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                                                                   Exhibit 10.48

                             SEPARATION AGREEMENT


     This Separation Agreement (this "Agreement"), made and entered into as of
December 20, 2000, by and between The Derby Cycle Corporation, a Delaware
corporation (the "Company"), and Gary S. Matthews (the "Executive" and, together
with the Company, the "Parties").


                             W I T N E S S E T H:
                             -------------------

     WHEREAS, the Executive has entered into an Employment Agreement dated as of
October 20, 1998 with the Company relating to such Executive's employment by the
Company (the "Employment Agreement");

     WHEREAS, the Parties have agreed to terminate certain provisions of the
Employment Agreement and to provide herein for the termination of the
Executive's employment by the Company;

     NOW, THEREFORE, in consideration of the mutual agreements set forth herein
and intending to be legally bound hereby, the Parties hereby agree as follows:


     1.   Termination of Employment.
          -------------------------

     The Executive hereby agrees to continue to serve as the President and Chief
Executive Officer of the Company until February 28, 2001, unless the Company
elects to terminate his employment prior to such date or the Parties agree to
extend his employment past such date. The Parties hereby agree that,
notwithstanding any provision to the contrary contained in the Employment
Agreement, (a) the Company shall have the right to terminate the employment of
the Executive at any time upon at least ten days prior written notice to the
Executive specifying the effective date of such termination and (b) at any time
after February 28, 2001, the Executive shall have the right to terminate his
employment by the Company upon at least ten days prior written notice to the
Company specifying the effective date of such termination. Upon the effective
date of any such termination (the "Termination Date"), the Executive shall cease
to serve as an officer or director of the Company or any of its subsidiaries,
and the Executive hereby resigns, effective as of the Termination Date, from all
such positions. In the event the Company exercises its termination right under
Section 1(a), the Executive shall maintain the title of President and Chief
Executive Officer of the Company until the earlier of (i) June 30, 2001, (ii)
the date Executive accepts an employment position with any other entity, and
(iii) such date (prior to June 30, 2001) as may be specified by the Executive;
provided, however, that after the Termination Date, the Executive shall have no
authority to act on behalf of the Company or any of its subsidiaries or to bind
the Company or any of its subsidiaries to any action, and shall take no action
on behalf of the Company or any of its subsidiaries, including, without
limitation, any action that could result in the creation or modification of any
obligation or right of the Company or any of its subsidiaries. In the
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event the Company exercises its termination right under Section 1(a), the
Executive shall also be entitled to use his office at 300 First Stamford Place,
Stamford, Connecticut and be provided normal office services (including the use
of his secretary) at the Company's expense until the earlier of (i) June 30,
2001, (ii) the date Executive commences employment with any other entity, and
(iii) such date (prior to June 30, 2001) as may be specified by the Executive.
The Parties hereby further agree that the Executive may solicit and offer
employment with a new employer to his secretary, and neither such offer nor an
acceptance of such offer shall be deemed to breach any provision of the
Employment Agreement. Until the Termination Date, the Executive shall cooperate
with the Company's Executive Chairman in formulating and implementing the
business plans of the Company and shall continue to perform his duties as
President and Chief Executive Officer of the Company as directed by the Board of
Directors of the Company or the Executive Chairman with reasonable care and in a
timely manner. Without limiting the generality of the foregoing, until the
Termination Date, the Executive shall diligently oversee the Company's personnel
regarding the Company's compliance with its reporting obligations under its
existing credit facility, the Company's preparation of its year-end and interim
financial statements, and the Company's compliance with all of its filing
requirements under the Securities Exchange Act of 1934, as amended, or any other
securities laws. In connection with the performance of such duties, the
Executive shall be entitled to rely upon the advice of counsel to the Company.
The Company hereby agrees that the Executive will not be terminated for Cause
under the Employment Agreement on the basis of any conduct prior to the date
hereof. The Executive hereby agrees that if he materially breaches any of his
agreements hereunder prior to the Termination Date and fails to cure such breach
in full within 10 days after a written notice thereof is delivered to him, he
shall not be entitled to any of the payments or other benefits provided herein,
the transactions contemplated by Section 2 hereof shall be void, and the
Executive shall return to the Company any amount paid to him pursuant to Section
3(b).

          2.   Repayment of Promissory Note.  The Company and the Executive
               ----------------------------
hereby agree that, effective January 2, 2001, the purchase price of the 1,500
shares of the Company's Class A Common Stock (the "Executive Stock") that the
Executive purchased from the Company pursuant to the Management Stock Purchase
Agreement dated as of October 20, 1998 between the Company and the Executive
(the "Purchase Agreement") shall be reduced to the fair market value of the
Executive Stock as of such date, and that the outstanding principal amount of
the promissory note (the "Executive Note") issued by the Executive to the
Company pursuant to the Purchase Agreement also shall be reduced to the amount
of the revised purchase price for the Executive Stock. Immediately after such
reduction in the purchase price of the Executive Stock and principal amount of
the Executive Note, the Executive shall deliver to the Company the Executive
Stock for cancellation in full payment of the adjusted principal amount of the
Executive Note, and the Company shall return to the Executive the Executive Note
marked "cancelled". The Company represents that it has not filed any financing
statements in respect of the Pledge Agreement dated as of October 20, 1998
between the Company and the Executive (the "Pledge Agreement"). Upon the
cancellation of the Executive Stock, the Purchase Agreement, the Executive Note
and the Pledge Agreement shall all terminate in their entirety. The Parties
hereby agree that such reduction in

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principal amount of the Executive Note shall be treated as a reduction in the
purchase price for the Executive Stock, and therefore a reduction in the
Executive's basis in the Executive Stock, for United States federal and state
income tax purposes.

