+00 and marked by a concrete post;

thence along said right of way on a curve to the right having a radius of 381.26 feet for 75.5 feet to the center line of the box culvert under said highway and also the center line of a ditch that bears North 76° 00’ East;

thence along said right of way on a curve to the right having a radius of 381.26 feet for 110.0 feet;

thence Southerly to a point which is Easterly of said highway right of way line 25 feet on the center line of said ditch that bears North 76° 00’ East;

thence Southerly on a line that is parallel to and 25 feet Easterly of said highway right of way line to the point of intersection with a line that bears North 88° 04’ East from the point of beginning;

thence Westerly along said line to the point of beginning.

EXCEPTING THEREFROM those portions conveyed to the Department of Highways by deed recorded under Auditor’s File Nos. 787154 and 787155.

PARCEL B:

BEGINNING 1476.4 feet North 1° 38’ East and 1882.7 feet North 88° 22’ West from the Southeast corner of said Section 26, Township 8 North, Range 2 West, Willamette Meridian, Cowlitz County, Washington, said point being the Northeast corner of a 5.5 acre tract of land described in Volume 620, Page 571, Cowlitz County, Washington, deed records;

thence along the center of a ditch South 4° 00’ East 369.2 feet;

thence South 28° 55’ West 262.06 feet to a point 50.00 feet distant at right angles to State Highway centerline FR RD NO. (1) 29+32.79 P.C.;

thence continuing parallel to the FR RD NO. (1) centerline South 30° 15’ 59” West 278.17 feet to a point 50.00 feet distant at right angles to centerline station FR RD NO. (1) 26+54.62 P.T.;

thence continuing parallel to the FR RD NO. (1) centerline along a curve left having a radius of 950.00 feet (the long chord of which bears South 24° 34’ 58” West 188.17 feet) 188.48 feet to the true point of beginning;

thence continuing parallel to the FR RD NO. (1) centerline along a curve having a radius of 950.00 feet (the long chord of which bears South 15° 43’ 57” West 104.95 feet) 105.00 feet;

thence North 89° 42’ East 224.88 feet to the center of an old river channel;

thence North 20° 32’ East along the center of said channel 105.00 feet;-

thence North 89° 38’ 21” West 233.27 feet to the true point of beginning.

2

Pendleton, Oregon

EXHIBIT A

PROPERTY DESCRIPTION

(Property: Pendleton, OR)

TRACT I:

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

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

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

TRACT II:

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

Sacramento Inn

California

EXHIBIT A

PROPERTY DESCRIPTION

(Property: Sacramento, CA )

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

PARCEL 1:

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

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

EXCEPTING THEREFROM ANY PORTION THEREOF WHICH MAY BE WITHIN THE FOLLOWING:

BEGINNING AT A POINT IN SECTION 15 FROM WHICH THE SOUTHEAST CORNER OF SAID SECTION 15 BEARS THE FOLLOWING EIGHT (8) COURSES AND DISTANCES: NORTH 89°09’ WEST 323.88 FEET; SOUTH 11°19’10” EAST 345.57 FEET; SOUTH 25°12’00” EAST 167.93 FEET; SOUTH 47°28’00” EAST 102.09 FEET; AND SOUTH 55°51’10” EAST 454.55 FEET; SOUTH 30°19’50” WEST 50.00 FEET TO A POINT ON THE CENTER LINE OF ARDEN WAY, A PUBLIC ROAD 60.00 FEET IN WIDTH,

SAID POINT BEING ON THE NORTHEASTERLY LINE OF THAT CERTAIN PROPERTY ACQUIRED BY THE STATE OF CALIFORNIA, AS DESCRIBED IN THE FINAL DECREE OF CONDEMNATION IN THE MATTER OF THE STATE OF CALIFORNIA VS. ROBERT SWANSTON, ET AL, A CERTIFIED COPY THEREOF, RECORDED IN THE OFFICE OF THE RECORDER OF SACRAMENTO COUNTY IN BOOK 1769 OF OFFICIAL RECORDS AT PAGE 470, ET SEQ., SOUTH 59°40’10” EAST 3652.94 FEET ALONG SAID CENTER LINE AND THE NORTHEASTERLY LINE OF SAID STATE OF CALIFORNIA PROPERTY TO A POINT ON THE CENTER LINE OF ETHAN WAY, A PUBLIC ROAD 60.00 FEET IN WIDTH AND NORTH 01°46’30” WEST 18.54 FEET ALONG SAID CENTER LINE TO THE SAID SOUTHEAST CORNER OF SAID SECTION 15; THENCE FROM SAID POINT OF BEGINNING SOUTH 89°09’00” EAST 81.28 FEET; THENCE NORTH 02°07’40” WEST 87.21 FEET; THENCE NORTH 39°35’00” EAST 233.43 FEET; THENCE SOUTH 34°01’30” EAST 248.78 FEET; THENCE SOUTH 50°42’00” WEST 321.00 FEET; THENCE NORTH 39°18’00” WEST 185.64 FEET TO THE POINT OF BEGINNING.

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

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

PARCEL 1-A:

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

BEGINNING AT THE SOUTHWEST CORNER OF THE ABOVE DESCRIBED PARCEL NO. 1; THENCE FROM SAID POINT OF BEGINNING ALONG THE EASTERN LINE OF THE ABOVE REFERRED TO 7.32 ACRE TRACT OF LAND DESCRIBED IN THE DEED RECORDED IN BOOK 2280 OF OFFICIAL RECORDS AT PAGE 331, SOUTH 11°19’10” EAST 285.00 FEET; THENCE ALONG THE ARC OF A CURVE TO THE LEFT WITH A RADIUS OF 350.00 FEET, THE CHORD OF WHICH BEARS SOUTH 25°12’ EAST 167.93 FEET TO THE WESTERN LINE OF THE PROPERTY DESCRIBED IN THE DEED FROM

2

HERATY & GANNON TO SEARS, ROEBUCK & CO., RECORDED MAY 5, 1955, IN BOOK 2825 OF OFFICIAL RECORDS AT PAGE 200, THE EASTERN LINE OF SAID 50 FOOT STRIP TO BE EXTENDED OR SHORTENED SO AS TO EXTEND, FROM THE SOUTHERN LINE OF PARCEL NO. 1, ABOVE DESCRIBED IN DEED TO SEARS, ROEBUCK & CO., RECORDED IN BOOK 2825 OF OFFICIAL RECORDS AT PAGE 200.

PARCEL l-B:

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

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

A STRIP OF LAND 40.00 FEET WIDE, THE CENTERLINE OF SAID STRIP BEGINNING AT A POINT ON THE NORTHERLY LINE OF ARDEN WAY, A PUBLIC ROAD, AS SAID ROAD IS SHOWN ON THE PLAT OF SURVEY ENTITLED “A PORTION OF SECTIONS 15, 64 AND 65 OF RANCHO DEL PASO”., RECORDED IN THE OFFICE OF THE SACRAMENTO COUNTY RECORDER IN BOOK 9 OF SURVEYS, MAP NO. 22, FROM WHICH POINT OF BEGINNING THE SOUTHEAST CORNER OF SAID SECTION 15 BEARS SOUTH 30°19’50” WEST 30.00 FEET TO A POINT ON THE CENTERLINE OF ARDEN WAY, AND ALONG SAID CENTERLINE SOUTH 59°40’10” WEST 3,583.93 FEET TO A POINT ON THE CENTERLINE OF ETHAN WAY, A PUBLIC ROAD 60.00 FEET IN WIDTH, AND NORTH 01°46’30” WEST 18.54 FEET ALONG SAID CENTERLINE TO SAID SOUTHEAST CORNER; THENCE FROM SAID POINT OF BEGINNING NORTH 30°19’50” EAST 103.0 FEET; THENCE NORTH 59°40’10” WEST 616.57 FEET MORE OR LESS TO A POINT ON THE WESTERLY BOUNDARY OF PARCEL I AS SAID PARCEL IS SHOWN ON “RECORD OF SURVEY, PORTION OF SECTIONS 15 AND 66, RANCHO DEL PASO”, RECORDED IN THE OFFICE OF THE SACRAMENTO COUNTY RECORDER IN BOOK 21 OF SURVEYS, MAP NO. 13.

PARCEL 2:

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

BEGINNING AT A POINT IN SAID SECTION 15 FROM WHICH THE SOUTHEAST CORNER OF SAID SECTION 15 BEARS THE FOLLOWING EIGHT (8) COURSES AND DISTANCES: NORTH 89°09’ WEST 323.88 FEET; SOUTH 11°19’10” EAST 345.57 FEET; SOUTH 25°12’00” EAST 167.93 FEET; SOUTH 47°28’00” EAST 102.09 FEET; AND SOUTH 55°51’10”

3

EAST 454.55 FEET; SOUTH 30°19’50” WEST 50.00 FEET TO A POINT ON THE CENTER LINE OF ARDEN WAY, A PUBLIC ROAD 60.00 FEET IN WIDTH, SAID POINT BEING ON THE NORTHEASTERLY LINE OF THAT CERTAIN PROPERTY ACQUIRED BY THE STATE OF CALIFORNIA, AS DESCRIBED IN THE FINAL DECREE OF CONDEMNATION IN THE MATTER OF THE STATE OF CALIFORNIA VS. ROBERT SWANSTON, ET AL, A CERTIFIED COPY THEREOF RECORDED IN THE OFFICE OF THE RECORDER OF SACRAMENTO COUNTY IN BOOK 1780 OF OFFICIAL RECORDS AT PAGE 470, ET SEQ., SOUTH 59°40’10” EAST 3653.94 FEET ALONG SAID CENTER LINE AND THE NORTHEASTERLY LINE OF SAID STATE OF CALIFORNIA PROPERTY TO A POINT ON THE CENTER LINE OF ETHAN WAY, A PUBLIC ROAD 60.00 FEET IN WIDTH AND NORTH 01°46’30” WEST 18.54 FEET ALONG SAID CENTER LINE TO SAID SOUTHEAST CORNER OF SAID SECTION 15; THENCE FROM SAID POINT OF BEGINNING SOUTH 89°09’00” EAST 81.28 FEET; THENCE NORTH 02°07’40” WEST 87.21 FEET; THENCE NORTH 39°35’00” EAST 233.43 FEET; THENCE SOUTH 34°01’30” EAST 248.78 FEET; THENCE SOUTH 50°42’00” WEST 321.0 FEET; THENCE NORTH 39°18’00” WEST 185.64 FEET TO THE POINT OF BEGINNING.

EXCEPTING THEREFROM ALL THAT PORTION OF “PARCEL H”, AS SAID PARCEL IS SHOWN ON THAT CERTAIN RECORD OF SURVEY ENTITLED “PORTION OF SECTIONS 15 AND 6.6, RANCHO DEL PASO”, RECORDED IN THE OFFICE OF THE RECORDER OF SACRAMENTO COUNTY, IN BOOK 21 OF SURVEYS, MAP NO. 13, DESCRIBED AS FOLLOWS:

BEGINNING AT THE MOST EASTERLY CORNER OF SAID “PARCEL H”; THENCE FROM SAID POINT OF BEGINNING ALONG THE NORTHEASTERLY LINE OF SAID “PARCEL H” NORTH 34°01’30” WEST 166.69 FEET TO A POINT ON THE SOUTHEASTERLY LINE OF THAT CERTAIN 50.00 FOOT ROAD EASEMENT DESCRIBED IN THAT CERTAIN DEED RECORDED IN THE OFFICE OF THE SAID RECORDER IN BOOK 2825 OF OFFICIAL RECORDS, PAGE 202, SAID EASEMENT BEING DESIGNATED (EASEMENT NO. 5) ON SAID RECORD OF SURVEY; THENCE ALONG THE SOUTHEASTERLY AND EASTERLY LINE OF SAID 50.00 FOOT ROAD EASEMENT THE FOLLOWING THREE (3) COURSES AND DISTANCES: (1) SOUTH 50°42’00” WEST 33.71 FEET; (2) CURVING TO THE LEFT ON AN ARC OF 68.33 FOOT RADIUS, SAID ARC BEING SUBTENDED BY A CHORD BEARING SOUTH 04°29’00” EAST 112.20 FEET AND (3) SOUTH 59°40’10” EAST 78.79 FEET TO A POINT ON THE SOUTHEASTERLY LINE OF SAID “PARCEL H” ; THENCE ALONG THE SOUTHEASTERLY LINE OF SAID “PARCEL H” NORTH 50°42’00” EAST 55.02 FEET TO THE POINT OF BEGINNING.

PARCEL 3:

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

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

4

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

PARCEL 4:

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

BEGINNING AT A POINT ON THE NORTHWESTERN LINE OF PROPERTY DESCRIBED IN THE DEED FROM PHILIP F. HERATY, ET UX, TO WILLIAM G. GANNON, ET UX, DATED JULY 17, 1958 AND RECORDED JULY 18, 1958, IN BOOK” 3550 OF OFFICIAL RECORDS AT PAGE 255, SAID POINT BEING LOCATED SOUTH 50°42’ WEST 323.47 FEET FROM THE MOST WESTERN CORNER OF LOT 548, AS SHOWN ON THE OFFICIAL “PLAT OF SWANSTON ESTATES UNIT NO. 5”, RECORDED MAY 29, 1958, IN BOOK 49 OF MAPS, MAP NO. 13; THENCE FROM SAID POINT OF BEGINNING SOUTH 50°42’ WEST 220.00 FEET TO A POINT ON THE NORTHEASTERN LINE OF PROPERTY DESCRIBED IN THE LEASE EXECUTED BY HERATY & GANNON, A CO-PARTNERSHIP, AS LESSOR, AND SACRAMENTO INN, INC., A CORPORATION, AS LESSEE, DATED JANUARY 10, 1957, AND RECORDED MAY 3, 1957, IN BOOK 3294 OF OFFICIAL RECORDS AT PAGE 30; THENCE ALONG THE NORTHEASTERN LINE OF SAID SACRAMENTO INN, INC., A PROPERTY NORTH 34°01’30” WEST 200.00 FEET; THENCE NORTH 50°42’ EAST 220.00 FEET; THENCE SOUTH 34°01’30” EAST 200.0 FEET TO THE POINT OF BEGINNING.

PARCEL 5:

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

BEGINNING AT THE NORTHWEST CORNER OF LOT 540, AS SHOWN ON THE “PLAT OF SWANSTON ESTATES UNIT NO. 5”, RECORDED MAY 29, 1958, IN BOOK 49 OF MAPS, MAP NO. 13; THENCE FROM SAID POINT OF BEGINNING ALONG THE WESTERLY BOUNDARY OF SAID SWANSTON ESTATES UNIT NO. 5, THE FOLLOWING THREE COURSES AND DISTANCES; SOUTH 00°57’30” EAST 144.50 FEET, SOUTH 21°00’02” WEST 99.05 FEET AND SOUTH 50°42’00” WEST 234.00 FEET; THENCE CONTINUING SOUTH 50°42’00” WEST 323.47 FEET; THENCE NORTH 34°01’30” WEST 200.00

5

FEET; THENCE SOUTH 50°43’00” WEST 220.00 FEET; THENCE NORTH 34°01’30” WEST 275.85 FEET TO A POINT ON THE SOUTHEASTERLY LINE OF A ROADWAY; THENCE NORTH 31°38’20” EAST 93.47 FEET AND NORTH 39°17’30” EAST 512.87 FEET; THENCE NORTH 89°02’30” EAST 43.20 FEET; THENCE CURVING TO THE RIGHT ON AN ARC OF 143.42 FEET RADIUS, SAID ARC BEING SUBTENDED BY A CHORD BEARING SOUTH 62°51’35” EAST 135.10 FEET; THENCE CURVING TO THE LEFT ON AN ARC OF 195.42 FOOT RADIUS, SAID ARC BEING SUBTENDED BY A CHORD BEARING. SOUTH 62°51’35” EAST 184.08 FEET AND THENCE NORTH 89°02’30” EAST 200.00 FEET TO THE POINT OF BEGINNING.

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

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

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

BEGINNING AT THE NORTHEAST CORNER OF SAID “PARCEL A” SAID CORNER ALSO BEING THE NORTHWEST CORNER OF LOT 540 AS SAID LOT IS SHOWN ON THE OFFICIAL “PLAT OF SWANSTON ESTATES UNIT NO. 5”, RECORDED IN THE OFFICE OF SAID RECORDER IN BOOK 49 OF MAPS, MAP NO. 13; THENCE FROM SAID POINT OF BEGINNING ALONG THE EAST BOUNDARY OF SAID “PARCEL A” AND THE WEST BOUNDARY OF SAID SWANSTON ESTATES UNIT NO. 5, THE FOLLOWING TWO (2) COURSES AND DISTANCES: (1) SOUTH 00°57’30” EAST 144.50 FEET AND (2) SOUTH 21°02’00” WEST 55.00 FEET; THENCE SOUTH 89°02’30” WEST 347.04 FEET; THENCE NORTH 50°42’30” WEST 360.41 FEET TO A POINT ON THE NORTHWESTERLY BOUNDARY OF SAID “PARCEL B”; THENCE ALONG THE NORTHWESTERLY BOUNDARY OF SAID “PARCEL B” NORTH 39°17’30” EAST 148.00 FEET TO THE NORTHWEST CORNER OF SAID “PARCEL B”; THENCE ALONG THE NORTH BOUNDARY OF SAID “PARCEL A” AND “PARCEL B” THE FOLLOWING FOUR (4) COURSES AND

6

DISTANCES: (1) NORTH 89°02’ 30” EAST 65.52 FEET; (2 ) CURVING TO THE RIGHT ON AN ARC OF 143.42 FOOT RADIUS, SAID ARC BEING SUBTENDED BY A CHORD BEARING SOUTH 62°51’35” EAST 135.10 FEET; (3) CURVING TO THE LEFT ON AN ARC OF 195.42 FOOT RADIUS, SAID ARC BEING SUBTENDED BY A CHORD BEARING SOUTH 62°51’35” EAST 184.08 FEET AND (4) NORTH 89°02’30” EAST 200.00 FEET TO THE POINT OF BEGINNING.

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

PARCEL 6:

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

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

PARCEL 7:

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

BEGINNING AT THE MOST SOUTHERLY CORNER OF SAID PARCEL H; THENCE FROM SAID POINT OF BEGINNING ALONG THE SOUTHEASTERLY BOUNDARY OF SAID PARCEL H NORTH 30°19’50” EAST 96.82 FEET; THENCE CONTINUING ALONG THE SOUTHEASTERLY BOUNDARY OF SAID PARCEL H NORTH 50°42’00” EAST 677.21 FEET TO THE MOST EASTERLY CORNER OF SAID PARCEL H; THENCE ALONG THE BOUNDARY OF SAID PARCEL H NORTH 34°01’30” WEST 166.69 FEET TO A POINT ON THE SOUTHEASTERLY LINE OF THAT CERTAIN 50.00 FOOT ROAD EASEMENT DESCRIBED IN THE DOCUMENT RECORDED IN THE OFFICE OF SAID RECORDER IN BOOK 3497 OF OFFICIAL RECORDS, AT PAGE 131; THENCE ALONG THE SOUTHEASTERLY AND EASTERLY LINE OF SAID 50.00 FOOT

7

ROAD EASEMENT THE FOLLOWING THREE (3) COURSES AND DISTANCES: (1) SOUTH 50°42’00” WEST 33.71 FEET; (2) CURVING TO THE LEFT ON AN ARC OF 68.33 FOOT RADIUS, SAID ARC BEING SUBTENDED BY A CHORD BEARING SOUTH 04°09’00” EAST 112.20 FEET AND (3) SOUTH 59°40’10” EAST 36.12 FEET TO A POINT ON THE SOUTHEASTERLY LINE OF THAT CERTAIN 1.549 ACRE TRACT OF LAND DESCRIBED AS PARCEL NO. 2 IN THE DEED RECORDED IN THE OFFICE OF SAID RECORDER IN BOOK 7608-31 OF OFFICIAL RECORDS, AT PAGE 1333; THENCE ALONG THE BOUNDARY OF SAID 1.589 ACRE TRACT OF LAND THE FOLLOWING TWO (2) COURSES AND DISTANCES: (1) SOUTH 50°42’00” WEST 247.43 FEET TO THE MOST SOUTHERLY CORNER OF SAID 1.549 ACRE TRACT OF LAND AND (2) NORTH 39°13’00” WEST 110.85 FEET TO A POINT ON THE SOUTHEASTERLY LINE OF THAT CERTAIN 8.001 ACRE TRACT OF LAND DESCRIBED AS PARCEL NO. 1 IN THE DEED RECORDED IN THE OFFICE OF SAID RECORDER IN BOOK. 7608-31 OF OFFICIAL RECORDS AT PAGE 1333; THENCE ALONG THE BOUNDARY OF SAID 8.001 ACRE TRACT OF LAND THE FOLLOWING TWO (2) COURSES AND DISTANCES: (1) SOUTH 41°46’30” WEST 15.04 FEET TO THE MOST SOUTHERLY CORNER OF SAID 8.001 ACRE TRACT OF LAND AND (2) NORTH 87°38’40” WEST 350.40 FEET TO A POINT ON THE NORTHEASTERLY BOUNDARY OF THAT CERTAIN 7.32 ACRE TRACT OF LAND DESCRIBED IN THE DEED RECORDED IN THE OFFICE OF SAID RECORDER IN BOOK 2280 OF OFFICIAL RECORDS AT PAGE 331; SAID POINT ALSO BEING LOCATED ON THE WESTERLY LINE OF SAID PARCEL H; THENCE ALONG SAID NORTH-EASTERLY BOUNDARY AND SAID WESTERLY LINE THE FOLLOWING TWO (2) COURSES AND DISTANCES: (1) SOUTH 11°19’00” EAST 286.27 FEET AND (2) CURVING TO THE LEFT ON AN ARC OF 350.00 FOOT RADIUS, SAID ARC BEING SUBTENDED BY A CHORD BEARING SOUTH 25°33’54” EAST 167.10 FEET TO THE POINT OF BEGINNING.

