Comfort Inn 2013 Annual Report Download - page 123

Table of Contents
proceeds from the promissory note were utilized to partially finance the construction of the Cambria Suites hotel by the Joint Venture.
The promissory note matures in two tranches with $9.5 million of the promissory note maturing during the year ended December 31, 2013 and the
remaining $10.0 million maturing on the fifth anniversary date of the promissory note. The promissory note bears interest at a fixed rate of interest which
increases from 6% to 8% after the completion of the hotel construction. Interest is payable quarterly during the hotel construction and due monthly, thereafter.
During the year ended December 31, 2013, the Company was repaid the first tranche of the promissory note or $9.5 million.
The promissory note is secured by a pledge of 100% of Concord's membership interests in the Joint Venture. In addition, the members of Concord have
unconditionally guaranteed and agreed to be fully and personally liable for the entire outstanding amount of the promissory note. If Concord defaults under the
terms of the promissory note, the Company may purchase Concord's interest in the Joint Venture for the sum of one dollar.
 
During the year ended December 31, 2013 the Company recorded a $1.7 million charge in SG&A and marketing and reservation expenses related to
salary and benefit continuation termination benefits provided to employees separating from service with the Company and remitted approximately $1.1 million
of these benefits during the current year. At December 31, 2013, approximately $0.6 million of these salary and benefits continuation payments remain to be
remitted.
During the year ended December 31, 2012, the Company recorded a $2.9 million charge in SG&A and marketing and reservation expenses related to
salary and benefit continuation termination benefits provided to employees separating from service with the Company. During the years ended December 31,
2013 and 2012, the Company remitted $2.2 million and $0.7 million, respectively, related to these salary and benefit continuation benefits and at
December 31, 2013 all benefits incurred had been remitted.
During the year ended December 31, 2011 , the Company recorded a $6.6 million charge in SG&A and marketing and reservation expenses related to
salary and benefit continuation termination benefits provided to employees separating from service with the Company. These expenses include $5.8 million of
salary and benefits continuation and $0.8 million related to the acceleration of share-based compensation expense for terminated employees. During the years
ended December 31, 2013, 2012 and 2011, the Company remitted $0.7 million, $4.0 million and $1.1 million, respectively, related to the salary and benefit
continuation benefits and at December 31, 2013 all benefits incurred had been remitted.
At December 31, 2013, approximately $0.6 million of termination benefits remained to be paid and were included in current and non-current liabilities
in the Company’s consolidated financial statements.
 
Except as noted below, the Company is not a party to any litigation other than litigation in the ordinary course of business. The Company's management
and legal counsel do not expect that the ultimate outcome of any of its currently ongoing legal proceedings, individually or collectively, will have a material
adverse effect on the Company's financial position, results of operations or cash flows.
In May 2013, the Company was added to an ongoing multi-district class action pending in federal court in Dallas, Texas. The lawsuit alleged that
several online travel companies and hotel companies have engaged in anti-competitive practices. The complaint sought an unspecified amount of damages and
equitable relief. The Company, along with other defendants, disputed the allegations and vigorously defended itself against these claims. On February 18,
2014, the court granted the defendants’ motion to dismiss the lawsuit without prejudice. The plaintiffs have 30 days to petition the court to refile their claim
with additional facts. The Company does not currently believe this litigation will have a material effect on its consolidated financial position, results of
operation or liquidity.
Contingencies
On October 9, 2012, the Company entered into a limited payment guaranty with regards to a VIE's $18.0 million bank loan for the construction of a
hotel franchised under one of the Company's brands in the United States. Under the terms of the limited guaranty, the Company has agreed to guarantee 25%
of the outstanding principal balance and accrued and unpaid interest, as well as any unpaid expenses incurred by the lender. The limited guaranty shall
remain in effect until the maximum amount guaranteed by the Company is paid in full. In addition to the limited guaranty, the Company entered into an
agreement in which the Company guarantees the completion of the construction of the hotel and an environmental indemnity agreement which indemnifies the
lending institution from and against any damages relating to or arising out of possible environmental contamination issues with regards to the property.
119