<PAGE> 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________ to ______________
Commission file number 1-5325
HUFFY CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 31-0326270
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7701 Byers Road, Miamisburg, Ohio 45342
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (513) 866-6251
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, $1.00 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the Common Stock held by non-affiliates of the
registrant, as of February 28, 1994, was $268,604,375.
The number of shares outstanding of each of the registrant's classes of Common
Stock, as of February 28, 1994, was 14,676,036.
"Index of Exhibits" at page 19 of this Report
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DOCUMENTS INCORPORATED BY REFERENCE
1. The Huffy Corporation Annual Report to Shareholders for the year ended
December 31, 1993. Only such portions of the Annual Report as are
specifically incorporated by reference under Parts I, II and IV of this
Report shall be deemed filed as part of this Report.
2. The Huffy Corporation Proxy Statement for its Annual Meeting of
Shareholders on April 15, 1994, definitive copies of which have been
filed with the Commission. Only such portions of the Proxy Statement as
are specifically incorporated by reference under Part III of this Report
shall be deemed filed as part of this Report.
__________________________
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PART I
ITEM 1. BUSINESS
Huffy Corporation, an Ohio corporation, and its subsidiaries (collectively
called "Huffy" or the "Company") are engaged in the design, manufacture and
sale of Recreation and Leisure Time Products, Juvenile Products, and the
furnishing of Services for Retail. The Company's executive offices are located
in Miamisburg, Ohio and its principal business offices and/or manufacturing
facilities are located in San Diego, California; Aurora, Ontario, Canada;
Thornton, Colorado; Miamisburg and Celina, Ohio; Camp Hill and Harrisburg,
Pennsylvania; Anderson, South Carolina; Waukesha and Suring, Wisconsin; and
Whites Cross, Cork, Ireland.
The general development of business within each business segment (Recreation
and Leisure Time Products, Juvenile Products and Services for Retail) is
discussed in more detail below. See also Part IV herein for financial
information relating to each such business segment.
RECREATION AND LEISURE TIME PRODUCTS
Huffy Bicycle Company, Huffy Sports Company, and True Temper Hardware
Company comprise the Recreation and Leisure Time Products segment of
the Company. Bicycles are one of the principal products produced
within the business segment. Bicycles sold to high volume retailers
represented 44.2 percent, 44.6 percent, and 47.5 percent of
consolidated revenues of the Company for the years ended December 31,
1993, 1992, and 1991, respectively. Sales to high volume retailers of
lawn and garden tools and cutting tools, which are also principal
products within the business segment, represented 13.6 percent, 15.6
percent and 10.5 percent of consolidated revenues of the Company for
the years ended December 31, 1993, 1992, and 1991, respectively.
Although to date the export business is not significant, the companies
in the Recreation and Leisure Time Products segment participate in
various foreign markets and are actively involved in expanding export
volume.
a. PRODUCTS, MARKETING AND DISTRIBUTION
Huffy Bicycle Company: The Huffy registered trademark bicycle
brand is the largest selling brand of bicycles sold in the United
States. The full line of Huffy registered trademark bicycles is
produced by Huffy Bicycle Company, a division of the Company,
whose manufacturing facilities are located in Celina, Ohio.
Included in the Huffy registered trademark bicycle line are adult
all purpose bicycles; adult all terrain bicycles; a series of
innovative boys' and girls' 20" bicycles; and a series of popular
children's 16" sidewalk bicycles. Huffy registered trademark
bicycles are extensively advertised and are sold predominantly
through national and regional high volume retailers, a
distribution network accounting for approximately 75 to 80
percent of all bicycles sold in the United States. Over 90
percent of Huffy Bicycle Company's bicycles are sold under the
Huffy registered trademark brand name with the balance being sold
under private label brands.
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Huffy Sports Company: Huffy Sports Company, a division of the
Company, located in Waukesha, Wisconsin, is the leading supplier
of basketball backboards, goals, and related products for use at
home. Huffy Sports Company products, which bear the logo of the
National Basketball Association ("NBA"), as well as the Huffy
Sports registered trademark trademark, are sold predominantly
through national and regional high volume retailers in the
United States.
True Temper Hardware Company: True Temper Hardware Company, a
wholly-owned subsidiary of the Company, is headquartered in Camp
Hill, Pennsylvania. The Company acquired the True Temper
Hardware business from certain affiliates of Black & Decker,
Inc. in 1990. True Temper Hardware Company is one of three
leading suppliers of non-powered lawn and garden tools, snow
tools and cutting tools; products include long-handled shovels,
hoes, forks, wheelbarrows, spreaders, snow shovels, rakes,
hitched accessories, pruners, and grass shears for use in the
home and in agricultural, industrial and commercial businesses.
Manufacturing facilities are located in Camp Hill and
Harrisburg, Pennsylvania, and Anderson, South Carolina. True
Temper Hardware Company also owns five sawmill facilities
located in Indiana, New York, Ohio, Pennsylvania, and Vermont
and staffs a sales office and distribution center for Canada
located in Aurora, Ontario, Canada. In addition, True Temper
Limited, an Irish Corporation and a wholly-owned subsidiary of
the Company, has offices and a manufacturing facility in Whites
Cross, Cork, Ireland. True Temper Hardware products are
extensively advertised and are sold both directly, and through
wholesale distributors, to national and regional high volume
retailers and hardware stores. Over 82 percent of True Temper
Hardware's products are sold under the True Temper registered
trademark name; the remainder are sold under the Jackson
registered trademark, Cyclone registered trademark or other
names, or under private labels. In the quarter ended December
31, 1993, the Company recorded a $28,755,000 ($20,329,000 after
tax) charge to restructure the True Temper Hardware Company lawn
and garden tool business to address inefficiencies in the
manufacturing process and to improve future profitability of
True Temper Hardware Company. Information regarding the
Company's restructure of True Temper Hardware Company is
incorporated herein by reference to pages 28 and 29 and note 2
to the consolidated financial statements on page 41 of the
Company's Annual Report to Shareholders for the year ended
December 31, 1993.
b. SUPPLIERS
Basic materials such as raw steel, steel tubing, plastic, ash
timber, and welding materials used in the manufacturing
operations are purchased primarily from domestic sources.
Alternate sources are available for all critical products and
components, but the sudden loss of any major supplier could, on
a temporary basis, cause a negative effect on the segment's
operations.
c. PATENTS, TRADEMARKS AND LICENSES
The patents, trademarks (including the registered trademarks
"Huffy", "Huffy Sports", "True Temper" and "Jackson"), licenses
(including the license to use the NBA logo) and other
proprietary rights of the companies in this segment are deemed
important to the Company. The loss by the Company of its rights
under any individual patent, trademark (other than "Huffy" or
"True Temper"), license or other proprietary right used by this
segment
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would not have a material adverse effect on the Company or the
segment. The loss of either the registered trademark "Huffy" or
"True Temper" could have a material adverse effect on the
Company and this segment. The Company has no reason to believe
that anyone has rights to either the trademark "Huffy" or the
trademark "True Temper" for the products in connection with
which such trademarks are used.
d. SEASONALITY AND INVENTORY
Due to the relatively short lapse of time between placement of
orders for products and shipments, the Company normally does not
consider its backlog of orders as significant to this business
segment. Because of rapid delivery requirements of their
customers, the companies in this segment maintain significant
quantities of inventories of finished goods to meet their
customers' requirements. Sales of bicycles are seasonal in that
sales tend to be higher in the spring and fall of each year.
Basketball products tend to have varying degrees of seasonality,
none of which are significant to the operations of the Company.
Sales of lawn and garden products, cutting tools and snow tools
tend to be higher in the spring and winter of each year,
respectively.
e. COMPETITION AND CUSTOMERS
In the high volume retailer bicycle business, Huffy Bicycle
Company has numerous competitors in the United States market,
only two of which are deemed significant. Although importers in
the aggregate provide significant competition, no individual
importer is deemed a significant competitor. Even though
competition among domestic manufacturers and importers of
bicycles is intense, Huffy Bicycle Company believes it is cost
competitive in the high volume retailer bicycle market and
maintains its position through continued efforts to improve
manufacturing efficiency and product value. Huffy Bicycle
Company's ability to provide its customers with low cost,
innovative new products has enabled it to maintain its market
position despite the targeted marketing efforts of competitors
from Taiwan, China, and other nations. On December 10, 1993, the
Board of Directors of the Company approved plans for Huffy
Bicycle Company to establish an additional bicycle manufacturing
facility in order to increase manufacturing flexibility and
capacity and market share. The selection of a proposed
Farmington, Missouri site as the location for the additional
manufacturing facility is in the final stages, and acquisition
and financing alternatives are currently being examined. Huffy
Sports Company has several competitors, but only one is deemed
significant. Huffy Sports Company maintains its competitive
position by offering its customers high quality, innovative
products at competitive prices and by supporting its products
with outstanding customer service. True Temper Hardware Company
has numerous competitors in the United States and Canada, but
considers only two competitors significant. True Temper Hardware
Company believes it remains competitive by offering its customers
in the home use, agricultural, industrial, and commercial markets
competitively priced, high quality, innovative products. The
loss by the Recreation and Leisure Time Products segment of
either of its two largest customers could result in a
short-term, material adverse effect on the segment.
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JUVENILE PRODUCTS
The Juvenile Products segment is comprised of Gerry Baby Products
Company, Snugli-Canada, Ltd., and Gerry Wood Products Company
(collectively, the "Gerry Companies"). Although to date the export
business is not significant, the Gerry Companies participate in
various foreign markets and are actively involved in expanding export
volume.
a. PRODUCTS, MARKETING AND DISTRIBUTION
Juvenile Products include products sold under two prominent
brand names: "Gerry" and "Snugli". Gerry registered trademark
baby products include a wide range of market entries, including
car seats, infant carriers, frame carriers, safety gates, toilet
trainers, electronic baby monitors, and a broad line of various
wood juvenile products including portable cribs, changing tables
and safety gates sold under the "Nu-Line" brand name prior to
1992 and under the Gerry registered trademark brand name since
1992. Snugli registered trademark baby products include infant
carriers and other accessories.
All of the juvenile products have wide distribution; the
products are marketed through all of the retail channels that
sell juvenile products: mass merchants, toy chains, warehouse
clubs, catalog showrooms, national and regional retailers, and
specialty shops. Juvenile Products represented 16.4 percent,
16.4 percent, and 15.9 percent of consolidated revenues of the
Company for the years ended December 31, 1993, 1992, and 1991,
respectively.
The Juvenile Products segment has been developed through
selective acquisitions and internal growth and expansion. It is
comprised of three direct or indirect subsidiaries of the
Company: Gerry Baby Products Company ("GBPC"); Snugli-Canada,
Ltd.; and Gerry Wood Products Company. GBPC's headquarters and
principal manufacturing facilities are located in Thornton,
Colorado. Snugli-Canada, Ltd. is located in Vancouver, British
Columbia, Canada, and enables GBPC to extend its operations into
Canada. Gerry Wood Products Company is a manufacturer of
juvenile wooden products and is located in Suring, Wisconsin.
In 1987, GBPC entered into a joint venture known as
Takata-Gerico Corporation ("TGC"), with Takata Corporation of
Japan, to manufacture children's car seats in the United States
for distribution by GBPC. The joint venture was subsequently
terminated by the parties' mutual agreement in 1992, and in
connection with such termination GBPC purchased certain assets
of TGC.
b. SUPPLIERS
Basic materials such as steel and aluminum tubing, plastic,
wood, fabric, and resins used in domestic manufacturing
operations are purchased primarily from domestic sources. All
electronic products and some sewn products are imported.
Alternate sources are available for all critical products and
components, but the sudden loss of any major supplier could, on
a temporary basis, cause a negative effect on the segment's
operations.
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c. PATENTS, TRADEMARKS AND LICENSES
The patents, trademarks (including the registered trademarks
"Gerry" and "Snugli") and other proprietary rights of the Gerry
Companies in this segment are deemed important to the Company.
However, the loss of any rights under any individual patent,
trademark (other than "Gerry" or "Snugli"), or other proprietary
right used by this segment would not have a material adverse
effect on the Company or this segment. The loss of the
registered trademark "Gerry" or "Snugli" could have a material
adverse effect on the Company and this segment, but the Company
has no reason to believe anyone has rights to either the "Gerry"
or "Snugli" trademark for the products in connection with which
either is used.
d. SEASONALITY AND INVENTORY
The Gerry Companies do not consider their backlog of orders
significant to this business segment, due to the relatively
short lapse of time between placement of orders for products and
shipments. Because of the rapid delivery requirements of their
customers, the Gerry Companies maintain significant quantities
of inventories of finished goods to meet their customers'
requirements. Most products within this business segment are
not seasonal.
e. COMPETITION AND CUSTOMERS
There are numerous juvenile products competitors in the U.S.
market, four of which are deemed significant. The Gerry
Companies believe they are competitive because of their
continued efforts to provide innovative new products of high
quality at competitive costs and to support their products with
outstanding customer service. The loss by the Gerry Companies
of their largest customer could have a short-term, material
adverse effect on the segment.
SERVICES FOR RETAIL
Huffy Service First, Inc. ("HSF") and Washington Inventory Service
("WIS") each provide certain services to retailers. Inventory,
assembly, repair and merchandise services provided by WIS and HSF to
their customers represented 15.8 percent, 15.6 percent, and 15.5
percent of consolidated revenues of the Company for the years ended
December 31, 1993, 1992, and 1991, respectively.
a. PRODUCTS, MARKETING AND DISTRIBUTION
Huffy Service First: HSF, a wholly-owned subsidiary of the
Company, headquartered in Miamisburg, Ohio, serves the needs of
major retailers in 50 states, Puerto Rico and the Virgin Islands
by providing in-store assembly, repair, and display services for
a variety of products, including among other things, bicycles,
gas grills, physical fitness equipment, lawn mowers, and
furniture. HSF is the only assembly service business of this
kind available to high volume retailers on a nationwide basis.
HSF also offers merchandising services (installation and
periodic maintenance of displays and merchandise replenishment)
to vendors who supply high volume retailers.
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Washington Inventory Service: WIS, a wholly-owned subsidiary of
the Company, headquartered in San Diego, California, provides
physical inventory services on a nationwide basis to meet the
financial reporting and inventory control requirements of mass
retailers, drugstores, home centers, sporting goods stores,
specialty stores and grocery stores. WIS operates from more
than 140 offices nationwide.
b. SEASONALITY
The demand for services provided by this business segment is
seasonal in that assembly service demand is generally strongest
in spring and at the winter holiday season, and inventory
service demand is generally strongest in the first and third
calendar quarters of the year.
c. COMPETITION AND CUSTOMERS
Although WIS has numerous competitors in the United States
market, only one is significant. HSF has numerous competitors
in the United States market, none of which is deemed
significant. WIS and HSF believe they remain competitive due to
their nationwide network of operations, competitive pricing and
full service. The loss by either WIS or HSF of its largest
customer could result in a short-term, material adverse effect
on the segment.
Sales to Kmart Corporation and Wal-Mart Corporation aggregated over ten percent
or more of the Company's consolidated revenues from each such customer for the
year ended December 31, 1993, and the loss of either customer could have a
short-term, material adverse effect on the Company and its subsidiaries as a
whole.
The number of persons employed full-time by the Company (excluding seasonal
employees in the Services for Retail Segment) as of December 31, 1993, was
5,854.
ITEM 2. PROPERTIES: Location and general character of the principal
plants and other materially important physical properties of the
Company as of January 15, 1994.
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<TABLE>
<CAPTION>
Owned or
Expiration
Building Area Date
Location Description (Sq. Ft.) of Lease
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
San Diego, California Offices (Services for Retail) 24,000 Owned
Aurora, Ontario, Offices and warehouse 31,500 1996(1)
Canada facility (Recreation and
Leisure Time Products)
Thornton, Colorado Offices, manufacturing and 386,000 2001(2)
warehouse facility
(Juvenile Products)
Miamisburg, Ohio Offices and display 47,000 2003(3)
facilities (Corporate,
Recreation and Leisure
Time Products)
</TABLE>
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Owned or
Expiration
Building Area Date
Location Description (Sq. Ft.) of Lease
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Miamisburg, Ohio Offices and warehouse 34,500 1996(1)
facility (Services for
Retail)
Celina, Ohio Offices, manufacturing and 822,000 1994(4)
warehouse facility
(Recreation and
Leisure Time Products)
Camp Hill, Offices, manufacturing and 391,690 2007(5)
Pennsylvania distribution facility
(Recreation and Leisure
Time Products)
Harrisburg, Offices and manufacturing 254,329 Owned
Pennsylvania facility (Recreation and
Leisure Time Products)
Anderson, South Offices and manufacturing 180,000 Owned(6)
Carolina facility (Recreation and
Leisure Time Products)
Waukesha, Wisconsin Offices and manufacturing 123,500 1996(1)
facility (Recreation and
Leisure Time Products)
Suring, Wisconsin Offices and manufacturing 140,000 Owned
facility (Juvenile
Products)
Whites Cross, Cork, Offices and manufacturing 70,000 Owned
Ireland facility (Recreation and
Leisure Time Products)
<FN>
(1)Subject to two consecutive options to renew for additional terms of five years
each.
(2)Subject to an option to purchase at the expiration of the lease.
(3)Subject to an option to purchase during the term of or at the expiration of the
lease, and if the option is not exercised at the expiration of the lease, the
Company automatically receives an extension on the term for up to 12 months
or until the property is sold, whichever time period is shorter.
(4)Pursuant to the terms of the lease, the Company has exercised an option to
purchase the subject land and facility. Because the holders of title to the
property failed to deliver clear title, the matter is in litigation and the
purchase price has been tendered into the court. The Company has purchased a
73 acre tract of land immediately adjacent to the Celina facility.
(5)Subject to two consecutive options to renew for additional terms of five years
each and an option to purchase.
(6)The Company is restructuring its lawn and garden tools business, and as part
of such restructuring, intends to shut down the facility in Anderson,
South Carolina during calendar year 1994. Information regarding such restruc-
turing is incorporated herein by reference to pages 28 and 29 and note 2 to
the consolidated financial statements on page 41 of the Company's Annual Report
to Shareholders for the year ended December 31, 1993.
</TABLE>
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There are no encumbrances on the Harrisburg, Pennsylvania; Anderson, South
Carolina; Suring, Wisconsin; and Whites Cross, Cork, Ireland properties which
are owned. The San Diego, California property is subject to a mortgage and to
a deed of trust which at December 31, 1993, totaled $939,322. All of the
Company's facilities are in good condition and are considered suitable for the
purposes for which they are used. The Camp Hill, Pennsylvania manufacturing
facility normally operates on a three full shift basis. The Celina, Ohio and
Suring, Wisconsin manufacturing facilities normally operate on a two full
shift basis, with third shift operations scheduled as needed to meet seasonal
production requirements. The Thornton, Colorado, Harrisburg, Pennsylvania, and
Waukesha, Wisconsin manufacturing facilities normally operate on a two full
shift basis. The Anderson, South Carolina manufacturing facility normally
operates on a one full shift basis, with additional shift operations scheduled
as needed to meet seasonal production requirements. The Whites Cross, Cork,
Ireland, manufacturing facility normally operates on a one full shift basis.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party, nor is its property subject, to any material
pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The market information and other related security holder matters pertaining to
the Common Stock of the Company are incorporated herein by reference to pages
54 and 55 and notes 4, 5 and 6 to the consolidated financial statements on
pages 42 through 45 of the Company's Annual Report to Shareholders for the year
ended December 31, 1993.
ITEM 6. SELECTED FINANCIAL DATA
Selected unaudited financial data for each of the last 10 calendar years are
incorporated herein by reference to pages 26 and 27 of the Company's Annual
Report to Shareholders for the year ended December 31, 1993.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Discussion and analysis of financial condition and results of operations are
incorporated herein by reference to pages 28 through 33, and note 4 to the
consolidated financial statements on pages 42 and 43 of the Company's Annual
Report to Shareholders for the year ended December 31, 1993.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial information included in the Company's Annual Report to
Shareholders for the year ended December 31, 1993, is set forth on pages 34
through 53 thereof and is incorporated herein by reference. See also the
information contained in Item 14 of Part IV of this Report.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS OF THE COMPANY
The name, age and background information for each of the Company's Directors is
incorporated herein by reference to the section entitled ELECTION OF DIRECTORS
and the table therein contained in the Company's Proxy Statement for its 1994
Annual Meeting of Shareholders.
EXECUTIVE OFFICERS OF THE COMPANY
The Executive Officers are elected annually to their respective positions,
effective at the April meeting of the Board of Directors. The Executive
Officers of the Company at February 15, 1994, were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Name Age Position Officer Since
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Charlton L. George 36 Vice President - Finance, September 1991
Chief Financial Officer
Timothy G. Howard 47 Vice President - Controller September 1978
W. Anthony Huffman 51 Vice President - Corporate March 1982
Affairs
Nancy A. Michaud 47 Vice President - General February 1993
Counsel and Assistant Secretary
Richard L. Molen 53 President and Chief January 1979
Executive Officer
Gary E. Morin 44 Executive Vice President February 1993
George A. Plotner 42 Vice President - Human Resources March 1992
Pamela J. Whipps 40 Treasurer and Director of February 1994
Investor Relations
Robert R. Wieland 57 Vice President - Chief September 1976
Administrative Officer
and Secretary
</TABLE>
Prior to being elected an Executive Officer in 1991, Mr. George was Vice
President and Treasurer of USAir Inc. and Treasurer of USAir Group Inc. from
September, 1989, to July, 1991; prior to that time he served as Director
Corporate Finance, Allied-Signal Inc. from 1985 to August, 1989. Prior to
being elected an Executive Officer in 1993, Ms. Michaud was Senior Counsel of
the Company from 1986 to February, 1993. Prior to being elected President and
Chief Executive Officer of the Company in 1993, Mr. Molen served as President
and Chief Operating Officer of the Company. Prior to being elected as an
Executive Officer in 1993, Mr. Morin was President and General Manager of Huffy
Bicycle Company from June, 1992, to February, 1993; prior to that time he
served as President and General Manager of Washington
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Inventory Service from March, 1991, to June, 1992; prior to that time he served
as Vice President - Finance, Chief Financial Officer and Treasurer of the
Company from 1989 to March, 1991. Prior to being elected an Executive Officer
in 1992, Mr. Plotner was Vice President - Quality and Human Resources of Huffy
Bicycle Company from 1989 to March, 1992, and prior thereto, Vice President -
Human Resources of such company. Prior to being elected an Executive Officer
in 1994, Ms. Whipps was Assistant Treasurer and Manager Investor Relations of
the Company from 1990 to February 1994; prior to that time she served as
Assistant Treasurer and Cash Manager, Robbins & Myers, Inc. Prior to being
elected Vice President - Chief Administrative Officer and Secretary of the
Company in 1993, Mr. Wieland served as Vice President - General Counsel and
Secretary of the Company.
ITEM 11. EXECUTIVE COMPENSATION
Information on executive compensation is incorporated by reference to the
sections entitled EXECUTIVE COMPENSATION and the tables therein, contained on
pages 17 through 20 in the Company's Proxy Statement for its 1994 Annual
Meeting of Shareholders. Notwithstanding anything to the contrary set forth
herein or in any of the Company's previous filings under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, that
might incorporate future filings, including this Form 10-K, the REPORT OF
COMPENSATION COMMITTEE OF BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION which
begins on page 11 and ends on page 16 and the graph which is set forth on page
21 in the Company's Proxy Statement for its 1994 Annual Meeting of Shareholders
are not deemed to be incorporated by reference in this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The number of shares of Common Stock of the Company beneficially owned by each
Director and by all Directors and Officers as a group as of January 1, 1994, is
incorporated herein by reference to the section entitled SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, and the table therein, contained on
pages 8 through 11 in the Company's Proxy Statement for its 1994 Annual Meeting
of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information on certain transactions with management is incorporated herein by
reference to the section entitled CERTAIN RELATIONSHIPS AND OTHER RELATED
TRANSACTIONS contained on page 16 in the Company's Proxy Statement for its 1994
Annual Meeting of Shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a) DOCUMENTS
(1) The following Consolidated Financial Statements of the Company
included in the Company's Annual Report to Shareholders are
incorporated by reference as part of this Report at Item 8
hereof:
Consolidated Balance Sheets as of December 31, 1993, and 1992.
Consolidated Statements of Operations for the years ended
December 31, 1993, 1992, and 1991.
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Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1993, 1992, and 1991.
Consolidated Statements of Cash Flows for the years
ended December 31, 1993, 1992, and 1991.
Notes to Consolidated Financial Statements.
The Annual Report to Shareholders for the year ended
December 31, 1993, is not deemed to be filed as part of this
Report, with the exception of the items incorporated by
reference in Items 1, 5, 6, 7 and 8 of this Report and those
financial statements and notes thereto listed above.
(2) The Accountants' Report on Consolidated Financial Statements
and the following Financial Statement Schedules of the Company
are included as part of this Report at Item 8 hereof:
Schedule VIII. Valuation and Qualifying Accounts -years
ended December 31, 1993, 1992, and 1991.
Schedule X. Supplementary Income Statement Information -
years ended December 31, 1993, 1992, and 1991.
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable and, therefore, have been
omitted.
(3) The exhibits shown in "Index to Exhibits" are filed as a part
of this Report.
(b) REPORTS ON FORM 8-K
During the fiscal quarter ended December 31, 1993, the Company filed
no report on Form 8-K.
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<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HUFFY CORPORATION
By /s/ Richard L. Molen Date: March 21, 1994
----------------------
Richard L. Molen
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Richard L. Molen Date: March 21, 1994
----------------------
Richard L. Molen
President and Chief Executive Officer
and Director (Principal Executive Officer)
/s/ Charlton L. George Date: March 21, 1994
----------------------
Charlton L. George
Vice President-Finance, Chief
Financial Officer (Principal
Financial Officer)
/s/ Timothy G. Howard Date: March 21, 1994
----------------------
Timothy G. Howard
Vice President and Controller
(Principal Accounting Officer)
/s/ Thomas D. Gleason Date: February 12, 1994
----------------------
Thomas D. Gleason, Director
/s/ William K. Hall Date: February 12, 1994
----------------------
William K. Hall, Director
/s/ Stephen P. Huffman Date: February 12, 1994
----------------------
Stephen P. Huffman, Director
/s/ Linda B. Keene Date: February 12, 1994
----------------------
Linda B. Keene, Director
/s/ Jack D. Michaels Date: February 12, 1994
----------------------
Jack D. Michaels, Director
/s/ Donald K. Miller Date: February 12, 1994
----------------------
Donald K. Miller, Director
/s/ Stuart J. Northrop Date: February 12, 1994
----------------------
Stuart J. Northrop, Director
-14-
<PAGE> 15
/s/ Boake A. Sells Date: February 12, 1994
----------------------
Boake A. Sells, Director
/s/ Harry A. Shaw Date: February 12, 1994
----------------------
Harry A. Shaw III, Director
/s/ Geoffrey W. Smith Date: February 12, 1994
----------------------
Geoffrey W. Smith, Director
/s/ Robin B. Smith Date: February 12, 1994
----------------------
Robin B. Smith, Director
/s/ Fred G. Wall Date: February 12, 1994
----------------------
Fred G. Wall, Director
-15-
<PAGE> 16
INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors,
Huffy Corporation:
Under date of February 11, 1994, we reported on the consolidated balance sheets
of Huffy Corporation and subsidiaries as of December 31, 1993, and 1992, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1993, as contained in the 1993 Annual Report to Shareholders. These
consolidated financial statements and our report thereon are incorporated by
reference in the Annual Report on Form 10-K for the year 1993. In connection
with our audits of the aforementioned consolidated financial statements, we
also have audited the related financial statement schedules as listed in Part
IV, Item 14(a)(2) of Form 10-K. The financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.
/s/ KPMG PEAT MARWICK
Cincinnati, Ohio
February 11, 1994
____________________________
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors,
Huffy Corporation:
We consent to the incorporation by reference in the Registration Statements,
and the Prospectuses constituting part thereof, of (i) the Form S-8
Registration Statement (Nos. 2-46912, 2-51064, 2-55162, 2-60973) pertaining to
the 1974 Stock Option Plan; (ii) the Form S-8 Registration Statement (No.
2-95128) pertaining to the 1984 Stock Option Plan; (iii) the Form S-8
Registration Statement (No. 33-25487) pertaining to the 1988 Stock Option Plan
and Restricted Share Plan; (iv) the Form S-8 Registration Statement (No.
