SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.

CANNONDALE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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2

CANNONDALE CORPORATION

16 TROWBRIDGE DRIVE
BETHEL, CONNECTICUT 06801
(203) 749-7000

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON NOVEMBER 17, 1999

To the Stockholders of Cannondale Corporation:

PLEASE TAKE NOTICE that the Annual Meeting of Stockholders of Cannondale
Corporation (the "Company") will be held on Wednesday, November 17, 1999, at
10:00 a.m., Eastern Standard Time, at the Ethan Allen Inn, 21 Lake Avenue
Extension, Danbury, Connecticut, for the following purposes:

1. To elect three (3) Class II directors of the Company for a three-year term;

2. To consider and act upon a proposal to ratify the selection of Ernst & Young
LLP as independent accountants of the Company; and

3. To transact such other business as may properly come before the meeting or
any adjournments thereof.

Accompanying this Notice is a Proxy, a Proxy Statement and a copy of the
Company's Annual Report to stockholders for fiscal year 1999.

WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE SIGN
AND DATE THE PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE PROVIDED FOR THAT
PURPOSE. The Proxy may be revoked at any time prior to the time that it is
voted. Only stockholders of record as of the close of business on October 11,
1999, will be entitled to vote at the meeting.

By Order of the Board of Directors

/s/ John T. Capetta

John T. Capetta
Secretary

Bethel, Connecticut
October 15, 1999
3

CANNONDALE CORPORATION

16 TROWBRIDGE DRIVE
BETHEL, CONNECTICUT 06801

------------------------
PROXY STATEMENT
------------------------

This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors and management of Cannondale Corporation, a Delaware
corporation (the "Company"), of proxies for use at the Annual Meeting of
Stockholders of the Company (the "Annual Meeting") to be held at the Ethan Allen
Inn, 21 Lake Avenue Extension, Danbury, Connecticut on Wednesday, November 17,
1999, at 10:00 a.m., Eastern Standard Time, and at any and all postponements or
adjournments thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting.

This Proxy Statement, Notice of Annual Meeting and accompanying proxy card
are first being mailed to stockholders on or about October 15, 1999.

GENERAL

Only stockholders of record at the close of business on October 11, 1999,
are entitled to notice of and to vote the shares of common stock, par value
$0.01 per share, of the Company (the "Common Stock") held by them on that date
at the Annual Meeting or any postponements or adjournments thereof. A list of
stockholders entitled to vote at the meeting will be available for inspection at
the meeting.

If the accompanying proxy card is properly signed and returned to the
Company and not revoked, it will be voted in accordance with the instructions
contained therein. Unless contrary instructions are given, the persons
designated as proxy holders in the proxy card will vote (i) FOR the slate of
nominees proposed by the Board of Directors, (ii) FOR ratification of the
selection of Ernst & Young LLP as the Company's independent accountants for the
fiscal year ending July 1, 2000 ("fiscal 2000"), and (iii) with regard to all
other matters which may be brought before the Annual Meeting, in accordance with
the judgment of the person or persons voting the proxies. Each stockholder may
revoke a previously granted proxy at any time before it is exercised by filing
with the Company a revoking instrument or a duly executed proxy bearing a later
date. The powers of the proxy holders will be suspended if the person executing
the proxy attends the Annual Meeting in person and so requests. Attendance at
the Annual Meeting will not, in itself, constitute a revocation of a previously
granted proxy.

The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the shares of Common Stock outstanding on October 11, 1999,
will constitute a quorum. As of October 11, 1999, 7,491,421 shares of Common
Stock were outstanding. Each outstanding share entitles its holder to cast one
vote on each matter to be voted upon at the Annual Meeting.

