Document:

GUARANTY OF GLADE M. KNIGHT

 Exhibit 4.2 
  

UNCONDITIONAL GUARANTY 
  
 June 1, 2005 
  
 Apple REIT Seven, Inc. 
 10 South Third Street 
 Richmond, Virginia 23219 
 (Individually and collectively “Borrower”) 
  
 Glade M. Knight 
 10 South Third Street 
 Richmond, Virginia 23219 
 (Individually and collectively “Guarantor”) 
  
 Wachovia Bank, National Association 
 201 S. Jefferson Street 
 Roanoke, Virginia 24011 
 (Hereinafter referred to as “Bank”) 
  
 IMPORTANT NOTICE 
  
 THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS GUARANTOR AND ALLOWS THE CREDITOR TO OBTAIN
A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE. 
  
 To induce Bank to make,
extend or renew loans, advances, credit, or other financial accommodations to or for the benefit of Borrower, which are and will be to the direct interest and advantage of the Guarantor, and in consideration of loans, advances, credit, or other
financial accommodations made, extended or renewed to or for the benefit of Borrower, which are and will be to the direct interest and advantage of the Guarantor, Guarantor hereby absolutely, irrevocably and unconditionally guarantees to Bank and
its successors, assigns and affiliates the timely payment and performance of all liabilities and obligations of Borrower to Bank and its affiliates, including, but not limited to, all obligations under any notes, loan agreements, security
agreements, letters of credit, instruments, accounts receivable, contracts, drafts, leases, chattel paper, indemnities, acceptances, repurchase agreements, overdrafts, and the Loan Documents, as defined below, and all obligations of Borrower to Bank
or any of its affiliates under any swap agreement (as defined in 11 U.S.C. § 101, as in effect from time to time), however and whenever incurred or evidenced, whether primary, secondary, direct, indirect, absolute, contingent, due or to become
due, now existing or hereafter contracted or acquired, and all modifications, extensions and renewals thereof, (collectively, the “Guaranteed Obligations”). 
  
 Guarantor further covenants and agrees: 
  
 GUARANTOR’S LIABILITY. This Guaranty is a continuing and unconditional guaranty of payment and performance and not of collection. The parties to this Guaranty
are jointly and severally obligated hereunder. This Guaranty does not impose any obligation on Bank to extend 

  

 
or continue to extend credit or otherwise deal with Borrower at any subsequent time. This Guaranty shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of the Guaranteed Obligations is rescinded, avoided or for any other reason must be returned by Bank, and the returned payment shall remain payable as part of the Guaranteed Obligations, all as though such
payment had not been made. Except to the extent the provisions of this Guaranty give Bank additional rights, this Guaranty shall not be deemed to supersede or replace any other guaranties given to Bank by Guarantor; and the obligations guaranteed
hereby shall be in addition to any other obligations guaranteed by Guarantor pursuant to any other agreement of guaranty given to Bank and other guaranties of the Guaranteed Obligations. 
  
 TERMINATION OF GUARANTY. Guarantor may terminate this Guaranty only by written notice, delivered personally to or received by
certified or registered United States Mail by an authorized officer of Bank at the address for notices provided herein. Such termination shall be effective only with respect to Guaranteed Obligations arising more than 15 days after the date such
written notice is received by said Bank officer. Such termination shall not be effective with respect to Guaranteed Obligations (including any subsequent extensions, modifications or compromises of the Guaranteed Obligations) then existing, or
Guaranteed Obligations arising subsequent to receipt by Bank of said notice if such Guaranteed Obligations are a result of Bank’s obligation to make advances pursuant to a commitment, or are based on Borrower’s obligations to make payments
pursuant to any swap agreement (as defined in 11 U.S.C. §101, as in effect from time to time), entered into prior to expiration of the 15 day notice period, or are a result of advances which are necessary for Bank to protect its collateral or
otherwise preserve its interests. Termination of this Guaranty by any single Guarantor will not affect the existing and continuing obligations of any other Guarantor hereunder. 
  
 CONSENT TO MODIFICATIONS. Guarantor consents and agrees that Bank (and, with respect to swap obligations, its affiliates) may from
time to time, in its sole discretion, without affecting, impairing, lessening or releasing the obligations of Guarantor hereunder: (a) extend or modify the time, manner, place or terms of payment or performance and/or otherwise change or modify
the credit terms of the Guaranteed Obligations; (b) increase, renew, or enter into a novation of the Guaranteed Obligations; (c) waive or consent to the departure from terms of the Guaranteed Obligations; (d) permit any change in the business or
other dealings and relations of Borrower or any other guarantor with Bank; (e) proceed against, exchange, release, realize upon, or otherwise deal with in any manner any collateral that is or may be held by Bank in connection with the Guaranteed
Obligations or any liabilities or obligations of Guarantor; and (f) proceed against, settle, release, or compromise with Borrower, any insurance carrier, or any other person or entity liable as to any part of the Guaranteed Obligations, and/or
subordinate the payment of any part of the Guaranteed Obligations to the payment of any other obligations, which may at any time be due or owing to Bank; all in such manner and upon such terms as Bank may deem appropriate, and without notice to or
further consent from Guarantor. No invalidity, irregularity, discharge or unenforceability of, or action or omission by Bank relating to any part of the Guaranteed Obligations or any security therefor shall affect or impair this Guaranty.

  
 WAIVERS AND ACKNOWLEDGMENTS. Guarantor waives and releases the following
rights, demands, and defenses Guarantor may have with respect to Bank (and, with respect to swap obligations, its affiliates) and collection of the Guaranteed Obligations: (a) promptness and 

  