33-25143) pertaining to the 1987 Director Stock Option Plan; (v) the Form S-8
Registration Statement (Nos.33-28811, 33-42724) pertaining to the 1989 Employee
Stock Purchase Plan; (vi) the Form S-8 Registration Statement (No. 33-44571)
pertaining to five company savings plans and (vii) the Form S-8 Registration
Statement (No. 33-60900) pertaining to the W.I.S. Savings Plan of our report
dated February 11, 1994, relating to the consolidated balance sheets of Huffy
Corporation and subsidiaries as of December 31, 1993 and 1992 and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1993, which
report appears in the 1993 Annual Report to Shareholders, which is incorporated
by reference in the Company's 1993 Annual Report on Form 10-K and our report
dated February 11, 1994 relating to the financial statement schedules for each
of the years in the three-year period ended December 31, 1993, which report
appears in the Company's 1993 Annual Report on Form 10-K.
/s/ KPMG PEAT MARWICK
Cincinnati, Ohio
March 21, 1994
-16-
<PAGE> 17
<TABLE>
<CAPTION>
HUFFY CORPORATION
Consolidated Financial Statement Schedule VIII
Valuation and Qualifying Accounts
(Dollar Amounts in Thousands)
Balance at Additions charged Balance
beginning to costs and Deductions at end
of period expenses (Note) of period
---------- ----------------- ---------- ---------
<S> <C> <C> <C> <C>
Reserves deducted from assets to which they apply:
Allowance for doubtful accounts:
Year ended December 31, 1993 $ 2,208 1,921 (1,747) 2,382
Year ended December 31, 1992 $ 4,941 1,034 (3,767) 2,208
Year ended December 31, 1991 $ 4,523 3,235 (2,817) 4,941
Inventory obsolescence
Year ended December 31, 1993 -0- 4,080 --- 4,080(1)
Reserves which support the balance sheet
caption, Reserves
Restructuring Reserve -0- 9,296 --- 9,296(2)
<FN>
Note: Represents accounts written off, less recoveries.
(1) Represents estimated obsolete inventory as a result of the decision to restructure the Company's lawn and garden
tools business.
(2) Represents estimated charges relating to the restructuring of the Company's lawn and garden tools business.
</TABLE>
-17-
<PAGE> 18
<TABLE>
<CAPTION>
HUFFY CORPORATION
Consolidated Financial Statement Schedule X
Supplementary Income Statement Information
(Dollar Amounts in Thousands)
Year Ended Year Ended Year Ended
December 31, 1993 December 31, 1992 December 31, 1991
----------------- ----------------- -----------------
<S> <C> <C> <C>
Maintenance and repairs $10,494 $ 9,156 $ 8,938
====== ====== ======
Taxes, other than income taxes:
Payroll $17,844 $16,306 $14,572
Other 1,611 1,676 1,318
====== ====== ======
Total $19,455 $17,982 $15,890
====== ====== ======
Advertising costs $ 9,623 $10,721 $ 8,738
====== ====== ======
<FN>
Note: Amortization of intangible assets and royalties has been omitted since the amounts are less than one
percent of net sales as reported in the accompanying consolidated statements of operations.
</TABLE>
-18-
<PAGE> 19
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
-----------------
Exhibit Form 10-K
No. Page No.
- ------- -------------------------------------------------------- ---------
<S> <C> <C>
3.a Amended Articles of Incorporation, dated February 16, *
1993, incorporated by reference to Exhibit 3(a) to
Form 10-K for the fiscal year ended December 31, 1992
3.b Code of Regulations, as amended, dated April 24, 1987, *
incorporated by reference to Exhibit (3)(a) to Form 10-K
for the fiscal year ended December 31, 1987
4.a Specimen Common Stock Certificate of Huffy Corporation, *
incorporated by reference to Exhibit (4)(a) to Form 10-K
for the fiscal year ended December 31, 1991
4.b Note Purchase Agreement, dated June 24, 1988, among Huffy *
Corporation, the Prudential Insurance Company of America
and Pruco Life Insurance Company, incorporated by reference
to Exhibit (4) to Form 10-Q for the fiscal quarter ended
June 30, 1988
4.c Amendment, dated as of December 20, 1993, to Note Purchase
Agreement, dated June 24, 1988, among Huffy Corporation,
The Prudential Insurance Company of America and Pruco
Life Insurance Company
4.d Rights Agreement, dated as of December 16, 1988, between *
Huffy Corporation and Bank One, Indianapolis, National
Association, incorporated by reference to Exhibit (4)(n)
to Form 10-K for the fiscal year ended December 31, 1988
4.e Amendment, dated as of August 23, 1991, to Rights Agreement, *
dated as of December 16, 1988, between Huffy Corporation
and Bank One, Indianapolis, National Association,
incorporated by reference to Form 8-K, dated August 23, 1991
4.f Note Agreement, dated as of December 1, 1990, among *
Huffy Corporation and Nationwide Life Insurance
Company, Employees Life Insurance Company of Wausaw
and Financial Horizons Life Insurance Company in
connection with the issuance and sale of $30,000,000
Huffy Corporation 9.62% Senior Notes, Series A, due
December 1, 2000, incorporated by reference to
Exhibit (4)(j) to Form 10-K for the fiscal year
ended December 31, 1990
4.g Credit Agreement, dated as of April 21, 1992, among *
Huffy Corporation, Bank One, Dayton, NA, NBD Bank, N.A.,
Security Pacific National Bank, and Society National
Bank, individually and as agent, in connection with
revolving loans up to an aggregate amount of $50,000,000
to Huffy Corporation, incorporated by reference to
Exhibit (4)(g) to Form 10-K for the fiscal year ended
December 31, 1992
10.a Lease, dated February 24, 1969, between The Knowlton *
Company and The Huffman Manufacturing Company, as
amended November 1, 1971, incorporated by reference
to Exhibit (10)(ss) to Form 10-K for the fiscal year
ended June 26, 1981
</TABLE>
-19-
<PAGE> 20
<TABLE>
<S> <C> <C>
10.b Lease, effective as of October 29, 1992, between SELCO *
Service Corporation and Gerry Baby Products Company,
incorporated by reference to Exhibit (10)(b) to Form 10-K
for the fiscal year ended December 31, 1992
10.c Lease, effective as of December 29, 1993, between
SELCO Service Corporation and Huffy Corporation
COMPENSATION PLANS AND ARRANGEMENTS
- -----------------------------------
10.d Employment Agreement, dated March 7, 1972, between *
The Huffman Manufacturing Company and Stuart J.
Northrop, incorporated by reference to Exhibit 13.12
to Form 10-K for the fiscal year ended June 30, 1972
10.e Deferred Compensation Unit Agreement, dated as of *
March 7, 1972, between The Huffman Manufacturing
Company and Stuart J. Northrop, incorporated by
reference to Exhibit 11.21 to Form 10-K for the
fiscal year ended June 30, 1972
10.f Special Deferred Compensation Agreements, as amended, *
between Huffy Corporation and certain of its officers
and key employees, in substantially the forms
incorporated by reference to Exhibit (ix) to Form 10-K
for the fiscal year ended June 24, 1977, to Exhibit (2)
to Form 10-Q for the fiscal quarter ended September 23,
1983, and to Exhibit (19)(c) to Form 10-Q for the
fiscal quarter ended September 30, 1986
10.g Deferred Compensation Agreements, as amended, between *
Huffy Corporation and certain of its officers and key
employees, in substantially the forms incorporated by
reference to Exhibit (vi) to Form 10-K for the fiscal
year ended June 29, 1979, and to Exhibit (3) to Form
10-Q for the fiscal quarter ended September 23, 1983
10.h Special Phantom Stock Award Agreement, dated as of *
March 28, 1980, between Huffy Corporation and Harry
A. Shaw III, incorporated by reference to Exhibit
(ix) to Form 10-K for the fiscal year ended June 27,
1980
10.i Amendment No. 1, dated January 12, 1981, to Special *
Phantom Stock Award Agreement between Huffy Corporation
and Harry A. Shaw III, incorporated by reference to
Exhibit (iii) to Form 10-Q for the fiscal quarter
ended March 27, 1981
10.j Amendment No. 2, dated August 3, 1981, to Special Phantom *
Stock Award Agreement between Huffy Corporation and Harry
A. Shaw III, incorporated by reference to Exhibit (10)(g)
to Form 10-K for the fiscal year ended June 26, 1981
10.k Amendment No. 3, dated December 17, 1982, between Huffy *
Corporation and Harry A. Shaw III, to Special Phantom Stock
Award Agreement, incorporated by reference to Exhibit 3
to Form 10-Q for the fiscal quarter ended December 24,
1982
</TABLE>
-20-
<PAGE> 21
<TABLE>
<S> <C> <C>
10.l Amendment No. 4, dated July 12, 1988, to Special Phantom *
Stock Award Agreement between Huffy Corporation and
Harry A. Shaw III, incorporated by reference to Exhibit
(10)(k) to Form 10-K for the fiscal year ended December 31,
1988
10.m Amendment No. 5, dated April 30, 1991, to Special Phantom *
Stock Award Agreement between Huffy Corporation and Harry
A. Shaw III, incorporated by reference to Exhibit (10)(l)
to Form 10-K for the fiscal year ended December 31, 1991
10.n Amendment No. 6, dated July 12, 1991, to Special Phantom *
Stock Award Agreement between Huffy Corporation and
Harry A. Shaw III, incorporated by reference to Exhibit
10(m) to Form 10-K for the fiscal year ended December 31,
1991
10.o Deferred Compensation Agreement For Director, as amended, *
between Huffy Corporation and certain of its directors,
in substantially the forms incorporated by reference to
Exhibit (x) to Form 10-K for the fiscal year ended
June 27, 1980, as amended, and to Exhibit (1) to
Form 10-Q for the fiscal quarter ended September 23,
1983
10.p Form of Amendment to Deferred Compensation Agreement For *
Director, as amended, dated as of April 30, 1991, between
Huffy Corporation and a director, incorporated by reference
to Exhibit (10)(o) to Form 10-K for the fiscal year ended
December 31, 1991
10.q Form of Deferred Compensation Agreement for Director, *
incorporated by reference to Exhibit (10)(p) to Form
10-K for the fiscal year ended December 31, 1991
10.r Severance Pay Agreements, between Huffy Corporation and *
certain of its officers, as amended, in substantially
the forms incorporated by reference to Exhibit (xi) to
Form 10-K for the fiscal year ended June 27, 1980, and
to Exhibit 10(a) to Form 10-K for the fiscal year ended
June 26, 1981
10.s Description of Executive Medical Reimbursement Plan *
between Huffy Corporation and certain executive
officers and key employees, incorporated by reference
to Exhibit (10)(n) to Form 10-K for the fiscal year
ended December 31, 1989
10.t Long Term Incentive Compensation Program, incorporated *
by reference to Exhibit (10)(s) to Form 10-K for the
fiscal year ended December 31, 1991
10.u Huffy Corporation 1984 Stock Option Plan, as amended, *
incorporated by reference to Exhibit A to the Company's
Proxy Statement, dated September 13, 1984, for the
Annual Meeting of Shareholders held October 19, 1984,
and to Exhibit B to the Company's Proxy Statement,
dated March 13, 1992, for the Annual Meeting of
Shareholders held April 24, 1992
10.v Huffy Corporation Capital Accumulation Plan Participation *
Agreement, between Huffy Corporation and certain of its
officers, in substantially the forms incorporated by
reference to Exhibit (19)(a) to Form 10-Q for the fiscal
</TABLE>
-21-
<PAGE> 22
<TABLE>
<S> <C> <C>
quarter ended September 30, 1985, and to Exhibit 19(a)
to Form 10-Q for the fiscal quarter ended June 30, 1986
10.w Huffy Corporation Capital Accumulation Program *
Participation Agreement, between Huffy Corporation and
certain of its directors, in substantially the forms
incorporated by reference to Exhibit (19)(b) to Form
10-Q for the fiscal quarter ended September 30, 1985,
and to Exhibit 19(b) to Form 10-Q for the fiscal quarter
ended June 30, 1986
10.x Severance Pay Agreements, dated June 30, 1986, between *
Huffy Corporation and certain of its officers, in
substantially the form incorporated by reference to
Exhibit (19)(a) to Form 10-Q for the fiscal quarter
ended June 30, 1986
10.y Huffy Corporation 1986 CEO Performance Unit and *
Performance Share Plan for Harry A. Shaw III,
effective August 28, 1986, incorporated by reference
to Exhibit (10)(x) to Form 10-K for the fiscal year
ended December 31, 1986
10.z First Amendment to Huffy Corporation 1986 CEO Performance *
Unit and Performance Share Plan for Harry A. Shaw III,
effective as of January 1, 1990, incorporated by reference
to Exhibit (10)(y) to Form 10-K for the fiscal year
ended December 31, 1991
10.aa Second Amendment to Huffy Corporation 1986 CEO Performance *
Unit and Performance Share Plan for Harry A. Shaw III,
effective as of April 30, 1991, incorporated by reference
to Exhibit (10)(z) to Form 10-K for the fiscal year ended
December 31, 1991
10.bb Huffy Corporation 1993 CEO Long-Term Performance Plan, *
effective as of January 1, 1993, between Huffy Corporation
and Richard L. Molen, incorporated by reference to
Exhibit (10) to Form 10-Q for the fiscal quarter ended
June 30, 1993
10.cc Description of supplemental group life insurance *
arrangement between Huffy Corporation and certain
officers and key employees, incorporated by reference
to Exhibit (10)(aa) to Form 10-K for the fiscal year
ended December 31, 1991
10.dd Description of financial planning and tax preparation
services between Huffy Corporation and certain
officers and key employees
10.ee Profit Sharing Bonus Plan of Huffy Corporation for 1993
10.ff 1987 Restricted Stock Unit Agreement, dated as of *
January 1, 1987, between Huffy Corporation and Richard
L. Molen, incorporated by reference to Exhibit (10)(dd)
to Form 10-K for the fiscal year ended December 31, 1991
10.gg Amendment No. 1 to 1987 Restricted Stock Unit Agreement *
dated July 12, 1988, between Huffy Corporation and
Richard L. Molen, incorporated by reference to Exhibit
(10)(cc) to Form 10-K for the fiscal year ended
December 31, 1988
</TABLE>
-22-
<PAGE> 23
<TABLE>
<S> <C> <C>
10.hh Amendment No. 2 to 1987 Restricted Stock Unit Agreement, *
dated as of April 30, 1991, between Huffy Corporation and
Richard L. Molen, incorporated by reference to Exhibit
(10)(ff) to Form 10-K for the fiscal year ended December
31, 1991
10.ii Amendment No. 3 to 1987 Restricted Stock Unit Agreement *
dated as of July 12, 1991, between Huffy Corporation and
Richard L. Molen, incorporated by reference to Exhibit
(10)(gg) to Form 10-K for the fiscal year ended December
31, 1991
10.jj Supplemental/Excess Benefit Plan, dated as of January 1, *
1988, incorporated by reference to Exhibit (10)(aa) to
Form 10-K for the fiscal year ended December 31, 1987
10.kk First Amendment to Huffy Corporation Supplemental/Excess *
Benefit Plan, effective as of January 1, 1988,
incorporated by reference to Exhibit (10)(ee) to Form
10-K for the fiscal year ended December 31, 1990
10.ll Huffy Corporation Master Benefit Trust Agreement, dated *
October 1, 1987, between Huffy Corporation and Bank One,
Dayton, National Association, incorporated by reference
to Exhibit (10)(bb) to Form 10-K for the fiscal year
ended December 31, 1987
10.mm Huffy Corporation Second Master Benefit Trust Agreement, *
dated as of January 1, 1988, between Huffy Corporation
and Bank One, Dayton, National Association, incorporated
by reference to Exhibit (10)(cc) to Form 10-K for the
fiscal year ended December 31, 1987
10.nn Form of First Amendment to Huffy Corporation Second *
Master Benefit Trust Agreement, effective as of
January 1, 1988, incorporated by reference to Exhibit
(10)(ii) to Form 10-K for the fiscal year ended
December 31, 1990
10.oo Huffy Corporation 1987 Director Stock Option Plan, *
incorporated by reference to Exhibit 19(a) to Form
10-Q for the fiscal quarter ended June 30, 1988
10.pp First Amendment to Huffy Corporation 1987 Director *
Stock Option Plan, effective as of April 30, 1991,
incorporated by reference to Exhibit (10)(nn) to
Form 10-K for the fiscal years ended December 31, 1991
10.qq Second Amendment to Huffy Corporation 1987 Director *
Stock Option Plan, effective as of December 15,
1991, incorporated by reference to Exhibit (10)(oo)
to Form 10-K for the fiscal year ended December 31,
1991
10.rr Huffy Corporation 1988 Stock Option Plan and Restricted *
Share Plan, incorporated by reference to Exhibit 19(b)
to Form 10-Q for the fiscal quarter ended June 30, 1988,
and to Exhibit A to the Company's Proxy Statement dated
March 13, 1992 for the Annual Meeting of Shareholders
held April 24, 1992
10.ss Huffy Corporation 1990 Directors' Retirement Plan *
incorporated by reference to Exhibit (10)(qq) to Form
10-K for the fiscal year ended December 31, 1991
</TABLE>
-23-
<PAGE> 24
<TABLE> <C>
<S> <C>
10.tt Description of Huffy Corporation Executive Automobile *
Policy incorporated by reference to Exhibit (10)(rr)
to Form 10-K for the fiscal year ended December 31, 1991
10.uu Transition Agreement, as amended and restated, dated *
February 15, 1993, between Huffy Corporation and Harry
A. Shaw III, incorporated by reference to Exhibit 10(tt)
to Form 10-K for the fiscal year ended December 31, 1992
OTHER FILINGS
- -------------
13 Certain sections of the Annual Report to Shareholders for
fiscal year ended December 31, 1993
19 Schedule of certain documents substantially identical
to filed documents with parties thereto and other
material differing details
22 List of all direct and indirect Subsidiaries of the
registrant:
Jurisdiction in
Name of Subsidiary which Incorporated
------------------ ------------------
Gerry Baby Products Company Delaware
Huffy FSC, Inc. Virgin Islands
Huffy International Finance, N.V. Netherland Antilles
Huffy Service First, Inc. Ohio
Gerry Wood Products Company Wisconsin
Snugli-Canada, Ltd. British Columbia, Canada
The Huffman Manufacturing Company Ohio
True Temper Hardware Company Ohio
Washington Inventory Service California
<FN>
*Indicates that the exhibit is incorporated by reference into this Annual Report
on Form 10-K from a previous filing with the Commission.
</TABLE>
-24-
<PAGE> 1
EXHIBIT NO. 4.c
AMENDMENT TO NOTE PURCHASE AGREEMENT
<PAGE> 2
December 20, 1993
Huffy Corporation
P. 0. Box 1204
Dayton, Ohio 45401
Ladies and Gentlemen:
Reference is made to the agreement, dated June 24, 1988 (the "Agreement"),
between Huffy Corporation, an Ohio corporation (the "Company"), The Prudential
Insurance Company of America ("Prudential") and Pruco Life Insurance Company
("Pruco"; Pruco and Prudential are hereinafter collectively referred to as the
"Noteholders"), pursuant to which the Company issued and sold and the
Noteholders purchased $25,000,000 in original aggregate principal amount of the
Company's 9.81% Notes due June 24, 1998.
Pursuant to the Company's request, and in accordance with the provisions of
paragraph 11C of the Note Agreement, the Noteholders and the Company hereby
agree as follows:
SECTION 1. AMENDMENT. From and after the date this letter becomes
effective in accordance with its terms, the Note Agreement is amended as
follows:
1.1 Paragraph 6B of the Note Agreement is amended to delete in their
entirety the section heading for such paragraph and the first sentence of such
paragraph and the definition of "Consolidated Net Earnings Available for
Restricted Payments" appearing in such paragraph. Paragraph 6B is further
amended to substitute for the section heading and first sentence of such
paragraph 6B the following:
"NET WORTH REQUIREMENT. The Company covenants that it will not
permit at any time Adjusted Consolidated Net Worth to fall below
$90,000,000 which amount shall be deemed to have been increased on
January 1, 1992 and on the first day of each fiscal year of the Company
thereafter by 40% of Consolidated Net Earnings (less 0% in the event of
a loss) for the preceding fiscal year."
<PAGE> 3
Huffy Corporation
December 20, 1993
Page 2
1.2 Paragraph 6C(2) of the Note Agreement is amended to delete in
their entirety clause(s) (v) and (vi) of such paragraph and to substitute
therefor the following:
"(v) additional Debt of the Company, if at all times after giving
effect thereto the aggregate principal amount of consolidated Debt of
the Company and its Subsidiaries does not at any time exceed 55% of
Consolidated Total Capitalization. As used herein, the term
"Consolidated Total Capitalization" shall mean as of any time of
determination the sum of consolidated Debt of the Company and its
Subsidiaries plus Adjusted Consolidated Net Worth."
1.3 Paragraph 10 of the Note Agreement is amended to renumber
paragraph 10A appearing therein as paragraph 1OA-2 and to insert immediately
before such renumbered paragraph the following which will be paragraph
10A-1:
"10A-1. 'Adjusted Consolidated Net Worth' shall mean, as of the
date of any determination thereof, the amount of the capital stock
accounts, including the portion thereof attributable to preferred
stock (net of any treasury stock, at cost), minus (to the extent
incurred after December 1, 1990) goodwill, organization expenses,
patents, trademarks, trade names, copyrights, franchises, unamortized
debt discount and other intangible assets, plus Minority Interests,
and plus (or minus in the case of a deficit), (i) cumulative
translation adjustments and (ii) the surplus and retained earnings of
the Company and its Subsidiaries, all as determined on a consolidated
basis for the Company and its Subsidiaries in accordance with
generally accepted accounting principles. As used herein, the term
"Minority Interests" shall mean any shares of stock of any class of a
Subsidiary (other than directors' qualifying shares if required by
law) that are not owned by the Company and/or one or more of its
Subsidiaries. Minority Interests shall be valued in accordance
with generally accepted accounting principles."
<PAGE> 4
Huffy Corporation
December 20, 1993
Page 3
1.4 Clause (ix) of paragraph 6C(3) of the Note Agreement is deleted in
its entirety and the following is hereby substituted therefor:
"(ix) own, purchase or acquire Excess
Investments not to exceed in the
aggregate ten percent 10% of Adjusted
Consolidated Net Worth."
SECTION 2. CONDITIONS PRECEDENT. This letter shall become effective
only on the first date on which all of the following conditions precedent shall
have been satisfied:
(i) the Noteholders shall have received a fully executed
counterpart of this letter duly signed by the Company;
and
(ii) Prudential shall have received a structuring fee in the
amount of $10,000.
SECTION 3. GOVERNING LAW. This letter amendment shall be governed by
the internal laws and decisions of the State of Ohio.
SECTION 4. MISCELLANEOUS. Except as specifically set forth in this
letter, the Company's obligations under the Note Agreement are neither altered
nor amended, and all terms and conditions of the Note Agreement remain in full
force and effect. This letter may be executed in any number of counterparts
and by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement.
Sincerely,
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /S/ Mark A. Hoffmeister
--------------------------------
Vice President
PRUCO LIFE INSURANCE COMPANY
By: /S/ Allen Weaver
--------------------------------
Vice President
Acknowledged and Agreed:
HUFFY CORPORATION
By: /S/ Charlton George
---------------------
Its: /S/ VP Finance
---------------------
<PAGE> 1
EXHIBIT 10.c
LEASE AGREEMENT BETWEEN SELCO SERVICE CORPORATION
AND HUFFY CORPORATION
<PAGE> 2
LEASE AGREEMENT
Between
SELCO SERVICE CORPORATION,
as Lessor
and
HUFFY CORPORATION,
as Lessee
<PAGE> 3
<TABLE>
TABLE OF CONTENTS
AND PARAGRAPH CAPTIONS
<CAPTION>
Page
----
<S> <C>
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 1
1. EFFECTIVE DATE; DURATION OF OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 5
1.1 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 5
1.2 Duration of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 5
2. LEASE OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 5
2.1 Demise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 5
2.2 Reservations from Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 5
3. LEASE TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 5
3.1 "Base Lease Term" Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 5
4. RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 5
4.1 Basic Rent; Rate Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 5
4.2 Libor Deposits Unavailable or Interest Rate Unascertainable . . . . . . . . . . . . . . . . . . . .. . . . . . 6
4.3 Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 6
4.4 Manner and Application of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 6
4.5 Lease Not Terminable Prior to Payment of Basic Rent . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 7
5. EARLY TERMINATION OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 7
5.1 Timing of Options; Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 7
5.2 Final Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 8
5.3 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 8
5.4 Title to Assets Purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 8
6. END OF TERM OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 8
6.1 Option to Purchase Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 8
6.2 Exercise of Option; Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 9
6.3 Title to Assets Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 9
6.4 Return of Leased Premises; Automatic Extension and Subsequent Sale . . . . . . . . . . . . . . . . .. . . . . . 9
7. REPRESENTATIONS AND WARRANTIES OF LESSEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 10
7.1 Existence and Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 10
7.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 10
7.3 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 10
</TABLE>
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7.4 Huffy Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.5 Environmental Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.6 Other Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8. COVENANTS OF LESSEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.1 Huffy Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.2 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.3 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.1 Required Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.2 Closing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.3 Transaction Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10. FACILITY USE, OCCUPANCY, AND OPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.1 Compliance with Law Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.2 Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10.3 Clean and Orderly Appearance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.4 Repairs and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.5 Alterations of Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.6 Discharge of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.7 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.8 Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.9 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.10 Duration of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.1 Required Insurance Coverages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.2 Certain Policy Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.3 Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.4 Exculpation for Property Damage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12. GENERAL INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
13. DAMAGE OR DESTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
13.1 Option to Rebuild or Terminate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
13.2 No Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14. EMINENT DOMAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.1 Condemnation During Leasehold - Total Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.2 Condemnation During Leasehold - Nonsubstantial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3 No Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
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15. DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
15.1 Default Defined; Cure Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
15.2 Rights Upon Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
15.3 Payment of Enforcement Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
15.4 Forbearance Not to Limit Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4 16. ASSIGNMENT, SUBLEASING, AND SUBCONTRACTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
16.1 Assignment by Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
16.2 Effect of Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
16.3 Bind and Inure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
17. SURRENDER; PERSONAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
17.1 Condition upon Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
17.2 Responsibility for Personalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
18. QUIET ENJOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
19. INDEPENDENT CONTRACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
20. REFORMATION; SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
21. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
22. CONSTRUCTION AND INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
22.1 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
22.2 Survival of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
22.3 Exercise of Discretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
22.4 Neither Party Drafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
22.5 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
22.6 Certain Words and Phrases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
22.7 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
22.8 Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
23. MEMORANDUM OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
24. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
25. [intentionally deleted]
26. INTEGRATION; AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
<PAGE> 6
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Agreement"), dated this 29 day of
December, 1993 by and between SELCO SERVICE CORPORATION, a bank service
corporation organized under Ohio law ("Lessor"), and HUFFY CORPORATION, an Ohio
corporation ("Lessee"), under the following circumstances:
A. Lessor owns certain real property located in
Miamisburg, Ohio (the "Land") on which Lessee currently maintains an
approximately 47,000 square foot headquarters facility (the "Facility").
B. Lessor intends to lease the Land and the Facility,
exclusive of any personal property as defined in Section 1245 of the Internal
Revenue Code of 1986, as amended, to Lessee pursuant to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual promises and covenants contained in this Agreement, Lessor and Lessee
hereby agree as follows:
DEFINITIONS
The following capitalized terms have the meanings provided in
this preliminary section, or as elsewhere defined in this Agreement. Failure
to enumerate in this section any capitalized term elsewhere defined in this
Agreement shall not limit the general applicability of such term elsewhere
defined.
"Additional Rent" has the meaning set forth in paragraphs 4.3
and 14.1.
"Adjustment Rent" has the meaning set forth in paragraph
4.1(b).
"Affiliate" means a person, company or other entity directly
or indirectly controlled by, controlling, or under common control with the
affiliated entity.
"Assumed Rate" shall mean an annual simple interest rate equal to 1.8125%.
"Base Lease Term" has the meaning set forth in paragraph 3.1,
but shall include for purposes of paragraphs 4.3 and 4.5 and sections 10, 13,
14 and 15 any extended lease term pursuant to paragraph 6.4.
"Basic Rent" means the rent payable by Lessee to Lessor
pursuant to paragraph 4.1.
<PAGE> 7
"Basic Rent Payment Date" means the last day of the Base Lease
Term and each December 31 during the Base Lease Term, commencing with December
31, 1994. Notwithstanding the foregoing, if any Basic Rent Payment Date would
otherwise fall on a day that is not a Business Day, such Basic Rent Payment
Date shall be deemed to fall on the immediately following Business Day (unless
such immediately following Business Day falls in another calendar month, in
which case such Basic Rent Payment Date shall be deemed to fall on the
immediately preceding Business Day).
