EMPLOYMENT AGREEMENT

 

Employment Agreement, dated as of July 15, 2013, by and between Supertel Hospitality, Inc., a Virginia corporation with its principal place of business located at 1800 West Pasewalk Avenue, Suite 200, Norfolk, Nebraska 68701 (the “Employer”) and Jeffrey Dougan, 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 Chief Operating Officer 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 July 14, 2015 and thereafter 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 provided on Exhibit A and 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 $15,833.34 per month, resulting in Base Salary of $190,000 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.

 

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 (as defined below), Employer shall pay Employee Employee’s Monthly Base Salary as in effect at the time of termination (i) for 12 months if such termination occurs on or prior to July 14, 2014 and (ii) if such termination occurs on or prior to July 14, 2015 up to 12 months of Base Salary reduced by one month of Base Salary for each month Employee is employed after July 14, 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.

 

(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 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 (not involving any illegality) 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 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.

 

 “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 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 knowingly or intentionally, 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

 

If to the Employee, to:

 

Jeffrey Dougan

                                                __________________

                                                __________________

 

(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 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/ Jeffrey Dougan                                                                            By:   /s/ Kelly A. Walters

Jeffrey Dougan

Kelly A. Walters, President and Chief Executive Officer

EXHIBIT A

 

 

·	Signing Bonus – The Employer will pay a signing bonus of $25,000, that will be paid with the Employee’s first payroll deposit, subject to full recoupment by Employer if Employee voluntarily terminates his employment or if Employer terminates employment of Employee for Cause prior to July 15, 2014.

 

·

Stock Options – Employer will grant Employee an option for 25,000 shares of common stock of Employer at an exercise price equal to the closing price of a common share as reported by the Nasdaq Stock Market on the commencement date of employment or $1.01 per share, whichever is greater.  The option will have a term of four years and vest over a three year period at a rate of 33% per year, conditioned on continued employment through each respective vesting date.

 

·	Stock Grant – Employer will issue Employee a stock grant for 25,000 shares of restricted stock, that will vest over a three year period at a rate of 33.3% per year, conditioned on continued employment through each respective vesting date.

 

·

Relocation Expenses – Employer will reimburse Employee’s relocation expenses to Omaha, Nebraska, up to a maximum reimbursement of $25,000 for travel and lodging expenses for one trip for Employee and spouse to conduct a home search and temporary housing expenses for up to six months during Employee’s transition to the Omaha office.  Employee will reimburse the amount paid in relocation and housing costs if Employee voluntarily terminates employment or the Employer terminates employment of Employee for Cause prior to July 15, 2014.

 

RESTRICTED STOCK AGREEMENT

 

AGREEMENT entered into effective July 15, 2013 (“Grant Date”) by and between Supertel Hospitality, Inc., a Virginia corporation (“Company”) and Jeffrey Dougan, an employee of the Company (“Employee”).

 

1.   Inducement Award .   25,000   shares (the “Restricted Shares”) of the Company’s common stock (“Stock”), shall be issued as hereinafter provided in Employee’s name subject to certain restrictions thereon.  The Restricted Shares shall become non-forfeitable and fully vested in staggered one-third (1/3) increments on July 15, 2014, July 15, 2015 and July 15, 2016, provided that with respect to each increment, the Employee is in the continuous employment of the Company on such vesting date.  In the event of termination of the Employee’s employment (voluntary or involuntary), the Employee shall forfeit all of the Restricted Shares not then vested.  This restricted stock grant is intended to be an award of Stock described in Rule 5635(c)(4) of the Marketplace Rules of the NASDAQ Stock Market, Inc. and is being made to the Employee as an inducement material to the Employee’s entering into employment with the Company.

 

2.   Dividends and Voting Rights.   The Employee shall be entitled to receive any dividends paid with respect to the Restricted Shares that become payable; provided, however, that no dividends shall be payable to or for the benefit of the Employee for the Restricted Shares with respect to the record dates occurring prior to the Grant Date, or with respect to record dates occurring on or after the date, if any, on which the Employee has forfeited the Restricted Shares.  The Employee shall be entitled to vote the Restricted Shares to the same extent as would have been applicable to the Employee if the Employee was then vested in the shares; provided, however, that the Employee shall not be entitled to vote the shares with respect to record dates for such voting rights arising prior to the Grant Date, or with respect to record dates occurring on or after the date, if any, on which the Employee has forfeited the Restricted Shares.

