Exhibit 10.3

EMPLOYMENT AGREEMENT

Employment Agreement, dated as of February 1, 2012, by and between Supertel
Hospitality, Inc., a Virginia corporation with its principal place of business
located at 309 North 5th Street, Norfolk, Nebraska 68701 (the “Employer”) and
David L. Walter, an individual (the “Employee”).

WHEREAS, the Employer and the Employee desires to enter into an employment
agreement on the terms set forth herein;

NOW, THEREFORE, for and in consideration of the premises, covenants, conditions
and obligations thereafter set forth, the parties hereto agree as follows:

Section 1. Employment. The Employer hereby employs the Employee, and the
Employee hereby accepts employment, upon the terms and subject to the conditions
hereinafter set forth.

Section 2. Duties. The Employee will be employed as Senior Vice President and
Treasurer of the Employer, or such other positions to which he may be appointed
by the Board of Directors. The Employee will perform the duties attendant to his
executive position with the Employer. The Employee agrees to devote his full
time and best efforts to the performance of his duties to the Employer. The
Employee shall be permitted to participate in charitable activities and accept
positions on the boards of non-profit entities.

Section 3. Term. The term of employment of the Employee hereunder will continue
until January 31, 2014 unless terminated by either party at any time, subject to
any prior notices and other terms of this Agreement.

Section 4. Compensation and Benefits. In consideration for the services of the
Employee hereunder, the Employer will compensate the Employee as follows:

 

  (a) Base Salary. Until the termination of the Employee’s employment hereunder,
the Employer will pay the Employee, bi-weekly in arrears, a base salary (the
“Base Salary”) established by the Compensation Committee of Employer’s Board of
Directors which Base Salary will be reviewed by the Employer annually. The
Employee’s Base Salary as of the date of this Agreement shall be $12,250.00 per
month, resulting in Base Salary of $147,000 per year.

 

  (b) Bonus. The Employer will consider the Employee for cash bonuses on an
annual basis. Any such bonus will be based on the recommendation of Employer’s
Compensation Committee of the board of directors.

 

  (c) Stock Options. Pursuant to the Employer’s Stock Plan, the Employer will
consider the Employee for option grants and other equity awards on an annual
basis. Any such grants will be made in the sole discretion of Employer’s
Compensation Committee of the Board of Directors.

 

  (d) Vacation. The Employee will be entitled to 4 weeks of paid vacation per
year at the reasonable and mutual convenience of the Employer and the Employee.
Accrued vacation not taken in any calendar year will not be carried forward or
used in any subsequent year except as otherwise provided in Employer policy as
then may be applicable generally to executives.

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Section 5. Expenses. The Employee, in connection with the services to be
performed by him pursuant to the terms of this Agreement, may be required to
make payments for travel and similar expenses. The Employer will reimburse the
Employee for all reasonable expenses of types authorized by the Employer and
incurred by the Employee in the performance of his duties hereunder. The
Employee will comply with such budget limitations and approval and reporting
requirements with respect to expenses as the Employer may establish from time to
time.

Section 6. Termination.

 

  (a) Termination For Cause. Employer may terminate Employee’s employment for
Cause (as defined below) immediately upon written notice to the Employee.

 

  (b) Termination Without Cause. The Employer may terminate Employee’s
employment at any time without Cause in its sole discretion, upon 30 days
written notice to Employee.

 

  (c) Death or Disability. Employee’s employment will terminate upon the death
of the Employee and, at the option of the Employer, in the event of the
Employee’s disability, upon 30 days written notice to the Employee. The Employee
will be deemed disabled if he is unable to perform his duties hereunder for a
period of sixty consecutive days on account of injury or sickness. Any refusal
by the Employee to submit to a medical examination for the purpose of certifying
disability under this Section 6(c) will be deemed conclusively to constitute
evidence of the Employee’s disability.