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

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Wenatchee, Washington

EXHIBIT A

PROPERTY DESCRIPTION

(Property: Wenatchee, WA)

The land is in the County of Chelan, State of Washington and is described as follows:

Lot 1, 2, 3 and 4, Block 11, Suburban Home Addition to Wenatchee, Chelan County, Washington, according to the plat thereof recorded in Volume 1 of Plats, Page 22, EXCEPT the Southerly 76.9 feet of said Lots 3 and 4.

EXHIBIT I

Purchaser’s Knowledge and Known to Purchaser

Tom McKeirnan

EXHIBIT J

REAFFIRMATION OF GUARANTY OF LEASE OBLIGATIONS

THIS REAFFIRMATION OF GUARANTY OF LEASE OBLIGATIONS (this “Reaffirmation”), is made as of October ___, 2011 (the “Effective Date”) by and between PROMUS HOTELS PARENT LLC, a Delaware limited liability company, successor in interest to Promus Hotel Corporation, a Delaware corporation, having an address for notice hereunder of 7930 Jones Branch Drive, McLean, VA 22102, 90210; PROMUS HOTELS, LLC (formerly known as Promus Hotels, Inc.) with an address for notice hereunder of 7930 Jones Branch Drive, McCleary, VA 22102 (collectively “Guarantors”); RLH PARTNERSHIP, L.P., a Delaware limited partnership (“Landlord”), with an address for notice hereunder of 1114 Avenue of the Americas, New York, New York 10036; and RED LION HOTELS HOLDINGS, INC., formerly known as Red Lion Hotels, Inc., a Delaware corporation (“Holdings”), with an address for notice hereunder of W 201 North River Drive, Suite 100, Spokane, Washington 99201.

R E C I T A L S

A. WHEREAS, Landlord and Holdings are parties to that certain Lease Agreement dated as of August 1, 1995 (as amended by that certain First Amendment to Lease dated November 8, 1996, that certain Second Amendment to Lease dated September 15, 1998, that certain Third Amendment to Lease dated February 26, 1999 and that certain Fourth Amendment to Lease of even date) which originally related to hotel properties described in that Lease Agreement and as a result of the sale of the Astoria property now relates to sixteen (16) hotel properties (the “Master Lease Hotels”), collectively the “Master Lease”;

B. WHEREAS, Guarantors have each entered into a Guaranty of Lease Obligations, dated September 15, 1998 relating to the obligations of Holdings to Landlord under the Master Lease (the “Guaranty”);

C. WHEREAS, Landlord and an affiliate of Holdings, WHC809, LLC (“Purchaser”), have entered into that certain Agreement to Purchase Eight Hotels and Assume Leases of even date and Landlord and Holdings have entered into that certain Agreement to Purchase Two Hotels of even date (the “Purchase Agreements”) under which Purchaser will purchase ten (10) Master Lease Hotels which are listed on Exhibit A (the “Sale Properties”) so that the Sale Properties will no longer be subject to the Master Lease;

D. WHEREAS, the Landlord’s interest in the two ground leases relating to Master Lease Hotels which are listed on Exhibit B (the “Ground Lease Properties”), have been sold by Landlord to Purchaser under the terms of one or more Assignments and Assumptions of Leases of even date (the “Ground Lease Assignment”) and Landlord’s interests in property relating to the Ground Lease Properties has been sold to Purchaser;

E. WHEREAS, Landlord and Holdings have entered into an amended and restated sublease of even date (the “Restated Vancouver Sublease”) for one of the Master Lease Hotels which is located in Vancouver, Washington (the “Vancouver Property”);

F. WHEREAS, the Holdings has subleased five (5) hotels listed on Exhibit C (the “Hilton Portfolio Properties”) to Doubletree DTWC LLC, as assigned to HLT Operate DTWC LLC, a Delaware limited liability company (formerly known as HLT Operate DTWC Corporation) (“Doubletree”) under the terms of a Sublease Agreement dated December 31, 2001 (the “Sublease”).

G; WHEREAS Holdings’ interests as tenant under the Master Lease and as Sublessor under the Sublease have been assigned to SFI DT Holdings LLC, a Delaware limited liability company (“Sublease Assignee”) under the terms of an Assignment and Assumption of Leases of even date (the “Sublease Assignment”);

H. WHEREAS, Landlord and Holdings have and entered into that certain Fourth Amendment of Lease of even date (the “Lease Amendment”), as a result of which Holdings will no longer has any interest in the Hilton Portfolio Properties;

I. WHEREAS, as a result of the transactions reflected in the Purchase Agreements, the Ground Lease Assignment, the Sublease Assignment, the Restated Vancouver Sublease and the Lease Amendment (collectively, the “Transactions”), the only Master Lease Hotels that will remain subject to the Master Lease after the Effective Date are the Hilton Portfolio Properties;

J. WHEREAS, Holdings and Doubletree continue to have certain indemnification obligations to Landlord with respect to the Master Lease Hotels relating to events occurring prior to the Effective Date and Doubletree will have continuing obligations to Landlord under the Guaranty;

K. WHEREAS, in connection with the Transactions, Landlord and Holdings have required that Guarantors ratify, confirm and reaffirm all terms, covenants and conditions of the Guaranty that may from time to time be binding against Guarantors by executing, acknowledging and delivering to Landlord this Reaffirmation.

L. WHEREAS, Guarantors will benefit from no longer being obligated to guaranty the performance of Holdings with respect to events that occur after the Effective Date with respect to Sale Properties, the Ground Lease Properties, or the Vancouver Property.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Guarantors hereby covenant and agree with Landlord to the foregoing and as follows:

1. Reaffirmation. Guarantors hereby agree that the Transactions do not in any way amend or impair the obligations of Guarantors under the Guaranty, except that Landlord hereby agrees that Guarantors shall no longer have any obligation to guaranty the performance of Holdings under the Master Lease with respect to events that first occur after the Effective Date in

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connection with the Sale Properties, the Ground Lease Properties or the Vancouver Property] The Guarantors acknowledge that they remain obligated in accordance with the terms and provisions of the Guaranty with respect to: (a) liabilities accruing prior to the Effective Date under the Master Lease in respect of the Sale Properties, the Ground Lease Properties and the Vancouver Property, including the obligations of Holdings under Sections 4 and 5 of the Fourth Amendment to Lease between Holdings and Tenant of even date herewith but without increasing the obligations of Guarantors beyond those which existed prior to the Effective Date of this Reaffirmation; and (b) except to the extent Guarantors and Landlord otherwise agree, the obligations of the Sublease Assignee under the Master Lease with regard to the Hilton Portfolio Properties.

2. Miscellaneous.

(a) Notices. All notices and other communications hereunder shall be in writing and shall be delivered to the applicable address or addresses set forth in the first paragraph above by certified mail or nationally recognized overnight courier.

(b) Severability. In the event any one or more of the provisions contained in this Reaffirmation or their application to any person or circumstance shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, but this Reaffirmation shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

(c) Successors and Assigns. This Reaffirmation is binding upon and inures to the benefit of Guarantors, Landlord and Holdings and their respective successors and permitted assigns. The parties acknowledge that delivery of a copy of this Reaffirmation signed by a party via fax or email attachment is intended to create a binding and enforceable Reaffirmation the same as if an original signed counterpart of this Reaffirmation were delivered manually. None of Guarantors nor Holdings shall voluntarily, or by operation of law, assign or transfer any interest which it may have hereunder without the prior written approval of Landlord. Landlord may assign or otherwise transfer all or any portion of its rights hereunder to any other person or entity, and such other person or entity shall thereupon become vested with all of the benefits granted to Landlord herein.

(d) Further Assurances. Guarantors shall do, execute, acknowledge and deliver, at no cost to Landlord or Landlord’s lender, all and every such further acts, assignments, notices, assignments and instruments as Landlord or Landlord’s lender may reasonably require from time to time in order to better assure, convey, secure, assign, transfer and confirm unto Landlord the rights now or hereafter intended to be granted to Landlord under this Reaffirmation, any other instrument executed in connection with this Reaffirmation or any other instrument under which Guarantors may hereafter become bound to convey, mortgage, or assign to Landlord for carrying out this intention or facilitating the performance of the terms of this Reaffirmation.

(e) Counterparts. This Reaffirmation may be executed in counterparts, each of which when so executed shall be deemed to be an original, and all such counterparts shall together constitute one and the same instrument.

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(f) Third Parties. Except as set forth in the Guaranty, and in Section 2(c) above, nothing expressed or implied in this Reaffirmation is intended, or shall be construed, to confer upon or give any other person or entity other than the parties hereto any rights or remedies by reason of this Reaffirmation.

(g) Entire Agreement. This Reaffirmation, the Master Lease, as amended by the Lease Amendment, and the Guaranty set forth all the promises, covenants, agreements, conditions and understandings between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written (but does not supersede the Master Lease or Guaranty). No amendment, modification or variation of the terms of this Reaffirmation shall be valid unless made in writing and signed by the parties hereto.

(h) Indemnity and Reimbursement Agreement. Guarantors and Holdings acknowledge that they and certain of their respective affiliates are party to that certain Indemnity and Reimbursement Agreement dated December 31, 2001 by and between Red Lion Hotels Holdings, Inc. (formerly known as Red Lion Hotels, Inc.), Red Lion Hotels Corporation (formerly known as WestCoast Hospitality Corporation), Promus Hotels LLC (formerly known as Promus Hotels Inc.), Doubletree LLC (formerly known as Doubletree Corporation) and Doubletree DTWC LLC (formerly known as Doubletree DTWC Corporation) (the “Indemnity and Reimbursement Agreement”). Guarantors and Holdings each hereby agree that this Reaffirmation does not in any way modify or otherwise affect their or their affiliates’ respective obligations to each other under the Indemnity and Reimbursement Agreement, and Guarantors and Holdings shall cause their respective affiliates which are parties to the Indemnity and Reimbursement Agreement to reaffirm their obligations thereunder.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the undersigned have executed this Reaffirmation as of the date first above written.

GUARANTOR:	PROMUS HOTELS PARENT LLC, a Delaware limited liability company
	By:
	Name:
	Title:
	PROMUS HOTELS LLC, a Delaware limited liability company
	By:
	Name:
	Title:
LANDLORD:	RLH PARTNERSHIP, L.P., a Delaware limited partnership
	By:	Red Lion GP, Inc., a Delaware corporation, its sole general partner
		By:
		Name:
		Title:
HOLDINGS:	RED LION HOTELS HOLDINGS, INC., a Delaware corporation
	By:
	Name:
	Title:

EXHIBIT A

SALE PROPERTIES

Bend

1415 NE Third Street

Bend, Deschutes County, Oregon 97701

Boise

1800 Fairview Avenue

Boise, Ada County, Idaho 83702

Coos Bay

1313 North Bayshore Drive

Coos Bay, Coos County, Oregon 97420

Longview

510 Kelso Drive

Kelso, Cowlitz County, Washington 98626

Pendleton

304 SE Nye Avenue

Pendleton, Umatilla County, Oregon 97801

Wenatchee

1255 North Wenatchee Avenue

Wenatchee, Chelan County, Washington 98801

Sacramento

1401 Arden Way

Sacramento, Sacramento County, California 95815

Missoula

700 West Broadway

Missoula, Missoula County, Montana 59802

Medford

200 North Riverside Avenue

Medford, Jackson County, Oregon 97501

Eugene

205 Coburg Road

Eugene, Lane County, Oregon 97401

EXHIBIT B

GROUND LEASE PROPERTIES

Eugene

205 Coburg Road

Eugene, Lane County, Oregon 97401

An unrecorded Lease dated March 1, 1963 (the “Lease”) between William G. Hewitt, a married man, and Pearle Hewitt, a single person, Lessors, and John Green and Beverley Green, husband and wife, Lessees, Lessors leased to Lessees certain real property described in the Lease. A Memorandum of the Lease was recorded April 9, 1965 as Reception No. 98820, Deed Records of Lane County, Oregon. The Lessees’ interest in the Lease was assigned by Assignment of Lease dated November 18, 1964 and then acquired by RLA Holding Company, Inc. by merger. The Lease was modified by Lease as Modified dated April 10, 1965, Supplement to Lease as Modified dated October, 1968, Second Supplement to Lease as Modified dated June 26, 1970, Third Supplement to Lease as Modified dated March 1, 1983, Fourth Supplement to Lease as Modified dated December 14, 1983; Fifth Supplement to Lease as Modified dated November 13, 1984; and Sixth Supplement to Lease as Modified dated December 1, 1987. The Lessees’ interest in the Lease was assigned to Red Lion, a California limited partnership, by Assignment of Lease dated December 23, 1987 and recorded in Lane County Official Records on December 23, 1987 as Reception No. 8755362 and by Consent dated December 9, 1987, William G. Hewitt, Trustee, as successor in interest to William G. Hewitt and Pearle A. Hewitt consented to the Assignment. By Letter Agreement dated December 11, 1992, the parties agreed upon rental to be paid for the period ending February 28, 1998. By Assignment and Assumption Agreement dated August 1, 1995 and recorded in Lane County Official Records on August 2, 1995 under Recorder’s Reception No. 9542405, Red Lion assigned its interest in and to the Lease to RLH Partnership, L.P., a Delaware limited partnership (“RLH Partnership”), which document was recorded in Lane County Official Records on August 2, 1995 under Reception No. 9542405. By Guaranty of Lease dated as of August 1, 1995, Red Lion Hotels, Inc., a Delaware corporation, unconditionally and irrevocably guaranteed the prompt payment by RLH Partnership, L.P. of all rental and other sums payable by Lessee under the terms of the Lease and the faithful and punctual performance of all other terms, covenants and conditions of the Lease to be kept and performed by the Lessee. By Consent and Acknowledgment dated July 11, 1995, William G. Hewitt, Trustee, consented to the Assignment and Assumption. By Sixth Supplement to Lease (misnumbered) dated October 31, 1997, William G. Hewitt, Trustee as Lessor and the Lessee entered into agreement for the payment of rent as reflected therein. By Assignment of Lease Agreement dated effective January 1, 1999 William G. Hewitt, Trustee of the Hewitt-Murphy Trust, William G. Hewitt and Pearle Hewitt Murphy assigned to Thunderbird Properties, LLC, an Oregon Limited Liability Company (“Lessor”), all of Lessor’s interest in the Lease as defined therein. By Oregon Statutory Warranty Deeds Dated December 22, 1998 and recorded January 4, 1999, at Reception Number 99000396, the

assignors named in the preceding sentence conveyed all right, title and interest of the grantors in the Property to Thunderbird Properties, LLC. By Seventh Supplement to Lease as Modified dated November 1, 2002, the parties agreed upon rent for the period beginning March 1, 2003 and ending February 29, 2008. The Lease was subsequently modified by the Eighth Supplement to Lease as Modified, dated November 14, 2007.

Boise

1800 Fairview Avenue

Boise, Ada County, Idaho 83702

J. Howard Hill and Rosemary Hill (together “Original Lessor”) entered into a Lease and Option dated as of January 1, 1981 with Tod E. McClaskey and Edward H. Pietz, doing business as partners under the name Red Lion Motor Inn/Downtowner (“Original Lessee”), pursuant to which Original Lessee leased from Original Lessor that certain property described therein. The Lease and Option was recorded May 13, 1981 in the Official Records of the County of Ada, State of Idaho, as Instrument No. 81 20564. The Original Lessee’s interest under the Lease and Option (as amended) was assigned to Red Lion, a California limited partnership (“Red Lion”), the successor in interest to RL Acquisition Company, a California Limited Partnership, pursuant to that certain Assignment of Lease dated April 8, 1985. Red Lion’s interest under the Lease and Option (as amended) was assigned to RLH Partnership, L.P., a Delaware limited partnership (“RLH Partnership”), pursuant to that certain Assignment and Assumption Agreement dated August 1, 1995. The Lease and Option, as amended pursuant to (1) that certain Amendment to Lease and Option dated as of January 1, 1981; (2) that certain Lease Amendment dated as of May 12, 1995; and (3) that certain 2011 Lease Amendment of even date herewith.

EXHIBIT C

HILTON PORTFOLIO PROPERTIES

Doubletree Seattle Airport

18740 International Boulevard

Seattle, WA 98188

Hilton Salt Lake City Center

255 South West Temple

Salt Lake City, UT 84101

Doubletree San Diego â Mission Valley

7450 Hazard Center Drive

San Diego, CA 92108

Doubletree Durango

501 Camino Del Rio

Durango, CO 81301

Doubletree Sonoma Wine County

One Doubletree Drive

Rohnert Park, CA 9492

EXHIBIT K

GUARANTY AGREEMENT

THIS GUARANTY AGREEMENT (this “Guaranty”) is made as of                 , 2011, (the “Effective Date”) by Red Lion Hotels Corporation, a Washington corporation (“Guarantor”), in favor of RHL Partnership, L.P., a Delaware limited partnership (“Seller”).

RECITALS

A. Pursuant to that certain Agreement to Purchase Eight Hotels and Assume Leases of even date herewith (as amended from time to time, the “Eight Hotel Agreement”) between Seller and an affiliate of Guarantor, WHC809, LLC, a Delaware limited liability company (“WHC809”), and that certain Agreement to Purchase Two Hotels of even date herewith (as amended from time to time, the “Two Hotel Agreement”) between Seller and another affiliate of Guarantor, Red Lion Hotels Holdings, Inc., a Delaware corporation (“Holdings”) (the Eight Hotel Agreement and the Two Hotel Agreement are collectively referred to herein as the “Purchase Agreements”), WHC809 and Holdings (collectively, “Buyers’) have purchased certain Property (as defined in the Purchase Agreements) from Seller

B. Pursuant to that certain Restated Vancouver Sublease of even date between Seller and Holdings (the “Restated Vancouver Sublease”), Holdings will continue to sublease from Seller a hotel property located in Vancouver, Washington.

C. Guarantor is an indirect owner of the equity in Buyers, and Guarantor will benefit materially from the sale of the Property to Buyers.

D. The delivery of this Guaranty is a condition to Seller’s obligation to purchase the Property and Seller would not have closed such purchase without the delivery of this Guaranty.

