<PAGE>

                                                                   Exhibit 10.46


                       SEPARATION AND RELEASE AGREEMENT
                       --------------------------------


     This Agreement is entered into as of this 1st day of September, 2000, by
and between NANCY URIDIL, ("the Employee") and THE DERBY CYCLE CORPORATION ("the
Company").

     In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

1.   Consideration:
     --------------

     The Company will pay to the Employee, and pay on the Employee's
behalf, the amounts set forth on Schedule A (the "Consideration").
Simultaneously with the payment of the Consideration, the Company shall furnish
the Employee with evidence of all amounts paid on the Employee's behalf.

     The Employee agrees that these payments are more than the Company is
required to pay under its normal policies and procedures, or under any agreement
to which the Company and the Employee are parties, and the Employee further
agrees that she has entered into this Agreement in exchange for the
Consideration.

2.   Date of Payment:
     ----------------

     Unless Employee exercises her right to revoke this Agreement as provided in
paragraph 10, payment of the Consideration will be made within nine (9) business
days after this Agreement has been executed by the Employee.  If the Company
fails to pay all or any part of the Consideration when due hereunder, any unpaid
amounts shall bear interest at the rate of twelve (12%) percent per annum.  If
the Employee is required to bring suit to collect any such unpaid amounts, the
Company shall be liable for all of the Employee's costs and reasonable
attorneys' fees in connection with such suit.

3.   Complete Release:
     -----------------

     The Employee agrees to forever release and discharge the Company, its
affiliates, predecessors, successors, employees, officers, directors,
stockholders, assigns, agents and other representatives (the "Releasee") or
collectively the "Releasees") from all covenants, obligations, liabilities and
agreements, and Employee forever waives all claims, rights and causes of action
whatsoever, in law or in equity, whether known or unknown, asserted or
unasserted, suspected or unsuspected ("Claims") under federal, state or local
law ordinance, tort, express or implied contract, or public policy, that
Employee ever had, may in the future have or now has against Releasees in
connection with or arising in any manner whatsoever from, Employee's employment
with the Company or the termination of her
<PAGE>

employment with the Company, including without limitation (a) any rights the
Employee may have under any program, policy, procedure or agreement with the
Company, including, without limitation, the Employment Agreement between the
Employee and the Company dated as of April 30, 2000 (the "Employment
Agreement"), and the Letter Agreements between the Employee and Company dated
November 19, 1999 and December 6, 1999, (b) any rights the Employee may have to
the continued receipt of health, disability or life insurance-type benefits
(except for rights under COBRA), (c) any claims based on covenant of good faith
and fair dealing, and (d) any legal restriction on the Company's right to
terminate the employment of employees, or any federal, state or other
governmental statute, regulation or ordinance, including, but not limited to:
(i) Title VII of the Civil Rights Act of 1964, as amended (race, color,
religion, sex and national origin discrimination); (ii) the Civil Rights Act of
1991 (race, color, religion, sex, national origin, age and disability
discrimination); (iii) 42 U.S.C. Section 1981 (race discrimination); (iv) the
Age Discrimination in Employment Act, as amended (age discrimination); (v) the
Older Workers Benefit Protection Act (age discrimination); (vi) 29 U.S.C.
Section 206(d)(1) (equal pay); (vii) Section 503 and 504 of the Rehabilitation
Act of 1973 (handicap discrimination); (viii) the Americans with Disability Act
(disability discrimination); (ix) the WARN ACT (advance notice of certain
layoffs); (x) the Employee Retirement Income Security Act (pension and welfare
benefit plans); any state fair employment practice statutes; and any other
federal, state, or local law dealing with employment discrimination.

     The Employee acknowledges that:

     (a)  the Employee is waiving all claims under the foregoing laws, including
specifically the Age Discrimination in Employment Act, as amended;

     (b)  the Employee is waiving her rights or claims under the foregoing laws
in exchange for consideration which is in addition to anything of value to which
she is already entitled;

     (c)  the Employee has been advised to have an attorney review this
Agreement and has, in fact, had an attorney review this Agreement; and

     (d)  the Employee has a period of at least twenty-one (21) days within
which to consider this Agreement and the Employee also has seven (7) days within
which to revoke it after signing.