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in Cleveland, Ohio are required or
authorized to remain closed.
"Closing Fee" means an amount equal to $11,850, payable to
Lessor by Lessee upon the execution of this Agreement.
"Damages" includes any and all expenses, losses, costs,
claims, liability or damages incurred by the damaged party as a proximate
result of an event or occurrence causing loss to the damaged party, including
without limitation reasonable attorneys' fees and other defense costs.
"Default" means any of the defaults by Lessee described in paragraph 15.1.
"Early Termination Price" shall have the meaning given to such
term in paragraph 5.1.
"Effective Balance" for any day means an amount equal to (a)
$3,950,000 plus (b) the Fixed Leasing Fee for the current Monthly Adjustment
Period through such day, plus (c) any accrued and unpaid Fixed Leasing Fees for
any prior Monthly Adjustment Period, plus (d) any accrued and unpaid Adjustment
Rent, less (e) all Basic Rent due to date.
"Effective Date" shall have the meaning given to such term in paragraph 1.1.
"Effective Rate" means the Libor Rate for any Monthly
Adjustment Period, minus 1.75%.
"Environmental Law" means any federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating, relating to
or imposing liability upon a Person in connection with the use, release or
disposal of any hazardous, toxic or dangerous substance, waste or material.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Facility" has the meaning set forth in paragraph 2.1.
"Fair Market Value" means the value (net of all expenses of
sale) of the Leased Premises which the owner can expect, with a high degree of
probability, to receive as of the relevant date in an arms-length sale
transaction in the marketplace, as determined by an MAI appraiser, taking into
account any estimated holding costs until an actual sale, brokerage
commissions, estimated advertising and any other
<PAGE> 8
associated costs and reflecting Lessee's right to quiet enjoyment of the Leased
Premises until the Termination Date.
"FIRREA" means the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended.
"Fixed Leasing Fee" for any Monthly Adjustment Period shall
mean an amount equal to the Effective Balance as of the last day of the prior
Monthly Adjustment Period (or, if there is no prior Monthly Adjustment Period,
as of the Effective Date), multiplied by the Assumed Rate, and divided by 12.
"GAAP" means United States generally accepted accounting
principles, consistently applied.
"Huffy Credit Agreement" means that certain Credit Agreement,
dated as of April 21, 1992, by and among Lessee, the banks signatory thereto
and Society National Bank, as Agent, as in effect on the date hereof, with such
amendments as may be adopted as long as Society National Bank is a party
thereto, and such other amendments as Lessor may approve.
"Land" means that certain real property to be leased by Lessor
to Lessee pursuant to this Agreement and on which the Facility is located. The
Land is particularly described in Exhibit A, and shall be subject to the
Permitted Encumbrances described in Schedule 1.
"Leased Premises" means the Land and the Facility leased by
Lessor to Lessee pursuant to this Agreement.
"Lessor's Purchase Price" means the amount paid by Lessor to
purchase the Leased Premises pursuant to a general warranty deed dated December
22, 1993, from Lessee as grantor. Such amount shall include any applicable
sales, use or similar front-end tax which Lessor may agree to pay.
"Libor Rate" means, for any Monthly Adjustment Period, an
interest rate per annum, determined solely by Lessor (rounded upward to the
next higher whole multiple of 1/16% if such rate is not such a multiple), equal
at all times during such Monthly Adjustment Period to the quotient of (i) the
rate per annum (rounded upwards to the next higher whole multiple of 1/16% if
such rate is not such a multiple) at which deposits in U.S. Dollars are offered
at 11:00 a.m. (London, England time), or as soon thereafter as is reasonably
practicable, by prime banks in the London interbank eurodollar market two (2)
London Days prior to the first day of such Monthly Adjustment Period, divided
by (ii) a number equal to 1.00 minus the aggregate (without duplication) of the
rates (expressed as a decimal fraction) of the Libor Reserve Requirements
current on the date two (2) London Days prior to the first day of such Monthly
Adjustment Period.
"Libor Reserve Requirements" means, for any Monthly Adjustment
Period, the maximum reserves (whether basic, supplemental, marginal, emergency
or otherwise) prescribed by the Board of Governors of the Federal Reserve
System (or any successor) with respect to liabilities or assets consisting of
or including
<PAGE> 9
"Eurocurrency liabilities" (as defined in Regulation D of the Board of
Governors of the Federal Reserve System) having a term equal to such Monthly
Adjustment Period.
"London Day" means a day which is a Business Day and on which
dealings in U.S. Dollar deposits may be carried out in the London interbank
eurodollar market.
"Materials of Environmental Concern" means chemicals,
pollutants, contaminants, wastes, degradation by-products, toxic substances,
petroleum and petroleum products, including, without limitation, "hazardous
substances," "hazardous wastes," "toxic substances" and "toxic pollutants," as
defined in or identified pursuant to any Environmental Law.
"Monthly Adjustment Period" shall mean each period of one (1)
calendar month (or portion thereof) during the term of this Lease, with the
first such period commencing January 1, 1994, and the period commencing on the
Effective Date and ending December 31, 1993.
"Monthly Adjustment Rent" shall have the meaning given to such
term in paragraph 4.1(b).
"Option Price" shall have the meaning given to such term in
paragraph 6.1.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto established under ERISA.
"Permitted Encumbrances" means those matters affecting title
to the Land as referenced or set forth in Schedule 1 hereto.
"Person" means and includes an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated association and a
government or any department or agency thereof.
"Plan" means any employee benefit plan covering the employees
of Lessee subject to ERISA.
"Prime Rate" means that interest rate established from time to
time by Society National Bank at Cleveland, Ohio as its Prime Rate, whether or
not such rate is publicly announced; the Prime Rate may not be the lowest
interest rate charged by such bank for commercial or other extensions of
credit.
"SARA" means the Superfund Amendments and Reauthorization Act
of 1986.
"Term Rent" shall have the meaning given to such term in
paragraph 4.1(a).
"Termination Date" means the date on which the Base Lease Term
or any renewal thereof expires.
<PAGE> 10
"Total Taking" has the meaning set forth in paragraph 14.1.
1. EFFECTIVE DATE; DURATION
OF OBLIGATIONS
-------------------------
1.1 EFFECTIVE DATE. The Effective Date of this
Agreement is the date first set forth above, notwithstanding any prior or
subsequent date of execution. All obligations of both parties shall take
effect on the Effective Date.
1.2 DURATION OF OBLIGATIONS. The leasehold
estate to be conferred hereunder shall begin on the Effective Date and shall
remain in effect until the Termination Date.
2. LEASE OF PREMISES
------------------
2.1 DEMISE. As of the Effective Date, Lessor shall, and hereby
does, lease and demise to Lessee, for and during the Base Lease Term, and
subject to all terms and conditions of this Agreement, that certain Land
described in Exhibit A attached hereto consisting of 10.02 acres, more or less,
together with the improvements thereon. Such improvements, together with any
subsequent permitted additions or alterations thereto made by Lessee, shall
constitute the Facility. The Facility and the Land are hereafter referred to
collectively as the "Leased Premises."
2.2 RESERVATIONS FROM DESCRIPTION. At any time
during the Base Lease Term, Lessor shall have the right, with the prior written
consent of Lessee, which shall not be unreasonably withheld or delayed, to make
reservations from the interest in the Land leased hereunder for such covenants,
easements, licenses, and rights of entry as Lessor may in Lessor's discretion,
reasonably exercised, deem necessary; provided, however, that such reservations
shall not impair materially the use of the Facility by Lessee for its intended
purposes. Thereafter, Schedule 1 to this Agreement shall be deemed to have
been amended to incorporate such reservations.
3. LEASE TERM
----------
3.1 "BASE LEASE TERM" DEFINED. The Base Lease
Term shall begin on the Effective Date, and shall expire, unless sooner
terminated, on December 31, 2003.
4. RENT
----
4.1 BASIC RENT; RATE ADJUSTMENTS. (a) Lessee
shall pay Basic Rent to Lessor during the Base Lease Term, in ten (10) annual
installments, payable in arrears on each Basic Rent Payment Date, with the
final payment of Basic Rent being due and payable on the last day of the Base
Lease Term. Each annual payment of Basic Rent shall be comprised of two
components: (i) Term Rent in the amount of $435,436.95, plus (ii) Adjustment
Rent, as calculated below, to reflect changes in the Libor Rate for each
Monthly Adjustment Period during the year.
<PAGE> 11
Lessee shall also pay to Lessor, in lieu of Basic Rent, on December 31, 1993,
the Fixed Leasing Fee for the period commencing with the Effective Date and
ending on December 31, 1993, prorated for such partial month. If the last day
of the Base Lease Term is other than a December 31, Basic Rent for the final
lease year shall be pro-rated.
(b) "Adjustment Rent" shall be an amount
equal to the sum of all Monthly Adjustment Rent computed since the last Basic
Rent Payment Date. "Monthly Adjustment Rent" shall be an amount equal to the
product of (i) the Effective Balance as of the last day of the prior Monthly
Adjustment Period and (ii) a fraction, the numerator of which is the Effective
Rate for the relevant Monthly Adjustment Period minus the Assumed Rate, and the
denominator of which is twelve (12), provided that there shall be no Monthly
Adjustment Rent for the period prior to January 1, 1994.
4.2 LIBOR DEPOSITS UNAVAILABLE OR INTEREST RATE
UNASCERTAINABLE. If prior to the commencement of any Monthly Adjustment Period
Lessor reasonably determines that U.S. Dollar deposits of the relevant amount
for such Monthly Adjustment Period are not available in the London interbank
eurodollar market or the rate at which such U.S. Dollar deposits are being
offered will not adequately and fairly reflect the cost to Lessor of making or
maintaining a rate determined by reference to the Libor Rate or, that by reason
of circumstances affecting such market, adequate and reasonable means do not
exist for ascertaining the Libor Rate applicable to such Monthly Adjustment
Period, as the case may be, Lessor shall promptly give notice of such
determination to Lessee and the Basic Rent for the corresponding month shall be
determined by reference to changes in the Prime Rate for the corresponding
periods.
4.3 ADDITIONAL RENT. Throughout the Base Lease
Term, Lessee also shall pay, as Additional Rent (i) all real estate and other
property taxes (including any tax on lease payments, other than Ohio and
Federal income taxes and income taxes imposed by Lessor's jurisdiction of
incorporation), (ii) all governmental assessments levied against the Leased
Premises (including without limitation the Land) for improvements benefitting
the Leased Premises, and (iii) all other costs or charges of any nature
whatsoever that Lessee is expressly required by this Agreement to pay,
including without limitation any insurance premiums to be paid by Lessee under
section 11 and any taxes that may be levied on the net income of Lessor with
respect to this Agreement other than Ohio and Federal income tax and income
taxes imposed by Lessor's jurisdiction of incorporation. Lessee shall pay
Additional Rent by making payment of such costs and charges to Lessor or
directly to the third party entitled to receive payment therefor, as the case
may be. If the current method of property taxation or assessment is changed so
that a capital tax or other tax imposed on the rent or any other payments
received by Lessor from Lessee hereunder would be substituted for the whole or
any part of the real property taxes or assessments now imposed on the Leased
Premises or any part thereof, such other tax, to the extent that it is so
substituted, shall be included in determining Lessor's real property tax bill
for the relevant years, and shall be paid by Lessee to Lessor as Additional
Rent.
4.4 MANNER AND APPLICATION OF PAYMENT. All rent
and other charges of any nature required to be paid by Lessee to Lessor under
this Agreement,
<PAGE> 12
including without limitation Basic Rent and Additional Rent, shall be paid to
Lessor on or before the due date in immediately available funds without notice
or demand. Payments shall be made at the office of Lessor from time to time
provided for delivery of notices or to such other address and/or payee as
Lessor may from time to time designate by notice to Lessee. Payments shall be
applied first to Additional Rent which shall become payable to Lessor hereunder
and second to Basic Rent then currently due and payable hereunder. Unless the
Lessor otherwise elects, payment of those components of Additional Rent which
Lessee is obligated to pay directly to third parties hereunder shall be made in
a timely manner as the applicable creditors may from time to time direct,
except for amounts as to which there is a bona fide dispute, so long as Lessee
takes all steps necessary to insure that no liens or other encumbrances are
filed against the Leased Premises as a result thereof. Lessor shall promptly
forward to Lessee all such bills or invoices it receives from third parties so
that timely payment of the same may be made by Lessee. Nothing herein shall
create any privity of contract between Lessor and any third-party creditors of
Lessee, or otherwise make Lessor responsible for any debts of Lessee. All
covenants in this Agreement with respect to payments of any nature to be made
by Lessee are and shall be deemed to be independent covenants.
4.5 LEASE NOT TERMINABLE PRIOR TO PAYMENT OF
BASIC RENT. Except as otherwise expressly set forth in this Agreement, the
demise of the Leased Premises provided in this Agreement shall not expire or
become terminable by Lessee for any reason whatsoever prior to payment to
Lessor in full of the entire Basic Rent provided in paragraph 4.1. Until Basic
Rent for the Base Lease Term shall be paid in full, Lessee waives all rights
which may now or hereafter be conferred by law to abandon, terminate, or
surrender the leasehold estate, in whole or in part, or to any abatement,
suspension, diminution, deduction, or reduction whatsoever of Basic Rent.
5. EARLY TERMINATION OPTIONS
-------------------------
5.1 TIMING OF OPTIONS; PURCHASE PRICE. Lessee
shall have the option to terminate the Base Lease Term and purchase the Leased
Premises from Lessor on any day on or prior to December 31, 2000, upon not less
than ninety (90) days prior notice to Lessor of such election for a price (the
"Early Termination Price") equal to the greater of (a) the Fair Market Value of
the Leased Premises on the date of such termination, as determined by an MAI
appraiser selected by Lessee, and (b) a percentage of the Lessor's Purchase
Price as set forth below:
<TABLE>
<CAPTION>
If Termination
Date is Percentage of
December 31,* Lessor's Purchase Price
-------------- -----------------------
<S> <C>
1993 100.00%
1994 94.80%
1995 88.87%
1996 82.76%
1997 76.28%
1998 69.50%
1999 62.48%
2000 54.78%
</TABLE>
<PAGE> 13
On the date of such purchase, Lessee shall pay to Lessor any
accrued and unpaid Basic Rent and Additional Rent due as of such date.
* The percentage for any Termination Date which is not a December 31 will be
calculated by Lessor in a manner consistent with the foregoing schedule to
maintain Lessor's economic yield on the next occurring December 31.
5.2 FINAL ADJUSTMENTS. If Lessee elects to
exercise the option described in paragraph 5.1 and the Early Termination Price
is the applicable percentage of Lessor's Purchase Price, a final adjustment of
the Basic Rent payment then due will be made at closing to reflect adjustments
in the Basic Rent for the year or portion thereof preceding such early
termination date with respect to changes in the Libor Rate during such year or
portion thereof.
5.3 CLOSING. A purchase of the Leased Premises
by Lessee pursuant to the exercise of an early termination option shall be
closed on the date set forth in the notice of exercise of such option. Closing
shall occur at the principal office of Lessor, or such other mutually
convenient location as the parties may designate. The Base Lease Term will
terminate upon such closing.
5.4 TITLE TO ASSETS PURCHASED. At the closing
of any purchase pursuant to paragraph 5.1, Lessee shall pay the Early
Termination Price to Lessor in immediately available funds, and Lessor shall
convey to Lessee all of Lessor's right, title, and interest in the Leased
Premises by special warranty deed in substantially the form attached as Exhibit
D hereto, with a covenant by the grantor to the effect that it had not done or
executed, or knowingly suffered to be done or executed, any act, deed or thing
whatsoever whereby or by means whereof the premises conveyed therein, or any
part thereof, then or at any time thereafter, will or may be charged or
encumbered in any manner or way whatsoever, except real property taxes for the
then current and subsequent years, but without further representation, warranty
or indemnity by Lessor, free and clear of all mortgages, liens, and other
encumbrances relating to financing obtained or debts incurred by Lessor,
subject to those matters, if any, set forth on the "Schedule of Permitted
Encumbrances" attached hereto as Schedule 1, as the same may be supplemented
pursuant to paragraph 2.2. Lessee shall accept such conveyance of the Land and
the Facility "as is, where is," and "with all faults," and shall thereafter
defend, indemnify and save Lessor harmless from any losses, damages or claims
arising out of or occurring in connection with the Land or the operation of the
Facility, except such losses, damages, and claims as may arise out of the gross
negligence, willful misconduct or intentionally tortious acts or omissions of
Lessor and its agents and employees.
6. END OF TERM OPTIONS
-------------------
6.1 OPTION TO PURCHASE FACILITY. At the
expiration of the Base Lease Term, Lessee shall have the option either to (a)
purchase the Leased Premises for a purchase price (the "Option Price") equal to
its Fair Market Value on the Termination Date, as determined by an MAI
appraiser selected by Lessor, or (b) return the Leased Premises to Lessor
pursuant to paragraph 6.4; provided, however,
<PAGE> 14
that at the time of exercise of the option to purchase, and at the time of
closing of such purchase, Lessee shall not be in Default under paragraph
15.1(a).
6.2 EXERCISE OF OPTION; CLOSING. Lessee must
exercise one of the options in paragraph 6.1 at least one hundred eighty (180)
days prior to the expiration of the Base Lease Term by notice to Lessor, which
exercise shall be irrevocable. If such notice is not timely received by
Lessor, Lessee shall be deemed to have elected to purchase the Leased Premises
as provided in paragraph 6.1(a). If the option to purchase is exercised or
deemed to have been exercised, the purchase shall be closed on the Termination
Date. Closing shall occur at the principal office of Lessor, or such other
mutually convenient location as the parties may designate.
6.3 TITLE TO ASSETS PURCHASED. At the closing
of any purchase pursuant to paragraph 6.1(a) or 6.2, Lessee shall pay the
Option Price to Lessor in immediately available funds, and Lessor shall convey
to Lessee all of Lessor's right, title, and interest in the Leased Premises by
special warranty deed in substantially the form attached as Exhibit D hereto,
with a covenant by the grantor to the effect that it had not done or executed,
or knowingly suffered to be done or executed, any act, deed or thing whatsoever
whereby or by means whereof the premises conveyed therein, or any part thereof,
then or at any time thereafter, will or may be charged or encumbered in any
manner or way whatsoever, except real property taxes for the then current and
subsequent years, but without further representation, warranty or indemnity by
Lessor, free and clear of all mortgages, liens, and other encumbrances relating
to financing obtained or debts incurred by Lessor, subject to those matters, if
any, set forth on the "Schedule of Permitted Encumbrances" attached hereto as
Schedule 1, as the same may be supplemented pursuant to paragraph 2.2. Lessee
shall accept such conveyance of the Land and the Facility "as is, where is,"
and "with all faults," and shall thereafter defend, indemnify and save Lessor
harmless from any losses, damages or claims arising out of or occurring in
connection with the Land or the operation of the Facility except such losses,
damages, and claims as may arise out of the gross negligence, willful
misconduct or intentionally tortious acts or omissions of Lessor, its agents,
and employees.
6.4 RETURN OF LEASED PREMISES; AUTOMATIC EXTENSION AND SUBSEQUENT SALE.
(a) If Lessee elects to return the Leased Premises
pursuant to paragraph 6.1(b), the Lease shall be automatically
extended for an additional term of twelve (12) months, which
additional term will, however, terminate sooner upon the sale
of the Leased Premises by Lessor as provided herein,
commencing at the expiration of the Base Lease Term. During
such extended lease term Lessee shall pay to Lessor monthly
rental payments of $50,740.66 each, payable in advance on the
first day of each calendar month. During such extension,
Lessee shall also pay Additional Rent as provided in paragraph
4.3. At the end of the extended term Lessee shall promptly
vacate the Leased Premises and return them to Lessor. The
sale of the Leased Premises to a third party shall be arranged
by
<PAGE> 15
Lessor as soon as commercially reasonable following the date
on which the Lessee notifies Lessor of its intention to return
the Leased Premises pursuant to paragraph 6.1(b). If Lessee
is not then in Default under this Agreement, Lessee shall have
the option to act as Lessor's agent in arranging such third
party sale, subject to negotiation of acceptable terms between
Lessee and Lessor, and subject to Lessor's approval of the
terms of sale, which shall not be unreasonably withheld or
delayed. Any such sale shall be "as is", "where is" and "with
all faults", by special warranty deed, without further
representation, warranty or indemnity by Lessor.
(b) All costs and expenses arising from the
marketing and sale of the Leased Premises shall be for the
account of Lessee. Lessee shall (i) promptly provide any
maintenance records relating to the Facility to Lessor and the
potential purchaser, as requested, (ii) maintain and insure
the Leased Premises at its expense through the date title is
conveyed, and (iii) do all other things necessary to
facilitate the transfer of the Leased Premises by Lessor to
the purchaser.
7. REPRESENTATIONS AND WARRANTIES OF LESSEE
----------------------------------------
Lessee hereby represents and warrants to Lessor as follows:
7.1 EXISTENCE AND RIGHTS. Lessee is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Ohio. Lessee has all corporate power and authority,
rights and franchises to own its properties and to carry on its business as now
conducted, and has the corporate power and authority to enter into and perform
this Agreement.
7.2 AUTHORIZATION. The execution, delivery and
performance of this Agreement by Lessee have been duly authorized and do not
require the consent or approval of any governmental body, other regulatory
authority or other Person; are not in contravention of or in conflict with any
law or regulation or any term or provision of Lessee's Amended Articles of
Incorporation or Code of Regulations; and this Agreement is the valid, binding
and legally enforceable obligation of Lessee in accordance with its terms.
7.3 NO CONFLICT. The execution, delivery and
performance of this Agreement will not breach or constitute a default under any
agreement, indenture or other material undertaking or instrument to which
Lessee is a party or by which it or any of its property may be bound or
affected, and such execution, delivery and performance will not result in the
creation or imposition of (or the obligation to create or impose) a lien on any
of its property pursuant to the provisions of any of the foregoing.
<PAGE> 16
7.4 HUFFY CREDIT AGREEMENT. All of the
representations and warranties of Lessee contained in Section 6 of the Huffy
Credit Agreement are hereby incorporated by reference herein in their entirety,
as though fully set forth herein, and Lessee hereby represents that they are
correct and complete on the date hereof as if then made, except as set forth in
Schedule 7.4.
7.5 ENVIRONMENTAL QUALITY. Except as disclosed
in writing to Lessor prior to the date hereof in the Phase I Environmental Site
Assessment dated December 16, 1993, prepared by QSource Environmental Services,
Inc. (the "Phase I Report"), Lessee has complied with all Environmental Laws
with respect to the Leased Premises except when the failure to so comply would
have no material adverse effect on the consolidated operations or financial
condition of Lessee; Lessee has not been notified that it is under
investigation by any state and federal agency designated to enforce any
Environmental Laws with respect to the Leased Premises, except as disclosed in
writing to Lessor prior to the date hereof in the Phase I Report, which such
exceptions shall be acceptable to Lessor.
7.6 OTHER REGULATIONS. Lessee is not subject to
the Investment Company Act of 1940, the Public Utility Holding Company Act of
1935, the Interstate Commerce Act or any other statute or regulation
restricting the execution or performance of this Agreement or any performance
in connection herewith by Lessee.
8. COVENANTS OF LESSEE.
Lessee covenants and agrees that, so long as this Agreement
remains in effect, unless Lessor shall otherwise consent in writing, Lessee
shall do all of the following:
8.1 Huffy Credit Agreement. Effective upon the
date, if any, upon which the Huffy Credit Agreement is terminated or Society
National Bank is no longer a party thereto, all of the covenants and agreements
of Lessee contained in Sections 8 and 9 of the Huffy Credit Agreement are
hereby incorporated by reference in their entirety, as though fully set forth
herein and as if Lessor were the Bank thereunder. Effective at such time,
Lessee agrees to comply with and be bound by such covenants and agreements so
long as this Lease Agreement remains in effect.
8.2 Reports. Furnish at Lessee's expense to
Lessor:
(a) on a quarterly basis commencing with the fiscal
quarter ending March 31, 1994, a certificate signed in the
name of Lessee by its chief financial officer, stating that no
Default or condition or event which, upon the giving of notice
or the passage of time, would constitute a Default has
occurred, or, if any such event has occurred, specifying the
nature thereof, the period of existence thereof and what
action Lessee proposes to take with respect thereto; and
<PAGE> 17
(b) promptly upon obtaining knowledge of a Default
or event which upon notice or passage of time will constitute
a Default hereunder, deliver to Lessor a certificate signed in
the name of Lessee by its chief executive or chief financial
officer specifying the nature thereof, the period of existence
thereof, and what action Lessee proposes to take with respect
thereto.
8.3 COMPLIANCE WITH LAWS. Comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority relating to the Leased Premises, including without
limitation any applicable Environmental Law, noncompliance with which could
have a material adverse effect on the consolidated financial condition or
operations of Lessee at the Leased Premises.
9. CLOSING
-------
9.1 REQUIRED DOCUMENTATION. Simultaneously with
the execution of this Agreement, Lessee is delivering to Lessor the following:
(a) a duly executed officer's certificate of
Lessee in the form attached as
EXHIBIT B;
(b) evidence of proper insurance as described in
section 11;
(c) an appraisal, satisfactory in form and
substance to Lessor, of the fair market value of the Leased
Premises as of a recent date, which shall have been performed
in accordance with FIRREA guidelines by a state certified
appraiser selected by Lessor;
(d) a satisfactory Phase I environmental report
addressed to Lessor and Lessee with respect to the Leased
Premises prepared by a consulting firm engaged by Lessee but
acceptable to Lessor, together with an environmental site
assessment report acceptable to the Lessor in its sole
discretion, certified to the Lessor and to the effect that all
inspections, research and tests customarily and reasonably
required to render a report have been undertaken;
(e) an ALTA owner's policy of title insurance in
form satisfactory to Lessor, issued by a company acceptable to
Lessor in an amount not less than Lessor's Purchase Price,
containing such endorsements as Lessor shall require
including, without limitation, a survey endorsement and an
ALTA 3.0 Zoning Endorsement which shall also cover compliance
with parking requirements in addition to such other matters
customarily covered by such endorsement and affirmatively
insuring that the fee simple estate is
<PAGE> 18
indefeasible and is not subject to any encumbrances other than
Permitted Encumbrances;
(f) a currently dated survey, subject to Lessor's
approval, certified by a registered land surveyor acceptable
to Lessor and prepared in accordance with the Minimum Standard
Detail Requirements for ALTA/ACSM Urban Land Title Surveys,
adopted by the American Land Title Association and the
American Conference on Surveying and Mapping in 1992, showing
(i) the outline of the property, (ii) all utility lines and
easements in the vicinity of the property serving or necessary
to serve the property, (iii) all set-back lines, (iv) all
easements and rights of way existing or of record, (v) whether
the property is located in an area designated by the Secretary
of Housing and Urban Development as having special flood
hazards, and (vi) such additional information as may be
required by Lessor;
(g) an opinion of counsel for Lessee satisfactory
in form and substance to Lessor and substantially in the form
attached as EXHIBIT C;
(h) a Certificate of Good Standing of Lessee from
its state of incorporation; and
(i) any and all other documents reasonably
requested by Lessor.
9.2 CLOSING FEE. Lessee shall pay the Closing
Fee to Lessor in immediately available funds upon execution of this Agreement.
9.3 TRANSACTION COSTS. Lessee shall pay all
transaction and closing costs and expenses relating to this Agreement and the
purchase by Lessor of the Leased Premises from Lessee, including but not
limited to Lessor's legal fees, documentation fees and expenses, title
insurance premiums, survey costs, outside inspectors' costs, appraisals,
recording fees and taxes.
10. FACILITY USE, OCCUPANCY,
------------------------
AND OPERATION
-------------
10.1 COMPLIANCE WITH LAW GENERALLY. Lessee
agrees that the Leased Premises shall be used and occupied in a legal, careful,
safe and proper manner in accordance with all applicable laws, including but
not limited to the Americans with Disabilities Act, that no activity which is
known in the insurance industry as extra or especially hazardous shall be
permitted therein, and that no waste shall be committed or suffered by Lessee
to the Leased Premises, ordinary wear and tear excepted. Lessee shall at all
times maintain in force and effect all permits and licenses required for the
operation of the Facility as an office facility. Notwithstanding the
foregoing, without the prior written consent of Lessor, in no event shall
Lessee use
<PAGE> 19
or permit the use of the Leased Premises for any purpose which materially
increases the risk of environmental liability for Lessor over and above the
level of risk of environmental liability in operating the Facility in the same
manner as was done by Lessee when it was the owner of said Facility immediately
prior to the transfer of legal title to the Leased Premises to Lessor.