NOW THEREFORE, in consideration of the foregoing and for other valuable consideration, the receipt and sufficiency of which Guarantor acknowledges, Guarantor agrees as follows:

1. Guaranty of Payment and Performance. Guarantor hereby irrevocably, unconditionally and absolutely guarantees the prompt payment and performance of the “Guaranteed Obligations” (as hereinafter defined). This Guaranty is a guarantee of payment and performance and not of collection. As used herein, “Guaranteed Obligations” means (A) all of Buyers’ obligations to Seller under the Purchase Agreements that accrue or are otherwise to be paid or performed by the Buyers, including, without limitation, (1) any and all amounts that Buyers may hereafter owe Seller under the Purchase Agreements (a) for breach of Buyers’ representations, warranties and covenants contained in the Purchase Agreements or (b) under any indemnification provision of the Purchase Agreements, and (2) any and all covenants or undertakings by Buyers to be performed under the Purchase Agreements and (B) all of Holdings’ obligations under the Restated Vancouver Sublease. Upon the failure by Buyers to pay or perform any Guaranteed Obligation, Guarantor shall, upon demand by Seller, itself promptly pay or cause to be performed such Guaranteed Obligation (or, if such Guaranteed Obligation is non-monetary and Guarantor cannot or does not cause it to be performed, promptly pay the damages suffered by Seller from such non-performance).

2. Guarantor’s Obligations Independent. Guarantor’s obligations hereunder shall be primary and this Guaranty shall be enforceable against Guarantor and its successors without the necessity for any suit or proceeding of any kind or nature whatsoever brought by Seller against Buyers.

3. Liability. Guarantor’s liability under this Guaranty with respect to the Purchase Agreements is limited to the extent that the Purchase Agreements limit Buyers’ liability with respect to the Guaranteed Obligations, including limitations on the amount of any claims and the time periods during which claims may be asserted.

4. Guarantor’s Representations and Warranties. Guarantor represents, warrants and covenants that:

(a) Guarantor is duly organized, validly existing and in good standing as a corporation under the laws of the state of Washington; has full power to enter into this Guaranty and fulfill its obligations hereunder; has authorized its execution, delivery and performance of this Guaranty by all necessary corporate action; and has caused this Guaranty to be duly executed and delivered on its behalf to Seller.

(b) No government or third party approval or consent, which has not been obtained, is required for Guarantor’s execution and delivery of this Guaranty or performance of its obligations hereunder.

(c) Guarantor’s execution, delivery and performance of this Guaranty do not and will not violate, and are not restricted by, any applicable law, any provision of its corporate articles or by-laws or any contractual obligation to which Guarantor is bound or by which Guarantor or any of its assets are bound.

(d) This Guaranty constitutes a valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, subject to bankruptcy, reorganization and other similar laws affecting the enforcement of creditors’ rights generally and to general principles of equity (regardless of whether enforceability is considered in equity or at law).

(e) Guarantor is familiar with the terms and conditions of the Purchase Agreements and Restated Vancouver Sublease.

5. Authorizations and Waivers Relating to Actions of Buyers.

(a) Guarantor authorizes Buyers and Seller, without notice or demand, and without affecting Guarantor’s liability under this Guaranty, from time to time to modify any of the terms and conditions of the Purchase Agreements and Restated Vancouver Sublease by arrangement between them. Guarantor’s obligations under this Guaranty shall continue and Guarantor shall not have the right to limit or revoke this Guaranty upon any modification of the Purchase Agreements or Restated Vancouver Sublease.

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(b) Guarantor waives any right it may have to require Seller to proceed against Buyers or any other person or entity liable under the Purchase Agreements or Restated Vancouver Sublease, or to pursue any other remedy with respect to the Guaranteed Obligations.

(c) Guarantor waives any requirement of presentment, demand for performance, notice of non-payment or non-performance, protest or notice of protest, notice of dishonor, notice of any modification of any term or condition of the Purchase Agreements or Restated Vancouver Sublease, notice of extension of time for payment or performance or any other notice or demand to which Guarantor might otherwise be entitled, except for such notices as Seller is expressly required to provide to Buyers under the Purchase Agreements, the Restated Vancouver Sublease or this Guaranty.

(d) Guarantor assumes responsibility for being and keeping informed of the financial condition of Buyers and of Buyers’ performance of the Guaranteed Obligations and of all other facts and circumstances bearing on the risk of nonperformance of the Guaranteed Obligations by Buyers, and Seller shall have no duty to advise Guarantor of information known to it regarding that condition or any such circumstances.

(e) At its election, Seller may exercise any right or remedy it may have against Buyers without affecting or impairing Guarantor’s liability under this Guaranty, except to the extent that the Guaranteed Obligations are actually paid or performed.

Guarantor acknowledges that it has discussed with legal counsel the effect of the above waivers on rights and remedies it might otherwise have.

6. Waivers. Without limitation of any other provisions of this Guaranty, Guarantor hereby expressly waives and relinquishes all rights, remedies and defenses accorded by applicable law to guarantors and sureties and agrees not to assert or take advantage of any such rights, remedies or defenses. Without limiting in any way the foregoing, Guarantor hereby expressly waives and relinquishes:

(a) any right to require Seller, as a condition to enforcement of this Guaranty, to proceed against Buyers or any other person or to pursue any other right or remedy in Seller’s power before proceeding against Guarantor;

(b) Guarantor waives any defense arising from the absence, impairment, or loss of any right of reimbursement, contribution, or subrogation, or any other right of Guarantor against Buyers, whether resulting from the election by Seller or otherwise. Guarantor waives any defense arising from any cause whatsoever, including without limitation Seller’s act or omission, resulting in the cessation of Buyers’ liability to Seller, either in whole or in part; provided, however, the foregoing shall not be construed or deemed to (i) expand Guarantor’s liability hereunder beyond Buyers’ liability under the Purchase Agreements or (ii) limit Guarantor’s rights to object to any Seller claim to the extent Buyers has the right to object to such claim under the Purchase Agreements. Guarantor waives all rights and defenses arising out of an election of remedies by Seller, even though that election of remedies has destroyed Guarantor’s rights of subrogation and reimbursement against Buyers.

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(c) Until all of the Guaranteed Obligations have either been indefeasibly paid or performed or have expired by the express terms of the Purchase Agreements and Restated Vancouver Sublease, Guarantor (i) waives any right of subrogation against Buyers by reason of any payments or acts of performance by Guarantor hereunder; (ii) waives any right to enforce any remedy which Guarantor may now or hereafter have against Buyers by reason of any one or more payments or acts of performance in compliance with Guarantor’s obligations hereunder, and (iii) subordinates any liability or indebtedness of Buyers now or hereafter held by Guarantor to Buyers’ obligations to Seller under the Purchase Agreements or Restated Vancouver Sublease.

(d) the defense of the statute of limitations in any action hereunder or in any action for the collection of any indebtedness or the performance of any obligation hereby guaranteed;

(e) any and all of its rights of subrogation, reimbursement, indemnification, and contribution and any other rights and defenses that are or may become available to Guarantor by reason of any of the following: Sections 2787 through 2855 of the California Civil Code, inclusive, it being the intent that Seller have the full benefit of the waivers available under Section 2856 of the California Civil Code;

(f) any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other person or persons or the failure of Seller to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other person or persons;

(g) any defense based upon the failure to give notice of the acceptance of this Guaranty by any person;

(h) any defense based upon any modification, compromise, acceleration or change in the terms of the Purchase Agreements or Restated Vancouver Sublease;

(i) any defense based upon the failure to make, give or serve demand, notice of default or nonpayment, presentment, protest and all other notices of any kind to which Guarantor might be entitled in connection with this Guaranty, the Purchase Agreements or Restated Vancouver Sublease;

(j) any defense based upon an election of remedies by Seller;

(k) any defense based upon any lack of diligence by Seller in enforcing the terms of the Purchase Agreements or Restated Vancouver Sublease;

(l) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal;

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(m) any duty on the part of Seller to disclose to Guarantor any facts Seller may now or hereafter know about Buyers, regardless of whether Seller has reason to believe that any such facts materially increase the risk beyond that which Guarantor intends to assume, or has reason to believe that such facts are unknown to Guarantor, or has a reasonable opportunity to communicate such facts to Guarantor, it being understood and agreed that Guarantor is fully responsible for being and keeping informed of the financial condition of Buyers and of all circumstances bearing on the risk of nonperformance of any obligations hereby guaranteed;

(n) any defense arising because of an election made by Seller under Section 1111(b)(2) of the Federal Bankruptcy Code or any similar statute; and

(o) any defense based on any borrowing or grant of a security interest under Section 364 of the Federal Bankruptcy Code;

it being agreed by Guarantor that this Guaranty is in the nature of an absolute guarantee of payment and performance and not of collection and that the failure of Seller to exercise any rights or remedies it has or may have against Buyers shall in no way impair the obligation or liability of Guarantor hereunder.

7. Survival of Guarantor’s Obligations. Guarantor agrees that if at any time all or any part of the payment of any Guaranteed Obligation at any time received by Seller from Buyers is or must be returned by Seller for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of Buyers), then Guarantor’s obligations hereunder shall, to the extent of the amount returned, be deemed to have continued in existence as to such Guaranteed Obligation, as though such previous payment had never been made.

8. Enforcement Costs. In the event of any litigation to enforce this Guaranty, the prevailing party shall be entitled to recover all reasonable costs and expenses incurred therein, including on appeal, and including without limitation, reasonable attorneys’ fees and expenses, court costs and costs of appeal.

9. Governing Law. This Guaranty shall be governed by, and construed and enforced in accordance with, the laws of the State of California, without regard to principles of conflicts of laws. Guarantor hereby agrees that any action to declare or enforce any rights or obligations under this Guaranty may be commenced by Seller in a court of general jurisdiction in California (or, if diversity jurisdiction exists, in the United States District Courts located in that State. Guarantor hereby consents to the jurisdiction of each such court for such purposes, and agrees that any notice, complaint or legal process delivered as required herein shall constitute adequate notice and service of process for all purposes and shall subject Guarantor to the jurisdiction of such court for purposes of adjudicating any matter related to this Guaranty.

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10. Notices. Notices under or with respect to this Guaranty shall be given in the same manner, and with the same effect, as under the Purchase Agreements to the Guarantor or the Seller as follows:

If intended for Seller, to:	RLH Partnership, L.P. c/o iStar Financial Inc. One Sansome Street San Francisco, California 94104 Attention: Erich Stiger
With copies to:	iStar Financial Inc. 1114 Avenue of the Americas New York, New York 10036 Attention: General Counsel
	Katten Muchin Rosenman LLP 525 West Monroe Street Chicago, IL 60661-3693 Attention: Kenneth M. Jacobson
If intended for Guarantor, to:	Red Lion Hotels Corporation W. 201 North River Drive Spokane, WA 99201 Attention: General Counsel
With copies to:	Davis Wright Tremaine LLP 1201 Third Avenue, Suite 2200 Seattle, WA 98101-3045 Attention: Bruce Bjerke

11. Successors and Assigns. This Guaranty shall be binding upon and inure to the benefit of Guarantor and Seller, and their respective successors and assigns.

12. Severability. If any provision of this Guaranty is held unenforceable, such holding shall not invalidate the remaining provisions hereof.

13. WAIVER OF JURY TRIAL. IN ANY ACTION BROUGHT BY EITHER PARTY UNDER OR OTHERWISE RELATING TO THIS GUARANTY, SELLER AND GUARANTOR EACH HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY OR ALL ISSUES ARISING IN SUCH ACTION.

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY,

EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF

A DEBT ARE NOT ENFORCEABLE UNDER CALIFORNIA LAW.

[SIGNATURE ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed by its duly authorized officer as of the date first above written.

RED LION HOTELS CORPORATION, a Washington corporation

By:

Name:

Title:

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EXHIBIT L

RESTATED VANCOUVER SUBLEASE

This Restated Vancouver Sublease (this “Sublease”) is made as of the _____ day of _____________, 2011 (the “Effective Date”), by and between RLH PARTNERSHIP, L.P., a Delaware limited partnership (“Sublandlord”), and RED LION HOTELS HOLDINGS, INC., formerly known as Red Lion Hotels, Inc., a Delaware corporation (“Subtenant”).

RECITALS

A. The Port of Vancouver and the Washington State Department of Natural Resources (“Ground Leases Landlords”), in their capacity as landlords, and Sublandlord, in its capacity as tenant, are respectively parties to that certain Lease with the Port of Vancouver dated November 18, 1983 (as amended, the “Port Lease”) and that certain Aquatic Lands Management Agreement with the Washington State Department of Natural Resources dated October 1, 1984 (as amended, the “Aquatic Lease”; the Port Lease and Aquatic Lease, as each of the same may be amended, assigned or modified from time to time, are sometimes collectively referred to as the “Ground Leases”). The Ground Leases cover certain premises which contains the hotel that is commonly known as the Red Lion Hotel at the Quay and located at the commonly known address of 100 Columbia, Vancouver, WA 98660 (the “Hotel”), as more particularly described on the attached Exhibit A (the “Sublease Premises”).

B. The Washington State Department of Transportation has notified Sublandlord and Subtenant of its intention to condemn the Sublease Premises, and has publicly announced its intention to take the Sublease Premises for bridge construction.

C. Sublandlord and Subtenant entered into a lease dated August 1, 1995, as amended, for the Sublease Premises among other properties (such lease, as amended prior to the date hereof, the “Original Master Lease”).

D. Pursuant to that certain Fourth Amendment to Lease dated as of the date hereof (the “Fourth Amendment”), the Original Master Lease was terminated as to certain properties and the remainder of the Original Master lease was divided, pursuant to Section 16.1 of the Original Master Lease, into two (2) separate leases, one of which is this restated Sublease of the Sublease Premises.

E. Sublandlord and Subtenant desire to amend and restate the Original Master Lease with respect to the Sublease Premises.

NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Sublandlord and Subtenant hereby amend and restate the Master Lease with respect to the Sublease Premises and agree as follows:

1. Sublease of Sublease Premises. Sublandlord hereby agrees to, and does hereby, continue to sublease the Sublease Premises to Subtenant and Subtenant hereby agrees to, and

does hereby, continue to sublease the Sublease Premises from Sublandlord, subject to the Ground Leases. Sublandlord and Subtenant each agree that the Master Lease has been amended and restated pursuant to this Sublease as to the Sublease Premises, and except as expressly provided in this Sublease, neither party has any further obligations pertaining to the Sublease Premises to the other party arising under the Master Lease. When referring to the Master Lease without giving effect to the amendment and restatement of the Master Lease pursuant to this Sublease, the Master Lease is sometimes referred to as the “Pre-Closing Master Lease.”

2. “As-Is” Letting. The Sublease Premises are leased to Tenant “as-is” and Sublandlord makes no representation or warranty, express or implied, with respect to the condition of the Sublease Premises, or as to the compliance of the Sublease Premises with any legal requirements. Subtenant has examined the Sublease Premises and title to the Sublease Premises and has found all of the same satisfactory for its purposes. Subtenant has accepted the Sublease Premises subject to the existing state of title. During the term of this Sublease, Subtenant shall have the exclusive right to use, enforce and obtain the benefits of (i) all guaranties, representations, and warranties relating to the construction, improvement, alteration and repair of the Sublease Premises and all architectural and engineering plans, drawings and specifications related thereto, and (ii) all of Sublandlord’s transferable licenses, permits, franchises, approvals, authorizations, consents or orders of, or filings with, any governmental authority, whether foreign, federal, state or local, or any other person related to the Sublease Premises which is required to be held by subtenant in connection with the operation of the Sublease Premises and/or the transactions contemplated hereby. During the term of this Sublease, Sublandlord shall, at Subtenant’s expense, execute such assignments or other transfer instruments, without recourse or warranty, as are necessary to transfer the benefits of all such items to Subtenant, and shall not waive, surrender or modify any of Sublandlord’s rights with respect thereto without obtaining Subtenant’s prior written consent.

3. Improvements. In recognition of the pending condemnation,, Subtenant shall have no obligation to make any improvements to the Sublease Premises, including but not limited to, any acquisition or replacement of furniture, fixtures and equipment, capital improvements, or maintenance expenditures of any kind, nature or manner. Notwithstanding any other provision contained in this Sublease, Subtenant shall observe all applicable “Legal Requirements” (as defined in the Pre-Closing Master Lease) regarding the condition of the improvements on the Sublease Premises and Subtenant’s use of the Sublease Premises and will not permit any insurance policy required to be maintained by Subtenant to be invalidated by virtue of the condition or use of the Sublease Premises or permit the Sublease Premises and improvements thereon to be maintained in an unsafe condition.

4. Personal Property. All of the personal property used in connection with the operation of the Subtenant’s business (including the hotel and restaurant operations) on the Sublease Premises, including all “FF&E” (other than Fixtures which were located on the Sublease Premises on August 1, 1995) and “Inventories” (as such terms are defined in the Pre-Closing Master Lease), trademarks, tradenames, marks, signage and signs (the “Personal Property”), and is not subject to this Sublease, but Subtenant’s use of such Personal Property shall comply with the terms and provisions of this Sublease. Subtenant is entitled to remove the Personal Property upon the termination of this Sublease.

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5. Net Lease. Subject to any express obligation of Sublandlord to the contrary under this Sublease, it is expressly understood and agreed by and between the parties that this Sublease is an absolutely net sublease, and that Subtenant shall pay all rents and all other sums payable hereunder to or on behalf of Sublandlord and perform all obligations owing the Ground Lease Landlords under the Ground Lease, including the payment and performance of all obligations owing to the Ground Lease Landlords under the Ground Leases, without notice or demand and without set-off, counterclaim, abatement, suspension, deduction, or defense. Sublandlord is not obligated to expend any of its funds in connection with the Sublease Premises.

6. Rent. Subtenant covenants and agrees to pay Sublandlord rent, in advance, for the Sublease Premises, commencing with the Effective Date and continuing until this Sublease is terminated, in monthly installments in the amount reflected on Schedule 1 (“Rent”) on or before the last day of each month. Time is of the essence with respect to all payments of Rent. Rent for the entire month in which the Effective Date occurs shall be paid on or before the last day of such month. If this Sublease is terminated pursuant to Section 9.2, Rent shall be paid through the Date of Taking. The Subtenant’s obligation to pay Rent is an independent covenant.

7. Ground Leases. This Sublease is subject at all times to all of the provisions of the Ground Leases and Subtenant shall not suffer any act or omission that will violate any of the provisions of the Ground Leases. Subtenant will pay all amounts due to Ground Lease Landlords under the Ground Lease so long as the Sublease remains in effect.

8. Term. The term of this Sublease shall commence on the Effective Date and continue in effect until December 31, 2020 unless sooner terminated pursuant to Sections 9 or 17.

9. Condemnation.

9.1 Definitions

(a) “Condemnation” means (i) the exercise of any governmental power, whether by legal proceedings or otherwise, by a condemnor or (ii) a voluntary sale or transfer by one or more Ground Lease Landlords to any condemnor, either under threat of condemnation or while legal proceedings for condemnation are pending.

(b) “Date of Taking” means the earlier of: (a) the date possession of all or substantially all of the Subleased Property is taken by the Condemnor; or (b) the date the Ground Leases are terminated.

(c) “Award” means all compensation, sums or anything of value awarded, paid or received on a total or partial condemnation.

(d) “Condemnor” means any public or quasi-public authority, or private corporation or individual, having the power of condemnation.

9.2 Taking. If all or a substantial portion of the Subleased Premises are taken by a Condemnation (a “Taking”), this Sublease shall terminate as of the Date of Taking.

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9.3 Award.

(a) Subject to the terms and conditions of the Ground Leases:

(1) Any Award which is received by Sublandlord or Subtenant as a result of a Condemnation or the settlement thereof (including any Award or other compensation on account of any Taking) in compensation for their real property interests in the Sublease Premises shall be allocated between Sublandlord and Subtenant as follows: (i) the first Four Million Dollars ($4,000,000) of any Award shall be paid to Sublandlord, and (ii) thereafter the balance (if any) of the Award shall be split evenly between Sublandlord and Subtenant.

(2) Any compensation or reimbursement Subtenant may receive from any public agency for the relocation of the Personal Property which it is entitled to remove in accordance with Section 4, shall be retained by Subtenant.

(3) Any funds which Subtenant may receive from any public agency as compensation for the loss of its business on the Sublease Premises shall be allocated equally between Sublandlord and Subtenant.

(b) Sublandlord and Subtenant shall cooperate with each other in connection with any proceedings or negotiations in respect of a Condemnation, Taking or Award, and any claims made in connection with this Section, including, without limitation, cooperation in connection with any proceedings or negotiations with any one or more of the Ground Lease Landlords. Subtenant and Sublandlord will promptly provide to the other, such material notices regarding a Condemnation as the applicable of the Sublandlord or Subtenant shall receive from any one or more of the Ground Lease Landlords or Condemnor with respect to a Condemnation.