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diligence in collection of any of the Guaranteed Obligations from Borrower or any other person liable thereon, and in foreclosure of any security interest
and sale of any property serving as collateral for the Guaranteed Obligations; (b) any law or statute that requires that Bank (and, with respect to swap obligations, its affiliates) make demand upon, assert claims against, or collect from Borrower
or other persons or entities, foreclose any security interest, sell collateral, exhaust any remedies, or take any other action against Borrower or other persons or entities prior to making demand upon, collecting from or taking action against
Guarantor with respect to the Guaranteed Obligations, including any such rights Guarantor might otherwise have had under Va. Code §§ 49-25 and 49-26, et seq., N.C.G.S. §§ 26-7, et seq., Tenn. Code Ann. §
47-12-101, O.C.G.A. § 10-7-24, Mississippi Code Ann. Section 87-5-1, and any successor statute and any other applicable law; (c) any law or statute that requires that Borrower or any other person be joined in, notified of or made part of any
action against Guarantor; (d) that Bank or its affiliates preserve, insure or perfect any security interest in collateral or sell or dispose of collateral in a particular manner or at a particular time, provided that Bank’s obligation to
dispose of Collateral in a commercially reasonable manner is not waived hereby; (e) notice of extensions, modifications, renewals, or novations of the Guaranteed Obligations, of any new transactions or other relationships between Bank, Borrower
and/or any guarantor, and of changes in the financial condition of, ownership of, or business structure of Borrower or any other guarantor; (f) presentment, protest, notice of dishonor, notice of default, demand for payment, notice of intention to
accelerate maturity, notice of acceleration of maturity, notice of sale, and all other notices of any kind whatsoever to which Guarantor may be entitled; (g) the right to assert against Bank or its affiliates any defense (legal or equitable),
set-off, counterclaim, or claim that Guarantor may have at any time against Borrower or any other party liable to Bank or its affiliates; (h) all defenses relating to invalidity, insufficiency, unenforceability, enforcement, release or impairment of
Bank or its affiliates’ lien on any collateral, of the Loan Documents, or of any other guaranties held by Bank; (i) any right to which Guarantor is or may become entitled to be subrogated to Bank or its affiliates’ rights against Borrower
or to seek contribution, reimbursement, indemnification, payment or the like, or participation in any claim, right or remedy of Bank or its affiliates against Borrower or any security which Bank or its affiliates now has or hereafter acquires, until
such time as the Guaranteed Obligations have been fully satisfied beyond the expiration of any applicable preference period; (j) any claim or defense that acceleration of maturity of the Guaranteed Obligations is stayed against Guarantor because of
the stay of assertion or of acceleration of claims against any other person or entity for any reason including the bankruptcy or insolvency of that person or entity; and (k) the right to marshalling of Borrower’s assets or the benefit of any
exemption claimed by Guarantor. Guarantor acknowledges and represents that Guarantor has relied upon Guarantor’s own due diligence in making an independent appraisal of Borrower, Borrower’s business affairs and financial condition, and any
collateral; Guarantor will continue to be responsible for making an independent appraisal of such matters; and Guarantor has not relied upon Bank or its affiliates for information regarding Borrower or any collateral. 
  
 FINANCIAL CONDITION. Guarantor warrants, represents and covenants to Bank and its
affiliates that on and after the date hereof: (a) the fair saleable value of Guarantor’s assets exceeds its liabilities, Guarantor is meeting its current liabilities as they mature, and Guarantor is and shall remain solvent; (b) all financial
statements of Guarantor furnished to Bank are correct and accurately reflect the financial condition of Guarantor as of the respective dates thereof; (c) since the date of such financial statements, there has not occurred a material adverse change
in 

  

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the financial condition of Guarantor; (d) there are not now pending any court or administrative proceedings or undischarged judgments against Guarantor, no
federal or state tax liens have been filed or threatened against Guarantor, and Guarantor is not in default or claimed default under any agreement; and (e) at such reasonable times as Bank requests, Guarantor will furnish Bank and its affiliates
with such other financial information as Bank and its affiliates may reasonably request. 
  
 INTEREST AND APPLICATION OF PAYMENTS. Regardless of any other provision of this Guaranty or other Loan Documents, if for any reason the effective interest on any of the Guaranteed Obligations should exceed the
maximum lawful interest, the effective interest shall be deemed reduced to and shall be such maximum lawful interest, and any sums of interest which have been collected in excess of such maximum lawful interest shall be applied as a credit against
the unpaid principal balance of the Guaranteed Obligations. Monies received from any source by Bank or its affiliates for application toward payment of the Guaranteed Obligations may be applied to such Guaranteed Obligations in any manner or order
deemed appropriate by Bank and its affiliates. 
  
 DEFAULT. If any of the
following events occur, a default (“Default”) under this Guaranty shall exist: (a) failure of timely payment or performance of the Guaranteed Obligations or a default under any Loan Document; (b) a breach of any agreement or representation
contained or referred to in the Guaranty, or any of the Loan Documents, or contained in any other contract or agreement of Guarantor with Bank or its affiliates, whether now existing or hereafter arising; (c) the death of, appointment of a guardian
for, dissolution of, termination of existence of, loss of good standing status by, appointment of a receiver for, assignment for the benefit of creditors of, or the commencement of any insolvency or bankruptcy proceeding by or against Guarantor or
any general partner of or the holder(s) of the majority ownership interests of Guarantor; and/or (d) Bank determines in good faith, in its sole discretion, that the prospects for payment or performance of the Guaranteed Obligations are impaired or a
material adverse change has occurred in the business or prospects of Borrower or Guarantor, financial or otherwise. 
  
 If a Default occurs, the Guaranteed Obligations shall be due immediately and payable without notice, other than Guaranteed Obligations under any swap agreements (as
defined in 11 U.S.C. § 101, as in effect from time to time) with Bank or its affiliates, which shall be due in accordance with and governed by the provisions of said swap agreements, and, Bank and its affiliates may exercise any rights and
remedies as provided in this Guaranty and other Loan Documents, or as provided at law or equity. Guarantor shall pay interest on the Guaranteed Obligations from such Default at the highest rate of interest charged on any of the Guaranteed
Obligations. 
  
 ATTORNEYS’ FEES AND OTHER COSTS OF COLLECTION.
Guarantor shall pay all of Bank’s and its affiliates’ reasonable expenses incurred to enforce or collect any of the Guaranteed Obligations, including, without limitation, reasonable arbitration, paralegals’, attorneys’ and
experts’ fees and expenses, whether incurred without the commencement of a suit, in any suit, arbitration, or administrative proceeding, or in any appellate or bankruptcy proceeding. 
  
 SUBORDINATION OF OTHER DEBTS. Guarantor agrees: (a) to subordinate the obligations now or hereafter owed by Borrower to Guarantor
(“Subordinated Debt”) to any and all 

  

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obligations of Borrower to Bank or its affiliates now or hereafter existing while this Guaranty is in effect, provided however that Guarantor may receive
regularly scheduled principal and interest payments on the Subordinated Debt so long as (i) all sums due and payable by Borrower to Bank and its affiliates have been paid in full on or prior to such date, and (ii) no event or condition which
constitutes or which with notice or the lapse or time would constitute an event of default with respect to the Guaranteed Obligations shall be continuing on or as of the payment date; (b) Guarantor will either place a legend indicating such
subordination on every note, ledger page or other document evidencing any part of the Subordinated Debt or deliver such documents to Bank; and (c) except as permitted by this paragraph, Guarantor will not request or accept payment of or any security
for any part of the Subordinated Debt, and any proceeds of the Subordinated Debt paid to Guarantor, through error or otherwise, shall immediately be forwarded to Bank by Guarantor, properly endorsed to the order of Bank, to apply to the Guaranteed
Obligations. 
  