          3.   Payments to the Executive.  In lieu of any amounts required to be
               -------------------------
paid to the Executive under Section 4 or 5 of the Employment Agreement, the
Company shall make the following payments to the Executive:

               (a)  Until March 31, 2001 if the Executive's employment is
terminated by the Company pursuant to Section 1(a) hereof or until the
Termination Date if the Executive's employment is terminated by the Executive
under Section 1(b) hereof, the Company shall continue to pay to the Executive
his base salary at the same rate and in the same manner as such base salary is
paid to the Executive as of the date of this Agreement;

               (b)  On January 2, 2001, the Company shall pay to the Executive a
lump sum amount equal to $250,000;

               (c)  On April 30, 2001, the Company shall pay to the Executive a
lump sum amount equal to $250,000; and

               (d)  If the Executive's employment has not been terminated by the
Executive or the Company on or prior to February 28, 2001, the Executive shall
also be entitled to a pro rata bonus for 2001 (based on the number of days in
2001 he is employed by the Company divided by 365); any such bonus shall be
determined in accordance with Appendix B to the Employment Agreement and shall
be paid at the same time bonuses in respect of 2001 performance are paid to the
Company's executives.

Until the earlier of (i) December 31, 2001 and (ii) the date on which the
Executive commences full-time employment by another entity, the Company shall
continue to provide coverage to the Executive and his dependents under the
Company's health, medical, dental and life insurance plans on the same basis as
provided on the date hereof.  Except as expressly provided in this Section 3 and
except for expense reimbursements under Section 6 of the Employment Agreement,
neither the Company nor any of its subsidiaries shall be obligated to make any
payment (including, without limitation, any bonus payments) to the Executive in
connection with his employment.  Any amounts not paid within 10 days after their
due date shall bear interest at an annual rate of 12%.

          4.   Releases.
               --------

                    (a)  The Executive hereby releases and forever discharges
the Company, each of its subsidiaries, each stockholder or affiliate of the
Company or any of its subsidiaries and each of their respective officers,
directors, employees and agents (the "Company Released Persons") from and waives
any and all claims, demands, controversies, actions, causes of action,
obligations, damages and liabilities of any nature whatsoever, whether at law or
in equity, known or unknown, suspected or unsuspected, absolute or contingent
(collectively, "Claims"), that the Executive ever had, now has, or may hereafter
have against any of the Released Persons arising out of, resulting from or
related to the Executive's service as an officer, director, employee or agent of
the Company, any of its subsidiaries or any of their affiliates, including
without limitation any Claims that may arise out of, result from or relate to
the Employment Agreement,

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except that nothing contained herein shall release the Company from its
obligations under this Agreement or its obligations to be performed after the
date hereof under the Employment Agreement as modified by this Agreement or any
indemnification or contribution obligations pursuant to the Company's
Certificate of Incorporation or bylaws or under any applicable law.

                    (b)  The Company (on its own behalf and on behalf of each of
its subsidiaries) hereby releases and forever discharges the Executive from and
waives any and all Claims that the Company or any of its subsidiaries ever had,
now has, or may hereafter have against the Executive arising out of, resulting
from or related to such Executive's service as an officer, director, employee or
agent of the Company, any of its subsidiaries or any of their affiliates,
including without limitation any Claims that may arise out of, result from or
relate to such Executive's Employment Agreement, except that nothing contained
herein shall release the Executive from (i) his obligations under the Employment
Agreement, including, without limitation, his obligations under Sections 9, 10
and 11 of the Employment Agreement, as modified by this Agreement, (ii) any
actions taken by the Executive after the date hereof, or (iii) his obligations
under this Agreement. The Company agrees that the restrictions contained in
Section 11(b)(i) or (ii) of the Employment Agreement shall not apply with
respect to any employee of the Company or any of its subsidiaries if, prior to
the time any actions prohibited under Section 11(b) are taken, such employee's
employment with the Company and its subsidiaries has been terminated by the
Company or such subsidiary or a notice of such termination has been received by
such employee.

          5.   Effect on Employment Agreement.  The Parties hereby agree that
               ------------------------------
Sections 4, 5 and 7 of the Employment Agreement are hereby terminated and
superceded by the provisions of this Agreement and that in the event of any
conflict between the provisions of this Agreement and the provisions of the
Employment Agreement, the provisions of this Agreement shall control.