 

3.   Restricted Shares.   Employee hereby accepts the Restricted Shares when issued and agrees with respect thereto as follows:

 

(a)             Forfeiture Restrictions:   The Restricted Shares may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of to the extent then subject to the Forfeiture Restrictions (as hereinafter defined), and in the event of termination of Employee’s employment with the Company or employing subsidiary, Employee shall, for no consideration, forfeit to the Company all Restricted Shares to the extent then subject to the Forfeiture Restrictions.  The prohibition against transfer and the obligation to forfeit and surrender Restricted Shares to the Company upon termination of employment are herein referred to as “Forfeiture Restrictions.”  The Forfeiture Restrictions shall be binding upon and enforceable against any transferee of Restricted Shares.  Notwithstanding the foregoing, the Forfeiture Restrictions shall lapse on the earlier of: (i) the vesting date of such Restricted Shares as have vested pursuant to Paragraph 1, (ii) the date of a Change of Control (as such term is defined in the Supertel 2006 Stock Plan), (iii) the date Employee’s employment with the Company is terminated by reason of death or total disability (as determined by the Compensation Committee of the Board of Directors of the Company (the “Committee”) using the definition of total disability of the Company’s long term disability plan), or (iv) July 14, 2016 (if the Employee’s employment with the Company has not previously terminated on such date(s)).

 

(b)             Certificates:   A certificate evidencing the Restricted Shares shall be issued by the Company in Employee’s name, or at the option of the Company, in the name of a nominee of the Company, pursuant to which Employee shall have voting rights and shall be entitled to receive all dividends as described in Paragraph 2 of this Agreement.  The certificate shall bear a legend evidencing the nature of the Restricted Shares, and the Company may cause the certificate to be delivered upon issuance to the Secretary of the Company or to such other depository as may be designated by the Company as a depository for safekeeping until the forfeiture occurs or the Forfeiture Restrictions lapse pursuant to the terms of the Plan and this Award.  Upon the lapse of the Forfeiture Restrictions without forfeiture and Employee’s delivery to the Company of the Restricted Shares, the Company shall cause a new certificate or certificates to be issued without legend in the name of Employee for the shares upon which Forfeiture Restrictions lapsed.  Notwithstanding any other provisions of this Agreement, the issuance or delivery of any shares of Stock (whether subject to the restrictions or unrestricted) may be postponed for such period as may be required to comply with applicable requirements of any national securities exchange or any requirements under any law or regulation applicable to the issuance or delivery of such shares.  The Company shall not be obligated to issue or deliver any shares of Stock if the issuance or delivery thereof shall constitute a violation of any provision of any law or any regulation of any governmental authority or any national securities exchange.

 

(c)             Transfer Restrictions:   The Restricted Shares may not be transferred except in accordance with applicable federal or state securities laws. Any certificate representing the Restricted Shares will bear a legend to the following effect:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED OR PLEDGED EXCEPT IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH ACT AND THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. AS A CONDITION TO THE TRANSFER OF THE SHARES, THE COMPANY MAY REQUIRE AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE SECURITIES LAWS OR THAT SUCH TRANSFER HAS BEEN REGISTERED UNDER FEDERAL AND ALL APPLICABLE STATE SECURITIES LAWS.

 

4.   Withholding of Tax.   To the extent that the receipt of the Restricted Shares or the lapse of any Forfeiture Restriction results in income to Employee for federal or state income tax purposes, Employee shall deliver to the Company at the time of such receipt or lapse, as the case may be, such amount of money or shares of unrestricted Stock as the Company may require to meet its withholding obligation under applicable tax laws or regulations, and if Employee fails to do so, the Company is authorized to withhold from any cash or Stock remuneration then or thereafter payable to Employee any tax required to be withheld by reason of such resulting compensation income.

 

5.   Reimbursement .   In the event that (i) the Company is required to restate and submit to the Securities and Exchange Commission a restatement of its audited financial statements for a fiscal year after fiscal 2012 due to material noncompliance with any financial reporting requirement and (ii) Employee engaged in fraud or intentional misconduct that caused or contributed to the need for the restatement, as determined by the Board of Directors, the Company, in an appropriate case as determined by the Board of Directors, shall be entitled to (i) cancel and forfeit any Restricted Shares and/or (ii) require Employee to return to the Company the value of such Restricted Shares (valued as of the date of the lapse of Forfeiture Restrictions with respect thereto), in whole or part, and return of all dividends paid thereon.  The rights of reimbursement of the Company shall be in addition to any other right of reimbursement provided by law.

 

6.   Administration.   The authority to manage and control the operation and administration of this Agreement shall be vested in the Committee, and the Committee shall have all powers with respect to this Agreement as it has with respect to the Plan.  Any interpretation of the Agreement by the Committee and any decision made by it with respect to the Agreement is final and binding.