 MISCELLANEOUS. Assignment. This Guaranty and other Loan
Documents shall inure to the benefit of and be binding upon the parties and their respective heirs, legal representatives, successors and assigns. Bank’s interests in and rights under this Guaranty and other Loan Documents are freely
assignable, in whole or in part, by Bank. Any assignment shall not release Guarantor from the Guaranteed Obligations. Organization; Powers. Guarantor (i) is (a) an adult individual and is sui juris, or (b) a corporation, general
partnership, limited partnership, limited liability company or other legal entity (as indicated below), duly organized, validly existing and in good standing under the laws of its state of organization, and is authorized to do business in each other
jurisdiction wherein its ownership of property or conduct of business legally requires such organization, (ii) has the power and authority to own its properties and assets and to carry on its business as now being conducted and as now contemplated;
and (iii) has the power and authority to execute, deliver and perform, and by all necessary action has authorized the execution, delivery and performance of, all of its obligations under this Guaranty and any other Loan Document to which it is a
party. Applicable Law; Conflict Between Documents. This Guaranty shall be governed by and construed under the laws of the state named in Bank’s address shown above without regard to that state’s conflict of laws principles. If the
terms of this Guaranty should conflict with the terms of any commitment letter that survives closing, the terms of this Guaranty shall control. Guarantor’s Accounts. Except as prohibited by law, Guarantor grants Bank and its affiliates a
security interest in all of Guarantor’s accounts with Bank and its affiliates. Jurisdiction. Guarantor irrevocably agrees to non-exclusive personal jurisdiction in the state named in Bank’s address shown above. Severability.
If any provision of this Guaranty or of the other Loan Documents shall be prohibited or invalid under applicable law, such provision shall be ineffective but only to the extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Guaranty or other Loan Documents. Notices. Any notices to Guarantor shall be sufficiently given if in, writing and mailed or delivered to Guarantor’s address shown above or such other
address as provided hereunder, and to Bank, if in writing and mailed or delivered to Wachovia Bank, National Association, Mail Code VA7628, P.O. Box 13327, Roanoke, VA 24040 or Wachovia Bank, National Association, Mail Code VA7628, 10 South
Jefferson Street, Roanoke, VA 24011 or such other address as Bank may specify in writing from time to time. Notices to Bank must include the mail code. In the event that Guarantor changes Guarantor’s address at any time prior to the date the
Guaranteed Obligations are paid in full, Guarantor agrees to promptly give written notice of said change of address to Bank by registered or 

  

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certified mail, return receipt requested, all charges prepaid. Plural; Captions. All references in the Loan Documents to borrower, guarantor, person,
document or other nouns of reference mean both the singular and plural form, as the case may be, and the term “person” shall mean any individual person or entity. The captions contained in the Loan Documents are inserted for convenience
only and shall not affect the meaning or interpretation of the Loan Documents. Binding Contract. Guarantor by execution of and Bank by acceptance of this Guaranty agree that each party is bound to all terms and provisions of this Guaranty.
Amendments, Waivers and Remedies. No waivers, amendments or modifications of this Guaranty and other Loan Documents shall be valid unless in writing and signed by an officer of Bank. No waiver by Bank or its affiliates of any Default shall
operate as a waiver of any other Default or the same Default on a future occasion. Neither the failure nor any delay on the part of Bank or its affiliates in exercising any right, power, or privilege granted pursuant to this Guaranty and other Loan
Documents shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise or the exercise of any other right, power or privilege. All remedies available to Bank or its affiliates with respect
to this Guaranty and other Loan Documents and remedies available at law or in equity shall be cumulative and may be pursued concurrently or successively. Partnerships. If Guarantor is a partnership, the obligations, liabilities and agreements
on the part of Guarantor shall remain in full force and effect and fully applicable notwithstanding any changes in the individuals comprising the partnership. The term “Guarantor” includes any altered or successive partnerships, and
predecessor partnership(s) and the partners shall not be released from any obligations or liabilities hereunder. Loan Documents. The term “Loan Documents” refers to all documents executed in connection with or related to the
Guaranteed Obligations and may include, without limitation, commitment letters that survive closing, loan agreements, other guaranty agreements, security agreements, instruments, financing statements, mortgages, deeds of trust, deeds to secure debt,
letters of credit and any amendments or supplements (excluding swap agreements as defined in 11 U.S.C. § 101, as in effect from time to time). LIMITATION ON LIABILITY; WAIVER OF PUNITIVE DAMAGES. EACH OF THE PARTIES HERETO, INCLUDING
BANK BY ACCEPTANCE HEREOF, AGREES THAT IN ANY JUDICIAL, MEDIATION OR ARBITRATION PROCEEDING OR ANY CLAIM OR CONTROVERSY BETWEEN OR AMONG THEM THAT MAY ARISE OUT OF OR BE IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY OTHER
AGREEMENT OR DOCUMENT BETWEEN OR AMONG THEM OR THE OBLIGATIONS EVIDENCED HEREBY OR RELATED HERETO, IN NO EVENT SHALL ANY PARTY HAVE A REMEDY OF, OR BE LIABLE TO THE OTHER FOR, (1) INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OR (2) PUNITIVE OR
EXEMPLARY DAMAGES. EACH OF THE PARTIES HEREBY EXPRESSLY WAIVES ANY RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY MAY HAVE OR WHICH MAY ARISE IN THE FUTURE IN CONNECTION WITH ANY SUCH PROCEEDING, CLAIM OR CONTROVERSY, WHETHER THE SAME IS
RESOLVED BY ARBITRATION, MEDIATION, JUDICIALLY OR OTHERWISE. FINAL AGREEMENT. This Agreement and the other Loan Documents represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or
subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties. 
  
 FINANCIAL AND OTHER INFORMATION. Guarantor shall deliver to Bank such information as Bank may reasonably request from time to time, including without limitation, 

  

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financial statements and information pertaining to Guarantor’s financial condition. Such information shall be true, complete, and accurate. 

 
 NEGATIVE COVENANTS. Guarantor agrees that from the date hereof and until final
payment in full of the Guaranteed Obligations, unless Bank shall otherwise consent in writing, Guarantor will not: Default on Other Contracts or Obligations. Default on any material contract with or obligation when due to a third party or
default in the performance of any obligation to a third party incurred for money borrowed. Government Intervention. Permit the assertion or making of any seizure, vesting or intervention by or under authority of any governmental entity, as a
result of which the management of Guarantor or any guarantor is displaced of its authority in the conduct of its respective business or such business is curtailed or materially impaired. Judgment Entered. Permit the entry of any monetary
judgment or the assessment against, the filing of any tax lien against, or the issuance of any writ of garnishment or attachment against any property of or debts due. Retire or Repurchase Capital Stock. Retire or otherwise acquire any of its
capital stock. 
  