In determining the presence of a quorum at the Annual Meeting, abstentions
and broker non-votes (votes withheld by brokers in the absence of instructions
from the street-name holders) will be counted. Directors will be elected by a
plurality of votes cast at the Annual Meeting. Abstentions are not counted
toward a nominee's number of total votes cast. All other matters which properly
come before the Annual Meeting must be approved by a majority of the votes
present at the Annual Meeting. Abstentions will have the practical effect of
voting against such matter, since an abstention is one less vote for approval.
Broker non-votes on any matter will have no impact on such matter since they are
not considered "shares present" for voting purposes.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table reflects shares of Common Stock beneficially owned (or
deemed to be beneficially owned pursuant to the rules of the Securities and
Exchange Commission) as of October 1, 1999, by (i) each person known to the
Company to own more than 5% of the outstanding Common Stock as of October 1,
1999; (ii) each director and nominee to be a director of the Company; (iii) each
of the executive officers named in the Summary Compensation Table included
elsewhere herein; and (iv) the current directors and executive officers of the
Company as a group. Unless otherwise indicated in the footnotes below, the
persons named in the table have sole voting and investment power with respect to
all shares shown as beneficially owned.

PERCENT OF
BENEFICIAL OWNER NUMBER OF SHARES(1) COMMON STOCK
- ---------------- ------------------- ------------

Joseph S. Montgomery(2)............................. 1,547,778 20.3%
James Scott Montgomery.............................. 454,237 6.0
William A. Luca..................................... 161,934 2.1
Daniel C. Alloway................................... 171,297 2.2
Leonard J. Konecny.................................. 18,917 *
Mario M. Galasso.................................... 36,899 *
John Sanders........................................ 6,000 *
Sally G. Palmer..................................... 6,000 *
Michael J. Stimola.................................. 6,200 *
Gregory Griffin..................................... 7,880 *
KAIM Non-Traditional, L.P.(3)....................... 767,252 10.2
Valarian Associates(4).............................. 567,500 7.6
Dimensional Fund Advisors Inc.(5)................... 553,000 7.4
All current directors and executive officers as a
group (10 persons)................................ 2,417,142 30.0%

- ---------------
* presents less than 1% of the Company's outstanding Common Stock.

(1) The number of shares of Common Stock deemed outstanding includes shares
issuable pursuant to stock options which may be exercised within 60 days of
October 1, 1999, for the following persons: Mr. Joseph Montgomery -- 128,750
shares, Mr. James Scott Montgomery -- 71,000 shares, Mr. Luca -- 147,565
shares, Mr. Alloway -- 135,216, Mr. Konecny -- 18,917, Mr.
Galasso -- 36,899, Mr. Sanders -- 6,000, Ms. Palmer -- 6,000, Mr.
Stimola -- 6,000 and Mr. Griffin -- 6,000.

(2) Mr. Joseph S. Montgomery has a business address c/o Cannondale Corporation,
16 Trowbridge Drive, Bethel, Connecticut 06801.

(3) Based on information contained in a Schedule 13D filed by KAIM
Non-Traditional, L.P. and Richard A. Kayne, dated October 13, 1998, KIAM
Non-Traditional, L.P. and Richard A. Kayne may be deemed to have sole or
shared voting power and investment power with respect to all of the shares
of Common Stock reported for KAIM Non-Traditional, L.P. and Richard A.
Kayne. KAIM Non-Traditional, L.P. and Richard A. Kayne have an address at
1800 Avenue of the Stars, Los Angeles, California 90067.

(4) Based on information contained in a Schedule 13D filed by Valarian
Associates, dated February 9, 1998, Valarian Associates may be deemed to
have sole or shared voting power and investment power with respect to all of
the shares of Common Stock reported for Valarian Associates. Valarian
Associates has an address at 1726 Cedar Wood Drive, Minden, Nevada 89423.

(5) Based on information contained in a Schedule 13G filed by Dimensional Fund
Advisors Inc., dated February 11, 1999, Dimensional Fund Advisors Inc. may
be deemed to have sole or shared voting power and investment power with
respect to all of the shares of Common Stock reported for Dimensional Fund
Advisors Inc. Dimensional Fund Advisors Inc. has an address at 1299 Ocean
Avenue, 11th Floor, Santa Monica, California 90401.

