<PAGE>

                                                                  EXHIBIT 10.iii

                        TRANSITION COMPENSATION AGREEMENT

This Transition Compensation Agreement, dated as of February 13, 2004, by and
between HUFFY CORPORATION, an Ohio corporation, with principal offices at 225
Byers Road, Miamisburg, Ohio 45342 ("Huffy") and DON R. GRABER, an individual
residing at 121 Pawley's Plantation Court, Xenia, Ohio 45385 ("Graber"), is
effective as of January 1, 2004.

                                   WITNESSETH:

WHEREAS, Graber currently serves as Chairman of the Board of Directors and Chief
Executive Officer of Huffy and, as part of a planned management transition,
plans to retire from his position as Chief Executive Officer and as an employee
of the Corporation on January 31, 2004, and thereafter to consult on a part-time
basis through March 31, 2004, and will serve as a non-employee Chairman of the
Board through December 31, 2004; and

WHEREAS, Graber and Huffy desire to reach certain agreements with respect to
Graber's compensation and benefits from and after January 31, 2004.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth,
the parties agree as follows:

1.       Consultant. Following Graber's retirement as an employee of the
         Corporation, during the period commencing February 1, 2004, and ending
         on March 31, 2004, Graber shall serve as a consultant for Huffy for
         such projects as Graber and the Chief Executive Officer shall agree.

<TABLE>
<CAPTION>
                                            Number of
               Period                      Hours Worked
----------------------------------   -----------------------
<S>                                  <C>
February 1, 2004 to March 31, 2004   Up to 160 hours or
                                     as agreed with the
                                     Chief Executive Officer
</TABLE>

         As compensation for serving as a consultant, Graber shall receive fees
         of $51,666 monthly, payable biweekly. Graber hereby acknowledges he
         will be an independent contractor responsible for all taxes owed on
         such fees; Huffy shall issue Graber a Form 1099 for such compensation.

2.       Non-employee Director. Following his retirement on January 31, 2004,
         Graber shall, subject to election by the Board of Directors, serve
         during the period commencing on February 1, 2004, as Chairman of the
         Board of Directors, and shall devote such time as shall be deemed
         necessary by the Board of Directors and/or the Chief Executive Officer
         in the performance of the duties of such position and in assisting the
         Chief Executive Officer with management transition and liaison with the
         Board of Directors. During such period, so long as Graber shall perform
         such services, Graber shall receive as compensation for such services,
         the sum of $75,000 through December 31, 2004, payable in nine (9)

<PAGE>

         equal monthly installments of $8,333.33 each, which shall be in lieu of
         all other Director fees and retainers.

3.       Non-Compete. Graber agrees that beginning on February 1, 2004 and
         continuing during the period that compensation and/or benefits are
         being paid to him hereunder and for a period of two (2) years
         thereafter, without the prior written approval of the Board of
         Directors of Huffy, he shall not, either as a consultant, shareholder,
         joint venturer, partner, officer, employee, licensee, licensor, agent,
         solicitor, distributor, creditor, advisor, principal, director, dealer,
         representative or in any other capacity, in any way engage or
         participate, directly or indirectly, (a) in any business which is a
         major customer of Huffy or any of its affiliated or subsidiary
         companies, or the successors or any of the related interests of any of
         them, (b) in any business which competes against any of the businesses
         engaged in or contemplated by Huffy or any of its affiliated or
         subsidiary companies, or the successors or any of the related interests
         of any of them (it being understood and agreed that the business
         activities of Huffy and its affiliated and subsidiary companies are
         carried on throughout the world), or (c) in any business which seeks to
         purchase or otherwise acquire, merge, consolidate or otherwise combine
         with, or otherwise achieve control of Huffy or any of its affiliated or
         subsidiary companies. In the event of any violation of this restrictive
         covenant, Huffy may, to the extent permitted by law, discontinue the
         payment of any or all further compensation provided in Section 1 or 2
         hereunder as well as those benefits listed on Schedule A and/or may
         enforce such restrictive covenants by specific performance in any court
         of competent jurisdiction in the world and/or in an action for monetary
         damages. If any court of competent jurisdiction shall determine either
         the period or the territory covered by this restrictive covenant is
         unreasonable, said restrictive covenant shall not be deemed to be null,
         void and of no effect, but shall be reformed by said court to impose a
         reasonable period or a reasonable territorial limitation, as the case
         may be.

4.       Entire Agreement. This Agreement constitutes the entire agreement as to
         Graber's transition. Any waiver, alteration or modification or any of
         the provisions of this Agreement or cancellation or replacement of this
         Agreement shall not be valid unless in writing, signed by the parties
         and approved by the Board of Directors of Huffy.

5.       Ohio Law. This Agreement shall be governed by the laws of the State of
         Ohio in all respects. If any provision hereof is contrary to or
         prohibited by or deemed invalid under such laws, such provision shall
         be inapplicable and deemed omitted.

6.       Assignment. This Agreement shall inure to the benefit of and bind the
         parties hereto and their respective legal representatives, successors
         and assigns; provided, however, that Graber shall not assign this
         Agreement or any of his rights hereunder without the prior written
         consent of Huffy.

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7.       Notice. Notices hereunder shall be deemed given upon receipt of same by
         certified or registered mail, with postage prepaid, addressed as
         follows:

                           If to Huffy, to:

                           Huffy Corporation
                           225 Byers Road
                           Miamisburg, OH 45342
                           Attention:  Secretary

                           If to Graber, to:

                           Don R. Graber
                           121 Pawley's Plantation Court
                           Xenia, OH 45385

         Any party may change its or his address for purposes of notices
         hereunder by notice duly given to the other party as provided above.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.

                                          /s/ Don R. Graber
                                          --------------------------------------
                                          Don R. Graber

                                          HUFFY CORPORATION

                                          By: /s/ Nancy A. Michaud
                                              ----------------------------------
                                              Nancy A. Michaud
                                              Secretary

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                                   SCHEDULE A
                                       TO
                        TRANSITION COMPENSATION AGREEMENT
                      DATED AS OF FEBRUARY 13, 2004 BETWEEN
                       HUFFY CORPORATION AND DON R. GRABER

The following additional compensation and benefits shall be provided to Graber
for the period indicated under the Transition Compensation Agreement.

1.       Retirement. Graber shall be entitled to receive the retirement benefits
         then provided under the provisions of the Huffy Corporation Retirement
         Plan and the Huffy Corporation Supplemental/Excess Benefit Plan
         ("SERP"), upon his retirement on January 31, 2004. Graber will also be
         eligible for up to $15,500 for financial and tax planning in each of
         2004 and 2005.

2.       Medical/Dental Plans. As a retiree and based on his years of service,
         Graber shall be entitled to participate in the medical/dental plans, on
         the same basis as an active Huffy Corporation employee, and an annual
         physical in such year, during the period commencing February 1, 2004
         and ending upon his 62nd birthday. Until he reaches age 65, Graber
         shall be entitled to participate in the employee medical/dental plans
         on the same basis as other early retirees under the Huffy Corporation
         Retirement Plan who are under the age of 65 and eligible for such
         benefits.

3.       Employee Plans. After his retirement, except as otherwise stated
         herein, Graber shall not be eligible for participation in the Annual
         Incentive Plan, the Long Term Incentive Plan or other plans which
         require participants to be employees to be eligible. However, Graber
         shall be eligible to exercise his rights, as applicable, as a retiree
         under the 1998 Key Employee Stock Plan and the Special 2% Deferred
         Compensation Plan.