 PERSONAL FINANCIAL STATEMENTS. Each Guarantor who is an
individual shall deliver to Bank annually, within thirteen months of the previous statement date on file with Bank, Guarantor’s financial statement. Said financial statement shall disclose all of Guarantor’s assets, liabilities, net worth,
income and contingent liabilities, all in reasonable detail and acceptable to Bank and submitted on a form to be provided by Bank or on such other form acceptable to Bank, signed by Guarantor and certified by Guarantor to Bank to be true, correct
and complete. 
  
 TAX RETURNS. Guarantor shall deliver to Bank, within 30
days of filing, complete copies of federal and state tax returns, as applicable, together with all schedules thereto, each of which shall be signed and certified by Guarantor to be true and complete copies of such returns. In the event an extension
is filed, Guarantor shall deliver a copy of the extension within 30 days of filing. 
  
 WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF GUARANTOR BY EXECUTION HEREOF AND BANK BY ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT EACH MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY, THE LOAN DOCUMENTS OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY WITH RESPECT HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK TO ACCEPT THIS GUARANTY. EACH OF THE PARTIES AGREES THAT THE TERMS HEREOF SHALL SUPERSEDE AND REPLACE ANY PRIOR
AGREEMENT RELATED TO ARBITRATION OF DISPUTES BETWEEN THE PARTIES CONTAINED IN ANY LOAN DOCUMENT OR ANY OTHER DOCUMENT OR AGREEMENT HERETOFORE EXECUTED IN CONNECTION WITH, RELATED TO OR BEING REPLACED, SUPPLEMENTED, EXTENDED OR MODIFIED BY, THIS
GUARANTY. 
  

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 CONFESSION OF JUDGMENT. Each Guarantor hereby constitutes and appoints John G. Fox, Douglas A. Carson (each of
whom is an officer of Bank), and Bank through an officer duly authorized by Bank (any of the foregoing may act), as the true and lawful attorneys-in-fact for them, in any or all of their names, place and stead, and upon the occurrence of a Default
in the payment of the Guaranteed Obligations due under this Guaranty, at maturity, or upon acceleration, to confess judgment against them or any of them, in favor of Bank, before the Clerk of the Circuit Court for City of Richmond, Virginia, in
accordance with 1950 Code of Virginia, Section 8.01-431 et seq., and any successor statute, for all amounts owed with respect to the Guaranteed Obligations under and pursuant to this Guaranty including, without limitation, all costs of
collection and attorneys’ fees in an amount equal to 15% of the Guaranteed Obligations then outstanding (which shall be deemed reasonable attorneys’ fees for the purposes of this paragraph), and court costs, hereby ratifying and confirming
the acts of said attorney-in-fact as if done by themselves. Upon request of Bank, each Guarantor will execute an amendment or other agreement substituting attorneys-in-fact appointed to act for each Guarantor hereunder. 
  
 IN WITNESS WHEREOF, Guarantor, on the day and year first written above, has caused
this Unconditional Guaranty to be executed under seal. 
  

			
		
	 /s/ Glade M. Knight
	 	(SEAL)
	 Glade M. Knight
	 	 

  
 Commonwealth of Virginia

 City/County of Richmond 
  
 Individual Acknowledgment 
  
 I certify that Glade M. Knight, a person(s) known to me, appeared before me this day, and being informed of the contents thereof, acknowledged execution
of the foregoing instrument. 
  
 Witness my hand and official seal, this 1 day of
June, 2005. 
  

					
	Notary Seal	 	________________              /s/ Debra L. Wilson_______________________,	 	Notary Public
	 	 	(Printed Name of Notary)	 	 
		
	 	 	My Commission Expires: 12-31-2006

  

 Page 8FORM OF ADVISORY AGREEMENT

 Exhibit 10.1 
  
 ADVISORY AGREEMENT 
  
 BETWEEN 
  
 APPLE REIT SEVEN, INC. 
  
 AND 
  
 APPLE SEVEN ADVISORS, INC.

  
 THIS ADVISORY AGREEMENT, dated as of
                        , 2005, is between APPLE REIT SEVEN, INC., a Virginia corporation (the “Company”), and
APPLE SEVEN ADVISORS, INC., a Virginia corporation (the “Advisor”). 
  
 RECITALS 
  
 A. The purpose of the
Company is to invest primarily in hotels, residential apartment communities and other income-producing real estate in selected metropolitan areas of the United States. The Company intends to qualify as a real estate investment trust pursuant to
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. 
  
 B. The Company desires to engage the Advisor to provide information, advice, assistance and facilities to the Company and to have the Advisor undertake the duties and responsibilities hereinafter set forth, all
subject to the supervision of the Company’s Board of Directors, on the terms and conditions set forth herein. In consideration therefor, the Company desires to pay the Advisor certain fees as herein set forth. 
  
 NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements contained herein, the parties agree as follows: 
  
 1. Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below. 
  
 (a) “Affiliate” means (i) any Person directly or indirectly controlling, controlled by or under common control with another
Person, (ii) any Person owning or controlling 10% or more of the outstanding voting securities or beneficial interests of such other Person, (iii) any officer, director, trustee or general partner of such Person and (iv) if such other Person is an
officer, director, trustee or partner of another entity, then the entity for which that Person acts in any such capacity. “Affiliated” means being an Affiliate of a specified Person. 
  

 (b) “Articles of Incorporation” means the Company’s Articles of
Incorporation filed with the Virginia State Corporation Commission, including all amendments, restatements or modifications thereof. 
  
 (c) “Asset Management Fee” means the fee payable to the Advisor for its services hereunder. Such fee will be paid pursuant and
subject to Section 11 of this Agreement. 
  
 (d)
“Average Invested Assets” for any period means the average of the aggregate book value of the assets of the Company invested, directly or indirectly, in equity interests in and loans secured by real estate, before reserves for depreciation
or bad debts or other similar non-cash reserves, computed by taking the average of such values at the end of each month during such period. 
  
 (e) “Board of Directors” means the Company’s Board of Directors as of any particular time. 
  
 (f) “Bylaws” means the Company’s Bylaws,
including all amendments, restatements or modifications thereof. 
  
 (g) “Calendar Year” means the year ended December 31st and any portion thereof treated by the Internal Revenue Service as a reporting period for the Company. 
  
 (h) “Code” means the Internal Revenue Code of
1986, as amended from time to time, including successor statutes thereto. 
  
 (i) “Company Net Income” for any period means the total revenues of the Company for such period, less expenses applicable to such period other than additions to reserves for depreciation or bad debts or
other similar non-cash reserves. “Company Net Income,” for purposes of calculating Operating Expenses in Section 15 of this Agreement, does not include the gain from the sale of the Company’s assets. 
  
 (j) “Directors” means, as of any particular time,
the directors of the Company holding office at such time. 
  