10.2 ENVIRONMENTAL COMPLIANCE.
(a) During the Base Lease Term, at Lessee's expense
and without expense to Lessor, Lessee will comply with and
abide by all applicable laws now or hereafter applicable to
the Leased Premises including, but not limited to,
Environmental Laws.
(b) In order to induce Lessor to enter into this
Lease, Lessee covenants and agrees that during the Base Lease
Term it shall:
(i) comply in all respects and cause its
subsidiaries, assignees, tenants or other persons
lawfully occupying or conducting operations on or
about the Leased Premises to comply in all respects
with all Environmental Laws now or hereafter
applicable to the Leased Premises or any operation
thereon;
(ii) have sole responsibility for any and
all costs and expenses associated with such
compliance, including compliance with any such
Environmental Law now or hereafter applicable to the
Leased Premises directed to Lessor or to which
Lessor may become subject;
(iii) not generate, use, treat, store,
release or dispose of, or permit the generation,
use, treatment, storage, release or disposal of
Materials of Environmental Concern on the Leased
Premises, or transport or permit the transportation
of Materials of Environmental Concern to or from the
Leased Premises, other than in each case in
connection with the maintenance of the Leased
Premises and in connection with the operations of
the business of the Lessee in the Leased Premises in
a manner consistent with its operations therein
immediately prior to the date of this Lease, and in
compliance at all times with section 10 hereof; and
(iv) provide Lessor written notice of (x)(A)
any condition, occurrence or release at, on or
arising from the Leased Premises or any operation
<PAGE> 20
thereon that triggers a government reporting requirement under
SARA or (B) any release of Materials of Environmental Concern
in violation of or in a manner giving rise to liability under
any Environmental Laws on or from the Leased Premises that has
resulted or, in the reasonable judgment of Lessee, may result
in personal injury, material property damage or the
requirement that Lessee or any of its subsidiaries,
sublessees, assignees, tenants or other persons occupying or
conducting operations on the Leased Premises remediate such
release, Lessee hereby agreeing to use all reasonable efforts
to give such notice within five Business Days after the
condition, occurrence or release is brought to the attention
of the corporate officer of Lessee responsible for
environmental compliance and (y) any pending or, to the best
knowledge of Lessee, threatened claim under any Environmental
Law against Lessee, any of its subsidiaries, sublessees,
assignees, tenants or other persons lawfully occupying or
conducting operations on the Leased Premises which relates to
the Leased Premises and, if determined adversely to Lessee or
any such persons, could reasonably be expected to have a
material adverse effect on the consolidated operations or
financial condition of Lessee (a "Material Environmental
Claim"), Lessee hereby agreeing to use all reasonable efforts
to give such notice within five Business Days after the date
such Material Environmental Claim or threat thereof is brought
to the attention of the corporate officer of Lessee
responsible for environmental compliance. All such notices
shall describe in reasonable detail the nature of the claim,
investigation, condition, incident or occurrence and Lessee's
response thereto. In addition, Lessee will provide Lessor
with copies of all relevant written communications with any
person asserting a Material Environmental Claim.
10.3 CLEAN AND ORDERLY APPEARANCE. Lessee shall
at all times keep the Leased Premises in a clean, neat, and orderly condition
and shall keep it in at least as good condition as it was on the Effective
Date, ordinary wear and tear excepted, shall cause trash and refuse to be
stored out of view of the general public and the adjoining properties, and
shall cause such trash, refuse, and other waste products to be removed on a
regular basis. Lessee shall keep all parking and walkway areas on the Land
clean, orderly, and reasonably free from snow, ice, and debris.
<PAGE> 21
10.4 REPAIRS AND MAINTENANCE. Lessee shall from
time to time make, at Lessee's expense, all necessary interior and exterior
repairs and replacements to the Facility and all parts thereof, in a condition
and in a manner that complies with all government regulations and requirements
and in accordance with generally accepted procedures and specifications and
shall perform all necessary interior and exterior maintenance to the Land, the
Facility and the other improvements thereon, including without limitation the
landscaped areas, drives, parking areas, aprons, and sidewalks constituting a
part thereof. Lessee shall maintain the Facility in satisfactory working order
and shall keep it in at least as good condition as it was on the Effective
Date, ordinary wear and tear excepted.
10.5 ALTERATIONS OF FACILITY. After providing
not less than thirty (30) days' prior notice to Lessor, Lessee may make at its
own expense such modifications, substitutions, alterations and additions to the
Facility as Lessee may from time to time require or deem appropriate in
Lessee's discretion to adapt the same to Lessee's reasonable business
requirements. All modifications, substitutions, alterations and additions made
by Lessee shall be effected in a good and workmanlike manner and in compliance
with all applicable laws and insurance requirements and shall not diminish the
value, condition or the appearance of, or impair the utility or useful life of
the Facility, shall not violate any covenant, condition, restriction,
reservation, easement, exception or encumbrance which affects the Leased
Premises unless Lessee shall obtain an appropriate waiver, variance or release
of same. All non-severable parts incorporated or installed in the Facility
shall become the absolute property of Lessor upon expiration or termination of
Lessee's leasehold or the abandonment of the Leased Premises by Lessee unless
the Leased Premises are purchased by Lessee pursuant to section 5 or section 6
hereof. Nothing herein shall be construed to constitute Lessee as the agent of
Lessor for purposes of making any such modifications, substitutions,
alterations or additions or to give Lessor any control over the manner of
execution of the work, it being agreed that Lessee and Lessee alone is fully
responsible for completion of and payment for all such modifications,
substitutions, alterations or additions.
10.6 DISCHARGE OF LIENS. Lessee shall defend,
indemnify and hold Lessor and Lessor's interest in the Facility and the Land
harmless from all liens and claims of liens which may be filed or claimed in
connection with any repairs, maintenance, alterations, additions, improvements,
or other work made or done by Lessee. Lessee shall have the right to dispute
or contest any such lien; provided, however, that Lessee first takes all steps
necessary to ensure that the lienor cannot recover against the Leased Premises.
10.7 UTILITIES. Lessee has inspected the Leased
Premises and concluded that it is served by water, gas, electricity, light,
heat, telephone, power and other utilities and communication services
(collectively, the "Utilities") sufficient for Lessee's use of the Leased
Premises. Lessor has not made any representations to Lessee about the
Utilities. Lessee shall not have any right to terminate this Agreement or to
abate its Basic Rent and Additional Rent due under this Lease or to assert any
claim against Lessor on account of the interruption, cessation or
unavailability of any of the Utilities. Lessee, at its expense, shall obtain
and pay for all necessary or required Utilities and other services for the
Leased Premises. Lessor shall not be liable for any damages Lessee may suffer
because of any unavailability of
<PAGE> 22
or interruption or other deficiency in such utility services. Lessor, upon
request of Lessee, and at the sole expense and liability of Lessee, shall join
with Lessee in any application required for obtaining or continuing any of the
Utilities, but in no event shall Lessor be obligated to pay any cost in
connection with such application or for any service supplied by the utility to
which such application is made.
10.8 ABANDONMENT. Should Lessee vacate or
abandon the Leased Premises, Lessor may enter the same, using such force as may
be necessary, change the locks on the doors, and take possession of the Leased
Premises, all without liability to Lessee or derogation of its rights as a
tenant. After 180 days, Lessor may use the Leased Premises for any desired
purpose, with or without terminating this Agreement in accordance with
provisions of this Agreement concerning Default.
10.9 INSPECTION. Lessee shall permit Lessor to
enter and inspect the Leased Premises at any reasonable time for any proper
purpose, including without limitation review of compliance by Lessee with its
obligations hereunder and inspection by a prospective purchaser, mortgagee, or
tenant of Lessor's interest in the Facility or Land. However, Lessor shall
have no duty to inspect and no failure by Lessor to inspect shall relieve
Lessee of any duty which Lessee may have under this Agreement. Lessee shall
also permit Lessor to discuss Lessee's affairs, finances and accounts with the
principal officers of Lessee, all at such reasonable times and as often as
Lessor may reasonably request; provided, however, that Lessor shall keep such
information confidential, except in connection with enforcement or exercise of
Lessor's rights under this Agreement or otherwise available at law or in
equity.
10.10 DURATION OF COVENANTS. Lessor and Lessee
shall be and remain obligated to each other as provided in this section 10 for
a period which commences with the Effective Date and expires on the Termination
Date.
11. INSURANCE
---------
11.1 Required Insurance Coverages. Schedule 11.1
hereto describes Lessee's liability and property insurance providers, ratings,
coverage amounts, terms, conditions, amount of self insurance (if any). Lessee
has caused Lessor to be named as an additional insured and loss payee on such
policies, as its interests may appear, in form and substance acceptable to
Lessor. Beginning on the Effective Date or as soon thereafter as the specified
risks shall arise, and continuing until the Termination Date or, if later, the
date on which the Facility is sold by Lessor pursuant to paragraph 6.4, Lessee
shall continuously maintain in force the following insurance coverage:
(a) all risk insurance coverage against losses
for the full insurable replacement value of the Leased
Premises, including losses by fire, lightning, hail,
windstorm, vandalism, and malicious mischief endorsement;
(b) public liability and property damage with
limits of $1,000,000 per occurrence (subject to $500,000
<PAGE> 23
self-insured retention per occurrence) and with umbrella
coverage of $20,000,000;
(c) boiler and explosion coverage in an amount
not less than full insurable replacement value of the Leased
Premises;
(d) workers' compensation; and
(e) automobile liability with limits of One
Million Dollars ($1,000,000) per occurrence, subject to a
$75,000 self-insured retention per occurrence and with
umbrella coverage of $20,000,000.
Lessee may vary the coverage and retention amounts on its third party liability
policies in its discretion, reasonably and prudently exercised, provided that
Lessee shall not, in exercising such discretion with respect to varying such
coverages and retention amounts, obtain insurance with respect to the Leased
Premises which is less favorable than that obtained for similar facilities that
it or the Guarantor may own.
11.2 CERTAIN POLICY PROVISIONS. All such
policies of insurance shall be written by responsible and accredited companies
of recognized standing authorized to do business in the State of Ohio, shall be
written in standard form and shall provide that the policies shall not be
cancelable except upon thirty (30) days' prior written notice by the insurer to
Lessor. In addition, such policies shall cover such loss contingencies and
hazards as are commonly covered in policies issued on similar properties in the
area of the Facility. Lessee shall deliver to Lessor a certificate of
insurance and, if requested by Lessor, a copy of such policies (or, in lieu of
policies of insurance, binders if then acceptable to Lessor) upon execution of
this Agreement, and a certificate of insurance or other evidence of renewal
and, if requested by Lessor, a copy of any renewal policy shall be delivered to
Lessor as promptly as possible prior to the termination date of any expiring
policy.
11.3 WAIVER OF SUBROGATION. Lessor and Lessee
each hereby waives, on behalf of itself and on behalf of all carriers of the
insurance required to be maintained pursuant to paragraph 11.1 above, all
claims, by subrogation or otherwise, which such waiving party might otherwise
have against the other for loss or damage to the Leased Premises and the
respective interests of both such parties therein, arising out of perils
insured against in accordance with such requirements of this Agreement, but
only to the extent of proceeds of insurance actually received, and only if this
waiver does not or will not invalidate, limit, or otherwise restrict coverage.
11.4 EXCULPATION FOR PROPERTY DAMAGE. All
personal property of every kind and description that may at any time be in, at
or on the Leased Premises shall be kept in, at or on the Leased Premises at
Lessee's sole risk, or at the risk of those claiming under Lessee. Without
limitation of the foregoing waivers of claims of subrogation, Lessor shall not
be liable for any damage to said personal property or any loss of business by
Lessee however arising, including without limitation from the bursting,
overflowing, or leaking of water or pipes, or from other heating, electrical,
or plumbing fixtures, from electric wires, from gas or odors, from acts of
other persons
<PAGE> 24
on or in the vicinity of the Land or from any other cause in any other manner
whatsoever, except to the extent that such damage to personal property may
result from and actually be caused by the gross negligence, willful misconduct
or intentionally tortious acts or omissions of Lessor.
12. GENERAL INDEMNIFICATION
-----------------------
Subject to such waivers and limitations of liability as are
specifically provided hereunder, Lessee shall at all times defend, indemnify
and save Lessor harmless from any and all Damages relating to the Leased
Premises, and from any Damages that may occur or be claimed by or with respect
to any party, person or persons, entity, property or chattels in, on, or about
the Leased Premises, resulting in whole or in part from any negligent or
willfully tortious act done or omission by or through Lessee, any Affiliate of
Lessee, or any third party in the Facility or on the Land or resulting from
Lessee's, any such Affiliate's or any such third party's use, non-use or
occupancy of the Leased Premises in any manner contrary to the requirements of
this Agreement, except for such Damages resulting from the gross negligence or
willful misconduct of Lessor. Without limiting the generality of the
foregoing, Lessee shall defend, indemnify and save Society Corporation and
Lessor and their respective directors, officers, employees, successors and
assigns harmless from any and all Damages that may occur or be claimed,
directly or indirectly, with respect to Lessee's, any Affiliate of Lessee's or
any such third party's violation or failure to comply with all applicable
Environmental Laws, or as a result of or in connection with the assertion of
any claim relating to the presence, generation, handling, disposal, release or
removal of any Materials of Environmental Concern on the Leased Premises,
except for such Damages resulting from the gross negligence or willful
misconduct of Lessor. This covenant of indemnity shall survive expiration or
termination of this Agreement, and shall be construed as supplementary to and
not be construed to conflict with or limit any other covenant of indemnity
contained in this Agreement.
13. DAMAGE OR DESTRUCTION
---------------------
13.1 OPTION TO REBUILD OR TERMINATE. (a) If, at
any time during the Base Lease Term, the Leased Premises is damaged or
destroyed by fire, hail, windstorm, flood or other casualty, regardless of the
severity of such loss and whether or not such loss shall have been insured
against, Lessee shall repair and reconstruct the Leased Premises to
substantially the same condition, or better, as existed immediately prior to
such casualty loss, provided that, if the Leased Premises is destroyed or so
badly damaged that repair is impracticable, Lessee may at its option terminate
the Base Lease Term upon thirty (30) days prior written notice to Lessor.
Lessor shall waive Lessor's interest in insurance proceeds, if any, relating to
such casualty loss, but Lessee's obligation to repair and reconstruct shall not
be limited by the amount of insurance proceeds. If Lessee is required or
elects to repair or reconstruct the Leased Premises, Lessor may disburse the
payment of such insurance proceeds in a manner which assures Lessor of
satisfactory, lien-free completion of such repair or reconstruction in
accordance with standard construction lending disbursement practices.
<PAGE> 25
(b) An election to terminate the Base Lease Term
pursuant to paragraph 13.1(a) shall be treated as a sale of the Leased Premises
to Lessee as a third party as contemplated in paragraph 6.4, except that Lessee
shall pay the Lessor, as Additional Rent, the applicable percentage of Lessor's
Purchase Price set forth below:
<TABLE>
<CAPTION>
If Termination
Date is Percentage of
December 31,* Lessor's Purchase Price
--------------- -----------------------
<S> <C>
1993 100.00%
1994 94.80%
1995 88.87%
1996 82.76%
1997 76.28%
1998 69.50%
1999 62.48%
2000 54.78%
2001 46.78%
2002 38.58%
2003 29.48%
</TABLE>
On the date of such termination, Lessee shall pay to Lessor
any accrued and unpaid Basic Rent and Additional Rent due as of such date.
* The percentage for any Termination Date which is not a December 31 will be
calculated by Lessor in a manner consistent with the foregoing schedule to
maintain Lessor's economic yield on the next occurring December 31.
Upon the payment of such Additional Rent, Lessor shall transfer the Leased
Premises to Lessee in the manner contemplated by paragraph 6.4(a), and shall
waive Lessor's interest in any insurance proceeds related to such casualty
loss.
13.2 NO ABATEMENT OF RENT. Neither Basic Rent
nor Additional Rent shall be abated or reduced during any period in which the
Leased Premises is being repaired or reconstructed or is otherwise
untenantable.
14. EMINENT DOMAIN
--------------
14.1 CONDEMNATION DURING LEASEHOLD - TOTAL TAKING.
(a) If, during the Base Lease Term, the Leased
Premises or any part thereof is condemned or appropriated by
any public authority such that Lessee reasonably determines
that the Leased Premises cannot economically be used by Lessee
for the purposes for which it was used immediately before such
taking (a "Total Taking"), the Base Lease Term shall terminate
on the date on which title to the portion of the Leased
Premises subject to the Total
<PAGE> 26
Taking vests in the condemning authority responsible for such
taking.
(b) A Total Taking as defined in paragraph
14.1(a) shall be treated as a sale of the Leased Premises to a
third party as contemplated in paragraph 6.4, except that
Lessee shall pay the Lessor, as Additional Rent, the
difference, if any, between the condemnation award received by
Lessor (net of any expenses reasonably incurred by Lessor in
connection therewith, including legal and appraisal fees) and
the applicable percentage of Lessor's Purchase Price set forth
below:
<TABLE>
<CAPTION>
If Termination
Date is Percentage of
December 31,* Lessor's Purchase Price
--------------- -----------------------
<S> <C>
1993 100.00%
1994 94.80%
1995 88.87%
1996 82.76%
1997 76.28%
1998 69.50%
1999 62.48%
2000 54.78%
2001 46.78%
2002 38.58%
2003 29.48%
</TABLE>
On the date of such termination, Lessee shall pay to Lessor
any accrued and unpaid Basic Rent and Additional Rent due as of such date.
* The percentage for any Termination Date which is not a December 31 will be
calculated by Lessor in a manner consistent with the foregoing schedule to
maintain Lessor's economic yield on the next occurring December 31.
14.2 CONDEMNATION DURING LEASEHOLD - NONSUBSTANTIAL.
(a) If a portion of the Leased Premises is
condemned or appropriated by any public authority during the
Base Lease Term in a manner which Lessee reasonably determines
would not materially and adversely affect the use thereof by
Lessee after practical repair and reconstruction, this
Agreement shall remain in effect and Lessee shall repair and
reconstruct the Leased Premises to as nearly as practicable
the same condition, or better, as existed immediately prior to
such taking, in which event Lessor shall deliver the proceeds
relating to such condemnation or appropriation loss to Lessee,
and any amount in excess of the amount required to repair or
reconstruct the
<PAGE> 27
Leased Premises shall be retained by Lessor to compensate
Lessor for any portion of the Land and any appurtenant rights
and easements taken. Lessee's obligation to repair and
reconstruct shall not be limited to the proceeds of
condemnation available for such purposes. Lessor may disburse
the payment of such proceeds in a manner that assures Lessor
of satisfactory, lien-free completion of such repair or
construction in accordance with standard construction lending
disbursement practices.
(b) If Lessee purchases the Leased Premises at
the end of the Base Lease Term pursuant to paragraph 6.2 or
earlier pursuant to paragraph 5.1, the amount of any
condemnation proceeds retained by Lessor under paragraph
14.2(a) shall be credited toward the payment of the Option
Price or the Early Termination Price, as the case may be.
14.3 NO ABATEMENT OF RENT. As long as the Base
Lease Term remains in effect, neither Basic Rent nor Additional Rent shall be
abated during or after the period in which the Leased Premises are being
repaired or reconstructed. Lessor shall be entitled to receive, and except for
proceeds to be delivered to Lessee as provided above, Lessor shall retain as
its sole property, all proceeds of any condemnation award for, or relating to,
the Leased Premises (including the leasehold created hereby), but Lessee may
make a separate claim against the condemning authority for the value of its
trade fixtures and costs of relocation, if such is required.
15. DEFAULT AND REMEDIES
--------------------
15.1 DEFAULT DEFINED; CURE PERIOD.
(a) Should Lessee fail to pay any installment of
Basic Rent, Additional Rent, or any other sum herein required
to be paid to Lessor within ten (10) days after such payment
is due and payable; or
(b) should Lessee abandon or vacate the Leased
Premises for any period of more than one hundred eighty (180)
consecutive days; or
(c) should Lessee fail to maintain any required insurance; or
(d) should Lessee fail to perform any other
covenant or to comply with any other condition herein provided
to be performed or complied with by Lessee (other than the
payment of money and maintenance of insurance), within thirty
(30) days after receipt by Lessee of written notice thereof
from Lessor (or, in the event such failure can be removed or
corrected, but cannot be
<PAGE> 28
removed or corrected within such thirty (30) day period, in
the event Lessee does not commence to remove or correct such
failure within said thirty (30) day period and thereafter
diligently pursue such removal or correction to completion as
quickly as may be reasonably practicable but in any event,
with respect to all matters except those involving compliance
with Environmental Laws which may require a longer remediation
period, within one hundred eighty (180) days after the onset
of such failure); or
(e) should there occur any material breach of
any representation or warranty by Lessee hereunder or in any
financial statements or other documents related to the
transactions contemplated by this Agreement; or
(f) should Lessee default under any indebtedness
after expiration of any applicable grace or cure period for
borrowed money in excess of $5,000,000 in the aggregate or
should there occur any Event of Default (as defined in the
Huffy Credit Agreement) under the Huffy Credit Agreement; or
(g) should there be a judgment entered against
Lessee or any of its Affiliates in an uninsured amount in
excess of $3,000,000, which judgment remains unvacated,
unbonded, unstayed or unsatisfied for a period of sixty (60)
days; or
(h) should (i) any Plan subject to Title IV of
ERISA be terminated by the PBGC pursuant to Subtitle C of
Title IV of ERISA, (ii) a trustee be appointed by the
appropriate U.S. District Court to administer any such Plan,
(iii) the PBGC institute proceedings to terminate any such
Plan, or (iv) any such Plan fail to satisfy the minimum
funding standard for such Plan for a Plan year as established
in Section 412 of the Internal Revenue Code, as amended; or
(i) should a court having jurisdiction enter a
decree or order (i) for relief in respect of Lessee or any
Subsidiary or Subsidiaries that account for 3% or more of the
Consolidated Adjusted Net Worth of Lessee and its Subsidiaries
(as each term is defined in the Huffy Credit Agreement), in an
involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or (ii)
appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of Lessee or any
Subsidiary or Subsidiaries that account for 3% or more of the
Consolidated Adjusted Net Worth of Lessee and its
Subsidiaries, for any substantial part of their
<PAGE> 29
respective properties or ordering the winding up or liquidation
of its affairs;
or
(j) should either (i) a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect be commenced by Lessee or any Subsidiary
or Subsidiaries that account for 3% or more of the
Consolidated Adjusted Net Worth of Lessee and its
Subsidiaries, or (ii) either Lessee or any Subsidiary or
Subsidiaries that account for 3% or more of the Consolidated
Adjusted Net Worth of Lessee and its Subsidiaries consent to
the entry of an order for relief in an involuntary case under
such law, or shall consent to the appointment of, or taking
possession by, a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or similar official) for any
substantial part of their respective properties; or
(k) should Lessee or any Subsidiary or
Subsidiaries that account for 3% or more of the Consolidated
Adjusted Net Worth of Lessee and its Subsidiaries make any
general assignment for the benefit of creditors or take any
corporate action in furtherance of any of the foregoing or any
of the matters described in paragraph 15.1(j) above;
then and in any such event Lessee shall be in Default hereunder. Any Default
shall be deemed to be continuing until it is waived in writing by Lessor or
cured to the reasonable satisfaction of Lessor. Notwithstanding anything to
the contrary, the occurrence of any of the events described in paragraph
15.1(j) with respect to Subsidiaries of Lessee shall not be a Default if: (a)
at least ten (10) Business Days prior to the occurrence of any such event
Lessee notifies Lessor of an intention to cause or consent to such event
pursuant to a specific investment program (such notice shall identify the
Subsidiary and shall contain a reasonably detailed discussion of the proposed
investment program); (b) the aggregate book value of Lessee's investments in
Subsidiaries then subject to this exception shall not exceed 5% of Consolidated
Total Assets (as defined in the Huffy Credit Agreement); and (c) such
investment program otherwise complies with the terms of the Huffy Credit
Agreement.
15.2 RIGHTS UPON DEFAULT. Upon the occurrence
and continuation of any Default, at its option, Lessor may declare Lessee to be
in default under this Agreement (except that no such declaration shall be
required in the event of a Default described in paragraph 15.1(i), (j) or (k)
above) and:
(a) Lessor may take all steps to protect and
enforce the rights of Lessor or the obligations of Lessee
hereunder, whether by action, suit or proceeding at law or in
equity (for the specific performance of any covenant,
condition or agreement contained in this Agreement, or in aid
of the execution of any power herein granted or for
<PAGE> 30
any foreclosure, or for the enforcement of any other
appropriate legal or equitable remedy) or otherwise as Lessor
shall deem most advisable to protect and enforce any rights of
Lessor hereunder or the obligations of Lessee hereunder;
(b) Lessor may terminate the Base Lease Term by
giving a termination notice to Lessee specifying a date not
less than fifteen (15) days after the date of such notice on
which the Base Lease Term shall terminate and on such date the
Base Lease Term and the estate granted hereunder shall expire
and all rights of Lessee under this Agreement shall cease on
the termination date so specified; and
(c) Lessor, whether or not the Base Lease Term
shall have been terminated pursuant to clause (b) of this
paragraph 15.2 shall have the right to terminate Lessee's
right to possession hereunder and to re-enter and take
possession of the Leased Premises hereunder or any part
thereof by giving a written notice to Lessee to quit and
surrender possession on a date not less than fifteen (15) days
after the date of such notice whereupon the right of Lessee to
the possession of the Leased Premises hereunder shall cease
and terminate on such date, and Lessor shall have the
immediate and continuing right then and at any time and from
time to time thereafter without further notice, to re-enter
upon or take possession of such Leased Premises or any part
thereof with or without legal proceedings (summary or
otherwise) and to remove all persons and property therefrom as
Lessor may elect to do. Lessor shall have no liability to
Lessee for or by reason of such entry or taking of possession
and during such possession, Lessor may hold and/or dispose of
the Leased Premises at public or private sale, as the Lessor
may determine, free and clear of any rights, titles,
interests, and estates of Lessee therein, thereto or
thereunder (other than any sign face, trademark or other
indicia of origin), and without any duty to account to Lessee
with respect to holding, disposition or sale thereof or
proceeds therefrom. Subject to clause (d) below, should
Lessor elect to re-enter as herein provided or should Lessor
take possession pursuant to legal proceedings or pursuant to
any notice provided for by law or upon termination of this
Lease pursuant to clause (b) of this paragraph 15.2 or
termination of Lessee's right to possession pursuant to this
clause (c) of this paragraph 15.2 or otherwise as permitted by
applicable laws, Lessee shall peaceably quit and surrender the
Leased Premises to Lessor.
<PAGE> 31
15.3 PAYMENT OF ENFORCEMENT EXPENSES. To the
maximum extent permitted by law, should Lessee commit a Default under this
Agreement, it hereby covenants and agrees to pay and discharge all reasonable
costs and expenses which shall be incurred by Lessor arising out of such
Default and in enforcing the covenants and agreements of this Agreement,
including without limitation reasonable attorneys' fees and enforcement
expenses incurred in connection with a bankruptcy proceeding.
15.4 FORBEARANCE NOT TO LIMIT REMEDIES. The
failure of Lessor to insist in any one or more cases on strict or specific
performance of any provision of this Agreement or to exercise any right herein
contained shall not constitute a waiver in the future of such right.
Acceptance by Lessor of rent or other payment, or acceptance of any other
performance required hereunder with knowledge of a breach by Lessee of any
provision hereof shall not constitute a waiver of such breach, nor shall any
acceptance of rent or other payment in a lesser amount than herein provided for
operate or be construed in any other manner other than as a payment on account
of the earliest rent or other charge then unpaid by Lessee. No remedy referred
to in this section 15 is intended to be exclusive, but each shall be cumulative
and in addition to any other remedy referred to above or otherwise available to
Lessor at law or in equity, and the exercise in whole or in part by Lessor of
any one or more of such remedies shall not preclude the simultaneous or later
exercise by Lessor of any or all other such remedies. No waiver by Lessor of
any Default hereunder shall in any way be, or be construed to be, a waiver of
any future or subsequent Default.