     This Agreement covers both claims that the Employee knows about and those
she may not know about. The Employee expressly waives all rights afforded by any
statute which limits the effect of a release with respect to unknown claims. The
Employee understands the significance of her release of unknown claims and her
waiver of statutory protection against a release of unknown claims.
<PAGE>

     Notwithstanding anything contained herein to the contrary, the following
matters are excepted and excluded from the Employee's release of the Releasees:

     (1) any and all of the obligations of any of the Releasees to the Employee
under this Agreement, including, without limitation, the obligation to pay the
Consideration;

     (2) the obligations of the Company to the Employee in connection with
vested rights of the Employee, if any, under any retirement plan; COBRA rights,
so-called; any conversion and other rights which survive termination of
employment under the terms of any group life, disability insurance and/or other
benefit plans of the Company in which the Employee participates or has
participated as an employee of the Company; and

     (3) any and all rights which the Employee may have, as an officer or
employee and/or former officer or employee of the Company, to be indemnified,
defended and/or held harmless by the Company.

4.   No Future Lawsuits:
     -------------------

     The Employee promises never to file a lawsuit or other complaint or charge
asserting any claims that are released in Section 3.

5.   Relocation Expenses:
     --------------------

     The Employee represents and warrants that the invoices listed in paragraph
3 of Schedule A reflect the only contracts, agreements or commitments (other
than those which have already been paid by the Employee or the Company) entered
into by the Employee in the Company's name for relocation-related expenses. The
Employee agrees to defend, indemnify and hold the Company harmless from any and
all claims or actions relating to commitments for relocation-related expenses
entered into by the Employee in the Company's name.

6.   Non-Admission of Liability:
     ---------------------------

     The Company has entered into this Agreement with the Employee to effect a
mutually acceptable termination of her employment with the Company. The Company
does not believe or admit that it (or any other person or entity described in
the first paragraph of Section 3) has done anything wrong in connection with the
Employee's employment or its termination.

7.   Non-Release of Future Claims:
     -----------------------------

     This Agreement does not waive or release any rights or claims that the
Employee may have under the Age Discrimination in Employment Act which arise
after the date the Employee signs this Agreement.

<PAGE>

8.   Consequences of Employee's Violation of Promises:
     -------------------------------------------------

     If the Employee breaks her promise in Section 4 by filing a lawsuit or
other complaint or charge based on claims that the Employee has released, as to
any person or entity she sues in violation of this Agreement, the Employee will
pay that person's or entity's reasonable attorneys' fees and all other costs
incurred in defending against the Employee's claim.  In addition, if the
Employee breaks the promises made in Section 4 or any other section of this
Agreement, she must repay the Consideration to the Company.

9.   Period for Review and Consideration of Agreement:
     -------------------------------------------------

     The Employee acknowledges that she has a period of at least twenty-one (21)
days to review and consider this Agreement before signing it. The Employee
understands that she may take as much of this period of time to consider this
Agreement as the Employee wishes prior to signing it.

10.  Employee's Rights to Revoke Agreement:
     --------------------------------------

     The Employee may revoke this Agreement within seven (7) days after the
Employee signs it. The last day on which this Agreement can be revoked is called
the "Last Revocation Day". Revocation can be made by delivering a written notice
of revocation to Gary Matthews, President, The Derby Cycle Corporation, 300
First Stamford Place, 5th Floor, Stamford, Connecticut 06902. For this
revocation to be effective, it must be received no later than the close of
business on the Last Revocation Day. If the Employee revokes this Agreement, it
shall not be effective and the Employee will not receive this Agreement, it
shall go into effect on the day after the Last Revocation Day.

11.  Return of Company's Property:
     -----------------------------

     The Employee represents and warrants that she has returned to the Releasee
all files, records, credit cards, keys and any other Releasee property in the
Employee's possession or control.