 (k) “Modified Net Income” means net income (computed in accordance with generally accepted accounting principles) excluding gains (or losses) from debt restructuring and sales of property, plus depreciation
of real property, and after adjustments for significant non-recurring items and unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect modified net income on the
same basis. 
  
 (l) “Offering” means
the public offering of the Company’s Units. 
  
 (m) “Operating Expenses” means all operating, general and administrative expenses of the Company as determined under generally accepted accounting principles (including regular compensation payable to the Advisor), excluding,
however, the following: 
  
 (i) expenses of
raising capital; 
  

 2 

 (ii) interest payments; 
  
 (iii) taxes; 
  
 (iv) non-cash expenditures, such as depreciation, amortization and bad debt; 
  
 (v) reserves; 
  
 (vi) incentive fees paid to the Advisor, if any; and

  
 (vii) costs related directly to asset
acquisition, operation or disposition. 
  
 (n)
“Organizational and Offering Expenses” means all expenses incurred in connection with the formation and registration of the Company and in qualifying and marketing the Units under applicable federal and state law, and any other expenses
actually incurred and directly related to the qualification, registration, offer and sale of the Units, including such expenses as (i) all marketing expenses and payments made to broker-dealers as compensation or reimbursement for all costs of
reviewing the Offering, including due diligence investigations and fees and expenses of their attorneys, accountants and other experts; (ii) registration fees, filing fees and taxes; (iii) the costs of printing, amending, supplementing and
distributing the registration statement and Prospectus; (iv) the costs of obtaining regulatory clearances of, and printing and distributing, sales materials used in connection with the offer and sale of the Units; (v) the costs related to investor
and broker-dealer sales meetings concerning the Offering; and (vi) accounting and legal fees incurred in connection with any of the foregoing. 
  
 (o) “Person” includes an individual, corporation, partnership, joint venture, association, company, trust, bank or other entity,
or government and any agency and political subdivision of a government. 
  
 (p) “Property” or “Properties” means partial or entire equity interests, including equity participation interests such as general partnership interests and joint venture interests, owned by the
Company in real property as described in the Prospectus. 
  
 (q) “Prospectus” has the meaning given to that term by Section 2(10) of the Securities Act of 1933, as amended, and as used herein, the term means the Prospectus of the Company pursuant to which the Units
are offered to the public. 
  
 (r) “Return
Ratio” means, for any period, the ratio of Modified Net Income to Total Contributions. 
  
 (s) “Shareholders” means the holders of record of the Company’s Units. 
  

 3 

 (t) “Total Contributions” means the gross offering proceeds which have been
received by the Company from time to time from the sale or sales of the Units. Total Contributions shall be calculated to reflect the average of the daily amounts during the period in question of the gross offering proceeds which have been received
by the Company from time to time from the sales of Units, to extent such Units are issued and such sales have actually been closed. 
  
 (u) “Units” means the Units of the Company. Each Unit consists of one Common Share and one Series A preferred share of the
Company. 
  
 2. Duties of the Advisor. Subject to the terms
of the Articles of Incorporation, the Bylaws, and the supervision of the Board of Directors, the Advisor, at its own cost and expense, unless otherwise set forth herein, on behalf of the Company, shall: 
  
 (a) serve as the Company’s investment advisor and
consultant in connection with policy and investment decisions to be made by the Board of Directors, furnish reports to the Board of Directors, and provide research, economic and statistical data in connection with the acquisition, financing,
refinancing, holding, leasing and disposition of Properties and other investments of the Company; 
  
 (b) administer the day-to-day operations of the Company and perform or supervise the various administrative functions reasonably necessary
for the management of the Company; 
  
 (c)
investigate, select and, on behalf of the Company, engage and conduct business with (including, but not limited to, entering into contracts in the name of the Advisor or the Company) consultants, accountants, correspondents, lenders, servicers,
technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, banks, builders, developers, property owners, mortgagors, and other mortgage and
investment participants, any and all agents for any of the foregoing, including Affiliates of the Advisor, and Persons acting in any other capacity deemed by the Board of Directors necessary or desirable for the performance of any of the foregoing
services; 
  
 (d) act as attorney-in-fact or
agent in acquiring, financing, refinancing, leasing and disposing of Properties and other investments, in disbursing and collecting funds of the Company, in paying the debts and fulfilling the obligations of the Company and in handling, prosecuting
and settling any claims of the Company, including the foreclosure or other enforcement of any mortgage or other lien securing Properties or other investments, and exercise its own discretion in doing so; provided that any fees and costs payable to
independent Persons incurred by the Advisor in connection with the foregoing shall be the responsibility of the Company; 
  

 4 

 (e) negotiate on behalf of the Company with banks or other lenders for loans to be made
to the Company, and negotiate on behalf of the Company with investment banking firms and broker-dealers or negotiate private sales of the securities of the Company or obtain loans for the Company, but in no event in such a way so that the Advisor
shall be acting as broker-dealer or underwriter; and provided, further, that any fees and costs payable to third parties incurred by the Advisor in connection with the foregoing shall be the responsibility of the Company; 
  
 (f) invest or reinvest any money of the Company, as directed
by the Board of Directors or subject to such discretionary powers as the Board of Directors may from time to time delegate; 
  
 (g) if requested by the Company, provide appraisal reports on any real property that is, or is proposed to be, acquired by the Company for
investment; 
  
 (h) at any time reasonably
requested by the Board of Directors (but not more than monthly) make reports of its performance of services to the Company; 
  
 (i) communicate on behalf of the Company with the Shareholders of the Company as required to satisfy the continuous reporting and other
requirements of any governmental bodies or agencies to the Shareholders and third parties and to maintain effective relations with the Shareholders; 
  
 (j) counsel the Company in connection with policy decisions to be made by the Board of Directors; 
  
 (k) provide the executive and administrative personnel and
services required in rendering the foregoing services to the Company; and 
  
 (l) perform such other services as may be required from time to time for management and other activities relating to the assets of the Company as the Advisor shall deem appropriate under the particular circumstances.

  
 3. Commitments. In order to meet the investment
requirements of the Company, but only as determined by the Board of Directors, or any authorized committee thereof, from time to time, the Advisor agrees at the direction of the Board of Directors or any such committee to issue on behalf of the
Company commitments on such terms as are established by the Board of Directors or any such committee, for the acquiring of Properties or other assets. 
  
 4. Duties of the Board of Directors. In order for the Advisor to fulfill its duties, the Board of Directors shall, to the extent it deems proper,
provide the Advisor with full information concerning the Company, its capitalization and investment policies and the intentions of the Board of Directors with respect to future investments. The Company shall furnish the Advisor with a copy of all
audited financial statements, a signed copy of each report prepared by independent accountants, and such other information with regard to its affairs as the Advisor may from time to time reasonably request. 
  