16. ASSIGNMENT, SUBLEASING,
AND SUBCONTRACTING
-----------------------
16.1 ASSIGNMENT BY LESSEE. Lessee may not assign
its rights, or any of them hereunder except to an Affiliate of Lessee
(incorporated under the laws of a state of the United States) which shall
assume in writing and agree to be bound by all of the terms, conditions, duties
and obligations hereunder, and then only if Lessor shall have given its prior
consent to such assignment. Lessor shall not withhold or delay such consent
unreasonably. A change in control of Lessee shall be deemed to constitute an
assignment for purposes of this paragraph. As used herein, "control" of Lessee
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of Lessee, whether through the
ownership of voting securities, by contract or otherwise. Lessee shall not
make or agree to make any partial assignment of the rights granted or conferred
hereunder. No sublease of the Leased Premises or any portion thereof shall be
granted hereunder, except that Lessee may sublease up to 50% of the square
footage of the Facility to any third party. Any assignment, sublease, or
subcontract (or attempted assignment, sublease, or subcontract) in violation of
these restrictions shall be void.
16.2 EFFECT OF ASSIGNMENT. If Lessee assigns its
rights or any of them hereunder to Lessee's Affiliate, such assignment shall
not relieve Lessee of any obligations hereunder unless such Affiliate's
tangible net worth is not less than the tangible net worth of the Lessee at the
time of assignment. Unless Lessee is relieved from its obligations hereunder,
any event subsequent to such assignment that causes Lessee to no longer have a
substantial economic investment in or economically
<PAGE> 32
significant relationship with the entity or person that is Lessee's Affiliate
shall be deemed an assignment of this Agreement and shall not be valid unless
Lessor's prior consent shall have been obtained.
16.3 BIND AND INURE. All terms, conditions,
duties, and obligations of this Agreement shall be binding on, and all rights
and benefits shall inure to the benefit of, the respective permitted successors
and assigns of Lessor and Lessee.
17. SURRENDER; PERSONAL PROPERTY
----------------------------
17.1 CONDITION UPON TERMINATION. Except to the
extent that Lessee shall have purchased the Leased Premises pursuant to section
5 or section 6, Lessee shall surrender the Leased Premises to Lessor upon
expiration or termination of the Base Lease Term in as good condition and
repair as the same shall be at the Effective Date, ordinary wear and tear and
construction of permitted improvements thereon excepted, consistent with normal
usage of the Leased Premises, as evidenced by an architectural/engineering
report provided by a firm acceptable to Lessor, with all associated expenses to
be paid by Lessee. Lessee shall be entitled to submit to Lessor, on or before
March 31, 1994, a similar architectural/engineering report as to the current
condition of the Leased Premises in order to provide a baseline for any such
reports in the future. The Leased Premises must be capable of fulfilling the
purpose for which it was originally intended, must conform to all regulatory
requirements imposed by any applicable governmental body prior to the
Termination Date and any Materials of Environmental Concern at the Leased
Premises (but not those incorporated as a part of the physical structure of the
Leased Premises, except for any asbestos containing materials) which Lessor
reasonably determines materially impair the marketability or then current Fair
Market Value of the Leased Premises shall be removed by Lessee. No tenancy of
any duration (other than a tenancy at will) shall be created by Lessee's
holding over beyond the Termination Date.
17.2 RESPONSIBILITY FOR PERSONALTY. All
equipment and trade fixtures furnished by Lessee and used in the operation of
the Leased Premises, shall at all times be and remain the personal property of
Lessee. Unless Lessee shall have purchased the Leased Premises pursuant to
section 5 or section 6, Lessee shall, on or prior to the Termination Date,
remove all of such equipment and trade fixtures from the Leased Premises. At
Lessor's request, Lessee shall repair all damage to the Leased Premises caused
by such trade fixtures and equipment or by their removal.
18. QUIET ENJOYMENT
---------------
Lessor covenants that, for so long as Lessee shall enjoy any
leasehold estate under this Agreement, Lessee, having performed all covenants
and obligations herein set forth, shall have quiet and peaceable possession of
the Leased Premises, subject to and on the terms and conditions herein
provided, free and clear of any claim by, from, through, or under any person
lawfully claiming an interest in the Leased Premises from or through Lessor.
<PAGE> 33
19. INDEPENDENT CONTRACTORS
-----------------------
Nothing herein shall be deemed to constitute Lessor and Lessee
as partners or joint venturers of any nature or to provide that either party
shall have any responsibility or authority for or in connection with the
business activities of the other, except as provided in paragraph 6.4(a).
Neither party shall have any control over or responsibility for or obligations
to the employees or other agents of the other. The relationship of the parties
hereunder is that of independent contractors and of lessor and lessee.
20. REFORMATION; SEVERABILITY
-------------------------
If any clause or provision of this Agreement shall be held by
final judgment of a court of competent jurisdiction to be illegal, invalid, or
unenforceable, then it is the intention of the parties that the remainder of
this Agreement shall not be affected thereby, and in lieu of each clause or
provision of this Agreement that is illegal, invalid, or unenforceable, there
shall be added as a part of this Agreement a clause or provision agreeable to
the parties as similar in terms to such illegal, invalid, or unenforceable
clause or provision as may be possible without being illegal, invalid, or
unenforceable. If such reformation cannot be accomplished, the offending
provision shall be stricken and the remainder of this Agreement shall remain in
full force and effect; provided, however, that if such offending provision
cannot be reformed without resulting in a material change in the contractual
relationship between the parties, thereby depriving either or both of the
parties of the benefit of the fundamental economic bargain herein provided,
this Agreement shall become voidable upon demand of the party whose economic
interests are thus impaired.
21. NOTICES
-------
Any notices under or pursuant to this Agreement must
be in writing and shall be deemed duly sent when delivered in hand or when
mailed by registered or certified mail, return receipt requested, addressed as
follows:
To Lee: Huffy Corporation
P.O. Box 1204
Dayton, Ohio 45401
Attention: Assistant Treasurer
Telecopy: (513) 865-5470
With a copy to: Huffy Corporation
P.O. Box 1204
Dayton, Ohio 45401
Attention: General Counsel
Telecopy: (513) 865-5470
<PAGE> 34
To Lessor: SELCO Service Corporation
c/o Society Equipment Leasing Company
127 Public Square
Cleveland, Ohio 44114
Attention: President
Telecopy: (216) 689-7926
With a copy to: Gerald G. Greenberg, Esq.
Taft, Stettinius & Hollister
1800 Star Bank Center
425 Walnut Street
Cincinnati, OH 45202
Telecopy: (513) 381-0205
Either party may change such address by sending notice of the change to
the other party.
22. CONSTRUCTION AND INTERPRETATION
-------------------------------
22.1 WAIVERS. Any term, covenant, condition,
representation, or warranty under this Agreement may be waived by the party
entitled to the benefit thereof, and any default in performance by one party
may be waived by the party entitled to receive such performance, but none of
such provisions of this Agreement shall be considered waived by either party
unless such waiver is reduced to writing and signed by the party entitled to
such benefits. No such waiver shall be construed as a modification of any of
the provisions of this Agreement or as a waiver of any past or future default
or breach hereof, except as expressly stated in such waiver.
22.2 SURVIVAL OF COVENANTS. All covenants and
agreements and all representations of either party not required by their terms
to be fully performed and discharged prior to expiration or earlier termination
of this Agreement shall survive such expiration or termination.
22.3 EXERCISE OF DISCRETION. Whenever either
party shall have the right under this Agreement, either expressly or by
implication, to exercise such party's discretion in making a decision, granting
or withholding an approval, or consenting to some action on behalf of the other
party, it is understood that such discretion is absolute and the exercise
thereof is not subject to review or question for any reason, unless the
contrary is expressly provided with respect to such decision (for example, in
those instances in which it is provided that discretion is to be exercised
reasonably).
22.4 NEITHER PARTY DRAFTER. This Agreement
represents the culmination of extensive and arms length negotiations between
the parties. Neither party shall be deemed the drafter of this Agreement.
22.5 CAPTIONS. Section and paragraph headings
have been included in this Agreement solely for the convenience of the reader.
Such headings do
<PAGE> 35
not constitute a part of this Agreement and shall be disregarded in the
construction or interpretation of this Agreement and every portion hereof.
22.6 CERTAIN WORDS AND PHRASES. Whenever the
terms "herein," "hereof," "hereunder," or words of like import are used in this
Agreement, the intended inference is to the entire Agreement and not to the
clause, sentence, paragraph or section in which such word appears. The word
"paragraph" refers to a single paragraph designated by a separate number. The
word "section" refers to a portion of this Agreement comprised of a series of
one or more paragraphs designated by the same numerical series. For example,
this section 22 includes paragraphs 22.1 through 22.8; the following section 23
consists of a single paragraph. Pronouns of any specific gender shall be
deemed to include all other genders. The singular shall include the plural,
and the plural the singular, unless the context otherwise requires.
22.7 TIME OF THE ESSENCE. Time is of the essence
with respect to all obligations and rights of the parties under this Agreement.
22.8 CHOICE OF LAW. This Agreement shall be
governed by and construed in accordance with the laws of the United States and
of the State of Ohio, without giving effect to conflicts of law principles
thereof. Lessee agrees that the state and federal courts in Montgomery County,
Ohio shall have exclusive jurisdiction over all matters arising out of this
Agreement, and that service of process in any such proceeding shall be
effective if mailed to Lessee at its address provided above.
23. MEMORANDUM OF AGREEMENT
A memorandum of this Agreement in proper form to give notice
for recording purposes of the demise of the Leased Premises shall be executed
and recorded upon request by either party, with the costs of preparation and
filing of such memorandum being paid by Lessee. Such memorandum may include
selected covenants, including without limitation those which are intended to
run with the land hereunder. This Agreement shall not be recorded.
<PAGE> 36
24. CONFIDENTIALITY
---------------
The Lessor agrees (on behalf of itself and each of its
affiliates, directors, officers, employees and representatives) to use
reasonable precautions to keep confidential, in accordance with its customary
procedures for handling confidential information of this nature, any non-public
information supplied to it by the Lessee pursuant to this Agreement which is
identified by the Lessee as being confidential at the time the same is
delivered to Lessor (and which at the time is not, and does not thereafter
become, publicly available or available to Lessor from another source not known
by Lessor to be subject to a confidentiality obligation to the Lessee not to
disclose such information), provided that nothing herein shall limit the
disclosure of any such information (i) to the extent required by statute, rule,
regulation or judicial process, (ii) to counsel for the Lessor, (iii) to bank
examiners, auditors or accountants, (iv) in connection with any litigation to
which the Lessor is a party or (v) to any assignee (or prospective assignee) so
long as such assignee (or prospective assignee) first agrees, in writing, to be
bound by confidentiality provisions similar in substance to this section 24;
provided that the Lessor shall, upon receipt of a request or identification of
the requirement for disclosure pursuant to clause (iv) hereof, make reasonable
efforts to keep the Lessee informed of such request or identification;
provided, further, that the Lessee acknowledges that the Lessor may make
disclosure as required or requested by any governmental agency or
representative thereof and that the Lessor is subject to bank regulatory
agencies and may be required to provide to, or otherwise make available for
review by, the representatives of such agencies any such non-public
information.
<PAGE> 37
[SIC] 25. INTEGRATION; AMENDMENT
This Agreement, together with the Exhibits and Schedules
attached hereto or incorporated by reference, embodies the entire agreement and
understanding of the parties with respect to the subject matter hereof.
Neither party shall be bound by or liable for any prior or contemporaneous
statement, representation, promise, inducement, or understanding of any kind or
nature which is not set forth or provided for herein. This Agreement may not
be amended, changed, modified, or altered except in a writing signed by both
parties and declaring therein the intention of the parties that said writing
shall effect an amendment hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized officers or agents as of the date and year
of acknowledgement of their signatures, set forth below.
Signed and acknowledged in the SELCO SERVICE CORPORATION
presence of:
/s/ Ronald L. DeBruler By: /s/ A.J. Desposito
- --------------------------------- --------------------------------------
Printed Name: Roland L. Depruler Its: President
/s/ Karla S. McLane
Printed Name: Karla S. McLane
HUFFY CORPORATION
/s/ Pamela J. Whipps By: /s/ Charlton L. George
- --------------------------------- ---------------------------------------
Printed Name: Pamela J. Whipps Its: VP Finance
/s/ William H. Seall
- ---------------------------------
Printed Name: William H. Seall
<PAGE> 38
STATE OF OHIO )
) SS:
COUNTY OF Montgomery )
The foregoing instrument was acknowledged before me this
29 day of December, 1993, by A. J. Desposito, the President of SELCO
Service Corporation, a bank service corporation, on behalf of the corporation.
/s/ Joya L. Murr
_____________________________________
Notary Public
Joya L. Murr, Notary Public
In and for the State of Ohio
My Commission Expires May 29, 1994
STATE OF OHIO )
) SS:
COUNTY OF Montgomery )
The foregoing instrument was acknowledged before me this
29 day of December, 1993, by Charlton L. George, the
Vice President-Finance of Huffy Corporation, an Ohio
corporation, on behalf of the corporation.
/s/ Joya L. Murr
_____________________________________
Notary Public
Joya L. Murr, Notary Public
In and for the State of Ohio
My Commission Expires May 29, 1994
This instrument prepared by:
Tammy P. Hamzehpour
Taft, Stettinius & Hollister
1800 Star Bank Center
425 Walnut Street
Cincinnati, OH 45202-3957
(513) 381-2838
<PAGE> 39
MEMORANDUM OF LEASE
Pursuant to Section 5301.251, Ohio Revised Code, this Memorandum of Lease has
been executed for recording purposes. The undersigned Landlord and Tennant
certify that they have entered into a certain Lease Agreement dated December
29, 1993 (hereinafter referred to as the "Lease"), as more fully set forth
below:
1. The Landlord is: SELCO Service Corporation
c/o Society Equipment Leasing Company
127 Public Square
Cleveland, OH 44114
2. The Tennant is : Huffy Corporation
P.O. Box 1204
Dayton, OH 45401
3. The Leased Premuses are descibred as follows: The Huffy Corporation
headquarters facility located at 7701 Byers Road, Miamisburg, Ohio. The record
descriptions of the real property which includes the Leased Premises is
attached hereto as Exhibit A and forms a part hereof.
4. The term of the Lease commences on December 29, 1993. The initial term
of the Lease ends on December 31, 2003. The Tenant has the option, subject to
terms and conditions contained in the Lease, to renew the term of the Lease for
an additional period not to exceed twelve (12) months.
5. This Memorandum contains only selected provisions of the Lease, and
reference is made to the full text of the Lease for the terms thereof. This
Memorandum shall not, in any way, amend or supersede the terms and conditions
of the aforesaid Lease.
IN WITNESS WHEREOF, the undersigned have executed this Memorandum of Lease on
the date of acknowledgment shown below.
Signed and ackowledged LANDLORD:
in the presence of: SELCO Service Corporation
As to Landlord:
/s/ Arline Z. Adams By: /s/ A. J. Desposito
- ------------------------- ------------------------------
Name: Arline Z. Adams Name: A. J. Desposito
Title: President
---------
/s/ George Eckstein
- -------------------------
Name: George Eckstein
---------------
<PAGE> 40
As to Tenant: TENANT:
Huffy Corporation
/s/ Melanie M. Clutter By: /s/ Timothy G. Howard
- ------------------------ ---------------------
Name: Melanie M. Clutter Name: Timothy G. Howard
------------------ --------------------
Title: V.P. and Controller
/s/ Eric P. Witte -------------------
- ------------------------
Name: Eric P. Witte
-------------
STATE OF OHIO
COUNTY OF MONTGOMERY
The foregoing instrument was acknowledged before me this
29th day of December, 1993, by A. J. Desposito, the President of
SELCO Service Corporation, on behalf of the corporation.
____________________________
Notary Public
STATE OF OHIO
COUNTY OF MONTGOMERY
The foregoing instrument was acknowledged before me this
29th day of December, 1993, by TIMOTHY G. HOWARD, the V.P. &
CONTROLLER of Huffy Corporation, on behalf of the corporation.
/s/ Pamela K. Booher
--------------------
Notary Public
PAMELA K. BOOHER, Notary Public
In and for the State of Ohio
My Commission Expires
September 13, 1997
<PAGE> 41
As to Tenant: TENANT:
Huffy Corporation
_________________________ By:___________________
Title:___________________ Name:_________________
Name:____________________
STATE OF OHIO
COUNTY OF CUYAHOGA
The foregoing instrument was acknowledged before me this 29th day of
December, 1993, by A.J. Desposito, the President of SELCO Service Corporation,
on behalf of the corporation.
/s/ Phyllis D. Stepler
__________________________________
Notary Public
STATE OF OHIO
COUNTY OF MONTGOMERY
The foregoing instrument was acknowleged before me this 29th day of December,
1993, by _______________________________, the ________________________________
of Huffy Corporation, on behalf of the corporation.
__________________________________
Notary Public
<PAGE> 1
EXHIBIT NO. 10.dd
DESCRIPTION OF FINANCIAL PLANNING AND
TAX PREPARATION SERVICES BETWEEN
HUFFY CORPORATION AND CERTAIN OFFICERS AND EMPLOYEES
<PAGE> 2
DESCRIPTION OF TAX SERVICES ARRANGEMENT
BETWEEN HUFFY CORPORATION AND CERTAIN EXECUTIVE
OFFICERS AND KEY EMPLOYEES
-----------------------------------------------
Huffy Corporation provides certain executive officers and key employees with
financial and tax planning services and tax return preparation services,
utilizing the service of an independent public accounting firm (excluding Huffy
Corporation's independent public accountants) and subject to specified maximum
cost limitations.
<PAGE> 1
EXHIBIT NO. 10.ee
PROFIT SHARING BONUS PLAN
OF HUFFY CORPORATION FOR 1993
<PAGE> 2
PROFIT SHARING BONUS PLAN - C 93 ENTIRE POLICY REVISED
POLICY
- ------
CERTAIN EXEMPT EMPLOYEES OF THE CORPORATION AND ITS SUBSIDIARIES SHALL BE GIVEN
CONSIDERATION FOR PAYMENT UNDER THE CORPORATION'S PROFIT SHARING BONUS PLAN
PROVIDED THEY HAVE COMPLETED SIX (6) MONTHS OF SERVICE BY CALENDAR YEAR END.
PAYMENTS WILL BE CONSIDERED ON THE BASIS OF CORPORATE AND HUFFY COMPANY
FINANCIAL RESULTS AND, FOR SOME POSITIONS, INDIVIDUAL PERFORMANCE AGAINST
OBJECTIVES.
THE SCHEDULES SET FORTH BELOW ARE GUIDELINES ONLY AND PAYMENTS MAY BE MODIFIED
OR OMITTED BY MANAGEMENT, OR BY THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS, IN THEIR SOLE DISCRETION.
PAYMENTS SHALL BE MADE ONLY TO EMPLOYEES WITH AT LEAST "MEETS SOME BUT NOT ALL
PERFORMANCE REQUIREMENTS" JOB EVALUATION.
<TABLE>
<CAPTION>
Bonus Opportunity as a % of
I. Basis and Level of Awards Actual Base Salary
------------------------- ---------------------------
Min. Target Max.
---- ------ ----
<S> <C> <C> <C> <C>
A. Chairman and President
----------------------
Corporate RONA 0 40.0% 80.0%
Individual Performance Against Goals 0 10.0% 20.0%
--- ----- -----
0% 50.0% 100.0%
B. Executive Vice President
------------------------
Corporate RONA 0 32.0% 64.0%
Individual Performance Against Goals 0 8.0% 16.0%
--- ----- -----
0% 40.0% 80.0%
C. Other Corporate Officers
------------------------
Corporate RONA 0 22.5% 45.0%
Huffy Company Performance* vs. PP 0 1.5% 3.0%
Individual Performance Against Goals 0 6.0% 12.0%
--- ------ -----
0% 30.0% 60.0%
<FN>
*Huffy Company Performance as used herein means the principal criteria
(Huffy Company RONA or Huffy Company EBIT-AUC) utilized for the assigned
Huffy Company.
</TABLE>
<PAGE> 3
<TABLE>
PROFIT SHARING/BONUS PLAN (Continued)
<S> <C> <C> <C> <C>
D. Huffy Company Heads
-------------------
1. HBC*, HSC, and WIS
Corporate RONA 0 6.0% 12.0%
Huffy Company RONA vs. PP 0 18.0% 36.0%
Individual Performance Against Goals 0 6.0% 12.0%
--- ----- -----
0% 30.0% 60.0%
*HBC President/General Manager also participates in the HBC
Gainsharing Program. Any monies earned under this PSBP will be
reduced by an amount equal to the amount earned under the HBC
Gainsharing Program.
2. HSF
Corporate RONA 0 6.0% 12.0%
Huffy Company EBIT-AUC vs. PP 0 18.0% 36.0%
Individual Performance Against Goals 0 6.0% 12.0%
--- ----- -----
0% 30.0% 60.0%
3. TTH
Corporate RONA 0 6.0% 12.0%
Huffy Company EBIT-AUC vs. PP 0 18.0% 36.0%
Individual Performance Against Goals 0 6.0% 12.0%
--- ----- -----
0% 30.0% 60.0%
4. GBPC
Corporate RONA 0 6.0% 12.0%
Huffy Company (without GWPC)
RONA vs. PP 0 14.4% 28.8%
GWPC RONA vs. PP 0 3.6% 7.2%
Individual Performance Against Goals 0 6.0% 12.0%
--- ----- -----
0% 30.0% 60.0%
E. Huffy Company Staffs
--------------------
1. HBC*, HSC, WIS
Huffy Company RONA vs. PP 0 12.0% 24.0%
Individual Performance Against Goals 0 3.0% 6.0%
--- ----- -----
0% 15.0% 30.0%
<FN>
*HBC Staff also participate in the HBC Gainsharing Program.
Any monies earned under this PSBP will be reduced by an amount
equal to the amount earned under the HBC Gainsharing Program.
</TABLE>
<PAGE> 4
<TABLE>
PROFIT SHARING/BONUS PLAN (Continued)
<S> <C> <C> <C> <C>
2. GWPC Vice President & General Manager
GWPC RONA vs. PP 0 12.0% 24.0%
Individual Performance Against Goals 0 3.0% 6.0%
--- ------ -----
0% 15.0% 30.0%
3. GBPC Vice President - Operations
Huffy Company (without GWPC)
RONA vs. PP 0 12.0% 24.0%
Individual Performance Against Goals 0 3.0% 6.0%
--- ----- -----
0% 15.0% 30.0%
4. TTH Staff and Manager, Cost and
Control; TTH Harrisburg Plant Manager
Huffy Company EBIT-AUC vs. PP 0 12.0% 24.0%
Individual Performance Against Goals 0 3.0% 6.0%
--- ----- -----
0% 15.0% 30.0%
5. HSF Staff
Huffy Company EBIT-AUC vs. PP 0 12.0% 24.0%
Individual Performance Against Goals 0 3.0% 6.0%
--- ----- -----
0% 15.0% 30.0%
6. GBPC Staff (excluding GBPC V.P. -
Operations and GWPC V.P./General Manager)
Huffy Company (without GWPC)
RONA vs. PP 0 9.6% 19.2%
GWPC RONA vs. PP 0 2.4% 4.8%
Individual Performance Against Goals 0 3.0% 6.0%
--- ----- -----
0% 15.0% 30.0%
</TABLE>
<PAGE> 5
<TABLE>
PROFIT SHARING/BONUS PLAN (Continued)
<S> <C> <C> <C> <C>
F. Corporate Exempt
----------------
1. Positions with 700 or more Hay points
Corporate RONA 0 12.0% 24.0%
Individual Performance Against Goals 0 3.0% 6.0%
--- ----- -----
0% 15.0% 30.0%
2. Positions with less than 700 Hay points
Corporate RONA 0% 10.0% 20.0%
G. Other Exempt
------------
1. Huffy Company Exempt* (except HSF Exempt;
GBPC Exempt; GWPC Exempt; WIS Field
Management (see Policy 701-B for WIS
Field Management personnel) and Exempt;
and TTH Exempt)
Huffy Company RONA vs. PP 0% 10.0% 20.0%
*HBC Exempt also participate in the HBC Gainsharing Program.
Any monies earned by HBC Exempt under this PSBP will be reduced
by an amount equal to the amount earned under the HBC
Gainsharing Program.
2. HBC First Line Production and Maintenance
Supervisors
Huffy Company RONA vs. PP 0 10.0% 12.0%*
Huffy Company Gainsharing Plan 0 - 12.0%*
--- ----- ------
0% - 20.0%
<FN>
*Either category of bonus payment (Huffy Company RONA vs. PP
or Gainsharing performance) may pay up to a maximum of 12% for
the fiscal year but the maximum total bonus for both
categories may not exceed 20%.
</TABLE>
<PAGE> 6
<TABLE>
PROFIT SHARING/BONUS PLAN (Continued)
<S> <C> <C> <C> <C>
3. HSF District Managers
District Sales $ vs. PP 0 2.0% 4.0%
District Gross Field Profit % vs. PP 0 2.0% 4.0%
District Gross Field Profit $ vs. PP 0 4.0% 8.0%
Huffy Company EBIT-AUC vs. PP 0 2.0% 4.0%
--- ----- -----
0% 10.0% 20.0%
4. HSF Area Managers
Area Gross Field Margin % vs. PP 0 2.0% 4.0%
Area Gross Field Margin $ vs. PP 0 2.0% 4.0%
Huffy Company EBIT-AUC vs. PP 0 1.0% 2.0%
--- ----- -----
0% 5.0% 10.0%
5. HSF Other Exempt
Huffy Company EBIT-AUC vs. PP 0% 10.0% 20.0%
6. GBPC Financial Staff (including
all Denver-based MIS, Credit and
Accounting employees except for MIS
LAN Administrator and Cost Accountant)
Huffy Company (without GWPC)
RONA vs. PP 0 8.0% 16.0%
GWPC RONA vs. PP 0 2.0% 4.0%
--- ----- -----
0% 10.0% 20.0%
7. GBPC Director - Sales, GBPC Director -
Marketing, GBPC Director - International
Sales and Marketing, GBPC Sales
Administrator, GBPC Consumer Relations
Supervisor, GBPC Sales Managers, GBPC
Customer Service Manager, GBPC Business
Line Manager for GWPC, GBPC Manager of
Design
Huffy Company (without GWPC)
RONA vs. PP 0 8.0% 16.0%
GWPC RONA vs. PP 0 2.0% 4.0%
--- ----- -----
0% 10.0% 20.0%
</TABLE>
<PAGE> 7
<TABLE>
PROFIT SHARING/BONUS PLAN (Continued)
<S> <C> <C> <C> <C>
8. Other GBPC Exempt
Huffy Company (without GWPC)
RONA vs. PP 0% 10.0% 20.0%
9. GWPC Exempt
GWPC RONA vs. PP 0% 10.0% 20.0%
10. TTH Plant Managers at Anderson,
Shiremanstown, and York; TTH
Site Manager; TTH Director of
Technical Services; TTH Regional
Sales Managers; TTH Industrial
Sales Manager; TTH Canadian
Marketing Manager; TTH Credit
Manager; TTH Manager, Financial
Analysis; TTH Marketing Manager;
TTH Manager, Materials and Wood
Operations; TTH Director, Purchasing;
TTH Manager, Design Engineering;
TTH Manager, Product Development;
TTH Division Manager, Quality
Assurance; TTH Manager, Industrial
Engineering/ Workmate; TTH Manager,
Production Engineering; Director,
MIS; TTH Supervisor, Tool & Die;
TTH Manager Production &
Inventory; TTH General Foreman,
Production; TTH Division Quality
Engr.; TTH Mill Managers; TTH
Regional Manager; TTH Supervisor,
Distribution; TTH Employee Relations
Rep.; TTH Sr. Benefits Admin.; TTH
Sr. Financial Analysts; TTH Plant
Controller, Camp Hill; TTH Camp Hill
Production Managers; TTH Manager, Data
Operations; TTH Product Managers; TTH
Buyers; TTH Manager, Sales Service;
TTH Product Design Engr.; TTH Product
Development Engr.; TTH Product Engr.;
TTH Sr. Programmer Analyst; TTH
Engineering Director, Ireland; TTH
Finance Controller, Ireland; TTH
Personnel Manager, Ireland; TTH
Sales/Marketing Director, Ireland;
TTH Materials/Warehouse Manager,
Ireland; TTH Manufacturing Director,
Ireland
</TABLE>
<PAGE> 8
<TABLE>
PROFIT SHARING/BONUS PLAN (Continued)
<S> <C> <C> <C> <C>
TTH EBIT-AUC vs. PP 0% 10.0% 20.0%
--- ----- -----
0% 10.0% 20.0%
11. TTH Canadian District Sales Managers
Net Sales $ vs. Sales Objective $* 0% 10.0% 20.0%
--- ----- -----
0% 10.0% 20.0%
*Threshold payment of 2% applies when 90% of pre-established Sales
Objective $ are attained, 10% when 100% of Sales Objective $ are
attained, and 20% when 110% of Sales Objective $ are obtained.
