Comfort Inn 2013 Annual Report Download - page 124

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Table of Contents
On November 15, 2013, the Company entered into a limited payment guaranty with regards to a VIE's $46.2 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 unconditionally
guarantee and become surety for the full and timely payment of the guaranteed outstanding principal balance, as well as any unpaid expenses incurred by the
lender. The guarantee is limited to 25% of the outstanding principal balance of the $46.2 million loan due at any time. The limited guaranty shall remain in
effect until the maximum amount guaranteed by the Company is repaid in full. The maturity date of the VIE's loan is May 2017.
Commitments
The Company has the following commitments outstanding:
•The Company occasionally provides financing in the form of forgivable promissory notes or cash incentives to franchisees for property
improvements, hotel development efforts and other purposes. At December 31, 2013, the Company had commitments to extend an additional $13.2
million for these purposes provided certain conditions are met by its franchisees, of which $7.9 million is expected to be advanced in the next twelve
months.
•The Company has committed to make additional capital contributions totaling $4.1 million to existing joint ventures, related to the
construction of various hotels to be operated under the Company's Cambria Suites brand. These commitments are expected to be funded in the next
twelve months.
•The Company has a property improvement incentive program for its domestic Comfort Inn and Comfort Suites hotels to incent hotel
owners to renovate their properties to accelerate improvement of the brand's product quality and consistency, guest satisfaction and brand
performance. The Company has committed to provide financing in the form of forgivable promissory notes to qualifying domestic hotels for a
portion of their Company approved and completed property improvement expenses. Financing will be provided upon the completion and Company
certification of the renovations. At December 31, 2013, the Company had commitments to extended $32.0 million for this purpose provided certain
conditions are met by its franchisees. These commitments are expected to be funded in the next twelve months.
•The Company has committed to loan monies totaling approximately $3.3 million to support the construction of a hotel under the
Company's Cambria Suites brand. This commitment is expected to be funded in the next twelve months.
In the ordinary course of business, the Company enters into numerous agreements that contain standard indemnities whereby the Company indemnifies
another party for breaches of representations and warranties. Such indemnifications are granted under various agreements, including those governing
(i) purchases or sales of assets or businesses, (ii) leases of real estate, (iii) licensing of trademarks, (iv) access to credit facilities, (v) issuances of debt or
equity securities, and (vi) certain operating agreements. The indemnifications issued are for the benefit of the (i) buyers in sale agreements and sellers in
purchase agreements, (ii) landlords in lease contracts, (iii) franchisees in licensing agreements, (iv) financial institutions in credit facility arrangements,
(v) underwriters in debt or equity security issuances and (vi) parties under certain operating agreements. In addition, these parties are also generally
indemnified against any third party claim resulting from the transaction that is contemplated in the underlying agreement. While some of these indemnities
extend only for the duration of the underlying agreement, many survive the expiration of the term of the agreement or extend into perpetuity (unless subject to a
legal statute of limitations). There are no specific limitations on the maximum potential amount of future payments that the Company could be required to
make under these indemnities, nor is the Company able to develop an estimate of the maximum potential amount of future payments to be made under these
indemnifications as the triggering events are not subject to predictability. With respect to certain of the aforementioned indemnities, such as indemnifications of
landlords against third party claims for the use of real estate property leased by the Company, the Company maintains insurance coverage that mitigates
potential liability.
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