9.4 Outside Date. In the event that this Sublease has not been terminated pursuant to Section 9.2 on or before December 31, 2016 (“Outside Date”), then, effective as of the Outside Date, the terms, covenants, agreements, conditions, representations, warranties, indemnities and provisions of the Pre-Closing Master Lease will, without further action of the parties, be incorporated herein by this reference thereto together with the relevant definitions of defined terms in the Pre-Closing Master Lease and apply to this Sublease mutatis mutandi with the Hotel and Sublease Premises consisting of the Hotel and Premises for such purposes.

10. Use and Operations. Provided Tenant complies at all times with applicable law and other applicable Legal Requirements, Tenant shall have the right to use the Sublease Premises for hotel and related purposes, including, without limitation, restaurants, bars, gift shops, car rental agencies, airline reservations desks, golf, tennis and other recreational activities and other ancillary services, and no other purposes. In light of the public announcement of an impending condemnation, at any time after a Condemnor commences a process to acquire the Sublease Premises (including for example by commencing a condemnation action, delivery of a notice of intended taking to the Port of Vancouver or the commencement of purchase price negotiations), Subtenant may, in its discretion alter, curtail or cease its operations on the Sublease Premises during the Term, so long as: (1) Subtenant continues to pay Rent as set forth in Article 6, maintains insurance in accordance with Section 11, complies with applicable law

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and other Legal Requirements, does not otherwise default under the terms and provisions of this Sublease and provides the indemnification required by Section 12, (2) gives not less than thirty (30) days prior notice to Sublandlord, (3) causes the Sublease Property to be secure from vandalism or other usage and (4) Subtenant obtains the permission of the Port of Vancouver to do so.

11. Insurance. The terms, covenants, agreements, conditions, representations, warranties and provisions of Article XIII of the Pre-Closing Master Lease are incorporated herein by this reference hereto together with the relevant definitions of defined terms in Article XIII of the Pre-Closing Master Lease and apply to this Sublease mutatis mutandi, provided, however, for purposes hereof, the reference in Section 13.4(a) of the Pre-Closing Master Lease to One Hundred Million Dollars ($100,000,000) shall be deemed to be Ten Million Dollars ($10,000,000).

12. General Indemnification by Red Lion. Red Lion shall pay, protect, indemnify, defend, save and hold harmless, Landlord, Landlord’s constituent partners, any ground lessor, and any Affiliate, partner, member, manager, trustee, officer, director, employee, agent or shareholder or other holder of any beneficial interest in any of them (collectively, the “Indemnified Parties” and, individually, an “Indemnified Party”), from and against all liabilities, obligations, claims, damages (including, without limitation, punitive damages), penalties and causes of action or judgments of any nature whatsoever, whether foreseen or unforeseen, howsoever and whensoever caused including, without limitation, if caused prior to the “Commencement Date” (as defined in the Pre-Closing Master Lease), without regard to the form of action and whether based on strict or statutory liability, gross negligence, negligence (including the negligence of any Indemnified Party) or any other theory of recovery at law or in equity, and all reasonable and documented costs and expenses (including reasonable attorneys’ fees costs of experts, and other legal costs and expenses), imposed upon or incurred or asserted against any of the Indemnified Parties by reason of or in connection with:

12.1 Any matter pertaining to the leasing, use, non-use, occupancy, operation, management, condition, design, construction, maintenance, repair or restoration of the Sublease Premises, or the employment of any persons at the “Hotel” (as defined in the Pre-Closing Master Lease) in each case whether by Red Lion or otherwise;

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

12.3 Any violation by Red Lion (or any employees, agents, invitees, guests, sublessees, concessionaires, or licensees of Red Lion) of any provision of the Master Lease (on or before the Effective Date) with respect to the Sublease Premises, either or both of the Ground Leases, any contract or agreement to which Red Lion (or any sublessee, concessionaire, or licensee of Red Lion) is a party, any violation or alleged violation of any Legal Requirement, including anti-discrimination “Laws” (as defined in the Pre-Closing Master Lease), or any “Insurance Requirement” (as defined in the Pre-Closing Master Lease); and

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12.4 Any contest undertaking by or on behalf of Red Lion with respect to any Legal Requirement, Insurance Requirement, tax imposition or otherwise, regardless of whether the same is permitted pursuant to the terms hereof, except in each case to the extent the same directly result from the gross negligence or willful misconduct by an Indemnified Party.

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

13.1 Red Lion’s failure to perform its duties and obligations as set forth in Article XII of the Pre-Closing Master Lease with respect to the Sublease Premises on or prior to the Effective Date or Section 12.1 of the Pre-Closing Master Lease as incorporated herein by reference pursuant to Section 20(m) whether prior to, on or after the Effective Date;

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

13.3 The violation of any Environmental Law occurring at any time on, prior to or after the Effective Date at or in connection with the leasing, use, non-use, occupancy, management or operations on any portion of the Sublease Premises; the discharge, disposal or release of any Hazardous Materials (as defined in the Pre-Closing Master Lease) at any time on or prior to the Effective Date in, on, under, at or from, or in connection with the leasing, use, non-use, occupancy, management or operations on any of the Hotel and/or any portion of the Sublease Premises; or the presence of any Hazardous Materials at any time on, prior to, or after the Effective Date in, on, under any portion of the Sublease Premises, including without limitation, any off-site migration onto any portion of the Sublease Premises.

14. Defense of Indemnified Parties. Promptly after receipt by an Indemnified Party of notice of the commencement or assertion against it of any claim, action, proceeding, such Indemnified Party shall, if a claim in respect thereof is to be made against Red Lion under this Section 14, notify Red Lion thereof; but the omission so to notify Red Lion shall not relieve Red Lion from any liability which it may have to such Indemnified Party under this Section 14,

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except to the extent that Red Lion shall have been prejudiced by such failure. As long as no Event of Default exists and provided that representation by counsel selected by Red Lion will not, in Indemnified Party’s reasonable judgment (which judgment may be based on, without limitation, due consideration of any obligations such Indemnified party may have to indemnify other parties in connection with the same matter, including requirements as to right of contest, time to indemnification and undertaking of defense of such other parties), prejudice Indemnified Party in any manner, Red Lion, at its sole cost and expense, shall have the right by counsel reasonably satisfactory to the indemnified Party, to contest, resist and defend any claim, action or proceeding with respect to which it shall have received the Notice described in the preceding sentence; provided, however, that Red Lion may not compromise or otherwise dispose of the same without the prior written approval of the Indemnified Party, such approval not to be unreasonably withheld, conditioned, or delayed so long as the Indemnified Party receives a full release with respect to the claim, action or proceeding. If an Event of Default exists, or, in Indemnified Party’s judgment, representation by counsel selected by Red Lion will prejudice Indemnified Party in any manner, such Indemnified party shall have the right to retain its own counsel and defend such action. If Red Lion shall have assumed responsibility for such contest and defense, Red Lion shall not be obligated to pay any attorneys’ fees or other legal costs incurred by or on behalf of the Indemnified party unless an Event of Default exists. Notwithstanding the foregoing, each Indemnified party shall, at Red Lion’s request and expense, cooperate with Red Lion, at no cost or expense to the Indemnified party, in the defense of any such claim, action, or proceeding.

15. Surrender. Subtenant agrees that at termination of this Sublease, Subtenant will quit and surrender the Sublease Premises, provided, however, upon surrender, Subtenant may remove any and all of its Personal Property located on the Sublease Premises unless termination is or account of Section 17, in which event, such Personal Property will, at the option of Sublandlord, be surrendered (together with title thereto) to the Landlord. If this Sublease is terminated as a result of a Taking, Subtenant will have no obligation to repair any nonmaterial damage caused as a result of the removal of such Personal Property unless such repair is required pursuant to the Ground Leases or by the Condemnor.

16. No Assignment or Subletting. Subtenant shall not assign all or any portion of its interest under this Sublease or sublet all or any portion of the Sublease Premises without the prior written consent of Sublandlord. This Sublease shall not be assignable by operation of law.

17. Default. If any of the following occur, then Sublandlord may treat the occurrence of any one or more of the foregoing events as a default by Subtenant under this Sublease, and thereupon, Sublandlord may terminate this Sublease and/or pursue any and all other rights and remedies provided Sublandlord at law or in equity or granted to Ground Leases Landlords under the Ground Leases or that are available under Section 20.2 of the Pre-Closing Master Lease:

(a) If Subtenant fails to make any payment due hereunder within three (3) days after written notice that such sum were not received on the due date thereof;

(b) If Subtenant shall fail to perform any material term, covenant or condition of this Sublease and such failure is not cured by Subtenant within a period of 30 days after receipt by Subtenant of notice thereof from Sublandlord, unless such failure cannot with

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diligence be cured within a period of 30 days, in which case, such failure shall not be deemed to continue if Subtenant proceeds promptly and with diligence to cure the failure and diligently completes the curing thereof in no event later than 180 days after receipt of such notice, provided, however, that such 180-day limitation shall not apply with respect to cure by Subtenant of defaults in its obligations under Section 12.1 of the Pre-Closing Master Lease (as incorporated by reference into this Sublease), so long as Subtenant has promptly commenced to cure said default within the initial 30-day period, and thereafter diligently prosecutes the cure to completion and provided further that such notice described above shall, to the full extent permitted by applicable law, be in lieu of and not in addition to any notice required under applicable law;

(c) If Subtenant shall:

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

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

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

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

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

(d) If Subtenant shall, on a petition in bankruptcy filed against it, be adjudicated as bankrupt or a court of competent jurisdiction shall enter an order or decree appointing, without the consent of Subtenant, a receiver of Subtenant or of the whole substantially all of its property, or approving a petition filed against it seeking reorganization or arrangement of Subtenant under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof;

(e) If Subtenant shall be liquidated or dissolved, or shall begin proceedings toward such liquidation or dissolution; or

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

18. Subrogation Waiver. Sublandlord and Subtenant each waive any and all right of recovery against the other, or against the officers, employees, agents and representatives of the

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other for loss of or damage to such waiving party or its property or the property of others under its control, for such loss or damages to property insured against under any property insurance policy in force at the time of such loss or damage. This waiver of subrogation shall apply to the full extent, but only to the extent, that the same shall be valid and enforceable without impairment of insurance policies.

19. Access. Subtenant will allow Sublandlord, its agents, lenders, insurers, and consultants, free access to the Sublease Premises at all reasonable times for the purpose of examination, testing and inspection of the Sublease Premises and for the purpose of exhibiting the Sublease Premises to prospective or actual lenders, purchasers, investors and tenants.

20. Miscellaneous.

(a) Successors and Assigns. This Sublease shall be binding upon the heirs, executors, administrators, and successors and permitted assigns of Sublandlord and Subtenant.

(b) Entire Agreement. This Agreement contains all of the covenants, conditions and agreements between the parties and shall supersede all prior correspondence, agreements and understandings, both oral and written.

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

(d) Further Assurances. Sublandlord or Subtenant shall promptly perform, execute, and deliver or cause to be performed, executed, and/or delivered any and all acts, deeds, and assurances as either party may reasonably require in order carrying out the intent and purpose of this Sublease.

(e) Amendment. This Sublease cannot be changed, amended, supplemented, or terminated orally.

(f) Counterparts. This Sublease may be executed in one (1) or more counterparts, and all the counterparts shall constitute but one and the same agreement, notwithstanding that all parties hereto are not signatory to the same or original counterpart. This Sublease may be executed and delivered by telecopy, pdf or similar electronic transmittal which shall be deemed an original.

(g) Nonwaiver. Unless otherwise expressly provided herein, no waiver by Sublandlord or Subtenant of any provision hereof shall be deemed to have been made if such waiver is made orally. No delay or omission in the exercise of any right or remedy accruing to Sublandlord or Subtenant upon any breach under this Sublease shall impair such right or remedy or be construed as a waiver of any such breach theretofore or thereafter occurring. The waiver by Sublandlord or Subtenant of any breach of any term, covenant or condition herein stated shall not be deemed to be a waiver of any other term, covenant or condition. All rights or remedies afforded to Sublandlord or Subtenant hereunder or by law shall be cumulative and not alternative, and the exercise of one right or remedy shall not bar other rights or remedies allowed herein or by law.

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(h) Captions. Paragraph titles or captions contained herein are inserted as a matter of convenience and for reference, and in no way define, limit, extent or describe the scope of this Sublease.

(i) Exhibits. All Exhibits attached hereto shall be incorporated herein by reference as if set out herein in full.

(j) Time. Time is of the essence in the performance of this Sublease.

(k) Recordation. There shall be no recordation of either this Sublease or any memorandum hereof, or any affidavit pertaining hereto, and any such recordation of this Sublease or memorandum or affidavit by either party without the prior written consent of the other party.

(l) Attorneys’ Fees. Should either party employ attorneys to enforce any of the provisions hereof or to protect its interest in any manner arising under this Agreement, or to recover damages for breach of this Agreement, or to enforce any judgment relating to this Agreement and the transaction contemplated hereby, the prevailing party shall be entitled to reasonable attorneys’ fees and court costs.

(m) Incorporation by Reference. The terms, covenants, agreements, conditions, representations, warranties and provisions of the following provisions of the Pre-Closing Master Lease are incorporated herein by this reference hereto together with the relevant definitions of defined terms in such Article or Section: Sections 3.4 (except that Section 15 of this Sublease will apply to the extent of any conflict if this Sublease is terminated pursuant to Section 9 of this Sublease), 4.2, 5.2(b), 6.4, 6.7, 9.1, 12.1, 16.1, 22.1, 22.15, 22.17, 22.18, 22.22, 22.23, 22.26, 22.28, 22.30, 22.32 and Articles XVIII and XIX.

(n) No Novation. This Sublease is not intended to be, and is not, a novation of the Master Lease.

EXECUTED in duplicate originals as of the day and year first above written.

SUBLANDLORD: RLH PARTNERSHIP, L.P.
By:	Red Lion GP, Inc., a Delaware corporation, its general partner
	By:
	Name:
	Title:

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SUBTENANT:

RED LION HOTELS HOLDINGS, INC.

By:

Name:

Title:

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STATE OF CALIFORNIA	)
	) ss.
COUNTY OF	)

On this          day of                     , 2011, before me, a Notary Public in and for the State of California, personally appeared                                         , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed this instrument, on oath stated that he was authorized to execute the instrument, and acknowledged it as the                                          of                                         , to be the free and voluntary act and deed of said corporation for the uses and purposes mentioned in the instrument.

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

NOTARY PUBLIC in and for the State of

California, residing at

My appointment expires

Print Name

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STATE OF WASHINGTON	)
	) ss.
COUNTY OF KING	)

On this          day of                     , 2011, before me, a Notary Public in and for the State of Washington, personally appeared                                         , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed this instrument, on oath stated that he was authorized to execute the instrument, and acknowledged it as the                                          of                                         , to be the free and voluntary act and deed of said corporation for the uses and purposes mentioned in the instrument.

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

NOTARY PUBLIC in and for the State of

Washington, residing at

My appointment expires

Print Name

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EXHIBIT A

Sublease Premises

EXHIBIT M

Seller’s Knowledge and Known to Seller

Erich Stiger

Katie Morris

EXHIBIT 7.01(a)

When recorded return to:

Davis Wright Tremaine LLP

1201 Third Avenue, Suite 2200

Seattle, WA 98101

Attn: Bruce Bjerke

SPECIAL WARRANTY DEED

(Not Statutory)

Grantor(s): RLH Partnership, L.P., a Delaware Limited Partnership

Grantee(s): WHC809, LLC, a Delaware limited liability company

Abbreviated Legal: Ptn Lots 1-4, Block 11, Suburban Home Add. to Wenatchee, Vol. 1, P. 22, Chelan County

Additional Legal at page 1

Assessor’s Tax Parcel No(s): 232034860080

THE GRANTOR, RLH Partnership, L.P., a Delaware Limited Partnership, for and in consideration of completion of an IRC Section 1031 Tax-Deferred Exchange by Grantee, WHC809, LLC, a Delaware limited liability company, and other valuable consideration, in hand paid, bargains, sells, and conveys to Grantee the following described real estate, situated in the County of Chelan, State of Washington:

LEGAL DESCRIPTION: Real property in the County of Chelan, State of Washington, described as follows: LOTS 1, 2, 3 AND 4, BLOCK 11, SUBURBAN HOME ADDITION TO WENATCHEE, CHELAN COUNTY, WASHINGTON, ACCORDING TO THE PLAT THEREOF RECORDED IN VOLUME 1 OF PLATS, PAGE 22,

EXCEPT THE SOUTHERLY 76.9 FEET OF SAID LOTS 3 AND 4

Subject To: The Grantor, for itself and for its successors in interest, does by these presents expressly limit the covenants of this deed to those herein expressed, and exclude all covenants arising or to arise by statutory or other implication, and does hereby covenant that against all persons whomsoever lawfully claiming or to claim by, through, or under said Grantor, and not otherwise, Grantor will forever warrant and defend the said described real estate. Without limiting the foregoing, this conveyance is subject to the exceptions set forth on Exhibit A attached hereto and incorporated by reference.

Dated this      day of                     , 2011

Grantor:	RLH Partnership, L.P.
	By: Red Lion GP, Inc., a Delaware corporation, its general partner
	By:
	Name:
	Title:

STATE OF CALIFORNIA                         )

                                                         )            ss:

COUNTY OF                                 )

On                              2011 before me,                                                               (here insert name of the officer), Notary Public, personally appeared,                                                              , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Notary Public

[Seal]

LPB 16-09(r)

Page 2 of 3

Exhibit A

Permitted Exceptions

Permitted exceptions shall include all of the following (capitalized terms used herein but not otherwise defined shall have the definitions set forth in that certain Agreement to Purchase Eight Hotels and Assume Leases (the “Purchase Agreement”) between Grantor and Grantee and dated as of even date herewith): (1) the Space Leases; (2) the Ground Leases, and (3) any liens, encumbrances, restrictions, exceptions and other matters (a) in existence on August 1, 1995, (b) that have been approved by Purchaser and Seller prior to the date hereof, (c) that are approved as matters in accordance with the terms of Article IV of the Purchase Agreement to which title to the Real Property may be subject on the Closing Date, (d) that arise out of the act or omission of Purchaser or its Affiliates or those claiming by, through or under Purchaser or its Affiliates, (e) that are the responsibility of Purchaser or its Affiliates under the Master Lease or (f) matters that would be disclosed by a survey of the Real Property.

EXHIBIT 7.01(b)

QUITCLAIM BILL OF SALE

KNOW ALL MEN BY THESE PRESENTS, that RLH PARTNERSHIP, L.P., a Delaware limited partnership (the “Seller”), for and in consideration of the sum of Ten Dollars and other valuable consideration to it in hand paid by [WHC 809, LLC, a Delaware limited liability company OR RED LION HOTELS HOLDINGS, INC., a _______ corporation (formerly known as Red Lion Hotels, Inc.)] (the “Purchaser”), the receipt and sufficiency of which are hereby acknowledged, and pursuant to that certain Agreement to Purchase [Eight OR Two] Hotels dated ______ __, 2011 between Seller and Purchaser (the “Purchase Agreement”), hereby quitclaims unto said Purchaser any and all of Seller’s right, title and interest in, to and under the Fixtures and Tangible Personal Property and the Documents (collectively, the “Transferred Property”), as is, where is, and without warranty of use, and without warranty, express or implied, of merchantability or fitness for a particular purpose. All capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Purchase Agreement.

Nothing contained in this Quitclaim Bill of Sale shall be deemed to limit, waive or otherwise derogate from any provision in the Purchase Agreement (including, but not limited to, any representations, warranties or indemnities) by either Seller or Purchaser and none of such provisions in the Purchase Agreement shall be deemed to have merged into this Quitclaim Bill of Sale.

Seller and Purchaser will, at the Closing, or at any time or from time to time thereafter, upon request of either party, execute such additional instruments, documents or certificates as either party deems reasonably necessary in order to quitclaim the Transferred Property to Purchaser, hereunder.

In no event shall the direct or indirect partners, shareholders, members, owner, or affiliates, any officer, director, employee or agent of either Seller or Purchaser, or any affiliate or controlling person thereof have any liability for any claim, cause of action or other liability arising out of or relating to this Assignment or the Transferred Property, whether based on contract, common law, statute, equity or otherwise.

TO HAVE AND TO HOLD all of said personal property unto Purchaser, its successors and assigns, to its own use forever.