12. WIS Director - Accounting; WIS Director -
Management Information Systems; WIS Manager -
Payroll; WIS Manager - Accounts Receivable;
WIS Manager - Tax & Financial Analysis;
WIS Manager, Business Systems Development;
WIS Manager - Compensation & Benefits;
WIS Manager - Systems Development; WIS
Manager - Requirements & Testing; WIS
Manager - General Accounting; WIS Manager
- Computer Operations; WIS National
Processing Manager; WIS Manager - Credit
and Collections; WIS Manager - Employee
Relations; WIS Manager - Operations
Support and Services; WIS Management
Information Systems Manager
Huffy Company RONA vs. PP 0 10.0% 20.0%
13. WIS Director - Account Management
& Customer Service; WIS National
Account Manager; WIS National Sales
Manager
Huffy Company RONA vs. PP 0 5.0% 10.0%
Sales Volume $ vs. PP 0 5.0% 10.0%
--- ----- -----
0% 10.0% 20.0%
14. Other WIS Exempt (excluding WIS
Field Management)
Huffy Company RONA vs. PP 0 5.0% 10.0%
</TABLE>
<PAGE> 9
PROFIT SHARING/BONUS PLAN (Continued)
II. Corporate Internal Audit Staff
-------------------------------
Corporate Internal Audit staff are members of the Corporate Exempt
category and bonus recommendations will generally be made on that
basis. Such bonus recommendations will be subject to approval by the
Audit Committee of the Board of Directors.
III. Award Scales1
-------------
<TABLE>
<CAPTION>
Corporate RONA % of Targeted
Level Award Earned2
-------------- ------------
<S> <C> <C>
Under 9.0% -0-
9.0% Threshold 25%
9.7 50
10.3 75
11.0 Target 100
11.8 125
12.6 150
13.4 175
14.2 Maximum 200
</TABLE>
<TABLE>
<CAPTION>
Percent of Targeted Award Earned
----------------------------------
Profit Plan Profit Plan
Huffy Company RONA 5% RONA less
RONA vs. Plan3 or Greater2 than 5%2
----------------- ----------- ---------
<S> <C> <C> <C>
Under 90% -0- -0-
90 Threshold 25% 25%
92 40 40
94 55 55
96 70 70
98 85 85
100 Target 100 100
101.5 110 105
103.0 120 110
104.5 130 115
106.0 140 120
107.5 150 125
109.0 160 130
110.5 170 135
112.0 180 140
113.5 190 145
</TABLE>
<PAGE> 10
<TABLE>
PROFIT SHARING/BONUS PLAN (Continued)
<CAPTION>
(CONT'D) Percent of Targeted Award Earned
----------------------------------
Profit Plan Profit Plan
Huffy Company RONA 5% RONA less
RONA vs. Plan3 or Greater2 than 5%2
------------------ ----------- ---------
<S> <C> <C> <C>
115.0 200 150
116.5 200 155
118.0 200 160
119.5 200 165
121.0 200 170
122.5 200 175
124.0 200 180
125.5 200 185
127.0 200 190
128.5 200 195
130.0+ Maximum 200 200
</TABLE>
<TABLE>
<CAPTION>
HSF % of Targeted
EBIT-AUC vs. Plan Award Earned
------------------ -------------
<S> <C> <C>
Under 90% -0-
90 Threshold 25%
92 40
94 55
96 70
98 85
100 Target 100
101 110
102 120
103 130
104 140
105 150
106 160
107 170
108 180
109 190
110+ Maximum 200
</TABLE>
<PAGE> 11
<TABLE>
PROFIT SHARING BONUS PLAN (Continued)
<CAPTION>
HSF District % of Targeted
Gross Field Profit % vs. PP Award_Earned2
--------------------------- ------------
<S> <C>
Greater than 1.0% below -0-
-1.0 Threshold 25%
-0.8 40
-0.4 70
Target Equal to Target 100
+0.3 130
+0.7 170
+1.0 Maximum 200
</TABLE>
<TABLE>
<CAPTION>
% of Targeted
HSF District Sales $ vs. PP Award Earned2
--------------------------- ------------
<S> <C>
Under 90% -0-
90 25%
100 100
115+ 200
</TABLE>
<TABLE>
<CAPTION>
HSF District Gross % of Targeted
Field Profit $ vs. PP Award Earned2
--------------------- ------------
<S> <C>
Under 90% -0-
90 25%
100 100
110+ 200 (REV.)
</TABLE>
<TABLE>
<CAPTION>
HSF Area Gross Field % of Targeted
Margin $ vs. PP Award Earned
-------------------- -------------
<S> <C>
Under 90% -0-
90 25%
100 100
110+ 200 (REV.)
</TABLE>
<PAGE> 12
<TABLE>
PROFIT SHARING/BONUS PLAN (Continued)
HSF Area Managers
<CAPTION>
% of Targeted
Area Gross Field Margin % vs. PP Award Earned2
-------------------------------- ------------
<S> <C> <C>
Greater than 1.0% below -0-
-1.0 Threshold 25%
-0.8 40
-0.4 70
Target Equal to Target 100
+0.3 130
+0.7 170
+1.0 Maximum 200
</TABLE>
<TABLE>
<CAPTION>
% of Targeted
TTH EBIT-AUC vs. Profit Plan* Award Earned2
----------------------------- ------------
<S> <C>
Greater than $600,000 below -0-
-600,000 Threshold 25%
-400,000 50
-200,000 75
Target Equal to Target 100
$+200,000 120
+400,000 140
+600,000 160
+800,000 180
$1,000,000+ Maximum 200
*See Addendum for further discussion.
</TABLE>
1. The scales are sliding. When actual Corporate RONA is above 8.5% and
falls between the points on the scale, it will be adjusted to the
nearest 1/10th of 1% and interpolated to determine the award level.
When Huffy Company RONA or TTH EBIT-AUC or HSF EBIT-AUC falls between
the points on the scale, it will be adjusted to the nearest 1/10th of
1% and interpolated to determine the award level.
<PAGE> 13
PROFIT SHARING/BONUS PLAN (Continued)
2. % of targeted award earned is used as a multiple of bonus target which
varies by level of employee. Refer to Section I.
3. This scale is applicable to Huffy Company RONA, TTH EBIT-AUC, HSF
EBIT-AUC, and similar Huffy Company performance measures.
IV. Positions Covered
A. Corporate Officers and Huffy Company Presidents
Corporate Officers
-------------------
Chairman of the Board
President
Executive Vice President
Vice President - Operations
Vice President - Law, Chief Administrative Officer and
Secretary
Vice President - Finance and CFO
Vice President - Marketing
Vice President - Controller
Vice President - Human Resources
General Counsel and Assistant Secretary
Huffy Company Presidents
------------------------
President and General Manager - Huffy Bicycle Company
President and General Manager - Huffy Sports Company
President and General Manager - Gerry Baby Products Company
President and General Manager - Washington Inventory Service
President and General Manager - Huffy Service First, Inc.
President and General Manager - True Temper Hardware Company
<PAGE> 14
PROFIT SHARING/BONUS PLAN (Continued)
B. Huffy Company Staff
HBC
---
V.P. Operations
V.P. Marketing/Sales and Design
V.P. Controller
V.P. Global Sourcing and Business Development
V.P. Product Engineering
V.P. Human Resources
V.P. Logistics
HSC
---
V.P. Sales
V.P. Controller
V.P. Product Engineering/Quality Assurance
V.P. Manufacturing
V.P. Materials Management
V.P. New Product and Business Development
GBPC
----
V.P. Sales/Marketing
V.P. Controller
V.P. Operations
V.P. Human Resources
V.P. General Manager - GWPC
V.P. Product Design and Engineering
HSF
---
V.P. Operations
V.P. Controller
V.P. Sales/Marketing
V.P. Human Resources
WIS
---
V.P. Operations
V.P. Finance and Controller
V.P. Technology & Information Systems
V.P. Human Resources
V.P. Marketing and Account Management
<PAGE> 15
PROFIT SHARING/BONUS PLAN (Continued)
TTH
---
V.P. Sales and Marketing
V.P. Operations
Director, Finance
V.P. Human Resources
Director, Marketing
Managing Director, TT Ireland
Acting Director, TT Canada
V. Individual Non-Financial Performance Goals
------------------------------------------
For those individuals who have a portion of their bonus measured on
this basis, the following implementation procedure will be used:
1. Each individual will draw up goals covering the calendar year
based on supporting the supervisor's goals and his own.
2. These goals should have the following characteristics:
a) Not be associated with financial goals in the Profit
Plan. (Financial goals for such things as cost
reduction or similar projects are appropriate
goals.)
b) Be as specific and as measurable as to successful
attainment as possible. (A project need not be
completed in the calendar year. The goal can be to
obtain a specific status in the project by calendar
year end.)
c) 1) Chairman and President shall each develop no
more than 7 to 8 goals.
2) Other Corporate Officers and Huffy Company
Presidents shall each develop no more than 6
goals.
3) Huffy Company Staff and Corporate Officer
Direct Reports in positions with 700 or more
Hay points shall each develop no more than 3
goals.
<PAGE> 16
PROFIT SHARING/BONUS PLAN (Continued)
d) A "degree of difficulty" should be assigned to each
goal on the basis of 1 to 10.
3. The goals and degrees of difficulty shall be reviewed between
the individual and his supervisor and agreement reached on:
a) Completeness of list
b) State of goals
c) Degree of difficulty
It is the supervisor's responsibility to ensure that there is
some consistency in the measurement of "degree of difficulty"
among all his subordinates, and the Corporate Officer's
responsibility to review for consistency in measurement of
"degree of difficulty" among Huffy Company Staff personnel
within his function.
4. Non-Financial Objectives Schedule
---------------------------------
Upon Approval by The Chairman's and the President's goals shall
Compensation be communicated to the Corporate Officers and
Committee Huffy Company Presidents promptly following
by Compensation Committee of the Board of
Directors.
15 days later Corporate Officers and Huffy Company Presidents
shall develop their goals and circulate them to
other Corporate Officers and Huffy Company
Presidents by this date.
10 days later Corporate Officers' and Huffy Company
Presidents' goals shall be reviewed with
Corporate Officers and approved by their
respective immediate supervisors. Corporate
Officers and Huffy Company Presidents shall
communicate their approved goals to their
respective Corporate Officer Direct Reports
in positions with 700 or more Hay points and
Huffy Company Staffs.
30 days later Corporate Officer Direct Report personnel in
positions with 700 or more Hay points and Huffy
Company Staff personnel shall have completed
their respective goals, reviewed them with the
appropriate Corporate Officer (who shall furnish
his comments to such Corporate Officer Direct
Report or Huffy Company Staff member, the Huffy
Company President and the President) and have
them approved by the Corporate Officer and
President with respect to Corporate Officer
Direct Reports in positions with 700 or more Hay
points and by the Huffy Company President and
the President with respect to Huffy Company
Staff members.
<PAGE> 17
PROFIT SHARING/BONUS PLAN (Continued)
5. Non-Financial Objectives Results Schedule
-----------------------------------------
First Friday in Corporate Officer Direct Report personnel in
December positions with 700 or more Hay points and Huffy
Company Staff personnel shall submit their
results for the year ending for evaluation to
the appropriate Corporate Officer and, with
respect to Huffy Company Staff, to the Huffy
Company President.
10 days later Corporate Officers shall have reviewed results
submitted to them by such Corporate Officer
Direct Reports and Huffy Company Staff members
and submitted their comments to the Corporate
Officer Direct Report or Huffy Company Staff
member, the Huffy Company President and the
President with respect to Huffy Company Staff,
and the President with respect to Corporate
Officer Direct Reports positions with 700 or
more Hay points.
10 days later CEO provides Compensation Committee of Board of
Directors with his results for evaluation and
approval.
5 days later Corporate Officer Direct Reports in positions
with 700 or more Hay points results shall be
approved by Corporate Officers. Huffy Company
Staff personnel results shall be approved by
Corporate Officers and Huffy Company Presidents.
Corporate Officers and Huffy Company Presidents
shall submit their results for the year ending
to their immediate supervisor for evaluation and
approval.
Feb. 1 The evaluation and approval of non-financial goal
results are to be completed.
6. The participant shall evaluate his own performance and then
submit the evaluation to his supervisor who shall review and
approve the evaluation.
This score is not binding. The supervisor shall use his
judgment to arrive at a final rating. However, only
performance on the written goals shall be evaluated, not
performance on any other matters.
<PAGE> 18
PROFIT SHARING/BONUS PLAN (Continued)
7. Each individual shall be informed by his supervisor of his
performance rating but only after all approvals have been
secured.
8. Notwithstanding the foregoing, payments for non-financial
goals performance are expressly conditioned upon and made
subject to the following base financial criteria:
<TABLE>
<S> <C> <C>
(A) CORPORATE OFFICERS AND ELIGIBLE
--------------------------------
CORPORATE OFFICER DIRECT REPORTS
--------------------------------
Corporate earnings less than - No bonus shall be paid
50% of threshold level for for performance of non-
Corporate bonus purposes financial goals
Corporate earnings at least - 50% of calculated bonus for
50%, but less than 75%, of performance of non-
threshold level for Corporate financial goals shall be
bonus purposes paid
Corporate earnings 75% or - 100% of calculated bonus
greater of threshold level for performance of non-
for Corporate bonus purposes financial goals shall be
paid
(B) HUFFY COMPANY PRESIDENT AND STAFF
---------------------------------
Huffy Company RONA or EBIT-AUC less - No bonus shall be paid for
than 50% of approved Huffy Company performance of non-
Profit Plan financial goals
Huffy Company RONA or EBIT-AUC at - 50% of calculated bonus for
least 50%, but less than 75%, of performance of non-
approved Huffy Company financial goals shall be
Profit Plan paid
Huffy Company RONA or EBIT-AUC 75% or - 100% of calculated bonus
greater of approved for performance of non-
Huffy Company Profit Plan financial
</TABLE>
<PAGE> 19
PROFIT SHARING/BONUS PLAN (Continued)
VI. Implementation
--------------
1. Eligibility
-----------
All exempt employees on the payroll on or before the first
business day of the calendar year shall be eligible for
consideration for a full bonus opportunity.
Hires: Employee coming on the payroll after the first
business day of the calendar year but on or before
the first business day of July will be eligible
for consideration for one-half the annual bonus
opportunity.
Exception: HSF Regional Operations, District
and Area Managers, and
eligible WIS personnel hired after
January 1 of the calendar year
shall be eligible for consideration
for the percentage of annual bonus
opportunity shown below:
<TABLE>
<CAPTION>
Percentage of Annual
Hire Date Bonus Opportunity
--------- --------------------
<S> <C>
During 1st quarter 75%
During 2nd quarter 50%
During 3rd quarter 25%
During 4th quarter 0%
</TABLE>
Transfers, Promotions or Demotions: Individuals transferred,
promoted or demoted during the calendar year shall have bonus
opportunity as follows:
<TABLE>
<CAPTION>
Calculation Based on
-----------------------------
Old Oppor. New Oppor.
---------- ----------
Old Actual New Actual
---------- ----------
Base Salary Base Salary
----------- -----------
Old. Opp. Level New Opp.Level
--------------- -------------
<S> <C> <C>
Transferred, Promoted or Demoted
During 1st Quarter 25% 75%
During 2nd Quarter 50% 50%
During 3rd Quarter 75% 25%
During 4th Quarter 100% 0%
</TABLE>
Note: Non-exempt and/or hourly employees promoted
to exempt positions are eligible for bonus
consideration as above but only for those
quarters in which they held exempt positions.
Also, status changes (including transfers,
promotions and demotions, but excluding new
hires) for bonus eligible employees at WIS
which are effective for the first pay period
beginning on or after the first day of the
quarter shall be treated for bonus purposes
as if they were effective the first day of
the quarter.
<PAGE> 20
PROFIT SHARING/BONUS PLAN (Continued)
Terminations: To be eligible to receive the Profit Sharing
payment for a calendar year, an employee must
be on the active pay- roll at the time
payment for that calendar year is made or HAVE
BEEN TERMINATED DUE TO A CURTAILMENT OF PRODUC-
TION BETWEEN JULY 1 OF THAT CALENDAR YEAR AND
THE DATE OF BONUS PAYMENT, HAVING MET ALL
ELIGIBILITY REQUIREMENTS OF THE PLAN AND HAVING
PERFORMED ALL DUTIES AND RESPONSIBILITIES
IN AT LEAST AN AVERAGE MANNER. UNDER THESE
CIRCUMSTANCES, SUCH EMPLOYEES MUST HAVE BEEN
ON THE PAYROLL AT THE BEGINNING OF THE CALENDAR
YEAR IN ORDER TO QUALIFY FOR BONUS FOR THAT
CALENDAR YEAR. APPROVAL OF THE CEO IS
REQUIRED IN ALL SUCH CASES. EXEMPT EMPLOYEES
TERMINATED DUE TO A CURTAILMENT OF PRODUCTION
SHALL BE ELIGIBLE FOR BONUS OPPORTUNITY AS
FOLLOWS:
<TABLE>
<CAPTION>
Bonus as percent payment
-------------------------
Termination Date of full bonus opportunity
---------------- --------------------------
<S> <C>
July 1 - September 30 50%
--------------------- ---
October 1 - December 31 75%
----------------------- ---
January 1 - date of payment 100%
--------------------------- ----
</TABLE>
Death or Retirement: Employees who retired or died during or
after the calendar year for which bonus is being calculated
and who met the requirement of being on the active payroll
during the year will be given consideration for a bonus
payment on basis of the following percentage of full
bonus opportunity: retired or died in 1st Qtr - 25%;
2nd Qtr - 50%; 3rd Qtr - 75%; 4th Qtr - 100%. Payment
for deceased employees shall be made to the beneficiary
designated under the Salaried Employees Group Term
Life Insurance Plan.
Active payroll is defined as receiving wages (recorded on
the Federal W-2 form) from the Corporation or one
of the Huffy Companies. Except for those terminated or
retiring or deceased employees described above,
employees absent for any reason and not receiving wages
(as defined above) are not considered on the active
payroll.
Exception to the eligibility requirements must be approved by
the CEO at the time approval is obtained for transfer or hire.
2. Payment
-------
Except as noted below, payment for Profit Sharing shall be
annual and shall occur in March of each year for the prior
calendar year's results.
<PAGE> 21
PROFIT SHARING/BONUS PLAN (Continued)
3. Calculations
All bonus calculations will be rounded up to the nearest
$25.00 increment and the minimum bonus payment to be paid
will be $125.00 per employee, provided employee is eligible
for bonus and such bonus is approved.
Definitions
- ------------
Corporate RONA Profit after tax after cost of plan plus tax affected
- -------------- interest divided by the twelve (12) month rolling
average of total assets less current liabilities excluding
all interest bearing debt.
Huffy Company Tax affected earnings before interest and
- ------------- taxes excluding interest income divided by the
RONA twelve (12) month rolling average of total assets other than
- ------------- cash less current liabilities excluding all interest bearing
debt.
Asset Usage Charge to Huffy Company at a 15% pre-tax rate multiplied by
- ------------ the change between Huffy Company actual Average
Charge Net Assets and Huffy Company planned Average Net Assets.
- ------------ Huffy Company Average Net Assets equal average
total assets minus average current liabilities (excluding
all interest bearing liabilities and intercompany
accounts).
HSF EBIT-AUC
TTH EBIT-AUC Earnings before interest and taxes minus an Asset Usage Charge.
- ------------
Actual Base Employee's actual base salary as of January 1 of the
Salary calendar year for which bonus is calculated.
- ------------
Midpoint of Midpoint of Salary Range as of January 1 of the calen-
Salary Range dar year for which bonus is calculated.
- ------------
Promotion 15% upward difference in Hay points (see Corporate Policy 113).
- ---------
Demotion 15% downward difference in Hay points (see Corporate Policy
- -------- 113).
Transfer A change in position which does not constitute a promotion
- -------- or demotion.
<PAGE> 22
PROFIT SHARING/BONUS PLAN (Continued)
<TABLE>
<S> <C>
Average Usage If Huffy Company actual Average Net Assets exceed the
Charge Rules profit plan for 1993, the excess over the target will
(Applicable to be extended times Huffy Corporation's average cost of
HSF & TTH) capital (15%). The resulting cost for excess asset
-------------- usage will be deducted from the EBIT earned by the Huffy
Company during 1993.
If Huffy Company actual Average Net Assets are lower
than the profit plan for 1993, the savings will be
extended times Huffy Corporation's average cost of
capital, and the resulting savings from asset effi-
ciency will be added to the EBIT earned by the Huffy
Company during 1993.
</TABLE>
Distribution of This Policy
- ---------------------------
Restricted to Corporate Officers, Huffy Company Presidents, Huffy
Company Staff, and Corporate Officers Direct Reports in positions with
700 or more Hay points, except for Policy 701-B which is restricted to
Corporate Officers and the President and General Manager of WIS.
/S/ George A. Plotner /S/ Richard Molen
- -------------------------------- -------------------------
Vice President - Human Resources President and CEO
/S/ Gary Morin
- --------------------------------
Executive Vice President
<PAGE> 1
EXHIBIT NO. 13
CERTAIN SECTIONS OF THE ANNUAL REPORT TO SHAREHOLDERS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
<PAGE> 2
<TABLE>
TEN-YEAR FINANCIAL AND OPERATING REVIEW (UNAUDITED)
(Dollar amounts in thousands, except per share data)
<CAPTION>
1993 1992 1991
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales $757,863 $703,345 $678,936
Gross profit 138,288 122,608 132,485
Selling, general and administrative expenses 102,493 95,163 92,499
Operating income [1] 7,040 27,445 39,986
Other income (expense), net [2] (1,379) 497 (482)
Earnings before interest, taxes and
cumulative effect of accounting changes 5,661 27,942 39,504
Interest expense, net (8,739) (9,321) (8,047)
Earnings (loss) before income taxes and
cumulative effect of accounting changes (3,078) 18,621 31,457
Income taxes (benefit) 755 6,778 11,630
Earnings (loss) before cumulative effect of accounting changes (3,833) 11,843 19,827
Cumulative effect of accounting changes, net of income taxes (1,084) (7,628) --
Net earnings (loss) (4,917) 4,215 19,827
- ---------------------------------------------------------------------------------------------------------
Earnings (loss) per common share:[3]
Primary (.38) .33 1.52
Fully diluted [4] (.38) .33 1.41
- ---------------------------------------------------------------------------------------------------------
Common dividends declared 4,175 3,809 3,740
Common dividends per share .31 .30 .29
Capital expenditures for plant and equipment 21,322 23,914 24,509
Average common and common equivalent shares outstanding:
Primary 13,240 12,903 13,056
Fully diluted 14,818 14,940 15,114
- ---------------------------------------------------------------------------------------------------------
FINANCIAL POSITION AT YEAR END
Total assets 319,337 335,328 316,577
Working capital 93,595 91,308 99,110
Net investment in plant and equipment 73,647 80,020 72,226
Notes payable 3,500 18,975 --
Long-term obligations 43,211 74,918 80,208
Redeemable preferred stock -- -- --
Shareholders' equity 136,029 117,687 124,997
Equity per share 9.27 9.35 9.68
- ---------------------------------------------------------------------------------------------------------
CASH FLOWS
Net earnings (loss) (4,917) 4,215 19,827
Depreciation and amortization 20,260 17,965 16,181
Changes in working capital (2,287) 7,802 (11,552)
(Acquisitions) divestitures -- -- --
Capital additions, net (20,437) (23,523) (21,074)
Net issuance (reduction) of debt (16,465) (4,280) (5,267)
Dividends paid (3,872) (3,834) (3,617)
Other 28,369 (3,318) (7,887)
Net change in cash and cash equivalents 651 (4,973) (13,389)
- ---------------------------------------------------------------------------------------------------------
RATIOS AND MISCELLANEOUS
Net profit margin (before cumulative effect of accounting changes) N/A 1.7% 2.9%
Average working capital turnover 8.2 7.4 7.3
Return on net assets N/A 4.1% 11.5%
Return on beginning shareholders' equity N/A 3.4% 18.6%
Current ratio 1.9 1.8 2.0
Debt/total capital 26.6% 40.5% 40.3%
- ---------------------------------------------------------------------------------------------------------
Number of common shareholders 3,760 3,883 3,016
Number of employees 5,854 6,339 6,330
</TABLE>
H U F F Y 2
6
<PAGE> 3
(1) Operating income in 1993 includes a provision of $28,755 for restructuring
the Company's lawn and garden tool business.
(2) Other income (expense), net includes the following: August 1985-($4,288)
cost for discontinuance of product line; October 1988-($5,584) loss on
sale of capital stock of Raleigh Cycle Company of America.
(3) The 1993 net loss per share is computed using actual average outstanding
shares. In 1992 the assumed conversion of the 7.25% Convertible
Subordinated Debentures was antidilutive, and therefore, the per share
amounts reported for primary and fully diluted are the same.
(4) The 1993 loss per share before cumulative effect of accounting changes is
$(.30). The 1992 fully diluted earnings per share before the cumulative
effect of accounting changes is $.89.