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended the
("Exchange Act") requires the Company's executive officers, directors and
persons owning more than 10% of the Company's Common Stock ("Reporting Persons")
to file reports of ownership and reports of changes of ownership with the
Securities and Exchange Commission. Reporting Persons are required to furnish
the Company with copies of all Section 16(a) forms that they file. Based solely
upon a review of copies of these filings received, the Company believes that
with respect to the fiscal year ended July 3, 1999 ("fiscal 1999"), all required
filings during this period were made on a timely basis, except for one
transaction on Form 4 that was filed late by Joseph S. Montgomery (Chairman,
President and Chief Executive Officer), one transaction on Form 4 that was filed
late by William A. Luca (Vice President, Treasurer and Chief Financial Officer),
two transactions on Form 4 that were filed late by Daniel C. Alloway (Vice
President of Sales) and two transactions on Form 4 that were filed late by John
P. Moriarty (Assistant Treasurer, Assistant Secretary and Chief Accounting
Officer).

ITEM 1 -- ELECTION OF DIRECTORS

The Board of Directors of the Company is divided into three classes, as
nearly equal in number as possible. Each class serves three years, with the
terms of office of the respective classes expiring in successive years. The term
of office of directors in Class II expires at the 1999 Annual Meeting. The Board
of Directors proposes that the nominees described below be elected to Class II
for a new term of three years and until their successors are duly elected and
qualified. The Board of Directors has no reason to believe that any of the
nominees will not serve if elected, but if any of them should become unavailable
to serve as a director, and if the Board designates a substitute nominee, the
persons named as proxies will vote for the substitute nominee designated by the
Board.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE SLATE OF NOMINEES
DESCRIBED BELOW.

CLASS II -- DIRECTORS STANDING FOR ELECTION

JOHN SANDERS, Director since 1998

John Sanders, 51, has been the President of the New York Islanders Hockey
Club, L.P. (the "Islanders") since May 1999. He joined the Islanders in June
1998 as a Senior Vice President and the General Counsel. Previously, Mr. Sanders
was a partner with the law firm of Levett, Rockwood & Sanders Professional
Corporation ("Levett Rockwood") since 1981. Levett Rockwood provides certain
legal services for the Company.

JAMES SCOTT MONTGOMERY, Director since 1994

James Scott Montgomery, 38, is a private investor and provides consulting
services to the Company. He was the Vice President of Marketing of the Company
from 1993 to June 1997. His previous positions with the Company include founder
and President of the Sales and Trading Divisions of Cannondale Japan KK (1991 to
1993), co-founder and Managing Director of Cannondale Europe B.V. ("Cannondale
Europe") (1989 to 1991) and Director of Purchasing. Mr. Montgomery is the son of
Joseph S. Montgomery, the Company's Chairman, President and Chief Executive
Officer.

SALLY G. PALMER, Director since 1999

Sally G. Palmer, 44, served as an advisor to the Company while she was a
Principal with the investment banking division of Robertson, Stephens & Company
(1990 to 1998). Ms. Palmer was elected to the Board of Directors by the
unanimous vote of the directors on January 27, 1999. Ms. Palmer was also
appointed to the Compensation Committee and the Stock Option Plan Administrative
Committee (the "Administrative Committee") of the Board of Directors on such
date.

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CLASS III -- TERM EXPIRES AT THE 2000 ANNUAL MEETING

WILLIAM A. LUCA, Director since 1994

William A. Luca, 56, was appointed Vice President, Treasurer and Chief
Financial Officer of Cannondale in November 1998. Mr. Luca joined the Company in
January 1994 as Vice President of Finance, Treasurer and Chief Financial
Officer. Prior to joining the Company, he served as a management consultant from
1989 to 1993, including consulting for the Company between August and December
1993. From 1980 to 1989 Mr. Luca was employed by Dual-Lite, Inc., a manufacturer
of emergency lighting systems, as Chief Financial Officer (1980-1983), President
and Chief Operating Officer (1983-1986) and President and Chief Executive
Officer (1986-1989).