(Remainder of page intentionally left blank; signatures follow.)

Bill of Sale - 1

IN WITNESS WHEREOF, Seller has executed this Quitclaim Bill of Sale as of October __, 2011.

RLH PARTNERSHIP, L.P.

By: Red Lion GP, Inc., a Delaware corporation,

its general partner

By:

Name:

Title:

[                                                                                                                       ]

By:

Name:

Title:

EXHIBIT 7.01(c)

QUITCLAIM CONTRACT ASSIGNMENT AND ASSUMPTION AGREEMENT

THIS QUITCLAIM CONTRACT ASSIGNMENT AND ASSUMPTION AGREEMENT of Hotel Contracts, Space Leases, and Permits (this “Assignment”) is being made effective as of the __ day of October, 2011, by RLH PARTNERSHIP, L.P. a Delaware limited partnership (“Assignor”) and WHC809, LLC, a Delaware limited liability company (“Assignee”), pursuant to the terms of that certain Agreement to Purchase Eight Hotels and Assume Leases dated as of October __, 2011, between Assignor, as Seller, and Assignee, as Purchaser, as assigned and amended (the “Purchase Agreement”), and located at the property with the commonly known address of 1225 North Wenatchee Avenue, Wenatchee, Chelan County, Washington 98801. All capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Purchase Agreement.

In consideration of the sum of Ten and No/100 Dollars ($10.00) and the mutual covenants and agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, Assignor and Assignee hereby covenant and agree as follows:

1. Assignor hereby quitclaims to Assignee all of the right, title and interest of Assignor, if any, in, to and under the Hotel Contracts, the Space Leases, and the Permits in connection with the Sale Properties (said Hotel Contracts, Space Leases and Permits are defined as the “Assigned Property”), to have and to hold the same unto Assignee and Assignee’s heirs, successors and assigns, forever.

2. Nothing contained in this Assignment shall be deemed to limit, waive or otherwise derogate from any provision in the Purchase Agreement (including, but not limited to, any representations, warranties or indemnities) by either Assignor or Assignee and none of such provisions in the Purchase Agreement shall be deemed to have merged into this Assignment.

3. Assignor and Assignee will, at the Closing, or at any time or from time to time thereafter, upon request of either party, execute such additional instruments, documents or certificates as either party deems reasonably necessary in order to quitclaim the Assigned Property to Assignee, hereunder.

4. This Assignment may be executed by the parties in one or more counterparts, all of which together shall constitute one and the same agreement.

5. This Assignment shall bind, and the benefits thereof shall inure to, the respective heirs, legal representatives, successors, and assigns of Assignor and Assignee.

6. In no event shall the direct or indirect partners, shareholders, members, owner, or affiliates, any officer, director, employee or agent of either Assignor or Assignee, or any affiliate or controlling person thereof have any liability for any claim, cause of action or other liability arising out of or relating to this Assignment or the Assigned Property, whether based on contract, common law, statute, equity or otherwise.

Signatures are set forth on the following page.

ASSIGNOR:	RLH PARTNERSHIP, L.P.
	By: Red Lion GP, Inc., a Delaware corporation, its general partner
	By:
	Name:
	Title:
ASSIGNEE:	WHC809, LLC, a Delaware limited liability company
	By:
	Name:
	Title:

2

EXHIBIT 7.01(h)

CERTIFICATE REGARDING FOREIGN INVESTMENT

IN REAL PROPERTY TAX ACT

(ENTITY TRANSFEROR)

Section 1445 of the Internal Revenue Code provides that a transferee (purchaser) of a U.S. real property interest must withhold tax if the transferor (seller) is a foreign person. To inform the transferee (purchaser) that withholding of tax is not required upon the disposition of a U.S. real property interest by WHC809, LLC, a Delaware limited liability company (“Transferor”), Transferor hereby certifies to Transferee:

1. Transferor is not a foreign corporation, foreign partnership, foreign trust, foreign estate or a disregarded entity (as those terms are defined in the Internal Revenue Code and Income Tax Regulations),

2. Transferor’s Federal Employer Identification Number is _______________,

3. Transferor’s office address is: 201 W North River Dr. #100, Spokane, WA 99201; and

4. The address or description of the property which is the subject matter of the disposition is 1415 Fifth Avenue, Seattle, WA 98101.

Transferor understands that this certification may be disclosed to the Internal Revenue Service by transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.

Transferor declares that it has examined this certification and to the best of its knowledge and belief, it is true, correct and complete, and further declares that the individual executing this certification on behalf of Transferor has full authority to do so.

Signature is set forth on the following page.

WHC809, a Delaware limited liability company
By:
Name:
Title:
Dated:	June     , 2011

EX-21

Exhibit 21

RED LION HOTELS CORPORATION

List of Subsidiaries of Red Lion Hotels Corporation as of March 1, 2012

Name(1)	State of Organization
North River Drive Company	Washington
Red Lion Hotels Holdings, Inc.(2)	Delaware
Red Lion Properties, Inc.(3)	Delaware
TicketsWest.com, Inc.	Washington
Red Lion Hotels Franchising, Inc.	Washington
WestCoast Hotel Properties, Inc.	Washington
WHC805, LLC	Washington
Red Lion Anaheim, LLC	Washington
RLH Denver Southeast, LLC	Washington
Red Lion Hotels Management, Inc.	Washington
Red Lion Hotels Limited Partnership(4)	Delaware

(1) Each of these subsidiaries is directly or indirectly wholly owned by the Company.

(2) This corporation wholly owns four Delaware limited liability companies, each of which wholly owns one Delaware limited liability company that owns one hotel property.

(3) This corporation, which is owned by Red Lion Hotels Holdings, Inc., wholly owns one Delaware limited liability company, which wholly owns one Delaware limited liability company that owns one hotel property.

(4) This limited partnership, which is owned by the Company and North River Drive Company, wholly owns nine Delaware limited liability companies, each of which wholly owns one Delaware limited liability company that owns one or more hotel properties.

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

Red Lion Hotels Corporation

Spokane, Washington

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-135561, No. 333-60791, No. 333-151989 and No. 333-160485) of Red Lion Hotels Corporation of our reports dated March 15, 2012, relating to the consolidated financial statements, and the effectiveness of Red Lion Hotels Corporation’s internal control over financial reporting, which appear in this Form 10-K.

BDO USA, LLP

Spokane, WA

March 15, 2012

EX-31.1

Exhibit 31.1

RED LION HOTELS CORPORATION

CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a)

I, Jon E. Eliassen, certify that:

1. I have reviewed this annual report on Form 10-K of Red Lion Hotels Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2012

/s/ JON E. ELIASSEN

Jon E. Eliassen

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

RED LION HOTELS CORPORATION

CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a)

I, Julie Shiflett, certify that:

1. I have reviewed this annual report on Form 10-K of Red Lion Hotels Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2012

/s/ JULIE SHIFLETT

Julie Shiflett

Executive Vice President, Chief Financial Officer

EX-32.1

Exhibit 32.1

RED LION HOTELS CORPORATION

CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(b)

In connection with the annual report of Red Lion Hotels Corporation (the “Company”) on Form 10-K for the period ended December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jon E. Eliassen, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: March 15, 2012

/s/ JON E. ELIASSEN

Jon E. Eliassen

President and Chief Executive Officer

EX-32.2

Exhibit 32.2

RED LION HOTELS CORPORATION

CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(b)

In connection with the annual report of Red Lion Hotels Corporation (the “Company”) on Form 10-K for the period ended December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Julie Shiflett, Executive Vice President, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: March 15, 2012

/s/ JULIE SHIFLETT

Julie Shiflett

Executive Vice President, Chief Financial Officer

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Operating Lease Commitments

12 Months Ended

Dec. 31, 2011

Commitments and Contingencies/Operating Lease Commitments [Abstract]

Operating Lease Commitments

18. Operating Lease Commitments

Total future minimum payments due under all current term operating leases at December 31, 2011, were as indicated below (in thousands). Total rent expense from continuing operations, net of sublease income under the leases for the years ended December 31, 2011, 2010, and 2009 was $8.6 million, $6.5 million, and $7.4 million, respectively, which included $7.3 million, $5.1 million, and $6.0 million of hotel facility and land lease expense, as presented on the consolidated statements of operations.

Year Ended December 31,
2012	$	4,870
2013		4,093
2014		3,751
2015		3,727
2016		2,273
Thereafter		7,457
Total	$	26,171

In 2001, the Company assumed a master lease agreement with iStar Financial, Inc. (“iStar”) for 17 hotel properties, including 12 which were part of the Red Lion acquisition. Subsequently, the Company entered into an agreement with Doubletree DTWC Corporation under which it subleased five of these hotel properties from the Company. During the second quarter of 2010, the Company amended the agreement to terminate the master lease as to the Astoria, Oregon property due to its closure. The master lease agreement required minimum monthly payments of $1.2 million plus contingent rents based on gross receipts from the remaining 16 hotels, of which approximately $0.8 million per month was paid by the sublease tenant.

On November 2, 2011, the Company signed an agreement to purchase for $37 million, the assets of 10 hotels formerly leased by the Company from iStar. The hotels purchased in the iStar agreement include: Red Lion Hotel Boise Downtowner; Red Lion Inn Missoula; Red Lion Inn Bend; Red Lion Hotel Coos Bay; Red Lion Hotel Eugene; Red Lion Hotel Medford; Red Lion Hotel Pendleton; Red Lion Hotel Kelso/Longview; Red Lion Hotel Wenatchee; and Red Lion Hotel Sacramento at Arden Village. The lease expense for these 10 hotels represented $4.3 million in annual payments which are no longer reflected in the table above. The Red Lion Hotel Vancouver at the Quay in Washington will remain leased under a new lease with iStar as the future of the property rests with the progress of the Columbia River Crossing bridge project, which will result in the right of way acquisition of the hotel. The Company also assigned to an affiliate of iStar the sublease described above with Doubletree DTWC Corporation whereby Doubletree DTWC Corporation was subleasing five additional properties from the Company.

In October 2007, the Company completed an acquisition of a 100-year (including extension periods) leasehold interest in a hotel in Anaheim, California for $8.3 million, including costs of acquisition. At the Company’s option, it is entitled to extend the lease for 19 additional terms of five years each, with increases in lease payments tied directly to the Consumer Price Index. The Company exercised its first option to extend for an additional five year term beginning in May 2011 at $2.2 million per year. The amounts shown in the table above extend through April 2016 and reflect this five year extension.

In addition to the above mentioned obligations, the Company has leasehold interests at properties in Eugene, Oregon, the Seattle Airport and Spokane, Washington as well as its corporate headquarters location. These leases require the Company to pay fixed monthly rent and have expiration dates of 2012 and beyond. The Company also assumed an office lease used by guests contracted to stay at its Denver Southeast Hotel. As part of this contract business, the Company is reimbursed the entire lease expense amount. The expense of all of these leases has been included in the table above.

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2011

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements have been prepared by Red Lion pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with generally accepted accounting principles in the United States of America (“GAAP”), and include all accounts and wholly and majority-owned subsidiaries’ accounts. All significant inter-company and inter-segment transactions and accounts have been eliminated upon consolidation. Certain amounts disclosed in prior period statements have been reclassified to conform to the current period presentation.

Cash and Cash Equivalents

All highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents. At times, cash balances at banks and other financial institutions may be in excess of federal insurance limits.

Restricted Cash

In accordance with the Company’s various borrowing arrangements, at December 31, 2011 and 2010, cash of approximately $3.4 million and $4.1 million, respectively, was held in escrow for the future payment of insurance, property taxes, repairs and furniture and fixtures.

Allowance for Doubtful Accounts

The ability to collect individual accounts receivable is reviewed on a routine basis. An allowance for doubtful accounts is recorded based on specifically identified amounts believed to be uncollectible. If actual collection experience changes, revisions to the allowance may be required and if all attempts to collect a receivable fail, it is recorded against the allowance. The estimate of the allowance for doubtful accounts is impacted by, among other things, national and regional economic conditions.

The following schedule summarizes the activity in the allowance account for trade accounts receivable for the past three years for continuing operations:

	Year ended December 31,
	2011			2010			2009
	(In thousands)
Allowance for doubtful accounts, continuing operations
Balance, beginning of year	$	539		$	592		$	522
Additions to allowance		176			376			225
Write-offs, net of recoveries		(286	)		(429	)		(155	)
Balance, end of year	$	429		$	539		$	592

Inventories

Inventories consist primarily of food and beverage products held for sale at the company operated restaurants and guest supplies. Inventories are valued at the lower of cost, determined on a first-in, first-out basis, or net realizable value.

Property and Equipment

Property and equipment are stated at cost. The cost of improvements that extend the life of property and equipment is capitalized. Repairs and maintenance charges are expensed as incurred.

Depreciation is provided using the straight-line method over the estimated useful life of each asset, which ranges as follows:

Buildings	25 to 39 years
Equipment	2 to 15 years
Furniture and fixtures	5 to 15 years
Landscaping and improvements	15 years

Valuation of Definite Lived Intangibles and Long-Lived Assets

The Company tests definite lived intangibles and long-lived asset groups for recoverability when changes in circumstances indicate the carrying value may not be recoverable, for example, when there are material adverse changes in projected revenues or expenses, significant underperformance relative to historical or projected operating results, or significant negative industry or economic trends. The Company also performs a test for recoverability when management has committed to a plan to sell or otherwise dispose of an asset group and the plan is expected to be completed within a year. The Company evaluates recoverability of an asset group by comparing its carrying value to the future net undiscounted cash flows the Company expects will be generated by the asset group. If the comparison indicates that the carrying value of an asset group is not recoverable, the Company recognizes an impairment loss for the excess of carrying value over the estimated fair value. When the Company recognizes an impairment loss for assets to be held and used, it depreciates the adjusted carrying amount of those assets over their remaining useful life.

The Company bases its calculations of the estimated fair value of a definite lived intangible asset or asset group on the income approach or the market approach. The assumptions and methodology it utilizes for the income approach are the same as those described in the “Valuation of Goodwill” caption. For the market approach, the Company uses analyses based primarily on market comparables, recent appraisals and assumptions about market capitalization rates, growth rates, and inflation.

For information on impairment losses recorded in 2011, 2010 and 2009 associated with definite lived intangibles and long-lived assets, see Note 5, Note 6 and Note 8.

Valuation of Goodwill and Indefinite Lived Intangible Assets

The Company assesses goodwill of its segments for potential impairments annually, or during the year if an event or other circumstance indicates that it may not be able to recover the carrying amount of the asset. For purposes of goodwill impairment testing, the Company has determined that the individual segments where goodwill is recorded constitute reporting units as defined in the literature.

In the first step of evaluating goodwill for impairment the Company compares the estimated fair value of the reporting unit with its carrying value. If the estimated fair value of the reporting unit exceeds its carrying amount, no further analysis is needed.

If the estimated fair value of the reporting unit is less than its carrying amount, the Company proceeds to the second step of the test to calculate the implied fair value of the reporting unit goodwill in order to determine whether any impairment is required. The Company calculates the implied fair value of the reporting unit goodwill by allocating the estimated fair value of the reporting unit to all of the assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination. If the carrying value of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, the Company recognizes an impairment loss for that excess amount. In allocating the estimated fair value of the reporting unit to all of the assets and liabilities of the reporting unit, the Company uses industry and market data, recent appraisals and knowledge of the industry and past experiences.

The Company bases its calculation of the estimated fair value of a reporting unit on a combined income and market approach. For the income approach, the Company uses discounted cash flow models that include, among others, the following assumptions: projections of revenues and expenses and related cash flows based on assumed long-term growth rates and demand trends; expected future investments to grow new units; and estimated discount rates. The Company bases these assumptions on historical data and experience, third-party appraisals, industry projections, micro and macro general economic condition projections, and its own expectations. For the market approach, the Company uses analyses based primarily on market comparables and assumptions about market capitalization rates, growth rates, and inflation.

For information on goodwill impairment charges, see Note 8.

Assets Held for Sale

The Company considers properties to be assets held for sale when all of the following criteria are met:

• management commits to a plan to sell a property;

• it is unlikely that the disposal plan will be significantly modified or discontinued;

• the property is available for immediate sale in its present condition;

• actions required to complete the sale of the property have been initiated;

• sale of the property is probable and the Company expects the completed sale will occur within one year; and

• the property is actively being marketed for sale at a price that is reasonable given its current market value.

Upon designation as an asset held for sale, the Company records the carrying value of each property at the lower of its carrying value or its estimated fair value, less estimated costs to sell, and ceases depreciation.

For information on the assets classified as held for sale, see Note 6.

Other Assets

Other assets primarily include deferred loan fees, straight-line rental income, long-term notes receivable and equity method and cost method investments discussed in Note 1. Deferred loan fees are amortized using the effective interest method over the term of the related loan agreement, and totaled $0.7 million, $0.6 million and $0.5 million at December 31, 2011, 2010 and 2009 respectively.

Cost method investments are carried at their original purchase price. Equity method investments are carried at cost, adjusted for the Company’s proportionate share of earnings and any investment disbursements. At both December 31, 2011 and 2010, the Company had a $0.3 million note receivable that bore interest at 7.05% related to its 19.9% owned investment in the Company’s corporate office building.

Fair Value Measurements

Applicable accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The Company measures its assets and liabilities using inputs from the following three levels of the fair value hierarchy:

• Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

• Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

• Level 3 includes unobservable inputs that reflect assumptions about what factors market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.

Deferred Income

During the year ended December 31, 2011, the Company entered into an agreement with a new tenant of the Red Lion Hotel Sacramento at Arden Village. The Company received $0.3 million in consideration that will be amortized over the lease period as deferred lease revenue. During the year ended December 31, 2011, the Company recognized $23,000 in deferred lease income. In connection with the initial sublease of the hotel, as well as an amendment to that agreement entered into during the second quarter of 2009, the Company received $3.9 million in consideration that was being amortized over the sublease period as deferred lease revenue by the previous subtenant. During the year ended December 31, 2010, that sublease agreement was terminated. As a result, the Company recognized the remaining deferred lease revenue of $3.0 million. Deferred lease revenue recognized for the year ended December 31, 2009 was $0.3 million.

In 2003, the Company sold a hotel to an unrelated party in a sale-operating leaseback transaction. The pre-tax gain on the transaction of approximately $7.0 million was deferred and is being amortized into income over the period of the lease term, which expires in November 2018 and is renewable for three, five-year terms at the Company’s option. During 2011, 2010 and 2009, the Company recognized income of approximately $0.5 million each year for the amortization of the deferred gain. The remaining balance at December 31, 2011, was $3.2 million.

Income Taxes

Deferred tax assets and liabilities and income tax expenses and benefits are recorded for the expected future income tax consequences of events that have been recognized in the consolidated financial statements. Deferred tax assets and liabilities are determined based on the temporary differences between the carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. Certain wholly or partially-owned entities, including RLHLP, do not directly pay income taxes. Instead, their taxable income either flows through to the Company or to the other respective owners of the entities.

The Company recognizes the financial statement effect of a tax position when, based on the technical merits of the uncertain tax position, it is more likely than not to be sustained on a review by taxing authorities. These estimates are based on judgments made from information currently available to the Company. The Company reviews these estimates and makes changes to recorded amounts of uncertain tax positions as facts and circumstances warrant. For additional information about income taxes, see Note 16.

A valuation allowance against the deferred tax assets has not been established as the Company believes it’s more likely than not that these assets will be realized.

Revenue Recognition and Receivables

Revenue is generally recognized as services are provided. When payments from customers are received before services have been performed, the amount received is recorded as deferred revenue until the service has been completed. The Company recognizes revenue from the following sources:

• Hotels — Room rental and food and beverage sales from owned and leased hotels. Revenues are recognized when services have been performed, generally at the time of the hotel stay or guest’s visit to the restaurant.

• Franchise — Fees received in connection with the franchise and marketing of the Red Lion brand name as well as termination fees. Franchise revenues are recognized as earned in accordance with the contractual terms of the franchise agreements, while termination fees are recorded as revenues as if the agreements were terminated at that date when the provisions of the franchise agreements provide for receipt of incentive fees upon termination.

• Entertainment — Computerized event ticketing services and promotion of Broadway-style shows and other special events. Where the Company acts as an agent and receives a net fee or commission, it is recognized as revenue in the period the services are performed. When the Company is the promoter of an event and is at-risk for the production, revenues and expenses are recorded in the period of the event performance.