 5 

 5. Advice. In addition to the services described in Section 2 above, the Advisor shall consult
with the Board of Directors and the officers of the Company and shall furnish them with advice and recommendations with respect to the acquiring of Properties or commitments therefor, or other investments of, or investments considered by, the
Company, and shall furnish advice and recommendations with respect to other aspects of the business and affairs of the Company. In order to facilitate the investment of the funds of the Company and enable it to avail itself of investment
opportunities as they arise, the Advisor may from time to time be granted, but is not hereby granted, the power and authority to make and dispose of investments and to make and terminate commitments for investments, on behalf of and in the name of
the Company, without further or express authority from the Board of Directors; provided, however that the Board of Directors shall have the power to revoke, suspend, modify or limit such power and authority at any time or from time to time, but not
retroactively. Unless otherwise notified by the Board of Directors, a representative of the Advisor shall attend all regular and special meetings of the Board of Directors, and the Board of Directors shall notify the Advisor of such meetings.

  
 6. Bank Accounts. The Advisor may establish and
maintain one or more bank accounts in the name of the Company and may collect and deposit into any such account or accounts, and disburse from any such account or accounts, any money on behalf of the Company, under such terms and conditions as the
Board of Directors may approve, provided that all such accounts shall be maintained in such fashion as to make clear that the funds therein are the property of the Company and not of the Advisor. The Advisor shall from time to time render
appropriate accountings of such collections and payments to the Board of Directors and to the auditors of the Company. 
  
 7. Investment Undertakings. The Advisor shall use its best efforts to assure that (i) any mortgage securing a Property of the Company shall be and
remain a valid lien upon the mortgaged property according to its terms; (ii) the title to any Property is insured by appropriate policies of title insurance; (iii) any Property is duly insured against loss or damage by fire, with extended coverage,
and against such other insurable hazards and risks as is customary and appropriate in the circumstances; and (iv) the policies from time to time specified by the Board of Directors with regard to the protection of the Company’s investments are
carried out. Any and all fees and costs incurred by the Advisor in performing such functions, whether payable to its Affiliates or independent Persons shall be borne by the Company. 
  
 8. Records; Confidentiality. The Advisor shall maintain appropriate records of all its activities hereunder and make
such records available for inspection by the Board of Directors and by counsel, auditors and authorized agents of the Company, at any time or from time to time during normal business hours. The Advisor shall at all reasonable times have access to
the books and records of the Company. The Advisor shall keep confidential any and all information obtained in connection with the services rendered hereunder and shall not disclose any such information to nonaffiliated Persons except with the prior
consent of the Board. 
  

 6 

 9. Limitation of Activities. Anything else in this Agreement to the contrary notwithstanding:

  
 (a) The Advisor shall refrain from taking any
action which, in its sole judgment made in good faith, would adversely affect the status of the Company as a real estate investment trust as defined in the Code, subject the Company to regulation under the Investment Company Act of 1940, violate any
law, rule or regulation or would otherwise not be permitted by the Articles of Incorporation or Bylaws of the Company, except if such action shall be ordered by the Board of Directors, in which case the Advisor shall notify promptly the Board of
Directors of the Advisor’s judgment of the potential impact of such action and shall refrain from taking such action until it receives further clarification or instructions from the Board of Directors. Notwithstanding the foregoing, the Advisor
and its stockholders, directors, officers and employees shall not be liable to the Company, or to the Company’s Board of Directors or Shareholders for any act or omission by the Advisor, or its stockholders, directors, officers or employees
except as provided in Section 16 of this Agreement. 
  
 (b) In performing its duties and obligations under this Agreement, the Advisor shall abide by and comply with the provisions and policies set forth in the Articles of Incorporation and Bylaws. 
  
 10. Relationship with Board of Directors. Employees of the Advisor may
serve as members of the Board of Directors or any committee thereof and as officers of the Company, except that no employee of the Advisor who also is a Director or officer of the Company shall receive any compensation from the Company for serving
as a Director or officer other than for reasonable reimbursement for travel and related expenses incurred in attending meetings of the Board of Directors or any committee thereof. 
  
 11. Fees. 
  
 (a) Asset Management Fee. The Company shall pay to the Advisor quarterly, for services rendered under this Agreement, an Asset Management
Fee calculated as follows: The Asset Management Fee for any calendar quarter shall be a applicable percentage of the Total Contributions. The applicable percentage used to calculate such Asset Management Fee shall be based upon the Return Ratio,
calculated on a per annum basis, for the preceding calendar quarter. The Asset Management Fee shall be as follows with respect to any such quarter: 0.1% of Total Contributions if the Return Ratio for the preceding calendar quarter is 6.0% per annum
or less; 0.15% of Total Contributions if the Return Ratio for the preceding calendar quarter is more than 6.0% per annum but not more than 8.0% per annum; and 0.25% of Total Contributions if the Return Ratio for the preceding calendar is above 8.0%
per annum. If the Asset Management Fee is payable with respect to any partial calendar quarter, it shall be prorated based on the number of days elapsed during any such partial calendar quarter. 
  

 7 

 (b) Payment of Asset Management Fee. The Advisor shall compute the compensation payable
to it under Section 11(a) of this Agreement within 45 days of the end of each calendar quarter. A copy of the computations made by the Advisor to calculate its compensation shall thereafter promptly be delivered to the Board of Directors and, upon
such delivery, payment of the compensation earned under Section 11(a) of this Agreement shown therein shall be due and payable within 60 days after the end of such calendar quarter. 
  
 12. Expenses. 
  
 (a) The Company shall pay directly or reimburse the Advisor for the following expenses in addition to the compensation provided for in
this Agreement: 
  
 (i) all costs of personnel
employed by the Company and involved in the business of the Company; 
  
 (ii) expenses incurred in connection with the initial investment of the funds of the Company, including all direct expenses incurred in connection with investigation and acquisition of Properties; 
  
 (iii) interest and other costs for borrowed money, including
discounts, points and other similar fees; 
  
 (iv) taxes and assessments on income or property and taxes as an expense of doing business; 
  
 (v) fees and commissions, including finder’s fees and brokerage commissions with respect to the acquisition and disposition of assets
of the Company, whether payable to an Affiliate of the Advisor or an unrelated Person, including, without limitation, costs of foreclosure, maintenance, repair and improvement of Property; 
  
 (vi) costs associated with insurance required in connection
with the business of the Company or by the Board of Directors; 
  
 (vii) expenses of managing and operating real property owned by the Company, whether payable to an Affiliate of the Advisor or an unrelated Person; 
  
 (viii) fees and expenses of legal counsel for the Company; 
  
 (ix) fees and expenses of independent auditors and
accountants for the Company; 
  
 (x) all expenses
in connection with payments to the Board of Directors or any committee thereof and meetings of the Board of Directors or any committee thereof and Shareholders; 
  

 8 

 (xi) expenses associated with listing the Units on a national stock exchange or quoting
the Units on the NASDAQ National Market System if requested by the Board of Directors, or with the issuance and distribution of any additional Units of the Company at any time, such as taxes, legal and accounting fees, listing and registration fees,
and other expenses; 
  
 (xii) dividend and
dividend distributions; 
  
 (xiii) expenses of
organizing, revising, amending, converting, modifying or terminating the Company, the Articles of Incorporation or the Bylaws; and 
  
 (xiv) expenses of maintaining communications with Shareholders, including the cost of preparation, printing, and mailing annual reports
and other Shareholder reports, proxy statements and other reports required by governmental entities; and 
  
 (xv) all costs and expenses associated with the office space used by the Advisor in rendering its services hereunder. 
  