 

  (d) Payments Upon Termination For Cause or Upon Death or Disability. If
Employee’s employment is terminated prior to a Change in Control (as defined
below), or upon death or disability pursuant to Section 6(c), the Employee will
not be entitled to any compensation upon termination, except for (i) any portion
of his Base Salary for the month of termination accrued but unpaid to the end of
the month of termination, (ii) to the extent not taken, the unused portion of
his annual vacation to the date of termination, and (iii) expense reimbursements
under Section 5 hereof for expenses incurred in the performance of his duties
hereunder prior to termination.

 

  (e) Payments Upon Termination Without Cause. If the Employee’s employment with
the Employer is terminated without Cause or is terminated by the Employee for
Good Reason (as defined below), Employer shall pay Employee Employee’s Monthly
Base Salary as in effect at the time of termination (i) for 24 months if such
termination occurs on or prior to January 31, 2013 and (ii) for 18 months if
such termination occurs on or prior to January 31, 2014. Such payments shall be
paid at the times Employee would have been paid Base Salary had the employment
not been terminated, provided, however, to the extent permitted and available
under shareholder approved employee equity plans, one-third of each monthly
payment of the Base Salary shall be paid in shares of common stock of Employer
valued at the closing sales price of the stock (“Fair Market Value”) on the day
of termination on the Nasdaq Stock Market (or, if not listed thereon, on such
other recognized market or quotation system on which the trading prices of the
stock are traded or quoted at the relevant time). In the event there are no
transactions reported on such exchange (or such other system) on such date, Fair
Market Value shall mean the closing sale price on the immediately preceding date
on which transactions in the Employer’s common stock were so reported.

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  (f) Additional Matters. Employee accepts the payments as specified herein as
full satisfaction of all amounts owed to Employee by Employer pursuant to this
Agreement in the event of Employee’s termination. Upon termination of Employee’s
employment for any reason:

 

  (i) The vesting, exercise and all of the terms of any equity awards and stock
options held by Employee at termination shall be governed by the plans and
programs and the agreements and other documents pursuant to which such awards
were granted; and

 

  (ii) All other rights of Employee under any other compensatory or benefit plan
shall be governed by such plan.

 

  (g)     

 

  (i) Limitation of Amount – Notwithstanding anything in this Agreement to the
contrary, if any of the compensation or benefits payable, or to be provided, to
the Employee by the Company under this Agreement or otherwise are treated as
Excess Severance Payments (whether alone or in conjunction with payments or
benefits outside of this Agreement), the compensation and benefits provided
under this Agreement or otherwise shall be modified or reduced in the manner
provided in Section 6(g)(ii) below to the extent necessary so that the
compensation and benefits payable or to be provided to the Employee under this
Agreement that are treated as Severance Payments, as well as any compensation or
benefits provided outside of this Agreement that are so treated, shall not cause
the Company to have paid an Excess Severance Payment. In computing such amount,
the parties shall take into account all provisions of Section 280G of the Code,
and the regulations thereunder, including making appropriate adjustments to such
calculation for amounts established to be Reasonable Compensation, and for
amounts paid to the Employee as consideration for the Employee’s non-competition
obligation under Section 8 of this Agreement. The determinations under this
Section 6(g)(i) with regard to Excess Severance Payments shall be made by an
independent accounting firm selected by the Company and the Employee, which
shall provide detailed supporting calculations to the parties.

 

  (ii) Modification of Amount – In the event that the amount of any Severance
Payments which would be payable to or for the benefit of the Employee under this
Agreement must be modified or reduced to comply with this Section 6(g), the
Employee shall direct which Severance Payments are to be modified or reduced but
only to the extent that the right to direct, and the actual direction of, which
Severance Payments are to be modified or reduced does not result in any failure
of this Agreement to comply with Section 409A of the Code. If the right to
direct, or the actual direction of, which Severance Payments are to be modified
or reduced would result in any failure of this Agreement or any other
arrangement to comply with Section 409A of the Code, then, in lieu of the
Employee’s right to direct which Severance Payments are to be reduced or
modified, the order of reduction shall be by first reducing or eliminating the
portion of the Severance Payments which are not payable in cash and then by
reducing or eliminating cash payments.