DANIEL C. ALLOWAY, Director since 1998

Daniel C. Alloway, 40, has held a number of positions since joining
Cannondale in 1982. He is currently Vice President of Sales. His previous
positions with the Company included the Vice President of Sales-United States
and Vice President of European Operations (1994 to November 1998), Managing
Director of Cannondale Europe (1992 to 1994), Director of Sales and Marketing
(1990 to 1992) and National Sales Manager (1987 to 1990).

GREGORY GRIFFIN, Director since 1999

Gregory Griffin, 50, is a self-employed attorney and businessman.
Previously, Mr. Griffin was Assistant General Counsel with BTR, Inc., a
multinational conglomerate (1994 to 1999) and a partner with the law firm of
Levett Rockwood (1981 to 1994). Mr. Griffin was elected to the Board of
Directors by the unanimous vote of the directors on January 27, 1999. Mr.
Griffin was also appointed to the Audit Committee, the Compensation Committee
and the Administrative Committee of the Board of Directors on such date.

CLASS I -- TERM EXPIRES AT THE 2001 ANNUAL MEETING

JOSEPH S. MONTGOMERY, Director since 1971

Joseph S. Montgomery, 59, founded Cannondale in 1971 and has been its
Chairman, President and Chief Executive Officer and a director since its
formation. Mr. Montgomery is the father of James Scott Montgomery, who is also a
director.

MICHAEL J. STIMOLA, Director since 1995

Michael J. Stimola, 42, founded Sandvick Associates, Inc., ("Sandvick") in
1986 and has been its President since its formation. Sandvick is a design and
construction company headquartered in Georgetown, Connecticut. See "Certain
Relationships and Related Transactions." Mr. Stimola is also the founder, Chief
Executive Officer and President of Sandella's Coffee Cafe, Inc. ("Sandella's"),
a company formed in 1994, of which Mr. Joseph Montgomery is the majority
stockholder. Sandella's owns, operates and franchises upscale gourmet
quick-service restaurants.

DIRECTORS' REMUNERATION; ATTENDANCE

Directors who are also full-time employees of the Company receive no
additional compensation for serving as a director. During fiscal 1999, each
non-employee director received a quarterly payment of $1,500, plus $1,000 for
each day on which the member attended a meeting of the Board of Directors or a
committee, together with reimbursement of actual expenses incurred in attending
meetings. Upon election to the Board of Directors, non-employee directors are
granted 1,000 options to purchase the Common Stock of the Company, which are
immediately exercisable, at an exercise price per share equal to the fair market
value of a share of Common Stock at the time of grant.

The Board of Directors met six times during fiscal 1999. No director
attended fewer than 75% of the total number of meetings of the Board and
committees on which such director served.

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COMMITTEES OF THE BOARD

At its December 1994 meeting, the Board established standing Compensation
and Audit Committees. The Compensation Committee is composed of Messrs. Sanders,
Griffin, Stimola and Joseph Montgomery and Ms. Palmer. The Audit Committee is
composed of Messrs. Sanders, Griffin and Stimola.

The Compensation Committee's functions are to review and set the
compensation, including salary, bonuses, stock options (in conjunction with the
Administrative Committee) and other incentive compensation, of the Company's
Chief Executive Officer and certain of its most highly compensated officers, and
to recommend to the Board of Directors incentive compensation, retirement or
other similar plans benefiting directors, officers and other key employees of
the Company. The Compensation Committee and/or Administrative Committee met
eight times during fiscal 1999.

The Audit Committee's functions are to review financial and auditing issues
of the Company, including the Company's choice of independent public accounting
firms, and to make recommendations to the Board of Directors. The Audit
Committee met two times during fiscal 1999.

EXECUTIVE COMPENSATION

COMPENSATION COMMITTEE REPORT ON COMPENSATION OF EXECUTIVE OFFICERS OF THE
COMPANY

The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:

Executive Officer Compensation

The Company's compensation program for executive officers and the Company's
management team consists of three key elements: a base salary, a profit-sharing
bonus (a discretionary annual bonus) and grants of stock options, in addition to
benefit plans. The Compensation Committee believes that this approach best
serves the interests of stockholders by ensuring that executive officers are
compensated in a manner that advances both the short-and long-term interests of
stockholders.