• Other — Primarily from rental income received from the Company’s direct ownership interest in a retail mall in Kalispell, Montana that is attached to a hotel property. The Company also owns a hotel in Sacramento, California that it leases to a franchisee.

Advertising and Promotion

Costs associated with advertising and promotional efforts are generally expensed as incurred. During the years ended December 31, 2011, 2010 and 2009, the Company incurred approximately $3.5 million, $3.4 million and $2.3 million, respectively, in advertising expense from continuing operations. These amounts include advertising and promotion spent by the Red Lion Central Program Fund discussed below.

Central Program Fund

In 2002, the Company established the Central Program Fund (“CPF”) in accordance with the Company’s various domestic franchise agreements. The CPF acts as an agent in providing services to its members, the hotels owned and leased by the Company and its franchisees. These services include advertising, frequent guest program administration, reservation services, national sales promotions and brand and revenue management services intended to increase sales and enhance the reputation of the Red Lion brand. CPF contributions by company owned and managed hotels and those made by the franchisees, based on the individual franchise agreements, and are up to 4.5% of room revenue. The Company can elect to contribute additional funds to the CPF in order to accelerate brand awareness or increase marketing and advertising expense to grow the brand, among other things. Activities of the CPF are conducted as a service, not as an operation or business venture.

Basic and Diluted Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing income (loss) by the weighted-average number of shares outstanding during the period. Diluted earnings (loss) per share gives effect to all dilutive potential shares that are outstanding during the period and includes outstanding stock options and other outstanding employee equity grants, as well as the effect of minority interests related to operating partnership units of RLHLP (“OP Units”), by increasing the weighted-average number of shares outstanding by their effect. When the Company reports a net loss during the period, basic and diluted earnings (loss) per share are the same.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could materially differ from those estimates.

New and Future Accounting Pronouncements

Intangibles-Goodwill and Other — In September 2011, the FASB released Accounting Standards Update No. 2011-08, “Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment”, (“ASU 2011-08”). Under ASU 2011-08, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. This standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company will adopt this standard in 2012 and it does not believe that it will have a material impact on the consolidated financial statements.

Amendments to Fair Value Measurement — In May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”) to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements, particularly for level 3 fair value measurements. ASU 2011-04 is effective for the Company’s fiscal year beginning on January 1, 2012 and must be applied prospectively. The Company does not expect the adoption of ASU 2011-04 to have a material impact on the consolidated financial statements.

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Subsequent Events

12 Months Ended

Dec. 31, 2011

Subsequent Events [Abstract]

Subsequent Events

21. Subsequent Events

On February 2, 2012, the Company modified its existing credit facility with Wells Fargo Bank, effective December 31, 2011, as follows: A financial covenant relating to loan commitment coverage was eliminated. In lieu thereof, the Company agreed that borrowings under the facility’s revolving line of credit extending up to $10 million may be limited based on a formula relating to the trailing twelve-month consolidated net income of the hotel properties collateralizing the facility. The financial covenant relating to debt service coverage ratio was eased. The Company was relieved of its obligation to offer the hotel in Medford, Oregon as additional security for the facility and for the period from January 1, 2012 through August 31, 2012, the margins on the interest rate options under the term loan and revolving line of credit were increased (i) to 2.5% for borrowings accruing interest by reference to the facility’s base rate, and (ii) to 5% for borrowings accruing interest by reference to LIBOR. Thereafter, the margins will decrease to at most 2% and 4.5%, respectively, or to as low as 1% and 3.5%, respectively, if the senior leverage ratio decreases sufficiently. The Company paid a fee of $10,000 in connection with the modification of the facility. See Notes 3 and 10.

During February 2012, the Company elected to issue 44,837 shares of its common stock in exchange for a like number of OP Units that then certain limited partners put to RLHLP. Partners who hold OP Units have the right to put those units to RLHLP, in which event either (i) RLHLP must redeem the units for cash, or (ii) as general partner, the Company may elect to acquire the OP Units for cash or in exchange for a like number of shares of its common stock. RLHLP remains in existence as a limited partnership because there are 70,842.51 OP Units help by North River Drive Company, a wholly owned subsidiary of Red Lion Hotels Corporation. However, on a consolidated basis, RLHLP is now wholly owned by the Company.

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Organization

12 Months Ended

Dec. 31, 2011

Organization [Abstract]

Organization

1. Organization

Red Lion Hotels Corporation (“RLH,” “Red Lion” or the “Company”) is a NYSE-listed hospitality and leisure company (ticker symbols RLH and RLH-pa) primarily engaged in the ownership, operation and franchising of midscale full, select and limited service hotels under the Red Lion brand. As of December 31, 2011, the Red Lion system of hotels was comprised of 48 hotels located in nine states and one Canadian province, with 9,010 rooms and 452,387 square feet of meeting space. As of that date, the Company operated 30 hotels, of which 25 are wholly-owned and five are leased, and franchised 18 hotels predominantly owned and operated by various third-party franchisees.

The Company is also engaged in entertainment operations, which derive revenues from promotion and presentation of entertainment productions and ticketing services under the operations of WestCoast Entertainment and TicketsWest. The ticketing service offers ticketing inventory management systems, call center services, and outlet/electronic channel distribution for event locations. The Company also maintains a direct ownership interest in a retail mall that is attached to one of its hotels and owns a hotel which is leased to a franchisee.

The Company was incorporated in the state of Washington in April 1978, and until 1999 operated hotels under various brand names including Cavanaughs Hotels. In 1999, the Company acquired WestCoast Hotels, Inc., and rebranded its Cavanaughs hotels to the WestCoast brand, changing the Company’s name to WestCoast Hospitality Corporation. In 2001, the Company acquired Red Lion Hotels, Inc. In September 2005, after rebranding most of its WestCoast hotels to the Red Lion brand, the Company changed its name to Red Lion Hotels Corporation. The financial statements encompass the accounts of Red Lion Hotels Corporation and all of its consolidated subsidiaries, including its 100% ownership of Red Lion Hotels Holdings, Inc., and Red Lion Hotels Franchising, Inc., and its more than 99% ownership of Red Lion Hotels Limited Partnership (“RLHLP”) further discussed in Note 14. The less than 1% noncontrolling interest in RLHLP has been classified as a component of equity separate from equity of Red Lion Hotels Corporation.

The financial statements include an equity method investment in a 19.9% owned real estate venture. In addition, the Company holds a 3% common interest in Red Lion Hotels Capital Trust (the “Trust”) that is considered a variable interest entity. The Company is not the primary beneficiary of the Trust; thus, it is treated as an equity method investment. As more fully discussed in Note 2, the consolidated financial statements include all of the activities of the Company’s cooperative marketing fund, a variable interest entity. The Company is the primary beneficiary of this variable interest entity.

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents	$ 1,981	$ 4,012
Restricted cash	3,358	4,120
Accounts receivable, net	7,591	5,985
Inventories	1,346	1,328
Prepaid expenses and other	1,973	1,937
Deferred income taxes	4,291	0
Assets held for sale	30,380	0
Total current assets	50,920	17,382
Property and equipment, net	232,589	272,030
Goodwill	8,512	28,042
Intangible assets, net	6,992	7,984
Other assets, net	5,883	6,044
Total assets	304,896	331,482
Current liabilities:
Accounts payable	4,928	7,146
Accrued payroll and related benefits	2,103	4,367
Accrued interest payable	231	276
Advance deposits	380	487
Other accrued expenses	9,249	10,178
Revolving credit facility	844	18,000
Long-term debt, due within one year	3,274	25,275
Total current liabilities	21,009	65,729
Long-term debt, due after one year	66,378	51,877
Deferred income	4,643	4,859
Deferred income taxes	16,176	7,427
Debentures due Red Lion Hotels Capital Trust	30,825	30,825
Total liabilities	139,031	160,717
Commitments and contingencies
Red Lion Hotels Corporation stockholders' equity
Preferred stock - 5,000,000 shares authorized; $0.01 par value; no shares issued or outstanding
Common stock - 50,000,000 shares authorized; $0.01 par value; 19,172,670 and 18,869,254 shares issued and outstanding	192	189
Additional paid-in capital, common stock	149,027	146,834
Retained earnings	16,589	23,737
Total Red Lion Hotels Corporation stockholders' equity	165,808	170,760
Noncontrolling interest	57	5
Total stockholders' equity	165,865	170,765
Total liabilities and stockholders' equity	$ 304,896	$ 331,482

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Consolidated Statements of Changes in Stockholders' Equity (USD $) In Thousands, except Share data	Total	Common Stock	Additional Paid-In Capital	Retained Earnings	Equity Attributable to Noncontrolling Interest
Balance at Dec. 31, 2008	$ 180,345	$ 180	$ 141,137	$ 39,009	$ 19
Balance, shares at Dec. 31, 2008		17,977,205
Net income (loss)	(6,664)			(6,663)	(4)
Stock issued under employee stock purchase plan	119		119
Stock issued under employee stock purchase plan, shares		54,871
Stock based compensation	1,225	2	1,223
Stock based compensation, shares		148,028
Balance at Dec. 31, 2009	175,022	182	142,479	32,346	15
Balance, shares at Dec. 31, 2009		18,180,104
Net income (loss)	(8,619)			(8,609)	(10)
Stock issued under employee stock purchase plan	130		130
Stock issued under employee stock purchase plan, shares		32,162
Stock issued under option plan	2,486	4	2,482
Stock issued under option plan, shares		429,528
Stock based compensation	1,746	3	1,743
Stock based compensation, shares		227,460
Balance at Dec. 31, 2010	170,765	189	146,834	23,737	5
Balance, shares at Dec. 31, 2010		18,869,254
Net income (loss)	(7,062)			(7,148)	86
Distributions to noncontrolling interest	(34)				(34)
Stock issued under employee stock purchase plan	129		129
Stock issued under employee stock purchase plan, shares		22,382
Stock issued under option plan	876	2	874
Stock issued under option plan, shares		163,035
Stock based compensation	1,107	1	1,106
Stock based compensation, shares		117,999
Tax benefit associated with stock based plans	84		84
Balance at Dec. 31, 2011	$ 165,865	$ 192	$ 149,027	$ 16,589	$ 57
Balance, shares at Dec. 31, 2011		19,172,670

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Earnings (Loss) Per Share

12 Months Ended

Dec. 31, 2011

Earnings (Loss) Per Share [Abstract]

Earnings (Loss) Per Share

15. Earnings (Loss) Per Share

The following table presents a reconciliation of the numerators and denominators used in the basic and diluted earnings (loss) per common share computations for the years ended December 31, 2011, 2010 and 2009 (in thousands, except per share amounts):

	Year ended December 31,
	2011			2010			2009
Numerator — basic and diluted:
Net income (loss) from continuing operations	$	(5,970	)	$	(7,850	)	$	(6,207	)
Less net income or loss attributable to noncontrolling interest		86			(10	)		(1	)
Net Income (loss) from discontinued operations		(1,092	)		(769	)		(457	)
Net income (loss) attributable to Red Lion Hotels Corporation	$	(7,148	)	$	(8,609	)	$	(6,663	)
Denominator:
Weighted average shares — basic		19,053			18,485			18,106
Weighted average shares — diluted		19,053			18,485			18,106
Earnings (loss) per share attributable to Red Lion Hotels Corporation:
Basic and Diluted
Net Income (loss) from continuing operations	$	(0.32	)	$	(0.43	)	$	(0.34	)
Less net income or loss attributable to noncontrolling interest	$	—		$	—		$	—
Net Income (loss) from discontinued operations	$	(0.06	)	$	(0.04	)	$	(0.03	)
Net income (loss) attributable to Red Lion Hotels Corporation	$	(0.38	)	$	(0.47	)	$	(0.37	)

At December 31, 2011, 2010 and 2009, the effect of converting the 44,837 outstanding OP Units during those periods was considered antidilutive due to reported net losses attributable to Red Lion Hotels Corporation and excluded from the above calculations.

At December 31, 2011, 2010 and 2009 there were; 263,872, 478,047 and 1,194,460 options to purchase common shares, respectively, outstanding. All of the options to purchase common shares were considered antidilutive and excluded from the above calculations due to reported net losses attributable to Red Lion Hotels Corporation in all years.

At December 31, 2011, 2010 and 2009, all 288,342, 220,816 and 239,318 outstanding but unvested restricted stock units, respectively, were considered antidilutive due to reported net losses attributable to Red Lion Hotels Corporation.

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Operating Lease Income

12 Months Ended

Dec. 31, 2011

Operating Lease Income [Abstract]

Operating Lease Income

17. Operating Lease Income

The Company leases commercial retail and office space to various tenants over terms ranging through 2047. The leases generally provide for fixed minimum monthly rent as well as tenants’ payments for their pro rata share of taxes and insurance and common area maintenance and expenses. Rental income for the years ended December 31, 2011, 2010 and 2009 from continuing operations was approximately $2.8 million, $3.0 million and $3.5 million, respectively, which included contingent rents of approximately $0.3 million, $0.2 million and $0.2 million, respectively. Future minimum lease income under existing non-cancelable leases as of December 31, 2011, is anticipated to be as follows (in thousands):

Year Ended December 31,
2012	$	2,310
2013		1,548
2014		1,384
2015		1,228
2016		1,171
Thereafter		4,565
Total	$	12,206

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Operating activities:
Net income (loss)	$ (7,062)	$ (8,619)	$ (6,664)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	19,021	20,919	20,954
Gain on disposition of property, equipment and other assets, net	(33,379)	(26)	(243)
Goodwill impairment	14,236
Asset impairment	9,449	5,792	8,686
Termination of sublease agreement, net		(2,109)
Deferred income taxes	4,542	(5,168)	(3,184)
Equity in investments	52	48	(9)
Stock based compensation expense	1,251	1,594	1,238
Provision for doubtful accounts	176	378	212
Change in current assets and liabilities:
Restricted cash	762	(319)	89
Accounts receivable	(1,764)	209	2,505
Inventories	(56)	22	160
Prepaid expenses and other	(36)	1,308	(432)
Accounts payable	(2,218)	1,067	(5,388)
Accrued payroll and related benefits	(2,264)	2,203	(2,798)
Accrued interest payable	(45)	(42)	4
Deferred income	275		900
Other accrued expenses and advance deposits	(1,059)	2,230	(338)
Net cash (used in) provided by operating activities	1,881	19,487	15,692
Investing activities:
Purchases of property and equipment	(46,278)	(10,615)	(16,425)
Liquor license purchase			(500)
Proceeds from disposition of property and equipment	68,346	44	16
Advances to Red Lion Hotels Capital Trust	(27)	(27)	(27)
Other, net	(430)	170	(34)
Net cash (used in) provided by investing activities	21,611	(10,428)	(16,970)
Financing activities:
Borrowings on revolving credit facility	10,844	15,500	11,000
Borrowings on long-term debt	18,042
Repayment of revolving credit facility		(23,500)	(21,000)
Retirement of revolving credit facility	(28,000)
Repayment of long-term debt	(25,542)	(3,170)	(3,009)
Common stock redeemed	(144)	(86)	(13)
Proceeds from issuance of common stock under employee stock purchase plan	129	130	119
Proceeds from stock option exercises	876	2,486
Distributions to noncontrolling interest	(34)		(3)
Additions to deferred financing costs	(1,694)	(292)	(153)
Net cash (used in) provided by financing activities	(25,523)	(8,932)	(13,059)
Change in cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents	(2,031)	127	(14,337)
Cash and cash equivalents at beginning of period	4,012	3,885	18,222
Cash and cash equivalents at end of period	1,981	4,012	3,885
Cash paid during periods for:
Interest on long-term debt	8,418	9,115	8,955
Income taxes	415
Cash received during periods for:
Income taxes		672	296
Noncash operating investing and financing activities:
Reclassification of property and other assets to assets held for sale	30,380
Reclassification of intangible assets to property and equipment	953
Conversion of accounts receivable to note receivable		377	771
Tax benefit associated with stock based plans	(84)
Bonuses to employees paid in stock		$ 237	$ 126

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Consolidated Balance Sheets (Parenthetical) (USD $)	Dec. 31, 2011	Dec. 31, 2010
Consolidated Balance Sheets [Abstract]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	19,172,670	18,869,254
Common stock, shares outstanding	19,172,670	18,869,254

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Credit Facility

12 Months Ended

Dec. 31, 2011

Debt Disclosure [Abstract]

Credit Facility

10. Credit Facility

During the second quarter of 2011 the Company retired its prior credit facility using a portion of the proceeds from the sale of the Seattle property, which secured the facility. The facility had an expiration date in September 2011.

On September 12, 2011, the Company expanded its existing term loan agreement with Wells Fargo. The term loan, the outstanding principal on which was approximately $12.0 million, was increased to $30 million. The additional advance of approximately $18.0 million was used to pay off maturing debt aggregating $17.4 million and to pay expenses in connection with the transaction, including a $0.2 million commitment fee, resulting in net cash proceeds to the Company of approximately $0.4 million. Principal payments of $0.5 million are required on the loan on December 31, 2011 and on the last day of each calendar quarter thereafter. Additional principal payments will be required on the term loan if a property securing the facility is sold or the Company raises new equity. In the case of a property sale, the additional payment required will be the greater of (i) 50% of the net proceeds from the sale, or (ii) 50% of the appraised market value of the property being sold. In the case of an equity issue, the additional payment required will be 50% of the net equity proceeds raised. Any outstanding amounts are due on March 31, 2013.

Under the facility with Wells Fargo, in addition to the $30 million term loan revolving line of credit for up to $10 million for general corporate purposes became available on October 13, 2011.

Interest during 2011 under the term loan and revolving line of credit was payable at the Company’s option (i) at a fluctuating rate 2% above a base rate in effect from time to time, or (ii) at a rate 4.5% above LIBOR (under one, three or six month terms). The interest rate on the outstanding balance at December 31, 2011 was 4.8% on the term loan and 5.25% on the revolving line of credit.

The Company’s obligations under the $40 million facility are (i) guaranteed by its subsidiaries RLHLP, Red Lion Hotels Franchising, Inc., Red Lion Hotels Management, Inc. and Red Lion Hotels Holdings, Inc., (ii) secured by its accounts receivable and inventory, and (iii) further collateralized by its owned hotel properties in Bellevue, Spokane and Olympia, Washington, in Post Falls and Pocatello, Idaho, in Kalispell and Helena, Montana and in Aurora, Colorado. On November 2, 2011, we purchased 10 hotels formerly leased from iStar Financial Inc., see Note 5 for further details. Subsequent to their purchase, the Company pledged its hotels in Bend and Coos Bay, Oregon, Boise, Idaho, Kelso and Wenatchee, Washington, and Sacramento, California as additional collateral for the facility.

The credit facility requires the Company to comply with customary affirmative and negative covenants, as well as financial covenants relating to leverage and to debt service coverage ratios and limitations of borrowing availability based on the operating results of collateral properties. It also includes customary events of default. The Company was in compliance with these covenants at December 31, 2011.

As of December 31, 2011 the outstanding balance on the term loan was $29.5 million. Additionally, the outstanding balance under the revolving credit facility at December 31, 2011 was $0.8 million and is included as a current liability.

On February 2, 2012, the Company modified the facility with Wells Fargo, effective December 31, 2011, as follows: A financial covenant relating to loan commitment coverage was eliminated. In lieu thereof, the Company agreed that borrowings under the facility’s revolving line of credit may be limited based on a formula relating to the trailing twelve-month consolidated net income of the hotel properties collateralizing the facility. The financial covenant relating to debt service coverage ratio was liberalized. The Company was relieved of its obligation to offer the hotel in Medford, Oregon as additional security for the facility and for the period from January 1, 2012 through August 31, 2012, the margins on the interest rate options under the term loan and revolving line of credit were increased (i) to 2.5% for borrowings accruing interest by reference to the facility’s base rate, and (ii) to 5% for borrowings accruing interest by reference to LIBOR. Thereafter, the margins will decrease to at most 2% and 4.5%, respectively, or to as low as 1% and 3.5%, respectively, if the senior leverage ratio decreases sufficiently. The Company paid a fee of $10,000 in connection with the modification of the facility.