N/A = Not Applicable
<TABLE>
TEN-YEAR FINANCIAL AND OPERATING REVIEW (UNAUDITED)
(Dollar amounts in thousands, except per share data)
<CAPTION>
1990 1989 1988 1987 1986 1985 1984
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales $516,744 $449,389 $335,713 $340,551 $294,698 $263,935 $269,482
Gross profit 102,545 84,638 62,847 67,328 54,145 45,393 52,707
Selling, general and administrative expenses 69,957 57,972 45,511 46,726 40,280 38,671 36,467
Operating income [1] 32,588 26,666 17,336 20,602 13,865 6,722 16,240
Other income (expense), net [2] 370 605 (5,704) (352) (82) (4,830) 1,465
Earnings before interest, taxes and
cumulative effect of accounting changes 32,958 27,271 11,632 20,250 13,783 1,892 17,705
Interest expense, net (4,390) (3,467) (3,856) (3,048) (2,873) (2,293) (3,016)
Earnings (loss) before income taxes and
cumulative effect of accounting changes 28,568 23,804 7,776 17,202 10,910 (401) 14,689
Income taxes (benefit) 10,561 8,811 3,240 7,111 5,003 (646) 6,433
Earnings (loss) before cumulative effect of
accounting changes 18,007 14,993 4,536 10,091 5,907 245 8,256
Cumulative effect of accounting changes,
net of income taxes -- -- -- -- -- -- --
Net earnings (loss) 18,007 14,993 4,536 10,091 5,907 245 8,256
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per common share:[3]
Primary 1.37 1.17 .36 .81 .49 .02 .66
Fully diluted [4] 1.28 1.11 .36 .78 .48 .02 .63
- ------------------------------------------------------------------------------------------------------------------------------------
Common dividends declared 3,461 3,071 2,613 2,333 2,148 2,137 2,140
Common dividends per share .27 .24 .20 .19 .18 .18 .18
Capital expenditures for plant and equipment 9,832 14,143 14,786 6,806 7,638 5,356 5,605
Average common and common equivalent
shares outstanding:
Primary 13,157 12,882 12,641 12,441 12,074 12,095 12,092
Fully diluted 15,179 14,271 13,376 13,415 13,112 12,095 13,134
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION AT YEAR END
Total assets 297,310 234,532 183,255 149,259 141,267 129,264 136,603
Working capital 87,558 80,189 45,884 61,649 54,161 50,034 58,110
Net investment in plant and equipment 65,423 45,659 41,360 27,895 27,495 26,679 26,869
Notes payable -- -- -- -- -- -- --
Long-term obligations 84,348 57,525 37,196 15,181 18,427 19,529 28,253
Redeemable preferred stock -- -- -- -- -- -- --
Shareholders' equity 106,747 95,645 80,776 78,914 68,848 64,678 66,573
Equity per share 8.39 7.43 6.50 6.35 5.68 5.38 5.54
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS
Net earnings (loss) 18,007 14,993 4,536 10,091 5,907 245
Depreciation and amortization 11,757 10,252 7,211 6,320 5,565 5,796
Changes in working capital (10,445) (2,195) 7,561 (6,493) (5,239) 4,748
(Acquisitions) divestitures (53,639) -- (20,368) (55) -- 3,779
Capital additions, net (9,473) (13,842) (14,176) (6,480) (6,018) (5,101)
Net issuance (reduction) of debt 27,192 26,275 19,487 (814) (1,128) (8,724)
Dividends paid (3,481) (2,868) (2,391) (2,402) (2,144) (2,137)
Other (9,940) 3,906 656 943 1,919 (1,933)
Net change in cash and cash equivalents (30,022) 36,521 2,516 1,110 (1,138) (3,327)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS AND MISCELLANEOUS
Net profit margin (before cumulative effect
of accounting changes) 3.5% 3.3% 1.4% 3.0% 2.0% .1% 3.1%
Average working capital turnover 6.2 6.9 6.2 5.9 5.7 4.9 4.7
Return on net assets 13.8% 13.7% 6.7% 12.5% 8.8% 1.8% --
Return on beginning shareholders' equity 18.8% 18.6% 5.7% 14.7% 9.1% .4% 13.6%
Current ratio 2.0 2.1 1.8 2.2 2.1 2.2 2.6
Debt/total capital 45.7% 40.5% 33.3% 17.3% 22.2% 24.3% --
- ------------------------------------------------------------------------------------------------------------------------------------
Number of common shareholders 2,410 2,473 2,180 2,173 2,615 3,019 3,467
Number of employees 5,736 4,650 3,571 3,330 2,943 3,073 2,749
</TABLE>
2 H U F F Y
7
<PAGE> 4
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per share data)
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1992
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,140 $ 3,489
Receivables:
Trade 93,233 115,343
Other 2,417 7,043
-------- --------
95,650 122,386
Less allowance for doubtful accounts 2,382 2,208
-------- --------
Net receivables 93,268 120,178
Inventories 82,144 71,298
Deferred federal income taxes 12,444 6,325
Prepaid expenses 5,369 5,539
-------- --------
Total current assets 197,365 206,829
-------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land and land improvements 1,657 2,805
Buildings 14,607 18,910
Machinery and equipment 109,581 100,488
Office furniture, fixtures and equipment 23,456 21,659
Leasehold improvements 13,412 12,411
Construction in progress 8,006 8,522
-------- --------
170,719 164,795
Less accumulated depreciation and amortization 97,072 84,775
-------- --------
Net property, plant and equipment 73,647 80,020
OTHER ASSETS:
Excess of cost over net assets acquired, net of
accumulated amortization of $4,763 in 1993
and $4,245 in 1992 26,555 32,352
Deferred federal income taxes 11,853 4,378
Other 9,917 11,749
-------- --------
$319,337 $335,328
======== ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
H U F F Y 3
4
<PAGE> 5
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to bank $ 3,500 $ 18,975
Current installments of long-term obligations 5,968 5,246
Accounts payable 43,713 55,363
Accrued expenses:
Salaries, wages and other compensation 14,910 12,347
Insurance 10,581 7,568
Other 11,975 11,257
-------- --------
Total accrued expenses 37,466 31,172
Restructuring reserve 9,296 --
Other current liabilities 3,827 4,765
-------- --------
Total current liabilities 103,770 115,521
-------- --------
Long-term obligations, less current installments 43,211 74,918
Pension liability 12,688 5,767
Postretirement benefits other than pensions 15,010 14,190
Other liabilities 8,629 7,245
-------- --------
Total liabilities 183,308 217,641
-------- --------
SHAREHOLDERS' EQUITY:
Preferred stock, par value $1 per share
Authorized 1,000,000 shares -- --
Common stock, par value $1 per share
Authorized 60,000,000 shares; issued 15,963,246
shares in 1993 and 13,860,290 in 1992 15,963 13,860
Additional paid-in capital 58,059 29,553
Retained earnings 82,029 91,121
Minimum pension liability adjustment (4,839) (2,415)
Cumulative translation adjustment (1,270) (723)
-------- --------
149,942 131,396
Less cost of 1,289,647 treasury shares
in 1993 and 1,277,866 in 1992 13,913 13,709
-------- --------
Total shareholders' equity 136,029 117,687
-------- --------
$319,337 $335,328
======== ========
</TABLE>
3 H U F F Y
5
<PAGE> 6
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands, except per share data)
<CAPTION>
Years Ended December 31, 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $757,863 $703,345 $678,936
Cost of sales 619,575 580,737 546,451
-------- -------- --------
Gross profit 138,288 122,608 132,485
Selling, general and administrative expenses 102,493 95,163 92,499
Provision for restructuring 28,755 -- --
-------- -------- --------
Operating income 7,040 27,445 39,986
Other expense (income)
Interest expense, net 8,739 9,321 8,047
Other 1,379 (497) 482
-------- -------- --------
10,118 8,824 8,529
-------- -------- --------
Earnings (loss) before income taxes and cumulative
effect of accounting changes (3,078) 18,621 31,457
Income taxes 755 6,778 11,630
-------- -------- --------
Earnings (loss) before cumulative effect
of accounting changes (3,833) 11,843 19,827
Cumulative effect of accounting
changes, net of income taxes (1,084) (7,628) --
-------- -------- --------
Net earnings (loss) $ (4,917) $ 4,215 $ 19,827
======== ======== ========
EARNINGS (LOSS) PER COMMON SHARE:[1]
PRIMARY
Weighted average number of common shares 13,023,211 12,903,209 13,055,608
Earnings (loss) per common share before
cumulative effect of accounting changes $ (.30) $ .92 $ 1.52
Cumulative effect of accounting changes,
net of income taxes (.08) (.59) --
-------- -------- --------
Net earnings (loss) per common share $ (.38) $ .33 $ 1.52
======== ======== ========
FULLY DILUTED
Weighted average number of common shares 13,023,211 14,940,493 15,113,734
Earnings (loss) per common share before
cumulative effect of accounting changes $ (.30) $ .89 $ 1.41
Cumulative effect of accounting changes,
net of income taxes (.08) (.59)[2] --
-------- -------- --------
Net earnings (loss) per common share $ (.38) $ .33[2] $ 1.41
======== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
(1) Net loss per common share in 1993 is based on actual weighted average shares
of common stock outstanding, as addition of common stock equivalents and
assumed conversion of the 7.25% Convertible Subordinated Debentures were
antidilutive.
(2) The assumed conversion of the 7.25% Convertible Subordinated Debentures
was antidilutive, and therefore, the per share amounts reported for
primary and fully diluted are the same.
H U F F Y 3
6
<PAGE> 7
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
<CAPTION>
Years Ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (4,917) $ 4,215 $ 19,827
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Provision for restructuring 28,755 -- --
Depreciation and amortization 20,260 17,965 16,181
Loss on sale of property, plant and equipment 744 56 228
Increase (decrease) in cash resulting from changes in:
Receivables, net 26,928 (24,040) (14,445)
Inventories (14,926) 6,110 (11,121)
Prepaid expenses 170 (190) (1,151)
Other assets (401) (1,165) (178)
Accounts payable (11,650) 4,697 15,067
Accrued expenses 6,729 (1,982) (883)
Other current liabilities (938) (5,200) (10,297)
Postretirement benefits other than pensions 820 14,190 --
Other long-term liabilities 1,384 (2,202) 2,641
Deferred federal income taxes (10,989) (387) (758)
Other (547) (650) 58
-------- --------- ---------
Net cash provided by operating activities 41,422 11,417 15,169
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (21,322) (23,914) (21,414)
Proceeds from sale of property, plant and equipment 140 335 112
Reduction of notes receivable -- 1,205 1,271
Acquisition purchase price contractual adjustments -- -- (1,753)
-------- --------- ---------
Net cash used in investing activities (21,182) (22,374) (21,784)
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in notes payable to bank (15,475) 18,975 --
Issuance of long-term obligations 3,967 76 --
Reduction of long-term obligations (4,957) (4,356) (5,267)
Issuance of common shares 952 568 2,116
Purchase of treasury shares (204) (5,445) (6)
Dividends paid (3,872) (3,834) (3,617)
-------- --------- ---------
Net cash provided by (used in) financing activities (19,589) 5,984 (6,774)
-------- --------- ---------
Net change in cash and cash equivalents 651 (4,973) (13,389)
Cash and cash equivalents:
Beginning of year 3,489 8,462 21,851
-------- --------- ---------
End of year $ 4,140 $ 3,489 $ 8,462
======== ========= =========
Cash paid during the year for:
Interest $ 9,188 $ 8,734 $ 9,433
Income taxes 5,612 8,003 13,807
Supplemental disclosure of non-cash financing activities:
During 1993, the Company issued 1,973,305 shares of common stock
upon the conversion of $29,995 principal amount of debentures.
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
3 H U F F Y
7
<PAGE> 8
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollar amounts in thousands, except per share data)
<CAPTION>
MINIMUM
ADDITIONAL PENSION CUMULATIVE
COMMON PAID-IN RETAINED LIABILITY TRANSLATION TREASURY
STOCK CAPITAL EARNINGS ADJUSTMENT ADJUSTMENT STOCK
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1990 $ 9,066 $ 31,663 $ 74,628 $ (404) $ 52 $ (8,258)
Net earnings 19,827
Issuance of 199,957 shares in
connection with common stock
plans and convertible debentures 200 1,916
Issuance of 4,538,161 shares of
common stock (including 295,142
of treasury shares) to effect a
three-for-two common stock split 4,538 (4,538)
Common dividends $.29 per share (3,740)
Purchase of 267 treasury shares (6)
Minimum pension liability adjustment 178
Foreign currency
translation adjustment (125)
------- ------- ------- -------- -------- --------
BALANCE AT DECEMBER 31, 1991 13,804 29,041 90,715 (226) (73) (8,264)
Net earnings 4,215
Issuance of 56,521 shares in
connection with common stock
plans and convertible debentures 56 512
Common dividends $.30 per share (3,809)
Purchase of 392,439 treasury shares (5,445)
Minimum pension liability adjustment (2,189)
Foreign currency
translation adjustment (650)
------- ------- ------- -------- -------- --------
BALANCE AT DECEMBER 31, 1992 13,860 29,553 91,121 (2,415) (723) (13,709)
Net (loss) (4,917)
Issuance of 2,102,956 shares in
connection with common stock
plans and convertible debentures 2,103 28,506
Common dividends $.31 per share (4,175)
Purchase of 11,781 treasury shares (204)
Minimum pension liability adjustment (2,424)
Foreign currency
translation adjustment (547)
------- ------- ------- -------- -------- --------
BALANCE AT DECEMBER 31, 1993 $15,963 $58,059 $82,029 $ (4,839) $ (1,270) $(13,913)
======= ======= ======= ======== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
H U F F Y 3
8
<PAGE> 9
Huffy Corporation, Fiscal Year 1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
(1) SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(a) Consolidation -- The consolidated financial statements include the
accounts of Huffy Corporation and its subsidiaries. All intercompany
transactions and balances have been eliminated.
(b) Cash and Cash Equivalents -- Cash equivalents consist principally of
short-term money market instruments, with original maturities of three months
or less, of approximately $4,065 at December 31, 1993 and $3,400 at December
31, 1992.
(c) Concentrations of Credit Risk -- Financial instruments which
potentially expose the Company to concentrations of credit risk, as defined by
Statement of Financial Accounting Standards (SFAS) No. 105, consist primarily
of trade accounts receivable. In the normal course of business, Huffy extends
credit to various companies in the retail industry where certain concentrations
of credit risk exist. These concentrations of credit risk may be similarly
affected by changes in economic or other conditions and may, accordingly,
impact Huffy's overall credit risk. However, management believes that
consolidated accounts receivable are well diversified, thereby reducing
potential material credit risk, and that the allowance for doubtful accounts is
adequate to absorb estimated losses as of December 31, 1993.
(d) Inventories -- Inventories are valued at cost (not in excess of market)
determined by the last-in, first-out (LIFO) method for all Huffy bicycle and
basketball inventories. Baby product and lawn and garden tool inventories are
valued on the first-in, first-out (FIFO) method. At December 31, 1993 and 1992,
53% and 46%, respectively, of the Company's inventories were valued using the
LIFO method.
3 H U F F Y
9
<PAGE> 10
(e) Property, Plant and Equipment -- Depreciation and amortization of plant
and equipment is provided generally on the straight-line method, except for
minor land improvements and certain buildings for which the
sum-of-the-years-digits method is used. Annual depreciation and amortization
rates are as follows:
<TABLE>
<S> <C>
Land improvements 5 -- 10%
Buildings 2-1/2 -- 10%
Machinery and equipment 5 -- 33-1/3%
Office furniture, fixtures and equipment 10 -- 33-1/3%
Leasehold improvements 4-1/2 -- 33-1/3%
</TABLE>
(f) Amortization of Intangibles and Other Assets -- The excess of cost over
net assets acquired is amortized on a straight-line basis over forty years.
Other assets are amortized on a straight-line basis over periods ranging from
five to fifteen years.
(g) Income Taxes -- Effective January 1, 1992, the Company adopted SFAS No.
109, "Accounting for Income Taxes," which requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
Pursuant to the deferred method under Accounting Principles Board Opinion
11, which was applied in 1991 and prior years, deferred income taxes are
recognized for income and expense items that are reported in different years
for financial reporting purposes and income tax purposes using the tax rate
applicable in the year of the calculation. Under the deferred method, deferred
taxes are not adjusted for subsequent changes in tax rates.
(h) Postretirement Benefits Other Than Pensions -- Effective January 1,
1992, the Company adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," which requires employers to
accrue the cost of such retirement benefits during the employees' service with
the company. Prior to 1992, the cost of providing these benefits was charged
against income as incurred.
(i) Postemployment Benefits -- Effective January 1, 1993, the Company
adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits,"
which requires companies to recognize the obligation to provide postemployment
benefits in accordance with SFAS No. 43, "Accounting for Compensated Absences,"
or SFAS No. 5, "Accounting for Contingencies." Prior to 1993, the cost of
providing these benefits was charged against income as incurred.
(j) Disclosures About the Fair Value of Financial Instruments -- The
carrying amount of cash and cash equivalents, trade receivables, trade accounts
payable, notes payable to bank,
H U F F Y 4
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<PAGE> 11
and accrued expenses approximates fair value due to the short maturity of
these instruments. The fair value of each of the Company's long-term debt
instruments is disclosed in Note (4).
(k) Earnings (Loss) Per Common Share -- Primary earnings (loss) per common
share is based on the weighted average number of shares of Common Stock and
Common Stock equivalents outstanding during the year. Fully diluted earnings
(loss) per common share is computed based on the weighted average number of
shares of Common Stock and Common Stock equivalents outstanding and, when not
antidilutive, assuming the full conversion of the 7.25% Convertible
Subordinated Debentures, and the elimination of the interest requirements
thereon. The 1993 loss per common share was based on average shares
outstanding. The 1992 fully diluted per share computations of the cumulative
effect of accounting changes, net of income taxes and fully diluted net
earnings were antidilutive, and therefore, the amounts reported for primary and
fully diluted are the same.
(l) Foreign Currency Translation -- The functional currency of the
Company's non-U.S. subsidiaries is the local currency. Adjustments resulting
from the translation of financial statements are reflected as a separate
component of shareholders' equity.
(m) Reclassifications -- Certain reclassifications have been made to prior
year amounts to conform with the current year presentation.
(2) RESTRUCTURING PROVISION
In the fourth quarter of 1993, the Company recorded a $28,755 ($20,329
after-tax) charge to restructure operations of its lawn and garden tools
business. The restructuring plan entails consolidation of certain manufacturing
facilities and the discontinuation of certain unprofitable product lines as
well as a reduction in personnel. The restructuring charge is comprised of
the following components:
<TABLE>
<S> <C>
Write-down to net realizable value:
Goodwill and intangible assets $ 6,670
Fixed assets 8,709
Inventories 4,080
Severance and related costs 4,363
Facilities consolidation costs 2,792
Estimated operating losses of discontinued product lines 2,141
-------
Total restructuring provision $28,755
=======
</TABLE>
(3) INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Finished goods $45,219 $29,375
Work-in-process 12,817 11,745
Raw materials and supplies 32,904 38,860
------- -------
90,940 79,980
Excess of FIFO cost over LIFO inventory value (8,796) (8,682)
------- -------
$82,144 $71,298
======= =======
</TABLE>
4 H U F F Y
1
<PAGE> 12
(4) LINES OF CREDIT AND LONG-TERM OBLIGATIONS
During 1993, the Company had a short-term committed line of credit with
various banks in the form of a $50,000 revolving credit agreement, which had no
outstanding balance at December 31, 1993. The line of credit expires December
31, 1995. The Company also has $75,000 in uncommitted lines of credit that
exist on a no fee basis, of which $3,500 was outstanding at December 31, 1993.
Short-term borrowings are summarized as follows:
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Average borrowings $12,742 $27,590
Maximum at any month end 31,200 53,350
Weighted average rate 3.46% 4.17%
</TABLE>
Long-term obligations are summarized as follows:
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Unsecured notes payable:
9.62% due serially through 2000 $27,000 $30,000
9.81% due serially through 1998 16,000 17,800
7.25% Convertible Subordinated Debentures -- 29,995
Obligations under capital leases 159 194
Other 6,020 2,175
------- -------
49,179 80,164
Less current installments 5,968 5,246
------- -------
$43,211 $74,918
======= =======
</TABLE>
During 1993, the Company called for the redemption of all its outstanding
7.25% Convertible Subordinated Debentures due 2014. All of the debentures were
converted into 1,973,305 shares of Huffy Corporation Common Stock at a
conversion price of $15.20 per share.
Principal payments required on long-term obligations during each of the
years 1995 through 1998 are approximately $5,300, $7,500, $7,300, and $7,700,
respectively.
Certain of the loan agreements contain covenants which, among other things,
require the Company to maintain current assets equal to 150% of current
liabilities, limit the percentage of capitalization from funded debt, and
require that certain levels of net worth be maintained.
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments",
requires entities to disclose the fair value of certain on- and off-balance
sheet financial instruments. The estimated fair value of the Company's
long-term obligations at December 31, 1993 is as follows: 9.62% unsecured note
payable - $31,950; 9.81% unsecured note payable - $18,500; other - $5,900.
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. Fair value
estimates were
H U F F Y 4
2
<PAGE> 13
based on the amount of future cash flows discounted using the
Company's current borrowing rate for loans of comparable maturity. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
(5) PREFERRED STOCK
Under the Company's Amended Articles of Incorporation, there are 1,000,000
authorized shares of Cumulative Preferred Stock, $1.00 par value. Subject to
certain limitations, the Articles provide that the Board of Directors may fix
the conditions of each series of Preferred Stock.
In 1988, the Company's Board of Directors declared a dividend of one
Preferred Share Purchase Right for each outstanding share of the Company's
Common Stock. Upon the occurrence of certain events, the new Preferred Share
Purchase Rights entitle the holder to purchase two three-hundredths of a share
of Series C Cumulative Preferred Stock at a price of $45.00 per one-hundredth
of a share, subject to adjustment. During 1991, the Board of Directors
approved certain changes to the existing Shareholder Rights Plan. The Rights
become exercisable only if a person or group acquires 15% or more of the
Company's Common Stock or announces a tender offer for 15% or more of the
Common Stock. Under certain circumstances, all Rights holders, except the
person or group holding 15% or more of the Company's Common Stock, will be
entitled to purchase a number of shares of the Company's Common Stock having a
market value of twice the Right's current exercise price. Alternately, if the
Company is acquired in a merger or other business combination, after the Rights
become exercisable the Rights will entitle the holder to buy a number of the
acquiring company's common shares having a market value at that time of twice
each Right's current exercise price.
Further, after a person or group acquires 15% or more (but less than 50%)
of the Company's outstanding Common Stock, the Company's Board of Directors may
exchange part or all of the Rights (other than the Rights held by the acquiring
person or group) for shares of Common Stock. The Rights expire January 13, 1999
and may be redeemed by the Company for $.02 per Right at any time prior to the
acquisition by a person or group of 15% or more of the Company's Common Stock.
4 H U F F Y
3
<PAGE> 14
(6) COMMON STOCK AND COMMON
STOCK PLANS
The 1988 Stock Option Plan and Restricted Share Plan authorizes the
issuance of both incentive stock options and non-qualified stock options, and
allows for the subscription of restricted shares of Common Stock. The total
number of shares which may be issued under this Plan shall not exceed 1,125,000
shares. These options may also include stock appreciation rights. Under the
1974 and 1984 Stock Option Plans, both incentive stock options and
non-qualified stock options were granted. Under the 1974 and 1984 Plans, no
additional options can be granted; however, options remain outstanding and
exercisable.
The 1987 Director Stock Option Plan authorizes the automatic issuance of
non-qualified stock options to members of the Board of Directors who are not
employees of the Company. Directors can elect to receive discounted stock
options in lieu of all or part of the annual retainer fees. The total number of
shares issued under the Plan shall not exceed 337,500 shares, and such shares
cannot include stock appreciation rights.
Activity in 1993 and 1992 for the Common Stock Option Plans was as follows:
<TABLE>
<CAPTION>
1993 1993 1992 1992
Number Option Price Number Option Price
of Shares Per Share of Shares Per Share
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
1988, 1984, AND 1974 PLANS
Outstanding at January 1 829,088 $4.83-20.00 802,955 $4.83-20.00
Granted 141,993 19.00 124,892 20.00
Cancelled (24,391) 4.83-20.00 (48,640) 4.83-20.00
Exercised (120,465) 4.83-11.33 (50,119) 4.83-11.33
--------- ----------- ------- -----------
Outstanding at December 31 826,225 $4.83-20.00 829,088 $4.83-20.00
========= =========== ======= ===========
Exercisable at December 31 335,073 $4.83-15.50 316,816 $4.83-13.58
========= =========== ======= ===========
1987 DIRECTOR STOCK OPTION PLAN
Outstanding at January 1 107,238 $ .67-13.67 100,439 $ .67-13.67
Granted 5,904 1.00 8,382 1.00
Exercised -- -- (1,583) .67
--------- ----------- ------- -----------
Outstanding at December 31 113,142 $ .67-13.67 107,238 $ .67-13.67
========= =========== ======= ===========
Exercisable at December 31 98,856 $ .67-13.67 41,989 $ .67-13.67
========= =========== ======= ===========
</TABLE>
H U F F Y 4
4
<PAGE> 15
The 1989 Employee Stock Purchase Plan, as amended, authorizes the offering
and sale of up to 975,000 shares of the Company's Common Stock at a price
approximating 90% of the closing price of the Common Stock on the offering
date. During 1993 and 1992, 9,186 and 14,083 common shares, respectively, which
had been granted under the 1989 Plan were issued at a purchase or option price
of $13.61 and $16.22 per share, respectively. At December 31, 1993, rights to
purchase 109,647 shares were outstanding under this Plan at an exercise price
of $13.61 per share and 746,585 shares were available for issuance.
(7) COMMITMENTS
The Company leases certain manufacturing and warehouse facilities, office
space, machinery, and vehicles under cancellable and non-cancellable operating
leases, most of which expire within ten years and may be renewed by the
Company. Rent expense under such arrangements totaled approximately $4,900,
$5,175 and $4,980 in 1993, 1992 and 1991, respectively.
Future minimum rental commitments under non-cancelleable operating leases
at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
AMOUNT
<S> <C>
1994 $ 5,313
1995 4,800
1996 3,950
1997 2,855
1998 2,408
Thereafter 9,720
-------
Total minimum payments $29,046
=======
</TABLE>
(8) BENEFIT PLANS
The Company sponsors defined benefit pension plans covering certain
salaried and hourly employees. Benefits to salaried employees are based upon
the highest three consecutive years of earnings out of their last ten years of
service; benefits to hourly workers are based upon their years of credited
service. Contributions to the plans reflect benefits attributed to employees'
service to date and also to services expected to be provided in the future.
Plan assets consist primarily of common and preferred stocks, investment grade
corporate bonds and U.S. government obligations.
4 H U F F Y
5
<PAGE> 16
<TABLE>
The following table sets forth the plans' funded status and amounts
recognized in the Company's Consolidated Balance Sheets at December 31, 1993
and 1992:
<CAPTION>
1993 1993 1992 1992
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
<S> <C> <C> <C> <C>
ACTUARIAL PRESENT VALUE
OF BENEFIT OBLIGATIONS:
Vested benefit obligation $ 20,928 $ 28,762 $ 14,886 $ 20,427
--------- -------- --------- ---------
Accumulated benefit obligation 22,542 34,096 17,338 24,485
--------- -------- --------- ---------
Projected benefit obligation for
service rendered to date 27,713 35,505 24,303 26,660
Plan assets at fair value 27,025 22,100 24,518 18,967
--------- -------- --------- ---------
Plan assets in excess (less than)
projected benefit obligation (688) (13,405) 215 (7,693)
Unamortized transition asset (2,516) (768) (2,731) (897)
Unrecognized prior service cost (533) 6,391 (573) 4,523
Unrecognized net loss 5,129 8,104 4,132 4,206
Adjustment required to recognize
minimum liability -- (12,688) -- (5,767)
--------- -------- --------- ---------
Pension costs prepaid (accrued)
at year end $ 1,392 $(12,366) $ 1,043 $ (5,628)
========= ======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
NET PENSION COST INCLUDED
THE FOLLOWING COMPONENTS:
Service cost benefits earned during the period $ 1,994 $ 1,997 $ 1,554
Interest cost on projected benefit obligation 4,215 4,007 3,465
Actual return on plan assets (4,812) (1,802) (5,544)
Net amortization and deferral 592 (2,170) 2,138
------- ------- -------
Net periodic pension cost $ 1,989 $ 2,032 $ 1,613
======= ======= =======
ACTUARIAL ASSUMPTIONS:
Weighted average discount rate 7.25% 8.5% 8.75%
Rate of return on assets 10.0% 10.0% 10.0%
Rate of increase in compensation 5.0% 6.0% 6.0%
</TABLE>
H U F F Y 4
6
<PAGE> 17
In accordance with SFAS No. 87, the Company has recorded an additional
minimum pension liability of $12,688 at December 31, 1993 and $5,767 at
December 31, 1992, representing the excess of unfunded accumulated benefit
obligations over previously recorded pension cost liabilities. A corresponding
amount is recognized as an intangible asset except to the extent that these
additional liabilities exceed related unrecognized prior service cost and net
transition obligation, in which case the increase in liabilities is charged
directly to shareholders' equity. In 1993 and 1992, the excess minimum pension
liability resulted in a charge to equity, net of income taxes, of $2,424 and
$2,189, respectively.
The Company maintains defined contribution retirement plans covering its
eligible employees under Section 401(k) of the Internal Revenue code. The
purpose of these defined contribution plans is generally to provide additional
financial security during retirement by providing employees with an incentive
to make regular savings. The Company's contributions to the plans are based on
employee contributions and were $834, $607, and $449 in 1993, 1992, and 1991,
respectively.
(9) OTHER POSTRETIREMENT BENEFIT PLANS AND POSTEMPLOYMENT BENEFITS
In addition to the Company's defined benefit pension plans, the Company
sponsors several defined benefit health care and life insurance plans that
provide postretirement medical, dental and life insurance benefits to full-time
employees who meet minimum age and service requirements. The plans are
contributory, with retiree contributions adjusted annually, and contain other
cost-sharing features such as deductibles and coinsurance. The Company's policy
is to fund the cost of medical benefits in amounts determined at the discretion
of management.
The Company also sponsors a deferred compensation plan for the benefit of
highly compensated management employees. The eligible employees make
contributions to the plan and receive postretirement benefits based upon a
stated rate of return on those contributions. The Company's policy is to fund
the cost of the benefits in amounts determined at the discretion of management.
The Company adopted SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions", effective January 1, 1992. The effect of
adopting SFAS No. 106 on earnings before cumulative effect of accounting
changes and net earnings for the year ended December 31, 1992 was a decrease
of $453 and $7,475 respectively.