          6.   Non-Disparagement; References.  The Executive shall not disparage
               -----------------------------
the Company, any of its subsidiaries, any of their stockholders or affiliates,
or any of their respective officers, directors, employees or agents. The Company
shall not disparage the Executive. In the event the Company is requested to
provide references or evaluations to another potential employer with respect to
the Executive's employment by the Company, such references shall be positive.

          7.   Representations and Warranties.  The Executive hereby represents
               ------------------------------
and warrants to the Company that he has carefully considered and reviewed the
provisions of this Agreement and consulted with his counsel regarding this
Agreement and that this Agreement is a valid and binding obligation of the
Executive enforceable in accordance with its terms.

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          8.   Miscellaneous.
               -------------

                    (a)  Successors.  This Agreement shall be binding upon and
                         ----------
inure to the benefit of the respective successors and assigns of each Party.

                    (b)  Interpretation and Construction.  The headings of the
                         -------------------------------
Sections of this Agreement have been inserted for convenience of reference only
and shall not be deemed to be a part of this Agreement. Words such as "herein,"
"hereof," "hereby," "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular Section of this Agreement, unless
the context clearly indicates otherwise.

                    (c)  Severability.  In the event any provision of this
                         ------------
Agreement shall finally be determined to be unlawful or unenforceable, such
provision shall be deemed to be severed from this Agreement, and every other
provision of this Agreement shall remain in full force and effect.

                    (d)  Notices.  All notices, requests and other
                         -------
communications hereunder shall be in writing and shall be deemed to have been
duly given at the time of receipt if delivered by hand or by facsimile
transmission or three days after being mailed, registered or certified mail,
return receipt requested, with postage prepaid to the address or facsimile
number listed below such Party's name on the signature page hereto or if any
Party shall have designated a different address or facsimile number by notice to
the other Parties given as provided above, then to the last address or facsimile
number so designated.

                    (e)  Complete Agreement.  This Agreement sets forth the
                         ------------------
entire understanding of the Parties with respect to the subject matter hereof
and supersedes all prior letters of intent, agreements, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
Party or any officer, employee or representative of any Party.

                    (f)  Third Parties.  Except as provided in Section 4(a)
                         -------------
hereof, this Agreement is not intended to, and shall not, create any rights in
or confer any benefits upon anyone other than the Parties and their successors
and assigns.

                    (g)  Governing Law; Consent to Jurisdiction.  This Agreement
                         --------------------------------------
shall be governed by, and construed in accordance with, the laws of the State of
New York, without giving effect to the conflicts of laws provisions thereof.

                    (i)  Waiver.  The waiver by any Party of any matter provided
                         ------
for herein shall only be effective if made in writing signed by such Party, but
such waiver shall not be deemed to be a waiver of any other such matter.

                    (j)  Counterparts.  More than one counterpart of this
                         ------------
Agreement may be executed by the Parties, and each fully executed counterpart
shall be deemed an original. This Agreement, and each other agreement or
instrument entered into in

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connection herewith or therewith or contemplated hereby or thereby, and any
amendments hereto or thereto, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person.
At the request of any party hereto or to any such agreement or instrument, each
other party hereto or thereto shall re-execute original forms thereof and
deliver them to all other parties.  No party hereto or to any such agreement or
instrument shall raise the use of a facsimile machine to deliver a signature or
the fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine as a defense to the
formation or enforceability of a contract and each such party forever waives any
such defense.

                    (k)  Amendment of this Agreement. Any amendment to this
                         ---------------------------
Agreement must be effected by the written consent of each Party who is to be
bound or adversely affected by such Amendment.

                    (l)  Attorneys' Fees.  The Company agrees to pay up to
                         ---------------
$10,000 of attorneys' fees and expenses reasonably incurred by the Executive in
connection with the negotiation and execution of this Agreement. Except as
provided in the immediately preceding sentence, each Party shall bear its own
costs and expenses incurred in connection with the negotiation, execution and
performance of this Agreement. If the Executive is the prevailing party in any
litigation or arbitration commenced by the Executive to enforce any terms of
this Agreement, the Company shall reimburse the Executive for all reasonable
expenses incurred by the Executive in such litigation, including reasonable
attorneys' fees.

                    (m)  Arbitration.  Sections 4.7 and 4.8 of the Purchase
                         -----------
Agreement shall apply with respect to any disputes under this Agreement.

                    (n)  Withholding.  All payments by the Company to the
                         -----------
Executive hereunder shall be less Social Security taxes and any withholding
taxes for which the Executive is obligated and less any other taxes or amounts
that may be lawfully levied by any governmental authority which the Company may
be required by law from time to time to withhold from such payments.

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     IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
Parties as of the date first above written.


                               THE DERBY CYCLE CORPORATION


                               By: /s/ Frederic V. Malek

                               ---------------------------
                               Frederic V. Malek
                               Chairman
                               Address:
                               Derby Cycle Corporation
                               300 First Stamford Place
                               Stamford, Connecticut 06902-6765
                               Facsimile No: 203-961-1673
                               Attention: Chairman of the Board


                               /s/ Gary S. Matthews

                               ---------------------------
                               Gary S. Matthews
                               Address:
                               13 Lower Cross Road
                               Greenwich, CT 06831
                               Fax No.: 203 622 0065

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