 

7.   Binding Effect.   This Agreement shall be binding upon and inure to the benefit of any successors to the Company and all persons lawfully claiming under Employee.

 

8.   Governing Law.   This agreement shall be governed by, and construed in accordance with, the laws of the State of Nebraska.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by an officer thereunto duly authorized, and Employee has executed this Agreement, effective as of the Grant Date.

 

SUPERTEL HOSPITALITY, INC.
By:   /s/ Kelly A. Walters	/s/ Jeffrey Dougan
Kelly A. Walters, President and Chief Executive Officer	Employee

STOCK OPTION AGREEMENT

 

STOCK OPTION AGREEMENT made this July 15, 2013 , between Supertel Hospitality, Inc., a Virginia corporation (“Company”), and Jeffrey Dougan, an employee   of the Company (“Holder”).

 

The Company is awarding this grant in connection with Employee’s commencement of employment with the Company to purchase its common shares as hereinafter provided.  This option is expressly designated not to be an Incentive Stock Option as defined in I.R.C. §422A.

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for good and valuable consideration, the parties hereto agree as follows:

 

1.   Grant of Option.   The Company hereby irrevocably grants to the Holder, pursuant to and subject to the terms hereof, the right and option, hereinafter called the “Option,” to purchase all or any part of an aggregate of 25,000 shares of common stock (the “Common Shares”) of the Company (such number being subject to adjustment as provided in Paragraph 7 hereof) on the terms and conditions herein set forth.  The holder of the Option shall not have any of the rights of a stockholder with respect to the shares covered by the Option until one or more certificates for such shares shall be delivered to such holder upon the due exercise of the Option.  This Option is intended to be an equity award described in Rule 5635(c)(4) of the Marketplace Rules of the NASDAQ Stock Market, Inc. and is being made to the Employee as an inducement material to the Employee’s entering into employment with the Company.

 

2.   Purchase Price .  The purchase price of the Common Shares covered by the Option shall be $1.01 per share.  The purchase price of the shares as to which the Option shall be exercised shall be paid in full in cash at the time of exercise or, with the approval of the Company’s Compensation Committee of the Board of Directors (the “Compensation Committee”), the purchase price may be paid (1) in common stock of the Employer already owned by the Holder valued at fair market value on the date of exercise (if such common stock has been owned by the Holder for at least six months) or (2) by the Holder remitting such amount by an appropriate reduction of the number of shares to be delivered to the Holder upon exercise (valued at fair market value on the date of exercise).

 

3.   Term of Option .  The term of the Option shall be for a period of 4 years from the date hereof, subject to earlier termination as provided in Paragraphs 5 & 6 hereof.

 

4.   Non-Transferability .  The Option shall not be transferable otherwise than by will or the laws of descent and distribution, and the Option may be exercised, during the lifetime of the Holder, only by such Holder.  More particularly (but without limiting the generality of the foregoing), the Option may not be assigned, transferred (except as provided above),  pledged or hypothecated in any way, shall not be assignable by operation of law, and shall not be subject to execution, attachment or similar process.  Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option contrary to the provisions hereof or the levy of any execution, attachment or similar process upon the Option shall be null and void and without effect.

 

5.   Exercisability .  Subject to Paragraph 6, this Option shall vest and become exercisable in staggered one-third (1/3) increments, all with a period of exercisability commencing on the date of first exercisability and ending on July 15, 2017.  The following exercise table is applicable:

 

Shares Granted	Exercisable on or After
1/3 of total grant	July 15, 2014
1/3 of total grant	July 15, 2015
1/3 of total grant	July 15, 2016

The Option may be exercised, at any time or from time to time, as to any part or all the shares exercisable; provided, however, that the Option may not be exercised as to less than one hundred (100) shares at any one time (or the remaining shares then purchasable under the Option, if less than one hundred (100) shares).  The Option may not be exercised unless at the date of exercise a Registration Statement under the Securities Act of 1933, as amended, relating to the shares covered by the Option shall be in effect or the Company shall have determined that an exemption from such registration is available.  Subject to the extension of the exercise periods set forth in Paragraph 6 hereof, the Option may not be exercised at any time unless the Holder shall have been in the continuous employ of the Company or a subsidiary from the time hereof to the date of the exercise of the Option.