 

  (iii)

Avoidance of Penalty Taxes – This Section 6(g) shall be interpreted so as to
avoid the imposition of excise taxes on the Employee under Section

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  4999 of the Code or the disallowance of a deduction to the Company pursuant to
Section 280G(a) of the Code with respect to amounts payable under this Agreement
or otherwise. In connection with any Internal Revenue Service examination, audit
or other inquiry, the Company and the Employee agree to take action to provide,
and to cooperate in providing, evidence to the Internal Revenue Service that the
compensation and benefits provided under this Agreement or otherwise do not
result in the payment of Excess Severance Payments.

 

  (iv) Additional Limitation – In addition to the limits otherwise provided in
this Section 6(g), to the extent permitted by law the Employee may in his sole
discretion elect to reduce (or change the timing of) any payments he may be
eligible to receive under this Agreement or otherwise to prevent the imposition
of excise taxes on the Employee under Section 4999 of the Code or to otherwise
reduce or delay liability for taxes owed under the Code; but, only if the right
of the Employee to elect to reduce (or change the timing of) any payments he may
be eligible to receive under this Agreement or otherwise, or any actual election
to reduce (or change the timing of) any payments he may be eligible to receive
under this Agreement or otherwise, will not result in any failure of this
Agreement or other arrangement to comply with Section 409A of the Code.

 

  (h) Section 6 Definitions. For purposes of this Agreement, a termination will
be for “Cause” if:

 

  (i) the Employee commits an unlawful or criminal act (A) involving moral
turpitude or (B) resulting in a financial loss to Employer, or upon conviction
of a felony; or

 

  (ii) the Employee (A) fails to obey written directions delivered to Employee
by the Employer’s Board of Directors or Chief Executive Officer, or (B) commits
a material breach of any of the covenants, terms and provisions hereof, and in
either case, with the exception of Section 7 Confidential Information and
Section 8 Noncompetition, such failure or breach continues for more than three
days after receipt by the Employee of written notice of such failure or breach.

“Change of Control” shall mean:

 

  (iii) The acquisition (other than from the Employer) by any person, entity or
“group”, within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
and Exchange Act of 1934, as amended (the “Act”), (excluding any acquisition or
holding by (i) the Employer or its subsidiaries or (ii) any employee benefit
plan of the Employer or its subsidiaries which acquires beneficial ownership of
voting securities of the Employer) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Act) of 50% or more of either the then
outstanding shares of common stock or the combined voting power of the
Employer’s then outstanding voting securities entitled to vote generally in the
election of directors; or

 

  (iv)

Individuals who, as of the date hereof, constitute the Board of Directors of
Employer (as of the date hereof the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the date hereof whose

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  election, or nomination for the election by the Employer’s stockholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be, for purposes of this Plan, considered as though such
person were a member of the Incumbent Board; or

 

  (v) Consummation of a reorganization, merger or consolidation, in each case,
with respect to which persons who were the stockholders of the Employer
immediately prior to such reorganization, merger or consolidation do not,
immediately thereafter, own more than 50% of the combined voting power entitled
to vote generally in the election of directors of the reorganized, merged or
consolidated Employer’s then outstanding voting securities, or a liquidation or
dissolution of the Employer or of the sale of all or substantially all of the
assets of the Employer.

“Code” shall mean the Internal Revenue Code of 1986, as amended

“Excess Severance Payment” shall have the same meaning as the term “excess
parachute payment” defined in Section 280G(b)(l) of the Code.

