Severance Agreement

SEVERANCE AGREEMENT


This Severance Agreement (this "Agreement") has been made and entered into as of the 16th day of February, 2000 by and among Cannondale Corporation, a Delaware corporation (the "Corporation"), and William A. Luca (the "Executive").


W I T N E S S E T H:
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WHEREAS, the Executive has served as a director and executive officer of the Corporation, and the Corporation desires to obtain the Executive's continued commitment to the Corporation; and


WHEREAS, the Corporation and the Executive desire to enter into this Agreement upon the terms and conditions set forth herein;


NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good, valuable and sufficient consideration, the receipt of which is hereby acknowledged, each of the parties hereto agrees as follows:


1. Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:


"Annual Base Salary" shall mean that amount equal to 12 times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Corporation and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Severance Date occurs.


"Cause" shall mean any termination of the Executive by the Corporation because the Executive (i) has committed an act of material willful misconduct in connection with the performance of his duties as an employee of the Corporation or (ii) is convicted of a crime involving moral turpitude or a felony.


"Change of Control" shall have the meaning set forth in Section 2 of the Change-of-Control Employment Agreement.


"Change-of-Control Employment Agreement" shall mean that certain Change-of-Control Employment Agreement, dated as of February 5, 1998, by and between the Corporation and the Executive.


"Disability" for purposes of Section 2 hereof shall mean that the Executive has become eligible to receive benefits under any long term disability plan of the Company.


"Good Reason" shall mean the occurrence, without the Executive's express written consent, of any of the following circumstances, unless such circumstances are 2 fully corrected within five days after written notice from the Executive: (i) the failure of the Executive to continue to be retained as an employee of the Company in a senior executive position with substantially the same duties, office arrangements and eligibility for benefit programs, including but not limited to bonuses, as he currently enjoys as of the date of this Agreement; (ii) a reduction by the Corporation in the Executive's base salary then currently being paid; or (iii) a relocation of the Executive's office to a location more than 50 miles from the current executive office of the Corporation or a change in the Executive's work schedule that requires him to work more than three days per week in the Corporation's facilities and two days per week at home.


"Non-Competition Agreement" shall have the meaning set forth in Section 2 of this Agreement.


"Recent Annual Bonus" shall mean that amount equal to the Executive's highest profit sharing bonus under the Company's profit sharing plan for the last three full fiscal years prior to the Severance Date (annualized in the event that the Executive was not employed by the Company for the whole of such fiscal year).


"Severance Date" shall have the meaning set forth in Section 2 of this Agreement.


2. Severance Date. Provided no Change of Control shall have occurred prior thereto, and provided further that the Company's obligations under the Change-of-Control Employment Agreement and/or that certain Non-Competition Agreement, dated as of February 16, 2000 (the "Non-Competition Agreement"), by and between the Company and the Executive have not been triggered, the Corporation's and the Executive's obligations under this Agreement will become effective as of the date on which the Executive's employment is terminated by the Corporation without Cause or by the Executive for Good Reason (the "Severance Date"). The termination of the Executive by the Corporation for Cause, the death of the Executive, the resignation or termination of the Executive due to Disability and a voluntary resignation by the Executive without Good Reason will not cause the obligations of the Corporation under this Agreement to become effective.


3. Obligations of the Corporation. If the obligations of the Corporation set forth in this Agreement are triggered pursuant to Section 2 above:


(a) The Corporation shall pay to the Executive in a lump sum in cash within 30 days after the Severance Date the aggregate of the following amounts:


(i) the sum of (1) the Executive's Annual
Base Salary through the Severance Date to the extent not theretofore
paid; (2) the product of the higher of (I) the Recent Annual Bonus and
(II) the annual profit sharing bonus paid or payable, including any
bonus or portion thereof which has been earned but deferred (and
annualized for any fiscal year consisting of less than twelve full
months or during which the Executive was employed for less than twelve
full months), for the most recently completed fiscal year (such higher
amount being referred to as the "Highest Annual Bonus") and (y) a
fraction, the numerator of which is the number of days in the current


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fiscal year through the Severance Date, and the denominator of which is
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