 

6.   Termination of Employment .  If holder is an employee, in the event that the employment of the Holder shall be terminated (other than by reason of death), the Option may, subject to the provisions of Paragraph 5 hereof, be exercised by the Holder (to the extent that the Holder shall have been entitled to do so at the termination of employment) at or prior to the time of such termination; provided, if the Holder is terminated by the Company without Cause, the Holder shall have ninety (90) days following such termination to exercise all options exercisable on the date of termination and if the employment of the Holder terminates by reason of the retirement of the Holder at or reaching age 55 and having completed five years of service, the Holder shall have one (1) year following such retirement to exercise all options exercisable on the date of such retirement.  In the event of such Holder’s death or total disability (using the definition of total disability of the Company’s long-term disability plan), the Option may, subject to the provisions of Paragraph 5 hereof, be exercised by the personal representative of the Holder’s estate (to the extent the Holder would have been entitled to do so as of the date of death) or the Holder in the case of disability at any time within ninety (90) days following the date of the Holder’s death or termination of employment due to total disability (but not more than the term of this Option).  So long as such Holder shall continue to be an employee of the Company, or an affiliate, or a subsidiary the Option shall not be affected by any change of duties or position.  Nothing in this Option Agreement shall confer upon a  Holder any right to continue in the employ of the Company or interfere in any way with the right of the Company to terminate his/her employment at any time.  The transfer of employment between any combination of the Company and any affiliate or subsidiary shall not be deemed a termination of employment.  For purposes of this Agreement, “Cause” shall have the meaning set forth in the Employment Agreement dated July 15, 2013 between Employee and Company.

 

7.   Adjustment in Capitalization .  If any adjustment in the Company’s capitalization as described in Section 5.3 of the Supertel 2006 Stock Plan occurs, similar appropriate adjustments shall be made by the Compensation Committee to the number of shares and price per share of stock subject to this Option.

 

8.   Method of Exercising Option .  Subject to the terms and conditions of the Option Agreement, the Option may be exercised by written notice to the Company, care of its Chief Financial Officer, 1800 West Pasewalk Avenue, Suite 200, Norfolk, Nebraska 68701.  Such notice shall state the election to execute the Option and the number of shares in respect of which it is being exercised, and shall be signed by the person or persons so exercising the Option.  Such notice shall either: (a) be accompanied by payment of the full purchase price of such shares, in which event the Company shall deliver a certificate or certificates representing such shares as soon as practicable after the notice shall be received; or (b) fix a date (not less than five (5) nor more than ten (10) business days from the date such notice shall be received by the Chief Financial Officer) for the payment of the full purchase price of such shares at the Company’s Transfer Agent Offices, against delivery of a certificate or certificates representing such shares.  Payment of such purchase price shall, in either case, be made by check payable to the order of the Company or, if applicable pursuant to Paragraph 2 hereof with the consent of the Compensation Committee, the transfer of the appropriate shares of stock or reduction of the appropriate number of shares to be delivered upon exercise of the Option.  The certificate or certificates for the shares as to which the Option shall have been so exercised shall be registered in the name of the person or persons so exercising the Option (or, if the Option shall be exercised by the Holder and if the Holder shall so request in the notice exercising the Option, shall be registered in the name of the Holder and another person jointly, with right of survivorship or in the name of the Holder’s spouse) and shall be delivered as provided above to or upon the written order of the person or persons exercising the Option.  All shares that shall be purchased upon the exercise of the Option as provided herein shall be fully paid and non-assessable.

 

As a condition of the issuance of shares hereunder, the Holder agrees to remit to the Company at the time of any exercise of this Option any taxes required to be withheld by the Company under federal, state or local law as a result of exercise.  With the approval of the Committee, the Holder may remit such amount by an appropriate reduction of the number of shares to be delivered to the Holder upon exercise, or by the Holder delivering sufficient shares of common stock of the Employer valued at its fair market value (if such common stock has been owned by the Holder for at least six months).

 

The Common Shares issued upon exercise of the Option may not be transferred except in accordance with applicable federal or state securities laws. Any certificate representing such shares will bear a legend to the following effect:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED OR PLEDGED EXCEPT IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH ACT AND THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. AS A CONDITION TO THE TRANSFER OF THE SHARES, THE COMPANY MAY REQUIRE AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE SECURITIES LAWS OR THAT SUCH TRANSFER HAS BEEN REGISTERED UNDER FEDERAL AND ALL APPLICABLE STATE SECURITIES LAWS.

 

9.   General .  The Company shall at all times during the term of the Option reserve and keep available such number of Common Shares as will be sufficient to satisfy the requirements of this Option Agreement, shall pay all original issue and transfer taxes with respect to the issue and transfer of shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection therewith, and will use its best efforts to comply with all laws and regulations which shall be applicable thereto.

 

IN WITNESS WHEREOF, the Company and the Holder have signed this Option Agreement effective as of the day and year first above written.

 

 

 

	Supertel Hospitality, Inc.
/s/ Jeffrey Dougan	By:   /s/ Kelly A. Walters
Employee	Kelly A. Walters, President and  Chief Executive Officer