4 H U F F Y
7
<PAGE> 18
The following table presents the plans' funded status reconciled with
amounts recognized in the Company's Consolidated Balance Sheet at December 31,
1993 and 1992 and the net periodic postretirement benefit cost recorded in the
Company's 1993 and 1992 Consolidated Statements of Operations:
<TABLE>
<CAPTION>
1993
--------------------------------------------------
Health Care and Deferred
Life Insurance Compensation
Plans Plan Total
<S> <C> <C> <C>
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION:
Retirees $ 5,048 $ 1,625 $ 6,673
Fully eligible active plan participants 1,050 2,628 3,678
Other active plan participants 5,688 -- 5,688
-------- ------- --------
11,786 4,253 16,039
UNRECOGNIZED NET LOSS (585) (427) (1,012)
-------- -------- --------
Postretirement benefits other than pensions
accrued at year end $11,201 $ 3,826 $15,027
======== ======== ========
NET PERIODIC POSTRETIREMENT BENEFIT COST:
Service cost $ 488 $ -- $ 488
Interest cost 941 290 1,231
-------- -------- --------
Net periodic postretirement benefit cost $ 1,429 $ 290 $ 1,719
======== ======== ========
ACTUARIAL ASSUMPTIONS:
Weighted average discount rate 7.25% 7.25%
Health care cost trend rate for expenses
of participants under age 65 14.25%
Health care cost trend rate for expenses of
participants over age 65 12.25%
</TABLE>
<TABLE>
<CAPTION>
1992
--------------------------------------------------
Health Care and Deferred
Life Insurance Compensation
Plans Plan Total
<S> <C> <C> <C>
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION:
Retirees $ 3,277 $ 843 $ 4,120
Fully eligible active plan participants 792 3,131 3,923
Other active plan participants 6,147 -- 6,147
-------- -------- --------
Postretirement benefits other than pensions
accrued at year end $10,216 $ 3,974 $14,190
======== ======== ========
NET PERIODIC POSTRETIREMENT BENEFIT COST:
Service cost $ 497 $ -- $ 497
Interest cost 825 311 1,136
-------- -------- --------
Net periodic postretirement benefit cost $ 1,322 $ 311 $ 1,633
======== ======== ========
ACTUARIAL ASSUMPTIONS:
Weighted average discount rate 8.5% 8.5%
Health care cost trend rate for expenses of
participants under age 65 15.0%
Health care cost trend rate for expenses of
participants over age 65 8.0%
</TABLE>
H U F F Y 4
8
<PAGE> 19
For measurement purposes, in 1994, a 12.00 percent health care cost trend
rate was assumed for expenses of participants under age 65; this rate was
assumed to decrease gradually to 5.5 percent by the year 2003 and remain at
that level thereafter. In addition, for 1994, a 10.00 percent health care cost
trend rate was assumed for expenses of participants over age 65; this rate was
assumed to decrease gradually to 5.5 percent by the year 2000 and remain at
that level thereafter. The health care cost trend rate assumption has a
significant effect on the amounts reported. For example, increasing the assumed
health care cost trend rates by one percentage point in each year would
increase the accumulated postretirement benefit obligation as of December 31,
1993 by $1,647 and the aggregate of the service and interest cost components of
net periodic postretirement benefit cost for the year ended December 31, 1993
by $234.
The Company adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," effective January 1, 1993. The effect of adopting SFAS No. 112 on
loss before cumulative effect of accounting changes and net loss for the year
ended December 31, 1993 was an increased loss of $45 and $1,084, respectively.
(10) INCOME TAXES
The provisions for federal and state income taxes attributable to income
from continuing operations consist of:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Current tax expense:
Federal $ 9,458 $ 2,876 $ 9,667
State 1,598 727 1,382
Foreign 105 322 589
--------- -------- -------
11,161 3,925 11,638
Deferred tax expense (benefit) (10,406) 2,853 (8)
--------- -------- -------
Total tax expense $ 755 $ 6,778 $11,630
========= ======== =======
</TABLE>
Effective January 1, 1992, the Company adopted the provisions of SFAS No.
109, "Accounting for Income Taxes," which requires recognition of deferred tax
liailities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Effective January 1, 1992, the Company
recorded a tax debit of approximately $153 or $0.01 per share, which amount
represents the net decrease to the deferred tax asset
4 H U F F Y
9
<PAGE> 20
as of that date. Such amount has been reflected in the Consolidated Statement
of Operations as a cumulative effect of an accounting change. Prior years'
financial statements have not been restated to apply the provisions of
SFAS No. 109.
The Company and its domestic subsidiaries file a consolidated U.S. federal
income tax return. Such returns have been audited and settled through the year
1989.
The deferred tax expense (benefit) attributable to continuing operations
consists of the following:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Change in statutory tax rate $ (315) $ -- $ --
Provision for restructuring (8,426) -- --
Property, plant and equipment (351) 176 (145)
Other temporary differences, net (1,314) 2,677 137
-------- ------ --------
Total $(10,406) $2,853 $ (8)
======== ====== ========
</TABLE>
The components of the net deferred tax asset as of December 31, 1993 and
1992 were as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 984 $ 728
Inventory obsolescence reserve 2,160 377
Property, plant and equipment 243 --
Workers' compensation 1,728 1,188
Product liability 1,301 1,003
Deferred compensation 2,039 2,102
Accrued vacation 1,332 1,204
Restructuring reserves 3,254 --
Pension liability 2,317 --
Postretirement benefits other than pensions 5,254 4,824
Other liabilities and reserves 5,157 2,740
Purchase price adjustments -- 1,218
---------- ----------
Total deferred tax assets 25,769 15,384
---------- ----------
Deferred tax liabilities:
Property, plant and equipment -- 3,156
Pension liability -- 109
Other assets 1,472 1,416
---------- ----------
Total deferred tax liabilities 1,472 4,681
---------- ----------
Net deferred tax asset $ 24,297 $ 10,703
======== ========
</TABLE>
Management expects that the Company's future levels of taxable income will
be sufficient to fully utilize the net deferred tax asset. Therefore, a
valuation allowance has not been established.
H U F F Y 5
0
<PAGE> 21
The following table accounts for the difference between the actual tax
provision and the amounts obtained by applying the statutory U.S. federal
income tax rate to the earnings (loss) before income taxes and cumulative
effect of accounting changes.
<TABLE>
<CAPTION>
Years Ended December 31, 1993 1992 1991
<S> <C> <C> <C>
Earnings (loss) before income taxes and cumulative
effect of accounting changes $ (3,078) $ 18,621 $ 31,457
======== ======== ========
Tax provision computed at statutory rate $ (1,077) $ 6,331 $ 10,695
Increase (reduction) in taxes due to:
State income taxes (net of federal tax benefit) 1,039 480 912
Goodwill amortization 1,615 286 308
Benefit plans (461) (174) (213)
Reduction in liability due to favorable
IRS settlement (900) -- --
Change in statutory tax rate (315) -- --
Intangible asset write-down 499 -- --
Miscellaneous 355 (145) (72)
-------- -------- --------
Actual tax provision $ 755 $ 6,778 $ 11,630
======== ======== ========
</TABLE>
(11) BUSINESS SEGMENTS
The Company's operations are transacted in the following business segments:
- - RECREATION AND LEISURE TIME PRODUCTS -- bicycles, basketball related
equipment, and lawn and garden tools.
- - JUVENILE PRODUCTS -- baby care and development products including car seats,
infant carriers, safety gates, cribs, and electronic safety products.
- - SERVICES FOR RETAIL -- in-store assembly, repair and display services as well
as inventory counting services.
5 H U F F Y
1
<PAGE> 22
A summary of the Company's 1993, 1992, and 1991 operations by business
segment is as follows:
<TABLE>
<CAPTION>
EARNINGS (LOSS)
BEFORE INCOME TAXES
AND CUMULATIVE
EFFECT OF DEPRECIATION
ACCOUNTING IDENTIFIABLE AND CAPITAL
SALES CHANGES ASSETS AMORTIZATION EXPENDITURES
<S> <C> <C> <C> <C> <C>
1993
Recreation and Leisure
Time Products $513,639 $ (4,765)[1] $196,585 $ 12,547 $ 13,881
Juvenile Products 124,274 8,081 [2] 60,007 3,604 3,873
Services for Retail 121,284 6,779 36,809 3,506 3,226
Eliminations (1,334)
Interest expense (8,830)
Interest income 91
General corporate (4,434) 23,331 603 342
-------- -------- -------- -------- --------
$757,863 $ (3,078) $316,732 $ 20,260 $ 21,322
======== ======== ======== ======== ========
1992
Recreation and Leisure
Time Products $478,837 $ 17,911 $222,050 $ 10,850 $ 15,541
Juvenile Products 115,535 9,535 60,837 2,708 4,924
Services for Retail 109,573 4,013 35,934 3,799 3,138
Eliminations (600)
Interest expense (9,590)
Interest income 269
General corporate (3,517) 16,507 608 311
-------- -------- -------- -------- --------
$703,345 $ 18,621 $335,328 $ 17,965 $ 23,914
======== ======== ======== ======== ========
1991
Recreation and Leisure
Time Products $465,582 $ 33,808 $205,128 $ 10,034 $ 14,941
Juvenile Products 108,509 7,096 56,167 2,199 3,785
Services for Retail 105,558 2,919 35,464 3,437 4,544
Eliminations (713)
Interest expense (8,964)
Interest income 917
General corporate (4,319) 19,818 511 1,239
-------- -------- -------- -------- --------
$678,936 $ 31,457 $316,577 $ 16,181 $ 24,509
======== ======== ======== ======== ========
<FN>
[1] Includes a $28,755 provision to restructure the Company's lawn and garden
tool business.
[2] Includes a charge of $858 associated with the disposition of previous
manufacturing facility and move to new facility, and a charge of $502 for
asset write offs associated with discontinued product.
</TABLE>
The effect of adopting SFAS No. 112 on earnings (loss) before income taxes
and cumulative effect of accounting changes was immaterial in 1993.
The effect of adopting SFAS No. 106 on earnings before income taxes and
cumulative effect of accounting changes in 1992 was to reduce earnings of the
Recreation and Leisure Time Products, Juvenile Products, and Services for Retail
segments by $662, $36, and $157, respectively.
In 1993, 1992, and 1991, two customers individualy accounted for 13% and
13%, 13% and 12%, and 12% and 11% of total consolidated net sales,
respectively.
H U F F Y 5
2
<PAGE> 23
<TABLE>
(12) QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data for the years 1993 and 1992 are as follows:
<CAPTION>
1ST[1] 2ND 3RD 4TH[2]
QUARTER QUARTER QUARTER QUARTER Total
<S> <C> <C> <C> <C> <C>
1993
Net sales $214,999 $220,095 $167,232 $ 155,537 $757,863
Gross profit 39,572 42,033 30,219 26,464 138,288
Earnings (loss) before cumulative effect
of accounting change 4,909 6,869 2,308 (17,919) (3,833)
Cumulative effect of accounting change,
net of income taxes (1,084) (1,084)
-------- -------- -------- --------- --------
Net earnings (loss) $ 3,825 $ 6,869 $ 2,308 $ (17,919) $ (4,917)
======== ======== ======== ========= ========
EARNINGS PER COMMON SHARE: [3]
PRIMARY
Earnings (loss) before cumulative
effect of accounting change $ .38 $ .54 $ .18 $(1.26) $(.30)
Cumulative effect of accounting
change, net of income taxes (.08) (.08)
-------- -------- -------- --------- --------
Net earnings (loss) $ .30 $ .54 $ .18 $(1.26) $(.38)
======== ======== ======== ========= ========
FULLY DILUTED
Earnings (loss) before cumulative
effect of accounting change $ .35 $ .48 $ .18 $(1.26) $(.30)
Cumulative effect of accounting
change, net of income taxes (.07) (.08)
-------- -------- -------- --------- --------
Net earnings (loss) $ .28 $ .48 $ .18 $(1.26) $(.38)
======== ======== ======== ========= ========
1992
Net sales $179,615 $180,910 $156,076 $186,744 $703,345
Gross profit 37,821 34,263 25,190 25,334 122,608
Earnings (loss) before cumulative effect
of accounting changes 5,774 4,743 1,647 (321) 11,843
Cumulative effect of accounting changes,
net of income taxes (7,628) (7,628)
-------- -------- -------- --------- --------
Net earnings (loss) $ (1,854) $ 4,743 $ 1,647 $ (321) $ 4,215
======== ======== ======== ========= ========
EARNINGS PER COMMON SHARE: [3]
PRIMARY
Earnings (loss) before cumulative
effect of accounting changes $ .43 $ .36 $ .13 $(.02) $ .92
Cumulative effect of accounting changes,
net of income taxes (.59) (.59)
-------- -------- -------- --------- --------
Net earnings (loss) $ (.14) $ .36 $ .13 $(.02) $ .33
======== ======== ======== ========= ========
FULLY DILUTED [4]
Earnings (loss) before cumulative effect
of accounting changes $ .40 $ .34 $ .13 $(.02) $ .89
Cumulative effect of accounting changes,
net of income taxes (.59) (.59)
-------- -------- -------- --------- --------
Net earnings (loss) $(.14) $ .34 $ .13 $(.02) $ .33
======== ======== ======== ========= ========
<FN>
[1] Amounts differ from those previously reported as a result of the adoption of SFAS No. 112 in the fourth quarter, effective
January 1, 1993.
[2] Includes a $28,755 ($20,329 after-tax) provision to restructure the Company's lawn and garden tools business.
[3] Quarterly per share amounts are computed independently for each quarter and the full year based upon the respective weighted
average number of common shares outstanding and may not equal the total for the year.
[4] Where the assumed conversion of the 7.25% Convertible Subordinated Debentures was antidilutive, the per share amounts reported
for primary and fully diluted are the same.
</TABLE>
5 H U F F Y
3
<PAGE> 24
Huffy Corporation, Fiscal Year 1993
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
COMPARISON OF THE YEAR ENDED
DECEMBER 31, 1993 TO THE YEAR
ENDED DECEMBER 31, 1992
The Company recorded a net loss of $4,917 in 1993, compared to net earnings
of $4,215 reported in 1992. The 1993 net loss included an after-tax charge of
$20,329 to reflect the restructure of the Company's lawn and garden tools
business, and an after-tax charge of $1,084 to reflect the cumulative effect of
a change in accounting for postemployment benefits upon adoption of Statement
of Financial Accounting
H U F F Y 2
8
<PAGE> 25
Standards (SFAS) No. 112. The 1992 net earnings included an after-tax charge
of $7,628 to reflect the cumulative effects of changes in accounting for
postretirement benefits and income taxes upon adoption of SFAS No. 106 and
SFAS No. 109.
Net loss per share of common stock was $.38 in 1993 compared to net
earnings per common share of $.33 in 1992. If net earnings (loss) were
adjusted to exclude the impact of the restructuring charge in 1993 and the
cumulative effects of changes in accounting resulting from the adoption of SFAS
No. 112 in 1993, and SFAS No. 106 and SFAS No. 109 in 1992, net earnings per
common share on a fully diluted basis would have been $1.20 in 1993 compared to
$.89 in 1992.
PROVISION FOR RESTRUCTURING
In the fourth quarter of 1993, the Company recorded a $28,755 ($20,329
after-tax) charge to restructure its lawn and garden tools business. During
1992 and 1993, True Temper Hardware Company experienced operating losses due to
several unprofitable product lines, and inefficiencies in the manufacturing
process. In order to position this business for future profitability,
Management determined it necessary to restructure operations by discontinuing
certain unprofitable products, relocating production to improve manufacturing
efficiency, and writing off impaired assets.
The restructuring plan entails the shutdown of facilities in Anderson,
South Carolina and certain other locations; discontinuation of certain
unprofitable product lines; and other facilities consolidation. The
restructuring charge is comprised of the following components:
<TABLE>
<S> <C>
Write-down to net realizable value:
Goodwill and intangible assets $ 6,670
Fixed assets 8,709
Inventories 4,080
Severance and related costs 4,363
Facilities consolidation costs 2,792
Estimated operating losses of discontinued product lines 2,141
-------
Total restructuring provision $28,755
=======
</TABLE>
The Company anticipates that it will take approximately six months to
wind-down operations at facilities that will be closed. At that time, certain
operations will be relocated to the Camp Hill, Pennsylvania facility. The
Company expects to complete the restructuring within the next year and,
accordingly, estimates that the majority of anticipated cash charges included
in the restructuring provision will be incurred in 1994.
The Company will benefit immediately from reduced depreciation and
amortization charges of approximately $1,600 in 1994 related to intangibles and
fixed asset write-downs to net realizable value. Additionally, the Company
expects to benefit in the future from increased production efficiency and
reduced overhead expenses, which should improve operating cash flow and
liquidity.
2 H U F F Y
9
<PAGE> 26
NET SALES
Net sales in 1993 were $757,863, a 7.8% increase over net sales of $703,345
in 1992. The net sales increase was spread across all business segments as
follows: Recreation and Leisure Time Products, 7.3%; Juvenile Products, 7.6%;
and Services for Retail, 10.7%.
The net sales increase in the Recreation and Leisure Time Products segment
was due primarily to significant sales increases at Huffy Bicycle Company and
Huffy Sports Company. Net sales increased at Huffy Bicycle Company due to
increased demand in the mountain bike category and strong sales of new bicycle
introductions in the youth bike category. Huffy Sports Company experienced
significant sales increases attributable primarily to new product
introductions, particularly portable basketball systems. Net sales decreased
slightly at True Temper Hardware Company primarily due to soft demand for lawn
and garden tool products in the fourth quarter as a result of eliminated
year-end rebates, and reductions of inventory by some of the Company's
important customers.
The Juvenile Products segment had record sales in 1993 due primarily to new
product introductions and increased distribution of existing products.
The net sales increase in the Services for Retail segment occurred
primarily at Huffy Service First with sales volume increases attributable to
increased bicycle assemblies caused by an overall improvement in the bicycle
market and further penetration into additional product category assemblies and
display programs. The net sales increase at Washington Inventory Service was
due to a broadening of the customer base and increased sales to existing
customers.
GROSS PROFIT
Consolidated gross profit for 1993 was $138,288, or 18.2% of net sales,
compared to $122,608, or 17.4% of net sales reported for 1992. Gross profit as
a percentage of net sales increased in the Recreation and Leisure Time Products
segment. This increase was caused primarily by the sale of a more profitable
product mix and volume related efficiencies at Huffy Bicycle Company. This
increase was partially offset by a reduction in gross profit as a percentage
of net sales at True Temper Hardware Company due to competitive pricing
pressures, costly customer promotional programs, and manufacturing
inefficiencies. The Services for Retail segment showed an improved gross
profit percentage, primarily as a result of increased volume and operating
efficiencies. Gross profit as a percentage of sales remained at 1992 levels in
the Juvenile Products segment.
H U F F Y 3
0
<PAGE> 27
Consolidated gross profit in total and as a percentage of sales varies by
quarter due to normal seasonal fluctuations at several Huffy companies. True
Temper Hardware Company typically experiences lower sales in the third quarter
due to the seasonal nature of its products. Lower gross profit percentages in
the fourth quarter are typically caused by seasonal fluctuations at Huffy
Bicycle Company and Washington Inventory Service. Huffy Bicycle Company
typically stops production for a period during December to prevent inventory
build-up. The fixed costs associated with this shutdown reduce fourth quarter
profitability. Washington Inventory Service also experiences a significant
unfavorable seasonal impact during the fourth quarter as retailers typically do
not conduct inventories during the Christmas season, causing low fourth quarter
sales volume and reduced gross profit.
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses in 1993 were $102,493, or
13.6% of net sales, compared to $95,163, or 13.6% of net sales in 1992. The
overall dollar increase in selling, general and administrative expenses was
caused primarily by volume related increases in selling expenses, increases in
incentive pay, increases in product engineering costs, and overall inflation.
NET INTEREST EXPENSE
Net interest expense decreased by 6.2% in 1993 due to the call for
redemption and subsequent conversion of the Company's 7.25% Convertible
Subordinated Debentures in October, 1993, lower interest rates for short-term
borrowing in 1993 compared to 1992, and lower average short-term borrowings.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1992 TO THE YEAR
ENDED DECEMBER 31, 1991
Net earnings for the year ended December 31, 1992, were $4,215, or $.33 per
common share, compared to $19,827, or $1.41 per common share reported in 1991.
The 1992 net earnings and net earnings per common share include a one-time
cumulative charge of $7,628, or $.59 per common share, from the adoption of
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" and SFAS No. 109, "Accounting for Income Taxes."
3 H U F F Y
1
<PAGE> 28
The primary reduction in earnings before the cumulative effect of
accounting changes in 1992 occurred in the Recreation and Leisure Time Products
segment at Huffy Bicycle Company and True Temper Hardware Company. At Huffy
Bicycle Company, both sales volume and gross profit were significantly below
1991's results for the same period. The decrease in earnings at True Temper
Hardware Company was attributable to reduced gross profit resulting from a
major emphasis on market share growth. Increases in earnings in the Juvenile
Products and Services for Retail segments were the result of increased sales
and cost reduction programs.
NET SALES
Net sales in 1992 were $703,345, a 3.6% increase over net sales of $678,936
in 1991. Net sales in the Recreation and Leisure Time Products segment
increased slightly as increased net sales at True Temper Hardware Company and
Huffy Sports Company offset decreased net sales at Huffy Bicycle Company. The
net sales decrease at Huffy Bicycle Company was primarily related to a shift in
market demand to lower specification, lower priced bicycles. The increase in
net sales at True Temper Hardware Company was the result of increased market
penetration. The increase at Huffy Sports Company resulted from new product
introductions and increased seasonal demand. The Juvenile Products and the
Services for Retail segments experienced increases in net sales, reflecting
increased demand for their products and services.
GROSS PROFIT
Consolidated gross profit for 1992 was $122,608, or 17.4% of net sales,
compared to $132,485, or 19.6% of net sales, reported for 1991. The gross
profit for the Recreation and Leisure Time Products segment in 1992 was
significantly lower than for 1991. Decreased profitability resulted from the
sale of a less profitable product mix at Huffy Bicycle Company, and from
competitive pricing and manufacturing inefficiencies at True Temper Hardware
Company. This decrease was offset by improved gross profit in both the
Services for Retail and the Juvenile Products segments. In the Services for
Retail segment, this improvement was generated by enhanced operating
efficiencies, while in the Juvenile Products segment the improved gross profit
resulted from increased volume, favorable product mix, and production
efficiencies.
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $95,163 in 1992, compared
to $92,499 in 1991. Expressed as a percentage of net sales, selling, general
and administrative expenses in 1992 were comparable to expenses for 1991 due to
cost containment programs implemented in the second quarter of 1992 which
partially offset the effect of inflation.
H U F F Y 3
2
<PAGE> 29
NET INTEREST EXPENSE
Net interest expense for 1992 was $9,321 as compared to $8,047 in 1991.
The primary factor affecting the increase in net interest expense was
short-term debt incurred to finance higher inventory levels at Huffy Bicycle
Company during the first nine months of 1992. This build up in inventory was
done to improve the delivery service level to its customers. In addition,
inventory levels were up slightly during 1992 at other Huffy companies for
similar reasons.
LIQUIDITY AND CAPITAL RESOURCES
The Company's significant source of capital in 1993 was cash provided by
operations of $41,422. This capital was used to reduce outstanding short-term
debt and fund capital expenditures in 1993. On a continuing basis, the
Company's primary sources of capital are its net earnings, short-term lines of
credit, long-term borrowings, and the issuance of equity securities. The
Company has committed and uncommitted short-term lines of credit totaling
$125,000 of which $3,500 was outstanding at December 31, 1993. The net
decrease in long-term debt of $30,985 in 1993 was due to normal principal
reductions and the conversion of $29,995 7.25% Convertible Subordinated
Debentures into 1,973,305 shares of the Company's common stock. The Company
believes that its capital structure provides the financial flexibility to
obtain additional financing that may be necessary to fund future growth.
On December 10, 1993, the Company announced plans to establish an
additional bicycle manufacturing facility to expand capacity and enable Huffy
Bicycle Company to improve customer service. The new facility will require an
investment of $15,000-$20,000. Capital expenditures related to the new
facility are expected to be approximately $13,000 in 1994. The additional
facility is scheduled to begin production in late 1994.
In addition to the new bicycle manufacturing facility, the Company
anticipates capital spending of approximately $27,000, primarily for new
products, cost reductions, and increased capacity. The majority of the cash
required for 1994 capital expenditures will be provided by operations and
short-term borrowings.
INFLATION
Inflation has had a minimal effect on the Company during the three years
ended December 31, 1993. Although there was limited inflation in labor,
material, overhead, and administrative costs, it was essentially offset by
sales price increases, cost reduction programs, and increased operating
efficiency.
3 H U F F Y
3
<PAGE> 30
COMMON STOCK
Huffy Corporation Common Stock is traded on the New York Stock Exchange.
Cash dividends declared and the quarterly high and low prices of Huffy Common
Stock during the years ended December 31, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1993
COMMON STOCK DIVIDENDS
PRICE RANGE DECLARED
<S> <C> <C> <C>
QUARTER HIGH LOW
First $ 16-7/8 $ 14-5/8 $.075
Second 16-3/8 14-3/4 $.075
Third 20-3/8 16 $.075
Fourth 19-7/8 16-3/4 $.085
-----
Total $.310
=====
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31, 1992
COMMON STOCK DIVIDENDS
PRICE RANGE DECLARED
QUARTER HIGH LOW
<S> <C> <C> <C>
First $ 24-3/8 $ 19-1/4 $.075
Second 19-7/8 12-1/4 $.075
Third 14-1/2 12-1/8 $.075
Fourth 16-1/4 12 $.075
-----
Total $.300
=====
</TABLE>
As of December 31, 1993 there were 14,673,599 shares of Huffy Corporation
Common Stock outstanding and there were 3,760 shareholders of record.
Management estimates an additional 9,000 shareholders hold their stock in
nominee name. Trading volume of the Company's Common Stock during the twelve
months ended December 31, 1993 totaled 11,046,400 shares. The average number of
Common Stock and Common Stock equivalent shares outstanding during this period
on a primary basis was approximately 13,240,000 shares.
Huffy Corporation, Fiscal Year 1993
SHAREHOLDER INFORMATION
ANNUAL MEETING
The Annual Meeting of Shareholders will be held April 15, 1994 at 10:00 a.m.,
Eastern Daylight Time, at the Dayton Marriott Hotel, 1414 South Patterson
Boulevard, Dayton, Ohio. Shareholders are cordially invited to attend.
STOCK EXCHANGE
New York Stock Exchange, Symbol HUF
DAYTON CENTER
7701 Byers Road
Miamisburg, Ohio 45342
Telephone (513) 866-6251
H U F F Y 5
4
<PAGE> 31
PRIMARY BUSINESS LOCATIONS
- - Anderson, South Carolina
- - Aurora, Ontario, Canada
- - Camp Hill, Pennsylvania
- - Celina, Ohio
- - Cork, Ireland
- - Thornton, Colorado
- - Miamisburg, Ohio
- - North Vernon, Indiana
- - Pine Valley, New York
- - San Diego, California
- - Suring, Wisconsin
- - Union City, Pennsylvania
- - Vancouver, British Columbia, Canada
- - Wallingford, Vermont
- - Waukesha, Wisconsin
TRANSFER AGENT AND REGISTRAR FOR
COMMON STOCK
Bank One, Indianapolis, NA
Bank One Center Tower
111 Monument Circle, Suite 1611
Indianapolis, IN 46277
Telephone (800) 753-7101
DIVIDENDS
Dividends are payable quarterly as declared by the Board of Directors. Huffy
has paid a dividend on its Common Stock each year since becoming publicly
traded on November 15, 1966.
DIVIDEND REINVESTMENT
A dividend reinvestment program is available to all holders of Huffy
Corporation Common Stock through Bank One, Indianapolis, NA, Indianapolis,
Indiana. Shareholders interested in participating should write for further
information to: Huffy Corporation, P.O. Box 1204, Dayton, Ohio 45401,
Attention: Vice President - Finance, Chief Financial Officer.
AUDITORS
KPMG Peat Marwick
FORM 10-K
Shareholders interested in obtaining Huffy Corporation's Annual Report on Form
10-K filed with the Securities and Exchange Commission may obtain a copy by
writing Huffy Corporation, P.O. Box 1204, Dayton, Ohio 45401, Attention:
Treasurer and Director of Investor Relations.
SHAREHOLDER COMMUNICATIONS
Communications concerning lost certificates, transfer requirements, address
changes, and Common Stock dividend checks should be sent to Bank One,
Indianapolis, NA, 111 Monument Circle, Suite 1611, Indianapolis, Indiana 46277.
Telephone (800) 753-7107.
The Management of Huffy Corporation welcomes comments and suggestions from
shareholders and investors. Call the Treasurer and Director of Investor
Relations, telephone (513) 866-6251.
5 H U F F Y
5
<PAGE> 1
EXHIBIT NO. 19
SCHEDULE OF CERTAIN DOCUMENTS
<PAGE> 2
SCHEDULE OF CERTAIN DOCUMENTS
SUBSTANTIALLY IDENTICAL TO FILED DOCUMENTS
WITH PARTIES THERETO AND OTHER MATERIAL
DIFFERING DETAILS
--------------------------------------------
10.f Additional parties to Special Deferred Compensation Agreements, as
amended, between Huffy Corporation and certain of its officers and key
employees, in substantially the form incorporated by reference to
Exhibit (ix) to Form 10-K for the fiscal year ended June 24, 1977, to
Exhibit (2) to Form 10-Q for the fiscal quarter ended September 23,
1983, and to Exhibit (19)(c) to Form 10-Q for the fiscal quarter ended
September 30, 1986:
Nancy A. Michaud
Pamela J. Whipps
10.x Additional parties to Severance Pay Agreement, as amended, in
substantially the form incorporated by reference to Exhibit
(iv) to Form 10-Q for the fiscal quarter ended December 25, 1981:
Nancy A. Michaud
Pamela J. Whipps