 Expenses incurred by the Advisor on behalf of the Company and payable
pursuant to this Section, shall be reimbursed quarterly to the Advisor within 60 days after the end of each quarter. The Advisor shall prepare a statement documenting the expenses of the Company during each quarter, and shall deliver such statement
to the Company within 45 days after the end of each quarter. 
  
 (b) Except as otherwise provided herein, the Advisor shall pay all expenses of performing its obligations under this Agreement, including, without limitation, the following expenses: 
  
 (i) employment expenses of the Advisor, including, but not
limited to, salaries, wages, payroll taxes, costs of employee benefit plans, and temporary help expenses, except to the extent that such expenses are otherwise reimbursable pursuant to Section 12(a) of this Agreement or the Articles of Incorporation
or Bylaws; 
  
 (ii) audit fees and expenses of
the Advisor; 
  
 (iii) legal fees and other
expenses of professional services to the Advisor; 
  
 (iv) rent, telephone, utilities and other office expenses of the Advisor; 
  
 (v) insurance of the Advisor; and 
  
 (vi) all other administrative expenses of the Advisor. 
  
 13. Limitation on the Advisor’s Investment Advice. Notwithstanding anything to the contrary in this Agreement,
the Advisor shall not be required to, and shall not, advise the 

  

 9 

 
Company as to any investments in securities, except when, and to the extent that, the Advisor and the Company specifically agree (i) that such advice is
desirable, and (ii) that such advice can be rendered consistently with applicable legal requirements, including any applicable provisions of relevant “investment advisor” laws. 
  
 14. Other Services. Should the Board of Directors request that the Advisor or any employee thereof render material
services for the Company other than set forth in Section 2, such services shall be separately compensated and shall not be deemed to be services pursuant to the terms of this Agreement. 
  
 15. Limitation on Operating Expenses. Within 120 days from the end of any Calendar Year, the Advisor shall refund to
the Company the amount, if any, by which the Operating Expenses of the Company, excluding extraordinary nonrecurring items and those items referred to in Section 14, during such Calendar Year exceeded the greater of either of the following
limitations: 
  
 (a) 2% of the Average Invested
Assets of the Company for such Calendar Year; or 
  
 (b) 25% of the Company’s Company Net Income for such Calendar Year, determined in accordance with generally accepted accounting principles. 
  
 The Directors of the Company may determine that, because of unusual and nonrecurring factors which they deem sufficient, a higher level of Operating
Expenses is justified for such Calendar Year. The Advisor shall be promptly reimbursed for any payments made under this Section 15 if, in any succeeding Calendar Year, the Operating Expenses of the Company are less than the permitted level of
Operating Expenses. 
  
 16. Advisory Responsibility. The
Advisor assumes no responsibility under this Agreement other than to render the services called for hereunder in good faith and with integrity, and shall not be responsible for any action of the Company in following or declining to follow any advice
or recommendation of the Advisor. Neither the Advisor, its shareholders, directors, officers nor employees nor any of its Affiliates, nor any Person contracting with the Advisor for services and its shareholders, directors, officers and employees
nor any of its Affiliates shall be liable to the Company or its Shareholders, except by reason of acts constituting gross negligence or willful misconduct. The Advisor hereby agrees to look solely to the assets of the Company for satisfaction of all
claims against the Company, and in no event shall any Shareholder, Director, officer or agent of the Company have any personal liability for the obligation of the Company under this Agreement. 
  
 17. Incorporation of the Articles of Incorporation and Bylaws. To the
extent the Articles of Incorporation and Bylaws impose obligations or restrictions on the Advisor or grant the Advisor certain rights which are not set forth in this Agreement, the Advisor shall abide by such obligations or restrictions and such
rights shall inure to the benefit of the Advisor with the same force and effect as if they were set forth herein. 
  

 10 

 18. Fiduciary Duty and Indemnification. Subject to Section 16, the Advisor shall have a fiduciary
relationship to the Shareholders. However, the Company shall indemnify the Advisor, to the fullest extent permitted by law, for its liabilities and losses arising from the operations of the Company (including its costs and expenses, including legal
fees and expenses, incurred in connection with investigating and defending itself against such liabilities and losses) if the following conditions are met: 
  
 (a) the Directors have determined, in good faith, that the course of conduct which caused the liability or loss was undertaken in good
faith within what the Advisor reasonably believed to be the scope of its employment or authority and for a purpose which it reasonably believed to be in the best interests of the Company; 
  
 (b) the Directors have determined, in good faith, that the
liability or loss was not the result of willful misconduct, bad faith, reckless disregard of duties or violation of the criminal law on the part of the Advisor; and 
  
 (c) the indemnified amount is recoverable only out of the assets of the Company and not from the
Shareholders. 
  
 Notwithstanding the foregoing, indemnification
will not be allowed for any liability imposed by judgment, and costs associated therewith, including attorneys’ fees, arising from or out of a violation of state or federal securities laws associated with the Offering of the Units unless (i)
there has been a successful adjudication on the merits of each count involving alleged securities laws violations as to the particular indemnitee, or (ii) such claims have been dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee or (iii) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee. 
  
 19. Transactions between the Advisor and the Company. All transactions between the Advisor and the Company shall require the approval by a majority
of the Directors and shall otherwise comply with the conflict of interest provisions of the Bylaws. 
  
 20. Relationship of Advisor and Company. The Company and the Advisor are not partners or joint ventures with each other, and nothing herein shall
be construed to make them such partners or joint ventures or impose any liability as such on either of them. 
  
 21. Other Activities. Except as otherwise expressly provided herein, nothing contained herein shall limit the right of the Advisor or any of its
officers, directors or employees, whether or not a Director, officer or employee of the Company, to engage in other business activities or to render services of any kind to any other Person even if such other business activities or services may be
in direct competition with the Company. 
  