Total Cash Compensation -- Salary and Bonuses. Salaries paid to executive
officers are reviewed annually by the Chief Executive Officer based upon his
subjective assessment of the nature of the position, and the contribution,
experience and Company tenure of the executive officer. The Chief Executive
Officer reviews his salary recommendations for all executive officers with the
Compensation Committee, which is responsible for approving or disapproving those
recommendations. In addition, the Chief Executive Officer makes recommendations
to the Compensation Committee as to profit-sharing bonuses, if any, to be paid
to individual executive officers, based upon his evaluation of each executive
officer's contribution to Company performance.

Stock Options. The Company's 1994 Stock Option Plan, 1994 Management Stock
Option Plan, 1995 Stock Option Plan, 1996 Stock Option Plan and 1998 Stock
Option Plan authorize the Administrative Committee of non-employee directors to
grant options to executives, directors, employees, consultants and advisors of
the Company. The Administrative Committee is composed of the four non-employee
directors on the Compensation Committee. Option grants are made from time to
time to executives whose contributions are perceived to have had or to be likely
to have a significant impact on the Company's performance.

Repricing. As previously disclosed in the Company's 1998 Proxy Statement,
during the course of fiscal 1999 and 1998, the Company implemented certain
repricings of existing stock options. The Compensation Committee is very much
aware of the general resistance in certain segments of the investor community to
option repricings. Although sensitive to such concerns, the Compensation
Committee is forced to deal with the reality that in the current environment,
experienced management and valuable employees have multiple opportunities
available to them. Stock options are one of the principal incentives for
employees and if such options have an exercise price above the current value of
the Company's Common Stock, the value of such options as a motivating and
retention factor is substantially reduced. It is very difficult to retain
employees

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8

when they are presented with other employment opportunities with stock options
which are not "underwater." At the same time, in considering whether to reprice
options, the Company must weigh, on the one hand, the direct and indirect costs
of attracting and incentivizing replacement management and other employees, to,
on the other hand, the cost to the Company of the repriced options needed to
keep employees or management who might otherwise leave due to the lower option
incentives. On balance, the Compensation Committee believed the repricings to be
in the best interest of the stockholders of the Company.

The following table sets forth historical information about the repricings
during the last ten years of stock options granted to the Company's executive
officers.

NUMBER OF MARKET LENGTH OF
SECURITIES PRICE OF EXERCISE ORIGINAL
UNDERLYING STOCK AT PRICE AT OPTION TERM
OPTIONS TIME OF TIME OF NEW REMAINING AT
DATE OF REPRICED OR REPRICING OR REPRICING OR EXERCISE DATE OF
NAME AND PRINCIPAL POSITION REPRICING(1)(2)(3) AMENDED AMENDMENT AMENDMENT PRICE REPRICING
- --------------------------- ------------------ ----------- ------------ ------------ -------- ----------------

