What constitutes a default under the Agreement and the Note for Sonesta Select Sonesta Essential?

According to the 2025 FDD, a default under the terms of the Franchise Agreement or the Note for Sonesta Select Sonesta Essential hotels is considered a default of both the Agreement and the Note. This means that if a franchisee fails to meet the obligations outlined in either document, Sonesta Select Sonesta Essential has the right to pursue remedies available under both agreements. This provision ensures that Sonesta Select Sonesta Essential can take comprehensive action in case of a franchisee's non-compliance.

Specifically, the FDD states that the Holder, which refers to any subsequent holder or participant in the Note, can pursue remedies available under both the Agreement and the Note in the event of a default. This gives Sonesta Select Sonesta Essential flexibility in enforcing the terms and conditions outlined in these documents. The Note is not intended to be exhaustive in nature, nor is it intended to set forth all of Holder's rights. It does not modify, replace, or affect any other rights, default or termination notices under the Agreement, or any other agreement with Holder regarding Maker's Hotel. Holder does not waive any of its legal or equitable rights (including the right to specify additional defaults) or remedies.

Furthermore, the Note can be accelerated if certain events occur. These "Acceleration Events" include (i) any false, misleading, or incorrect representation or warranty made in connection with the Note, the application, the Agreement, or any submitted report; (ii) termination of the Agreement for any reason; (iii) any breach of the Agreement or the Note, regardless of whether the Maker (franchisee) is notified or cures the breach; and (iv) transfer of any interest in the Agreement where the transferee does not assume the Maker's obligations under the Note. Upon the occurrence of an Acceleration Event, the unamortized Principal shall become immediately due and payable without further notice and, if applicable, Maker will have no obligation to make any additional Disbursement.

In practical terms, this means that a Sonesta Select Sonesta Essential franchisee needs to be diligent in adhering to all terms and conditions outlined in both the Franchise Agreement and the Note. Failure to do so can trigger a default, leading to potential legal and financial repercussions. Prospective franchisees should carefully review both documents and seek legal counsel to fully understand their obligations and the potential consequences of non-compliance.