12.  Confidentiality:
     ----------------

     Employee agrees that she will keep the terms of this Agreement confidential
and will not disclose the facts or terms to anyone except to enforce the terms
hereof and/or to members of her immediate family, her attorney and persons
assisting her in financial planning or income tax preparation; provided,
however, that such other persons must be advised of Employee's confidentiality
obligations hereunder and must agree to keep such information confidential prior
to disclosure to them.
<PAGE>

     The Company agrees that it will keep the terms of this Agreement
confidential and will not disclose the facts or circumstances to anyone, except
to enforce the terms hereof and to those persons who have a need to know in the
course of the Company's business.

13.  Termination of Employment:
     --------------------------

     The Employee acknowledges that her employment with the Company terminated
on August 4, 2000.

     The Employee promises not to disparage the Releasees in any matter and not
to use or disclose any confidential information or trade secrets which the
Employee learned while employed by the Company . The Employee acknowledges and
agrees that she is bound by the non-compete and non-solicitation provisions of
paragraph 6 of the Employment Agreement.

     The Company promises not to disparage the Employee in any manner.

14.  Severability:
     -------------

     The provisions of this Agreement are severable, and, if any part of it is
found to be unenforceable, the other paragraphs shall remain fully valid and
enforceable.

15.  Choice of Laws/Venues:
     ----------------------

     This Agreement shall be governed by the substantive laws, statutes and
common laws of the State of Connecticut, without application of any of its
choice of law statutes or common law.

     The parties agree that the exclusive jurisdiction for any disputes arising
out of this Agreement shall be the state or federal courts of Connecticut.

16.  Entire Agreement/Binding Effect:
     --------------------------------

     This is the entire Agreement between the Employee and the Company with
respect to the termination of her employment, and the Company has made no
promises to the Employee other than those in this Agreement. This Agreement may
be modified only by a written agreement signed by the Company and Employee. This
Agreement is binding upon and shall inure to the benefit of the Employee, her
heirs, executors and administrators, and the Company, its successors and
assigns.

     THE EMPLOYEE ACKNOWLEDGES THAT SHE HAS READ THIS AGREEMENT, UNDERSTANDS IT
AND IS VOLUNTARILY ENTERING INTO IT.
<PAGE>

                                /s/Nancy Uridil
                                ---------------
                                NANCY URIDIL

                                THE DERBY CYCLE CORPORATION
                                By /s/Gary S. Matthews
                                ----------------------
                                Gary S. Matthews
                                Its President
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                                  SCHEDULE A
                                  ----------


1.  Repurchase of Stock. The Company agrees to repurchase at a purchase price of
    -------------------
$1,000 per share the 240 shares of Class A common stock and the 60 shares of
Class C common stock purchased by Employee pursuant to the Management Stock
Purchase Agreement dated as of April 30, 2000 (the "Stock Purchase Agreement").
Such purchase price shall be paid as follows: (a) the Promissory Note dated
April 30, 2000 in the amount of $225,000 from the Employee to the Company shall
be deemed paid in full and shall be cancelled; (b) the Company shall release the
Employee from all of her obligations under the Stock Purchase Agreement,
including, without limitation, the obligation in Section 1.1 to pay the Company
$37,500 on or before March 31,2001; and (c) the Company shall pay the Employee
$37,500; provided that simultaneously with such payment, the Employee delivers
to the Company a stock power transferring the shares of the Company.

2.  Business Expenses. The Company shall pay Employee $7,969.72 in reimbursement
    -----------------
for business travel expenses incurred prior to Employee's termination of
employment.

3.  Relocation Expenses Payments. The Company shall pay, on Employee's behalf,
    ----------------------------
the following invoices for expenses incurred in connection with her relocation,
copies of which are attached hereto:

    .  $1,694.90 to United Van Lines
    .  $1,838.37 to United Van Lines
    .  $7,492.55 to Armstrong Relocation

4.  Relocation Expenses Allowance. The Company shall pay Employee $66,574.18 as
reimbursement for the Employee's cost of relocating her residence to Stamford,
Connecticut.

5.  Severance.  The Company shall pay the Employee $16, 930.28 (less applicable
    ---------
withholding) as severance.