Contractual maturities for the term loan and revolving line of credit outstanding at December 31, 2011, are summarized by year as follows (in thousands):

Year Ending December 31,	Amount
2012	$	2,844
2013		27,500
	$	30,344

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Document and Entity Information (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Mar. 08, 2012	Jun. 30, 2011
Document and Entity Information [Abstract]
Entity Registrant Name	Red Lion Hotels CORP
Entity Central Index Key	0001052595
Document Type	10-K
Document Period End Date	Dec. 31, 2011
Amendment Flag	false
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 150.9
Entity Common Stock, Shares Outstanding		19,255,939

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Long-Term Debt

12 Months Ended

Dec. 31, 2011

Debt Disclosure [Abstract]

Long-Term Debt

11. Long-Term Debt

In addition to the credit facility discussed in Note 10 and the debentures discussed in Note 12, the Company has long-term debt consisting of mortgage notes payable and notes and contracts payable, collateralized by real property, equipment and the assignment of certain rental income. A summary of long-term debt as of December 31, 2011 and 2010, monthly installment and interest amounts, if applicable, interest rate and maturity date is as provided in the below table (in thousands, except monthly payment amounts).

	Outstanding December  31,						Last Applicable Monthly Installment		Last Applicable Interest Rate			Type		Maturity/ Balloon Payment Due	Security
	2011			2010
Notes Payable(1)	$	—		$	12,425		$	93,269		4.00	%		Variable	September 2013	Real Property
Notes Payable		—			11,822			108,797		8.08	%		Fixed	September 2011	Real Property
Notes Payable		8,607			8,863			70,839		6.70	%		Fixed	July 2013	Real Property
Notes Payable		7,604			7,830			62,586		6.70	%		Fixed	July 2013	Real Property
Notes Payable		—			5,742			52,844		8.08	%		Fixed	September 2011	Real Property
Notes Payable		5,014			5,163			41,265		6.70	%		Fixed	July 2013	Real Property
Notes Payable		—			5,111			46,695		8.00	%		Fixed	October 2011	Real Property
Notes Payable		4,262			4,388			35,076		6.70	%		Fixed	July 2013	Real Property
Notes Payable		4,136			4,263			34,353		6.70	%		Fixed	July 2013	Real Property
Notes Payable		3,426			3,528			28,198		6.70	%		Fixed	July 2013	Real Property
Notes Payable		2,507			2,581			20,633		6.70	%		Fixed	July 2013	Real Property
Notes Payable		2,507			2,581			20,633		6.70	%		Fixed	July 2013	Real Property
Notes Payable		2,089			2,151			17,194		6.70	%		Fixed	July 2013	Real Property
Industrial revenue bonds payable		—			704			66,560		5.90	%		Fixed	October 2011	Real Property
Total long-term debt		40,152			77,152
Due within one year		(1,274	)		(25,275	)
Long-term debt due after one year	$	38,878		$	51,877

(1) Interest rate based on Prime rate

During 2011, the Company retired $22.2 million in notes payable that matured in September and October, 2011. In addition, the industrial revenue bonds were paid in full in October 2011.

Contractual maturities for long-term debt outstanding at December 31, 2011, excluding the $30.3 million outstanding under the term loan and revolving line of credit discussed in Note 10 and the debentures of the Red Lion Hotels Capital Trust discussed in Note 12, are summarized by year as follows (in thousands):

Year Ending December 31,	Amount
2012	$	1,274
2013		38,878
	$	40,152

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Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Revenue:
Hotels	$ 138,291	$ 144,378	$ 143,320
Franchise	3,955	3,209	3,616
Entertainment	11,379	9,236	11,690
Other	2,455	2,481	2,641
Total revenues	156,080	159,304	161,267
Operating expenses:
Hotels	111,498	112,934	109,356
Franchise	4,092	3,118	2,255
Entertainment	10,584	7,769	9,466
Other	1,733	1,598	2,075
Depreciation and amortization	18,651	20,462	20,438
Hotel facility and land lease	7,252	5,117	5,983
Goodwill impairment	14,236
Asset impairment	8,430	5,733	8,509
Gain on asset dispositions, net	(33,379)	(25)	(253)
Undistributed corporate expenses	5,503	6,304	5,200
Restructuring expenses			136
Total expenses	148,600	163,010	163,165
Operating income (loss)	7,480	(3,706)	(1,898)
Other income (expense):
Interest expense	(8,372)	(9,073)	(8,503)
Other income, net	436	409	379
Income (loss) from continuing operations before income taxes	(456)	(12,370)	(10,022)
Income tax (benefit) expense	5,514	(4,520)	(3,815)
Net income (loss) from continuing operations	(5,970)	(7,850)	(6,207)
Discontinued operations:
Income (loss) from operations of discontinued business units, net of income tax (benefit) expense of $(250), $(397), and $(195) respectively	(441)	(731)	(340)
Impairment of the assets of the discontinued business units, net of income tax (benefit) expense of $(370), $(20), and $(60) respectively	(651)	(38)	(117)
Income (loss) from discontinued operations	(1,092)	(769)	(457)
Net income (loss)	(7,062)	(8,619)	(6,664)
Net income or loss attributable to noncontrolling interest	86	(10)	(1)
Net income (loss) attributable to Red Lion Hotels Corporation	$ (7,148)	$ (8,609)	$ (6,663)
Basic and diluted
Net income (loss) from continuing operations	$ (0.32)	$ (0.43)	$ (0.34)
Income (loss) from discontinued operations	$ (0.06)	$ (0.04)	$ (0.03)
Net income (loss) attributable to Red Lion Hotels Corporation	$ (0.38)	$ (0.47)	$ (0.37)
Weighted average shares - basic	19,053	18,485	18,106
Weighted average shares - diluted	19,053	18,485	18,106

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Property and Equipment

12 Months Ended

Dec. 31, 2011

Property and Equipment/Assets Held for Sale [Abstract]

Property and Equipment

5. Property and Equipment

Property and equipment used in continuing operations is summarized as follows (in thousands):

	December 31, 2011			December 31, 2010
Buildings and equipment	$	247,809		$	301,766
Furniture and fixtures		41,896			47,316
Landscaping and land improvements		8,129			9,821
		297,834			358,903
Less accumulated depreciation and amortization		(138,272	)		(153,373	)
		159,562			205,530
Land		71,264			63,581
Construction in progress		1,763			2,919
	$	232,589		$	272,030

December 2011 amounts in the table above exclude $30.3 million for the property and equipment of The Red Lion Hotel Denver Southeast in Aurora, Colorado (“Denver Southeast”), The Red Lion Colonial Hotel in Helena, Montana (“Helena property”), The Red Lion Hotel Medford in Medford, Oregon (“Medford property”) and The Red Lion Inn Missoula in Missoula, Montana (“Missoula property”), which are all classified as assets held for sale at December 31, 2011. See Notes 6 and 7.

On November 2, 2011, the Company purchased the assets of ten hotels formerly leased by the Company from a subsidiary of iStar Financial, Inc. for $37 million plus acquisition costs. The purchase price was funded with cash proceeds received from the sale of the Red Lion Hotel on Fifth Avenue, $32 million of which was paid through a tax deferred exchange. See Note 6 for further detail. The hotels purchased include: Red Lion Hotel Boise Downtowner, Red Lion Inn Missoula, Red Lion Inn Bend, Red Lion Hotel Coos Bay, Red Lion Hotel Eugene, Red Lion Hotel Medford, Red Lion Hotel Pendleton, Red Lion Hotel Kelso/Longview, Red Lion Hotel Wenatchee, and Red Lion Hotel Sacramento at Arden Village.

During the year ended December 31, 2011, assets held and used with a carrying value of $1.7 million were fully impaired. This related to The Red Lion Hotel Vancouver at the Quay which is subject to a right of way acquisition by the state of Washington to allow a replacement of a bridge to be built where the property now exists. The Company will continue to operate the hotel until this occurs, thus it is not appropriate to classify the operating results of this hotel as discontinued operations.

During the year ended December 31, 2010, assets held and used with a carrying amount of $4.1 million were written down to their estimated fair value of $0.4 million, resulting in a non-cash impairment charge of $3.7 million. This impairment related to the termination of a sublease and franchise agreement with the former operator of the Red Lion Hotel Sacramento.

During the year ended December 31, 2009, assets held and used with a carrying amount of $28.4 million were written down to their fair value of $19.9 million, resulting in a non-cash impairment charge of $8.5 million. The full amount of the impairment related to Denver Southeast.

As discussed in Note 2, the Company used Level 3 inputs for its impairment analyses, including growth rate, property-level pro forma financial information and remaining lives of the assets. Management bases these assumptions on historical data and experience and future operational expectations. For certain assets, recent asset appraisals or valuations performed by third parties were used, which were also deemed to be Level 3 inputs. The following tables show impairment losses recorded for the years ended December 31, 2011, 2010 and 2009 (in thousands):

Description	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Loss
Long-lived assets held and used	$	—	$	—	$	—	$	—	$	(1,719	)

Description	December 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Loss
Long-lived assets held and used	$	429	$	—	$	—	$	429	$	(3,695	)

Description	December 31, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Loss
Long-lived assets held and used	$	19,500	$	—	$	—	$	19,500	$	(8,509	)

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Business Segments

12 Months Ended

Dec. 31, 2011

Business Segments [Abstract]

Business Segments

4. Business Segments

As of December 31, 2011, the Company had three operating segments — hotels, franchise and entertainment. The “other” segment consists primarily of a retail mall, a hotel property leased to a franchisee and miscellaneous revenues and expenses, cash and cash equivalents, certain receivables and certain property and equipment which are not specifically associated with an operating segment. Management reviews and evaluates the operating segments exclusive of interest expense and income taxes; therefore, it has not been allocated to the segments. All balances have been presented after the elimination of inter-segment and intra-segment revenues and expenses. Selected information with respect to continuing operations is as provided below (in thousands).

	Year ended December 31,
	2011			2010			2009
Revenues:
Hotels	$	138,291		$	144,378		$	143,320
Franchise		3,955			3,209			3,616
Entertainment		11,379			9,236			11,690
Other		2,455			2,481			2,641
	$	156,080		$	159,304		$	161,267
Operating income (loss):
Hotels	$	15,222		$	7,487		$	2,238
Franchise		(1,040	)		(4,895	)		1,006
Entertainment		478			1,115			1,802
Other		(7,180	)		(7,413	)		(6,944	)
	$	7,480		$	(3,706	)	$	(1,898	)
Capital expenditures:
Hotels(1,3)	$	33,849		$	9,427		$	14,658
Franchise		106			481			986
Entertainment		459			188			44
Other(1)		12,817			513			731
	$	47,231		$	10,609		$	16,419
Depreciation and amortization:
Hotels	$	15,826		$	17,368		$	17,225
Franchise		135			749			620
Entertainment		300			352			421
Other		2,390			1,993			2,172
	$	18,651		$	20,462		$	20,438

	December 31,
	2011		2010
Identifiable assets:
Hotels(2)	$	249,672	$	292,436
Franchise		8,933		9,811
Entertainment		6,541		5,115
Other		39,750		24,120
	$	304,896	$	331,482

(1) Includes the asset acquisition of ten hotels, which were formerly leased, in the fourth quarter of 2011 for $37 million plus acquisition costs. One of ten hotels is currently leased to a third party.

(2) Includes the identifiable assets of discontinued operations held for sale.

(3) Includes $1.0 million of a noncash reclassification of intangible assets to property and equipment.

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Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

16. Income Taxes

Major components of the income tax (benefit) expense for the years ended December 31, 2011, 2010 and 2009, are as follows (in thousands):

	December 31,
	2011		2010			2009
Current:
Federal (benefit) expense	$	349	$	179		$	(886	)
State (benefit) expense		87		32			—
Deferred (benefit) expense		4,458		(5,148	)		(3,184	)
Income tax (benefit) expense attributable to Red Lion Hotels Corporation		4,894		(4,937	)		(4,070	)
Less: tax benefit of discontinued operations		620		417			255
Income tax (benefit) expense from continuing operations	$	5,514	$	(4,520	)	$	(3,815	)

The income tax (benefit) expense shown in the consolidated statements of operations differs from the amounts calculated using the federal statutory rate applied to income before income taxes as follows (in thousands, except percentages):

	December 31,
	2011						2010						2009
	Amount			%			Amount			%			Amount			%
(Benefit) provision at federal statutory rate	$	(767	)		-34.0	%	$	(4,605	)		-34.0	%	$	(3,649	)		-34.0	%
State tax (benefit) expense		228			10.0	%		(200	)		-1.5	%		(371	)		-3.4	%
Effect of tax credits		(357	)		-15.8	%		(422	)		-3.1	%		(343	)		-3.2	%
Fixed asset basis difference		(791	)		-35.0	%		—			0.0	%		—			0.0	%
Non-deductible goodwill		6,640			294.4	%		—			0.0	%		—			0.0	%
Other		(59	)		-2.6	%		290			2.2	%		293			2.7	%
Income tax (benefit) expense attributable to Red Lion Hotels Corporation		4,894			217.0	%		(4,937	)		-36.4	%		(4,070	)		-37.9	%
Less: tax benefit of discontinued operations		620			27.5	%		417			3.1	%		255			2.4	%
Income tax (benefit) expense from continuing operations	$	5,514			244.5	%	$	(4,520	)		-33.3	%	$	(3,815	)		-35.5	%

Significant components of the net deferred tax assets and liabilities at December 31, 2011 and 2010, are as follows (in thousands):

	December 31,
	2011				2010
	Assets		Liabilities		Assets		Liabilities
Property and equipment	$	—	$	14,895	$	—	$	13,514
Brand name		—		2,484		—		2,491
Other intangible assets		120		—		124		—
Gain on sale leaseback		1,586		—		1,760		—
Tax credit carryforwards		2,687		—		3,311		—
Federal net operating losses		—		—		1,566		—
Impact of CPF consolidation		—		—		1,038		—
Other		1,101		—		779		—
Total	$	5,494	$	17,379	$	8,578	$	16,005

At December 31, 2011 and 2010, the Company had federal gross operating loss carryforwards of approximately $-0- and $4.9 million, respectively; state gross operating loss carryforwards of approximately $3.2 million and $5.4 million, respectively; and federal and state tax credit carryforwards of approximately $2.7 million and $3.3 million. The state net operating loss carryforwards will expire beginning in 2016; the federal credits will begin to expire in 2025; and the state credits will carry forward indefinitely. A valuation allowance against the deferred tax assets has not been established as the Company believes it’s more likely than not that these assets will be realized.

The Company recognizes the financial statement effect of a tax position when, based on the technical merits of the uncertain tax position, it is more likely than not to be sustained on a review by taxing authorities. These estimates are based on judgments made with currently available information. The Company reviews these estimates and makes changes to recorded amounts of uncertain tax positions as facts and circumstances warrant. The Company has no material uncertain tax positions at December 31, 2011 and 2010, and does not anticipate a significant change in any unrecognized tax benefits over the next twelve months. Accordingly, the Company has not provided for any unrecognized tax benefits or related interest and penalties. The Company accounts for penalties and interest related to unrecognized tax benefits as a component of income tax expense. With limited exception, the Company is no longer subject to U.S. federal, state and local income tax examinations by taxing authorities for years prior to 2005.

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Debentures of Red Lion Hotels Capital Trust

12 Months Ended

Dec. 31, 2011

Debt Disclosure [Abstract]

Debentures of Red Lion Hotels Capital Trust

12. Debentures of Red Lion Hotels Capital Trust

Together with the Trust, the Company completed a public offering of $46.0 million of trust preferred securities in 2004. The securities are listed on the New York Stock Exchange and entitle holders to cumulative cash distributions at a 9.5% annual rate with maturity in February 2044. The cost of the offering totaled $2.3 million, which the Trust paid through an advance by the Company. The advance to the Trust is included with other noncurrent assets on the consolidated balance sheets.

The Company borrowed all of the proceeds from the offering, including the Company’s original 3% trust common investment of $1.4 million, on the same day through 9.5% debentures that are included as a long-term liability on the consolidated balance sheets. The debentures mature in 2044 and their payment terms mirror the distribution terms of the trust securities. The debenture agreement required the mandatory redemption of 35% of the then-outstanding trust securities at 105% of issued value if the Company completed an offering of common shares with gross proceeds of greater than $50 million. In accordance therewith and in connection with a common stock offering in May 2006, the Company repaid approximately $16.6 million of the debentures due the Trust. The Trust then redeemed 35% of the outstanding trust preferred securities and trust common securities at a price of $26.25 per share, a 5% premium over the issued value of the securities. Of the $16.6 million, approximately $0.5 million was received back by the Company for its trust common securities and was reflected as a reduction of its investment in the Trust. At December 31, 2011 and 2010, debentures due the Trust totaled $30.8 million.

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Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2011

Goodwill and Intangible Assets [Abstract]

Goodwill and Intangible Assets

8. Goodwill and Intangible Assets

Goodwill represents the excess of the estimated fair value of the net assets acquired during business combinations over the net tangible and identifiable intangible assets acquired. Goodwill was recorded in prior years in connection with the acquisitions of hotels, franchises and entertainment businesses. The Red Lion brand name is an identifiable, indefinite lived intangible asset that represents the separable legal right to a trade name and associated trademarks acquired in a business combination the Company entered into in 2001. Goodwill and the brand name are not amortized, but are subject to an impairment assessment annually.

The following table summarizes the cost and accumulated amortization of goodwill and other intangible assets (in thousands):

	December 31, 2011						December 31, 2010
	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization			Net
Goodwill	$	8,512		n/a	$	8,512	$	28,042		n/a		$	28,042
Intangible assets
Brand name	$	6,878		n/a	$	6,878	$	6,878		n/a		$	6,878
Lease contracts(1)		—		—		—		1,417		(425	)		992
Trademarks		114		n/a		114		114		n/a			114
Total intangible assets	$	6,992	$	—	$	6,992	$	8,409	$	(425	)	$	7,984

(1) On November 2, 2011, the Company purchased 10 hotels which were formerly leased. The lease contract value transferred with the purchase of the related assets and was reclassified as a long-lived asset.

Amortization expense related to intangible assets was approximately $39,000, $176,000 and $178,000 during the years ended December 31, 2011, 2010 and 2009, respectively. All amortized intangible assets on the consolidated balance sheets on December 31, 2011, have now been fully amortized.

Goodwill and other intangible assets attributable to each of the Company’s business segments at December 31, 2011 and 2010 were as follows (in thousands):

	December 31,
	2011				2010
	Goodwill		Other Intangibles		Goodwill		Other Intangibles
Hotels	$	—	$	4,639	$	19,530	$	5,631
Franchise		5,351		2,347		5,351		2,347
Entertainment		3,161		6		3,161		6
Total	$	8,512	$	6,992	$	28,042	$	7,984

At the Company’s measurement date of October 1, 2011, it determined that the carrying amount of the hotel reporting unit exceeded its fair value, which was estimated based on a combined income and market approach. Accordingly, a goodwill impairment charge of $14.2 million was recognized in the hotel reporting unit. Prior to this impairment, $4.7 million of goodwill had been allocated to the sale of the Company’s Seattle property and $0.6 million of goodwill allocated to the Helena property had been impaired as part of the fair value assessment and decision to sell this property. There were no other impairments of goodwill or intangible assets during 2011. The table below shows the impact of this impairment (in thousands):

Description	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Loss
Goodwill	$	8,512	$	—	$	—	$	8,512	$	(14,236	)

See Note 2 for a discussion of the Company’s accounting policy on goodwill.

In December 2010, there was an event that caused the Company to review its lease contract intangible asset balance for potential impairment. A sublease agreement at the Company’s Red Lion Hotel Sacramento was terminated, thus eliminating $1.4 million of annual sublease income. The Company signed an agreement on February 22, 2011 with another subtenant, however for an initial minimum amount of $0.4 million in annual sublease income. After analysis, the Company concluded that the full amount of the lease contract intangible asset was not recoverable and recorded a $2.0 million impairment charge. There were no other impairments of intangible assets recorded in 2010. The table below shows the impact of this impairment (in thousands):

Description	December 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Loss
Lease contract intangible asset	$	—	$	—	$	—	$	—	$	(2,039	)

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Assets Held for Sale

12 Months Ended

Dec. 31, 2011

Property and Equipment/Assets Held for Sale [Abstract]

Assets Held for Sale

6. Assets Held for Sale

See Note 2 for the criteria used by the Company to classify an asset as held for sale. Upon designation as an asset held for sale, the Company records the asset at the lower of its carrying value, which includes allocable goodwill, or its estimated fair value, less estimated costs to sell, and the Company stops recording depreciation expense. The operations of a property held for sale prior to the sale date are recorded in discontinued operations unless the Company will have continuing involvement after the sale in which case their operations remain part of continuing operations.

