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Loan Transactions and Related Notes Receivable
 12 Months Ended
Jul. 31, 2013
Loan Transactions and Related Notes Receivable

8. LOAN TRANSACTIONS AND RELATED NOTES RECEIVABLE

In January 2009, we entered into two credit agreements, for $10,000 each, with Stephen Adams, in his individual capacity, and Stephen Adams and his successors, as trustee under the Stephen Adams Living Trust (the “Trust” and, together with each of the foregoing persons, the “January 2009 Loan Borrowers”), pursuant to which $4,000 of original principal on the first agreement is outstanding as of July 31, 2013 and due on January 15, 2014.

Under the terms of the second agreement, the January 2009 Loan Borrowers agreed to use the loan proceeds to make an equity contribution to FreedomRoads Holding to be used to purchase the Company’s products. As a result, principal payments received under this agreement are classified as operating activities in the Consolidated Statements of Cash Flows. The final principal and interest payments on this agreement were received in fiscal 2012.

In December 2009, we entered into a $10,000 credit agreement with Marcus Lemonis, Stephen Adams, in his individual capacity, and Stephen Adams and his successors, as trustee under the Trust (collectively, the “December 2009 Loan Borrowers”), and later modified in December 2012, pursuant to which $8,500 of original principal is outstanding as of July 31, 2013 with the final payment due on August 30, 2015.

The January 2009 and December 2009 Loan Borrowers own, directly or indirectly, a controlling interest in FreedomRoads Holding Company, LLC, the parent company of FreedomRoads, LLC, the Company’s largest dealer.

The credit agreements each contain customary representations and warranties, affirmative and negative covenants, events of default and acceleration provisions for loans of this type. All payments of principal and interest due to date on the outstanding agreements have been paid in full. Based on payment history and assessment of the credit quality of the January 2009 and December 2009 Loan Borrowers, the Company does not consider the receivables impaired or requiring an allowance for credit losses.

In connection with the January 2009 Loan, the borrowers caused FreedomRoads Holding and its subsidiaries (collectively, the “FR Dealers”), to enter into an agreement pursuant to which the FR Dealers agreed to purchase additional recreational vehicles from the Company’s subsidiaries. The term of this agreement, as subsequently amended, continues until December 22, 2029 unless earlier terminated in accordance with its terms.