“Good Reason” shall mean the occurrence of one of the following events, without
the Employee’s prior written consent, provided such event is not corrected
within 30 days following the Board of Directors’ receipt of written notice from
Employee of Employee’s intention to terminate his employment with the Employer
for Good Reason within sixty (60) days of such Employee having actual knowledge
of one of the following events:

 

  (i) a material diminution in the Employee’s duties or responsibilities or any
material demotion from the Employee’s current position with the Employer;

 

  (ii) a requirement that the Employee work principally from a location outside
the 50 mile radius from the Employee’s primary work location in Norfolk,
Nebraska or Omaha, Nebraska as of the date of this agreement, except for
required travel on the Employer’s business to the extent substantially
consistent with the Employee’s business travel obligations on the date hereof;

 

  (iii) a material reduction in the Employee’s Base Salary as then in effect
other than in connection with a similar or across-the-board reduction for all of
the Company’s senior officers; or

 

  (iv) the failure of the Employer to obtain an agreement from any successor or
assign of the Employer to assume and agree to adopt this Agreement upon a Change
in Control.

“Reasonable Compensation” shall have the same meaning as provided in
Section 280G(b)(4) of the Code.

“Severance Payment” shall have the same meaning as the term “parachute payment”
defined in Section 280G(b)(2) of the Code.

Section 7. Confidential Information. The Employee recognizes and acknowledges
that certain assets of the Employer and its affiliates, including without
limitation information regarding

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methods of operation, proprietary computer programs, sales, products, profits,
costs, markets and key personnel (hereinafter called “Confidential Information”)
are valuable, special and unique assets of the Employer and its affiliates. The
Employee will not, during or after his term of employment, disclose any of the
Confidential Information to any person, firm, corporation, association, or any
other entity for any reason or purpose whatsoever, directly or indirectly,
except as may be required pursuant to his employment hereunder, unless and until
such Confidential Information becomes publicly available other than as a
consequence of the breach of the Employee of his confidentiality obligations
hereunder. In the event of the termination of his employment, whether voluntary
or involuntary and whether by the Employer or the Employee, the Employee will
deliver to the Employer all documents and data pertaining to the Confidential
Information and will not take with him any documents or data or any kind or any
reproductions (in whole or in part) of any items relating to the Confidential
Information.

Section 8. Noncompetition. During the term hereof and during the period Employee
receives payments under Section 6(e), the Employee will not (i) engage directly
or indirectly, alone or as a shareholder, partner, officer, director, employee
or consultant of any other business organization, in any business activities
which (A) relate to the economy motel business (the “Designated Industry”) and
(B) were either conducted by the Employer prior to the Employee’s termination or
proposed to be conducted by the Employer at the time of such termination,
(ii) divert to any competitor of the Employer in the Designated Industry any
business opportunity of the Employee, or (iii) solicit or encourage any officer,
employee, or consultant of the Employer to leave its employ for employment by or
with any competitor of the Employer in the Designated Industry. The Employee’s
noncompetition obligations hereunder will not preclude the Employee from owning
less than 5% of the common stock of any publicly traded corporation conducting
business activities in the Designated Industry. The Employee will continue to be
bound by the provisions of this Section 8 until their expiration and will not be
entitled to any compensation from the Employer with respect thereto. If at any
time the provisions of this Section 8 will be determined to be invalid or
unenforceable, by reason of being vague or unreasonably as to area, duration or
scope of activity, this Section 8 will be considered divisible and will become
and be immediately amended to only such area, duration and scope of activity as
will be determined to be reasonable and enforceable by the court or other body
having jurisdiction over the matter; and the Employee agrees that this Section 8
as so amended will be valid and binding as though any invalid or unenforceable
provision had not been included herein.

Section 9. General.

 

  (a) Notices. All notices and other communications hereunder will be in writing
or by written telecommunication, and will be deemed to have been duly given if
delivered personally or if mailed by certified mail, return receipt requested or
by written telecommunication, to the relevant address set forth below, or to
such other address as the recipient of such notice of communication will have
specified to the other party hereto in accordance with this Section 9:

If to the Employer, to:

Supertel Hospitality, Inc.