Joseph S. Montgomery........ June 15, 1998 40,000 $12.50 $15.00 $15.00 7 Years 127 Days
Chairman, President and June 15, 1998 50,000 $12.50 $13.00 $13.00 6 Years 153 Days
Chief Executive Officer September 3, 1998 40,000 $ 9.31 $15.00 $ 9.31 7 Years 47 Days
September 3, 1998 50,000 $ 9.31 $13.00 $ 9.31 6 Years 73 Days
William A. Luca............. March 27, 1998 50,000 $16.50 $18.75 $16.50 8 Years 254 Days
Vice President, Treasurer March 27, 1998 36,697 $16.50 $21.31 $16.50 9 Years 189 Days
and Chief Financial June 15, 1998 40,000 $12.50 $15.00 $15.00 7 Years 127 Days
Officer
June 15, 1998 24,715 $12.50 $16.50 $16.50 7 Years 280 Days
June 15, 1998 50,000 $12.50 $16.50 $16.50 8 Years 174 Days
June 15, 1998 36,697 $12.50 $16.50 $16.50 9 Years 109 Days
June 15, 1998 60,000 $12.50 $13.00 $13.00 6 Years 153 Days
June 15, 1998 35,000 $12.50 $16.56 $16.56 9 Years 290 Days
September 3, 1998 60,000 $ 9.31 $13.00 $ 9.31 6 Years 73 Days
September 3, 1998 40,000 $ 9.31 $15.00 $ 9.31 7 Years 47 Days
September 3, 1998 24,715 $ 9.31 $16.50 $ 9.31 7 Years 200 Days
September 3, 1998 50,000 $ 9.31 $16.50 $ 9.31 8 Years 94 Days
September 3, 1998 36,697 $ 9.31 $16.50 $ 9.31 9 Years 29 Days
September 3, 1998 35,000 $ 9.31 $16.56 $ 9.31 9 Years 210 Days
Daniel C. Alloway........... March 27, 1998 50,000 $16.50 $18.75 $16.50 8 Years 254 Days
Vice President of Sales June 15, 1998 25,000 $12.50 $15.00 $15.00 7 Years 127 Days
June 15, 1998 63,091 $12.50 $16.50 $16.50 7 Years 280 Days
June 15, 1998 50,000 $12.50 $16.50 $16.50 9 Years 286 Days
June 15, 1998 20,000 $12.50 $13.00 $13.00 6 Years 153 Days
June 15, 1998 15,000 $12.50 $16.56 $16.56 9 Years 290 Days
September 3, 1998 20,000 $ 9.31 $13.00 $ 9.31 6 Years 73 Days
September 3, 1998 25,000 $ 9.31 $15.00 $ 9.31 7 Years 47 Days
September 3, 1998 50,000 $ 9.31 $16.50 $ 9.31 8 Years 94 Days
September 3, 1998 63,091 $ 9.31 $16.50 $ 9.31 7 Years 200 Days
September 3, 1998 15,000 $ 9.31 $16.56 $ 9.31 9 Years 210 Days
Leonard J. Konecny.......... March 27, 1998 20,000 $16.50 $18.75 $16.50 8 Years 254 Days
Vice President of June 15, 1998 2,250 $12.50 $15.63 $15.63 7 Years 105 Days
Purchasing
June 15, 1998 15,000 $12.50 $16.50 $16.50 7 Years 280 Days
June 15, 1998 20,000 $12.50 $16.50 $16.50 8 Years 174 Days
June 15, 1998 1,667 $12.50 $13.00 $13.00 6 Years 153 Days
June 15, 1998 20,000 $12.50 $16.56 $16.56 9 Years 290 Days
September 3, 1998 1,667 $ 9.31 $13.00 $ 9.31 6 Years 73 Days
September 3, 1998 2,250 $ 9.31 $15.63 $ 9.31 7 Years 25 Days
September 3, 1998 15,000 $ 9.31 $16.50 $ 9.31 7 Years 200 Days
September 3, 1998 20,000 $ 9.31 $16.50 $ 9.31 8 Years 94 Days
September 3, 1998 20,000 $ 9.31 $16.56 $ 9.31 9 Years 210 Days

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Mario M. Galasso............ March 27, 1998 20,000 $16.50 $18.75 $16.50 8 Years 254 Days
Vice President of Product March 27, 1998 20,000 $16.50 $17.63 $16.50 8 Years 162 Days
Development June 15, 1998 5,000 $12.50 $15.63 $15.63 7 Years 105 Days
June 15, 1998 3,000 $12.50 $13.00 $13.00 6 Years 153 Days
June 15, 1998 15,000 $12.50 $16.56 $16.56 9 Years 290 Days
June 15, 1998 8,900 $12.50 $16.50 $16.50 7 Years 280 Days
June 15, 1998 40,000 $12.50 $16.50 $16.50 9 Years 286 Days
September 3, 1998 3,000 $ 9.31 $13.00 $ 9.31 6 Years 73 Days
September 3, 1998 5,000 $ 9.31 $15.63 $ 9.31 7 Years 25 Days
September 3, 1998 20,000 $ 9.31 $16.50 $ 9.31 8 Years 94 Days
September 3, 1998 20,000 $ 9.31 $16.50 $ 9.31 8 Years 2 Days
September 3, 1998 8,900 $ 9.31 $16.50 $ 9.31 7 Years 200 Days
September 3, 1998 15,000 $ 9.31 $16.56 $ 9.31 9 Years 210 Days

- ---------------
(1) On March 27, 1998, an aggregate of 509,426 options to purchase Common Stock
with exercise prices in excess of $16.50 were canceled and new options were
issued in replacement thereof with exercise prices of $16.50 and terms
identical to those canceled. These options are no longer outstanding due to
the June 15, 1998 repricing.