 22. Term;
Termination of Agreement. 
  
 (a) This
Agreement shall have an initial term ending seven years after                     , 2005, and thereafter shall be renewed for additional
two-year terms upon the consent of the Directors. 
  

 11 

 (b) Prior to any renewal of this Agreement, the Directors shall review (i) the
performance of the Advisor hereunder to determine its compliance with the provisions of this Agreement, and (ii) the fees payable to the Advisor hereunder to determine whether they are reasonable in relation to the nature and quality of services
performed. The findings of the Directors shall be recorded in the minutes of the Directors. 
  
 (c) This Agreement shall be terminable (i) without cause by the Advisor or (ii) without cause by a majority of the Directors, in each case
upon 60 days’ prior written notice to the non-terminating party. 
  
 (d) In the event of the termination of the Advisor, the Advisor will cooperate with the Company and take all reasonable steps requested to assist the Directors in making an orderly transition of the advisory function
to another Person. 
  
 (e) At the sole option of
a majority of the Directors, this Agreement may be terminated for cause by written notice of termination from the Company to the Advisor if any of the following events occur: 
  
 (i) if the Advisor shall violate or default in the performance of any material provision of this Agreement
and, after written notice of such violation or default, shall not cure such violation or default within 30 days; 
  
 (ii) if the Advisor shall be adjudged bankrupt or insolvent by a court of competent jurisdiction, or an order shall be made by a court of
competent jurisdiction for the appointment of a receiver, liquidator or trustee of the Advisor, or of all or substantially all of its property by reason of the foregoing, or approving any petition filed against the Advisor for reorganization, and
such adjudication or order shall remain in force or unstayed for a period of 30 days; or 
  
 (iii) if the Advisor shall institute proceedings for voluntary bankruptcy or shall file a petition seeking reorganization under the
federal bankruptcy laws, or for relief under any law for relief of debtors, or shall consent to the appointment of a receiver for itself or for all or substantially all of its property, or shall make a general assignment for the benefit of its
creditors, or shall admit in writing its inability to pay its debts, generally, as they become due. 
  
 (f) Any notice of termination under this Section shall (except to the extent this Section requires a different notice period) be effective
on the date specified in such notice, which may be the day on which such notice is given or any date thereafter. The Advisor agrees that if any of the events specified in subparagraph (ii) or (iii) of Section 22(e) shall occur, it shall give written
notice thereof to the Board of Directors within 5 days after the occurrence of such event. 
  

 12 

 23. Action Upon Termination. 
  
 (a) From and after the effective date of termination of this Agreement pursuant to Section 22 hereof, the
Advisor shall not be entitled to compensation for further services rendered hereunder, but shall be entitled to receive from the Company within 30 days after the effective date of such termination, an amount in cash equal to all earned but unpaid
Asset Management Fees payable to the Advisor prior to the termination of this Agreement. 
  
 (b) Within a reasonable period of time, but in no event later than 30 days after the termination of this Agreement, the Advisor shall:

  
 (i) pay over to the Company all money
collected and held for the account of the Company pursuant to this Agreement, after deducting any accrued compensation and reimbursement for its expenses to which it is then entitled; 
  
 (ii) deliver to the Board of Directors a full accounting, including a statement showing all payments
collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board of Directors; and 
  

(iii) deliver to the Board of Directors all property and documents of the Company then in the custody of the Advisor. 
  
 The Advisor shall be entitled to receive, promptly after
such 30-day period, reimbursement for any additional expenses to which it is entitled (and for which it has not been reimbursed under clause (i) of Section 23(b)). 
  
 24. Assignment. This Agreement may be assigned by the Advisor with the approval of a majority of the Board of
Directors; provided, however, that such approval shall not be required in the case of an assignment to a corporation, association, trust or organization which may take over the assets and carry on the affairs of the Advisor, provided that at the
time of such assignment, such successor organization shall be owned substantially by the Advisor or its Affiliates and that an officer of the Advisor shall deliver to the Board of Directors a statement in writing indicating the ownership structure
of the successor organization. Such an assignment shall bind the assignees hereunder in the same manner as the Advisor is bound hereunder and the assignee shall be entitled to any and all rights under this Agreement, including those set forth in
section 18. Upon assignment of this Agreement, the Advisor shall be discharged from its future duties and shall not be entitled to any of the rights granted under this Agreement. This Agreement shall not be assigned by the Company without the
consent of the Advisor, except in the case of an assignment by the Company to a corporation or other organization which is a successor to the Company, in which case such successor organization shall be bound hereunder and by the terms of said
assignment in the same manner as the Company is bound hereunder. 
  
 25. Bylaws. The execution and performance of this Agreement hereby is expressly made subject to Article VIII of the Bylaws of the Company. 
  

 13 

 26. Notices. Any notice, report or other communication required or permitted to be given hereunder
shall be in writing unless some other method of giving such notice, report or other communication is accepted by the party to whom it is given, and shall be given by being delivered to the addresses set forth herein: 
  
 To the Board of Directors or to the Company: 
  
 Apple REIT Seven, Inc. 
 814 East Main Street 
 Richmond, Virginia
23219 
 Attn: Board of Directors 
  
 To the Advisor: 
  
 Apple Seven Advisors, Inc. 
 814 East Main
Street 
 Richmond, Virginia 23219 
 Attn: Glade M. Knight 
  
 Either party may at any time give notice in
writing to the other party of a change in its address for the purposes of this Section. 
  
 27. Modification. This Agreement shall not be changed, modified, amended, terminated or discharged, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective
successors or assigns. 
  
 28. Shareholder Liability. No
Shareholder of the Company shall be personally liable for any of the obligations of the Company under this Agreement. 
  
 29. Severability. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. 
  
 30. Binding. This Agreement shall bind any successors or permitted assigns of the parties hereto as herein provided. 
  
 31. Construction. The provisions of this Agreement shall be construed
and interpreted in accordance with the laws of the Commonwealth of Virginia. 
  
 32. Entire Agreement. This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade
inconsistent with any of the terms hereof. 
  

 14 

 33. Indulgences, Not Waivers. Neither the failure nor any delay on the part of a party to exercise
any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right,
remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be
effective unless it is in writing and is signed by the party asserted to have granted such waiver. 
  
 34. Gender. Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the context requires. 
  
 35. Titles Not to Affect Interpretation. The titles of sections and subsections contained in this Agreement are for convenience only, and they
neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof. 
  
 36. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories. 
  
 IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their duly authorized officers as of the date first written above. 
  

			
	 APPLE REIT SEVEN, INC.
 a Virginia corporation

		
	By:	 	 
	 Title:
	 	 Glade M. Knight, President

	
	 APPLE SEVEN ADVISORS, INC.,
 a Virginia corporation

		
	By:	 	 
	 Title:
	 	 Glade M. Knight, President

  

 15

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