1800 West Pasewalk Avenue, Suite 200

Norfolk, NE 68701

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If to the Employee, to:

David L. Walter

  

 

  

 

 

  (b) Equitable Remedies. Each of the parties hereto acknowledges and agrees
that upon any breach by the Employee of his obligations under Section 7 and 8
hereof, the Employer will have no adequate remedy at law, and accordingly will
be entitled to specific performance and other appropriate injunctive and
equitable relief.

 

  (c) Severability. If any provision of this Agreement is or becomes invalid,
illegal or unenforceable in any respect under any law, the validity, legality
and enforceability of the remaining provisions hereof will not in any way be
affected or impaired.

 

  (d) Waivers. No delay or omission by either party hereto in exercising any
right, power or privilege hereunder will impair such right, power or privilege,
nor will any single or partial exercise of any such right, power or privilege
preclude any further exercise thereof or the exercise of any other right, power
or privilege.

 

  (f) Assigns. This Agreement will be binding upon and inure to the benefit of
the heirs and successors of each of the parties hereto.

 

  (g) Entire Agreement. This Agreement contains the entire understanding of the
parties, supersedes all prior agreements and understandings relating to the
subject matter hereof, and will not be amended except by a written instrument
signed by each of the parties hereto.

 

  (h) Governing Law. This Agreement and the performance hereof will be construed
and governed in accordance with the laws of the State of Nebraska.

 

  (i)

Section 409A. Notwithstanding anything herein to the contrary, this Agreement is
intended to be interpreted and operated to the extent possible so that the
payments set forth herein either shall be exempt from the requirements of
Section 409A of the Code or shall comply with the requirements of such
provision; provided however that in no event shall the Employer be liable to the
Employee for or with respect to any taxes, penalties or interest which may be
imposed upon the Employee pursuant to Section 409A. To the extent that any
amount payable pursuant to this Agreement constitutes a “deferral of
compensation” subject to Section 409A (a “409A Payment”), then, if on the date
of the Employee’s “separation from service,” as such term is defined in Treas.
Reg. Section 1.409A-1(h)(1), from the Employer (“Separation from Service”), the
Employee is a “specified employee,” as such term is defined in Treas. Reg.
Section 1.409-1(i), as determined from time to time by the Employer, then such
409A Payment shall not be made to the Employee earlier than the earlier of
(i) six (6) months after the Employee’s Separation from Service; or (ii) the
date of Employee’s death. The 409A Payment under this Agreement that would
otherwise be made during such period shall be aggregated and paid in one lump
sum, with interest (compounded monthly) at the prime rate reported by the Wall
Street Journal on the date the payment otherwise would have been made, on the
first business day following the end of the six (6) month period or following
the date of the Employee’s death, whichever is earlier. The Employee hereby
acknowledges that Employee has been advised to seek and has sought the advice of
a tax advisor with respect to the tax consequences to the Employee of

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  all payments pursuant to this Agreement, including any adverse tax
consequences or penalty taxes under Section 409A and applicable federal and
state tax law. Employee hereby agrees to bear the entire risk of any such
adverse federal and state tax consequences and penalty taxes in the event any
payment pursuant to this Agreement is deemed to be subject to Section 409A, and
that no representations have been made to the Employee relating to the tax
treatment of any payment pursuant to this Agreement under Section 409A and the
corresponding provisions of any applicable state income tax laws. If payments
under Section 6(c) constitute 409A Payment, references within Section 6(c) and
this Section 9(i) to termination of employment or similar language shall mean
Employee’s “separation from service” as defined in Treas. Reg.
Section 1.409A-1(h), including the default presumptions thereunder. No 409A
Payment payable under this Agreement shall be subject to acceleration or to any
change in the specified time or method of payment, except as otherwise provided
under this Agreement and consistent with Section 409A.

IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto
have caused this Agreement to be duly executed as of the date and year first
above written.

 

    Supertel Hospitality, Inc.

/s/ David L. Walter

    By:  

/s/ George R. Whittemore

David L. Walter       Chairman, Compensation Committee of the Board of Directors
of Supertel Hospitality, Inc.