(2) In February 1998, the Company amended its stock option plans to include a
provision whereby upon a change of control, as defined by the plans, any
option granted and outstanding shall immediately become vested. On June 15,
1998, an aggregate of 1,430,652 options to purchase Common Stock with
exercise prices in excess of $12.50 were canceled and new options were
issued with the same exercise prices and terms as the old options; provided,
however, that in the event of a change of control, the exercise price of the
new options would have been $12.50 (the fair value of the Company's common
stock at the time of the grant). These options are no longer outstanding due
to the September 3, 1998 repricing.

(3) As disclosed in the Company's 1998 Proxy Statement, on September 3, 1998, an
aggregate of 1,462,252 options to purchase Common Stock, including options
granted to the executive officers of the Company, with exercise prices in
excess of $9.31 were canceled and new options were issued in replacement
thereof with exercise prices of $9.31 and terms identical to those canceled.

Chief Executive Officer Compensation

Mr. Joseph Montgomery's compensation as Chief Executive Officer is composed
of the same elements and performance measures as the Company's other senior
executives. The Compensation Committee believes that Mr. Montgomery's total
compensation reflects the unique contributions that he makes to the Company's
performance as an innovative leader in the bicycle industry and in leading the
Company's entrance into the motorcycle industry. He was awarded a profit-sharing
bonus of $67,391 in the fiscal year ended June 27, 1998 ("fiscal 1998") based on
corporate profitability in the fiscal year ended June 28, 1997 ("fiscal 1997").
He was awarded a profit-sharing bonus of $62,000 in fiscal 1999 based on
corporate profitability in fiscal 1998, and he was not awarded a profit-sharing
bonus in fiscal 2000 based on corporate profitability in fiscal 1999. The
Compensation Committee believes that such compensation is appropriate based on
the Company's performance, including its earnings, revenue growth and cash flow
from operations.

Members of the Compensation Committee
John Sanders
Joseph S. Montgomery
Michael J. Stimola
Sally G. Palmer
Gregory Griffin

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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors of the Company has a Compensation Committee. During
fiscal 1999, the Compensation Committee included Michael J. Stimola, John
Sanders, John H.T. Wilson, Sally G. Palmer, Gregory Griffin and Joseph
Montgomery as members. During fiscal 1999, Mr. Wilson resigned as a member of
the Board of Directors and Mr. Griffin and Ms. Palmer were elected to the Board
of Directors and appointed to the Compensation Committee. During the last fiscal
year, Joseph Montgomery, the Company's Chairman, President and Chief Executive
Officer participated in discussions with members of the Compensation Committee
concerning executive officer compensation.

Joseph Montgomery serves as a director of Sandella's, a company formed in
1994, of which Mr. Stimola is the founder, President and Chief Executive
Officer. During fiscal 1999, William Luca resigned as a director of Sandella's.
Sandella's owns, operates and franchises upscale gourmet quick-service
restaurants.

Joseph Montgomery is the sole shareholder of JSM, Inc. ("JSM"). During
fiscal 1999, JSM sold its Cessna Citation Jet aircraft and an option to buy a
learjet to the Company. See "Certain Relationships and Related Transactions."

Sandvick, of which Mr. Stimola is the President and majority stockholder,
has been the construction manager and general contractor for several
construction projects of the Company, including the construction of the
Company's headquarters and research and development facility and the expansion
of its bicycle manufacturing facility in Bedford, Pennsylvania. In fiscal 1999,
Sandvick was the construction manager and general contractor for the
construction of a new 100,000 square foot facility in Bedford, Pennsylvania to
house production of the Company's motorcycle and to provide additional
warehousing space. See "Certain Relationships and Related Transactions."