During 2011, the Company determined that three of its hotel properties, the Seattle property, the Helena property, and Denver Southeast met the criteria to be classified as assets held for sale, but did not meet the criteria for treatment as discontinued operations as the Company anticipates that it will maintain significant continuing involvement either through a management or franchise agreement. During the second quarter the Company completed the sale of the Seattle property to a third party for $71 million. The Company entered into a franchise license agreement with the buyers of the property, so discontinued operations treatment was not appropriate. The Company recognized a pretax gain on the sale of $33.5 million. Approximately $6.1 million of the taxable gain attributable to the sale of the property was deferred in a tax deferred exchange, as discussed in Note 5.

During the fourth quarter of 2011, the Company additionally listed for sale the Medford and Missoula properties. Both properties are non-core assets in which the Company does not expect to maintain significant continuing involvement. Accordingly, the operations of these properties have been classified as discontinued operations in the Company’s consolidated statements of operations for all years presented. The property and equipment of these properties has been classified as held for sale in the consolidated balance sheet as of December 31, 2011. Refer to Note 7 for further detail.

The Company plans to sell the above discussed properties within one year. The property and equipment classified as assets held for sale on the consolidated balance sheet as of December 31, 2011 are detailed in the table below.

	2011
Buildings and equipment	$	24,739
Furniture and fixtures		4,781
Landscaping and land improvements		1,461
		30,981
Less accumulated depreciation and amortization		(11,149	)
		19,832
Land		10,458
Construction in progress		90
Assets held for sale	$	30,380

During 2011, the Company lowered the selling price of the Helena property to $7.9 million. Therefore, the carrying value of $9.8 million was written down to its estimated fair value less estimated costs to sell of $0.3 million, resulting in a non-cash impairment charge during the year of $2.2 million. Included in the carrying amount of $9.8 million was $0.6 million of goodwill allocated to the property which was also impaired. Additionally, long-lived assets of the Denver property with a carrying amount of $21.0 million were written down to their estimated fair value of $17.0 million less estimated costs to sell of $0.5 million, resulting in a non-cash impairment charge during the year of $4.5 million on this property.

As shown in the table below (in thousands), the Company used Level 3 inputs for its analysis. These inputs reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset based on the best information available in the circumstances.

Description	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Loss
Long-lived assets held for sale	$	24,172	$	—	$	—	$	24,172	$	(6,125	)
Goodwill of assets held for sale		—		—		—		—		(586	)
Long-lived assets held for sale	$	24,172	$	—	$	—	$	24,172	$	(6,711	)

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Discontinued Operations

12 Months Ended

Dec. 31, 2011

Discontinued Operations [Abstract]

Discontinued Operations

7. Discontinued Operations

During 2011, the Company listed for sale the Medford and Missoula properties which were formerly leased but were purchased in November 2011, as discussed in Note 5. Both properties are non-core assets in which the Company does not expect to maintain significant continuing involvement after they are sold. Accordingly, the operations of these properties have been classified as discontinued operations in the Company’s consolidated statements of operations for all years presented. The property and equipment of these hotels is classified as held for sale on the consolidated balance sheet as of December 31, 2011 since the Company plans to sell these properties within one year.

During the fourth quarter of 2010, the Company concluded that one of its leased hotels in Astoria, Oregon had reached the end of its useful life. Accordingly, the operations of this hotel have been classified as discontinued operations in the Company’s financial statements. The Company has segregated the operating results of this hotel from continuing operations in the consolidated statements of operations for 2010 and 2009.

The following table summarizes the assets and liabilities of discontinued operations included in the consolidated balance sheets as of December 31, 2011 and December 31, 2010 (in thousands):

	2011		2010
ASSETS
Cash and cash equivalents	$	46	$	40
Accounts receivable, net		36		31
Inventories		39		33
Prepaid expenses and other		23		22
Total current assets	$	144	$	126
Property and equipment, net(1)		6,208		2,176
Intangible assets, net		—		213
Total assets	$	6,352	$	2,515
LIABILITIES
Accounts payable	$	23	$	21
Accrued payroll and related benefits		77		85
Advance deposits		9		11
Other accrued expenses		135		125
Current liabilities	$	244	$	242

(1) Property and equipment of $6.2 million included in assets held for sale on the consolidated balance sheet as of December 31, 2011.

The following table summarizes results of discontinued operations for the periods indicated (in thousands):

	For the Year Ended December 31,
	2011			2010			2009
Revenues	$	3,791		$	4,190		$	6,059
Operating expenses		(3,507	)		(4,003	)		(5,086	)
Hotel facility and land lease		(607	)		(858	)		(992	)
Depreciation and amortization		(368	)		(457	)		(516	)
Income tax benefit		250			397			195
Loss from operations of discontinued business units		(441	)		(731	)		(340	)
Impairment of the assets of the discontinued business units		(1,021	)		(58	)		(177	)
Income tax benefit		370			20			60
Loss on impairment of the assets of the discontinued business units		(651	)		(38	)		(117	)
Loss from discontinued operations	$	(1,092	)	$	(769	)	$	(457	)

Long-lived assets of the Medford and Missoula properties with a carrying amount of $7.2 million were written down to their fair value of $6.4 million less estimated costs to sell of $0.2 million, resulting in a non-cash impairment charge taken during the year of $1.0 million reflected above.

As shown in the table below (in thousands), the Company used Level 3 inputs for the impairment analysis of these two properties. These inputs reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset based on the best information available in the circumstances.

Description	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Loss
Long-lived assets of discontinued business units held for sale	$	6,208	$	—	$	—	$	6,208	$	(1,020	)

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Other Investments

12 Months Ended

Dec. 31, 2011

Other Investments [Abstract]

Other Investments

9. Other Investments

Aggregate investments recorded as noncurrent assets on the consolidated balance sheets totaled $1.1 million and $1.2 million, respectively, as of December 31, 2011 and 2010. During 2011, the Company recorded a loss from investments of $52,000, compared to a loss of $48,000 and income of $16,000, respectively in 2010 and 2009.

The Company owns a 19.9% partnership interest in its corporate office building as discussed in Note 1. The Company’s investment balance was approximately $0.8 million as December 31, 2011 and 2010. Summarized unaudited financial information with respect to the office building, on a 100% basis, is as follows (in thousands):

	December 31,
	2011		2010
Current assets	$	134	$	224
Total assets	$	11,131	$	11,510
Current liabilities	$	129	$	120
Total liabilities	$	8,485	$	8,828
Total equity	$	2,645	$	2,681
Revenues	$	1,588	$	1,532
Net income	$	203	$	149

The Company maintains a 3% common security interest in the Red Lion Hotels Capital Trust (“the Trust”), as discussed in Note 12, which represents all of the common ownership of the Trust. The Trust is considered a variable interest entity and the Company is not considered its primary beneficiary. At December 31, 2011 and 2010, the Company’s equity method investment in the Trust had a balance of $0.3 million and $0.4 million, respectively, after adjusting for trust earnings and operating expenses.

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Stockholders' Equity

12 Months Ended

Dec. 31, 2011

Stockholders' Equity [Abstract]

Stockholders' Equity

14. Stockholders’ Equity

The Company is authorized to issue 50 million common shares, par value $0.01 per share, and five million shares of preferred stock, par value $0.01 per share. As of December 31, 2011, there were 19,172,670 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding. The board of directors has the authority, without action by the shareholders, to designate and issue preferred stock in one or more series and to designate the rights, preferences and privileges of each series, which may be greater than the rights of the common stock.

Each holder of common stock is entitled to one vote for each share held on all matters to be voted upon by the shareholders with no cumulative voting rights. Holders of common stock are entitled to receive ratably the dividends, if any, that are declared from time to time by the board of directors out of funds legally available for that purpose. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that the Company may designate in the future.

Stock Incentive Plans

As approved by the shareholders of the Company, the 1998 Stock Incentive Plan and the 2006 Stock Incentive Plan, as amended , authorize the grant or issuance of various option or other awards including restricted stock grants and other stock-based compensation. The 2006 plan allows awards covering up to two million shares, subject to adjustments for stock splits, stock dividends and similar events. The 1998 plan allows awards covering up to 1.4 million shares, although as a condition to the approval of the 2006 plan, the Company no longer grants or issues awards under the 1998 plan. The compensation committee of the board of directors administers the 2006 plan and establishes to whom awards are granted and the type and terms and conditions, including the exercise period, of the awards. As of December 31, 2011, there were 1,009,450 shares of common stock available for issuance pursuant to future stock option grants or other awards under the 2006 plan.

Stock based compensation expense reflects the fair value of stock based awards measured at grant date, including an estimated forfeiture rate, and is recognized over the relevant service period. Stock-based compensation expense related to these awards during 2011, 2010 and 2009 for employees was approximately $0.7 million, $1.1 million and $1.2 million, respectively.

Stock-based compensation expense recorded in 2010 includes $0.5 million of expense recorded upon the termination of the Company’s former President and Chief Executive Officer in January 2010.

In addition to the awards mentioned above, during the years ended December 31, 2011, 2010 and 2009; 68,618, 78,873 and 86,625 shares of common stock, respectively, were issued in aggregate to non-management directors as compensation for service. During the years ended December 31, 2011, 2010 and 2009, the Company recognized compensation expense of approximately $0.5 million, $0.5 million and $0.4 million, respectively, upon issuance.

Stock Options

Stock options issued are valued based upon the Black-Scholes option pricing model and the Company recognizes this value as an expense over the periods in which the options vest. Use of the Black-Scholes option-pricing model requires that the Company make certain assumptions, including expected volatility, forfeiture rate, risk-free interest rate, expected dividend yield and expected life of the options, based on historical experience. Volatility is based on historical information with terms consistent with the expected life of the option. The risk free interest rate is based on the quoted daily treasury yield curve rate at the time of grant, with terms consistent with the expected life of the option. No stock options were granted during 2011 or 2009.

During 2010, the following weighted average assumptions were used for stock options granted:

	2010
Options granted		5,864
Weighted-average grant date fair value of options granted	$	7.10
Dividend yield		0	%
Expected volatility		61	%
Forfeiture rate		2	%
Risk free interest rates		3.36	%
Expected option lives		4 years

A summary of stock option activity for the year ended December 31, 2011, is as follows:

	Number of Shares			Weighted Average Exercise Price
Balance, January 1, 2011		478,047		$	7.62
Options granted		—		$	—
Options exercised		(163,035	)	$	5.37
Options forfeited		(51,140	)	$	10.08
Balance, December 31, 2011		263,872		$	8.53
Exercisable, December 31, 2011		228,341		$	8.53

Additional information regarding stock options outstanding and exercisable as of December 31, 2011, is presented below. Total unrecognized stock-based compensation expense related to non-vested stock options, as of December 31, 2011, was approximately $32,000 before the impact of income taxes and is expected to be recognized in 2012.

Range of Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Expiration Date		Weighted Average Exercise Price		Aggregate Intrinsic Value (1)		Number Exercisable		Weighted Average Exercise Price		Aggregate Intrinsic Value (1)
									(in thousands)						(in thousands)
$5.10 — $5.98		60,460		2.05		2013-2014	$	5.31	$	98,243		60,460	$	5.31	$	98,243
$7.10 — $7.80		25,864		4.62		2012-2020		7.38		—		21,467		7.44		—
$8.74 — $8.80		129,734		6.34		2018		8.76		—		98,600		8.76		—
$12.21 — $13.00		47,814		5.13		2016-2017		12.61		—		47,814		12.61		—
		263,872		4.97		2012-2020	$	8.53	$	98,243		228,341	$	8.53	$	98,243

(1) The aggregate intrinsic value is before applicable income taxes and represents the amount option recipients would have received if all options had been available to be exercised on the last trading day of 2011, or December 31, 2011, based upon the Company’s closing stock price of $6.93.

Restricted Stock Units, Shares Issued as Compensation

During 2011, 2010 and 2009, the Company granted 168,398, 165,439 and 213,282 unvested restricted stock units, respectively, to executive officers and other key employees, the majority of which vest 25% each year for four years on each anniversary of the grant date. While all of the shares are considered granted, they are not considered issued or outstanding until vested. Since the Company began issuing restricted stock units, approximately 15.2% of total restricted stock units granted have been forfeited.

A summary of restricted stock unit activity for the year ended December 31, 2011, is as follows:

	Number of Shares			Weighted Average Grant Date Fair Value
Balance, January 1, 2011		220,816		$	6.40
Granted		168,398		$	7.97
Vested		(67,588	)	$	5.43
Forfeited		(33,284	)	$	7.04
Balance, December 31, 2011		288,342		$	7.23

67,588 shares of common stock were issued to employees in 2011 as their restricted stock units vested. Under the terms of the 2006 plan and upon issuance, the Company authorized a net settlement of distributable shares to employees after consideration of individual employees’ tax withholding obligations, at the election of each employee. During 2011, the Company repurchased 18,207 shares at a weighted average of $7.92 per share to cover the participants’ tax liability.

During 2011, 2010 and 2009, the Company recognized approximately $0.6 million, $0.8 million and $0.3 million, respectively, in compensation expense related to these grants, and expects to record an additional $1.6 million in compensation expense over the remaining vesting periods.

Employee Stock Purchase Plan

In 2008, the Company adopted a new employee stock purchase plan (“ESPP”) upon expiration of its previous plan. Under the ESPP, 300,000 shares of common stock are authorized for purchase by eligible employees at a discount through payroll deductions. No employee may purchase more than $25,000 worth of shares, or more than 10,000 total shares, in any calendar year. As allowed under the ESPP, a participant may elect to withdraw from the plan, effective for the purchase period in progress at the time of the election with all accumulated payroll deductions returned to the participant at the time of withdrawal. During 2011, 2010 and 2009, 22,382, 32,162 and 54,871 shares, respectively, were issued, and approximately $15,000, $20,000 and $22,000 was recorded in compensation expense related to the discount associated with the plan.

Non-controlling Interest and Operating Partnership Units

As discussed in Note 1, the Company is a general partner of RLHLP and at December 31, 2011, held more than a 99% interest in that entity. Partners who hold operating partnership units (“OP Units”) have the right to put those units to RLHLP, in which event either (i) RLHLP must redeem the units for cash, or (ii) the Company, as general partner, may elect to acquire the OP Units for cash or in exchange for a like number of shares of its common stock. At December 31, 2011 and 2010, 44,837 OP Units held by unaffiliated limited partners remained outstanding. In February, 2012 these 44,837 OP Units were acquired by the Company in exchange for common stock. See Note 21.

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Related-Party Transactions

12 Months Ended

Dec. 31, 2011

Related-Party Transactions [Abstract]

Related-Party Transactions

19. Related-Party Transactions

The Company conducted various business transactions in which the counterparty was considered a related party due to the relationships between the Company and the counterparty’s officers, directors and/or equity owners. The nature of the transactions was limited to performing certain management and administrative functions for the related entities, commissions for real estate sales and leased office space. The total aggregate value of these transactions in 2011, 2010 and 2009 was $0.7 million, $0.4 million and $0.4 million, respectively.

During 2011 and 2010, the Company held certain cash and investment accounts in, and had a note payable to a bank whose chairman and chief executive officer is a member of the Company’s board of directors. At December 31, 2011 and 2010, total cash and investments held were approximately $0.1 million and $0.05 million, respectively. The note payable was paid in full in October, 2011. Net interest expense of $0.02 million, $0.06 million and $0.1 million, respectively, related to this note payable was recorded during 2011, 2010 and 2009.

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Consolidated Statements of Operations (Parenthetical) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Consolidated Statements of Operations [Abstract]
Income tax (benefit) expense on discontinued business units	$ (250)	$ (397)	$ (195)
Impairment of the assets of the discontinued business units, net of income tax (benefit) expense	$ (370)	$ (20)	$ (60)

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Liquidity, Financial Condition and Risks of Refinancing Debt

12 Months Ended

Dec. 31, 2011

Debt Disclosure [Abstract]

Liquidity, Financial Condition and Risks of Refinancing Debt

3. Liquidity, Financial Condition and Risks of Refinancing Debt

As of December 31, 2011 the Company had total long term debt maturing within one year of $3.3 million. Additionally, the outstanding balance under the revolving credit facility at December 31, 2011 of $0.8 million is included as a current liability.

The Company’s current liabilities at December 31, 2011 exceeded its current assets, excluding assets held for sale, by $0.5 million. The Company is actively pursuing financing alternatives to address maturing liabilities and to supplement working capital. Additionally, the Company can access up to $10 million on its current revolving credit facility to fund operating needs. As of March 8, 2012, the full $10 million on the revolving credit facility was available as the Company had no amount drawn on that date. While the Company continues to be in compliance with its debt covenants, to generate positive cash flow from operations and to have adequate liquidity to fund its ongoing operating activities, there can be no assurance that it will be able to repay or refinance its debts when they mature or invest in its hotels to remain competitive at its current rates.

On June 14, 2011, the Company completed a sale of its Red Lion Hotel on Fifth Avenue in Seattle, Washington for $71 million in cash and used $28 million of the proceeds to retire its previous revolving credit facility, which was scheduled to expire in September 2011. The Company used additional proceeds of $37 million to acquire a portfolio of 10 previously leased hotels from iStar Financial, Inc. in November 2011. As a result of this acquisition, contractual annual lease payment obligations of approximately $4.3 million have been eliminated.

The Company announced a strategic listing for sale or the intent to sell some of its real estate assets in 2011. See Notes 5 and 6. The Company may seek to raise additional funds through public or private financings, strategic relationships, sales of assets or other arrangements. The Company cannot assure that such funds, if needed, will be available on terms attractive to it, or at all. Furthermore, any additional equity financings may be dilutive to shareholders and debt financing, if available, may involve covenants that place substantial restrictions on its business. Additional principal payments will be required on the Company’s term loan if a property securing that facility is sold or the Company raises new equity. In the case of a property sale, the additional payment required will be the greater of (i) 50% of the net proceeds from the sale, or (ii) 50% of the appraised market value of the property being sold. In the case of an equity issue, the additional payment required will be 50% of the net equity proceeds raised. Refer to Note 10 for further discussion. The Company’s failure to secure funding as and when needed could have a material adverse impact on its financial condition and its ability to pursue business strategies

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Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2011

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

20. Fair Value of Financial Instruments

Estimated fair values of financial instruments are as indicated below (in thousands). The carrying amounts for cash and cash equivalents, current investments, accounts receivable and current liabilities are reasonable estimates of their fair values. The fair value of long-term debt is estimated based on the discounted value of contractual cash flows using the estimated rates currently offered for debt with similar remaining maturities. The debentures are valued at the closing price on December 31, 2011, of the underlying trust preferred securities, as discussed in Note 12, on the New York Stock Exchange, plus the face value of the debenture amount representing the trust common securities held by the Company.

	December 31,
	2011				2010
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents and restricted cash	$	5,339	$	5,339	$	8,132	$	8,132
Accounts receivable	$	7,591	$	7,591	$	5,985	$	5,985
Financial liabilities:
Current liabilities, excluding debt	$	16,891	$	16,891	$	22,454	$	22,454
Total debt	$	70,496	$	70,658	$	95,152	$	95,400
Debentures	$	30,825	$	30,717	$	30,825	$	31,279

The fair values provided above are not necessarily indicative of the amounts the Company or the debt holders could realize in a current market exchange. In addition, potential income tax ramifications related to the realization of gains and losses that would be incurred in an actual sale or settlement have not been taken into consideration.

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2011

Commitments and Contingencies/Operating Lease Commitments [Abstract]

Commitments and Contingencies

13. Commitments and Contingencies

At any given time the Company is subject to claims and actions incidental to the operations of its business. During the second quarter of 2010, a federal court ruled in favor of the Company in a lawsuit the Company filed against the owner of a former franchised hotel. The court awarded the Company approximately $0.6 million in damages, which will accrue interest at 18% per annum pending the defendant’s appeal. During 2011 and 2010 the Company incurred approximately $0.1 and $0.3 million, respectively, in legal expense in connection with this matter. The Company is actively pursuing this action and cannot at this time reasonably predict the ultimate outcome of the proceedings. The Company has not recorded a receivable for this contingent gain. The Company does not expect that any sums it may receive or have to pay in connection with this or any other legal proceeding would have a materially adverse effect on its consolidated financial position or net cash flows.