During the Company's 1999 and 1998 fiscal years, the Company provided
Joseph Montgomery with certain loans. See "Certain Relationships and Related
Transactions."

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EXECUTIVE COMPENSATION SUMMARY TABLE

The following table sets forth certain information with respect to the
compensation paid by the Company for services rendered to the Company in all
capacities during fiscal 1999, 1998 and 1997 to its Chief Executive Officer and
the Company's other most highly compensated executive officers whose aggregate
cash and cash equivalent compensation exceed $100,000.

SUMMARY COMPENSATION TABLE

LONG TERM
COMPENSATION
AWARDS(3)
ANNUAL COMPENSATION(1) SECURITIES
---------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) OPTIONS
- --------------------------- ---- -------- -------- ------------

Joseph S. Montgomery............................. 1999 $338,278 $62,000 190,000(4)
Chairman, President and Chief Executive Officer 1998 287,616 67,391 0
1997 278,471 0 0
William A. Luca.................................. 1999 305,769 62,000 276,412(4)
Vice President, Treasurer and Chief 1998 247,252 67,391 158,394(5)
Financial Officer 1997 233,100 75,000 50,000
Daniel C. Alloway................................ 1999 175,000 45,000 203,091(4)
Vice President of Sales 1998 150,000 44,927 65,000(5)
1997 148,462 50,000 50,000
Leonard J. Konecny............................... 1999 130,278 23,000 73,917(4)
Vice President of Purchasing 1998 108,077 22,464 40,000(5)
1997 97,500 25,000 20,000
Mario M. Galasso................................. 1999 114,231 23,000 86,900(4)
Vice President of Product Development 1998 97,308 12,500 55,000(5)
1997 86,481 10,000 20,000

- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted because such perquisites and other personal benefits
constituted less than the lesser of $50,000 or ten percent of the total
annual salary and bonus reported for the executive officer during fiscal
1999, 1998 and 1997.

(2) Profit-sharing bonuses paid in fiscal 1999 are based on corporate
profitability in fiscal 1998. No profit-sharing bonuses will be paid to
Messrs. Montgomery, Luca, Alloway, Konecny and Galasso in fiscal 2000 for
corporate profitability in fiscal 1999.

(3) The Company did not grant any restricted stock awards or stock appreciation
rights during fiscal 1999, 1998 or 1997. The Company does not have any
long-term incentive plan.

(4) Includes the replacement of 90,000, 246,412, 173,091, 58,917 and 71,900
options that were previously granted to Messrs. Montgomery, Luca, Alloway,
Konecny and Galasso, respectively, and canceled pursuant to the repricing of
options on September 3, 1998.

(5) Includes the replacement of 86,697, 50,000, 20,000 and 40,000 options that
were previously granted to Messrs. Luca, Alloway, Konecny and Galasso,
respectively, and canceled pursuant to the repricing of options on March 27,
1998.

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12

The following table sets forth certain information regarding stock options
granted during fiscal 1999 by the Company to the executive officers named in the
Summary Compensation Table above.

OPTION GRANTS IN FISCAL YEAR 1999

INDIVIDUAL GRANTS POTENTIAL
------------------------------------------------------ REALIZABLE VALUE
PERCENT OF ASSUMED ANNUAL
NUMBER OF OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED(1) FISCAL YEAR PER SHARE(2) DATE 5% 10%
---- ---------- ------------ ------------ ---------- -------- ----------

Joseph S. Montgomery....... 50,000(4) 2.36% $9.31 11/15/04 $164,432 $ 375,032
40,000(6) 1.89 9.31 10/20/05 154,907 362,264
100,000 4.73 9.69 04/30/09 609,399 1,544,336

William A. Luca............ 60,000(4) 2.84 9.31 11/15/04 197,318 450,039
40,000(6) 1.89 9.31 10/20/05 154,907 362,264
24,715(7) 1.17 9.31 03/22/06 102,445 242,336
50,000(9) 2.36 9.31 12/06/06 230,952 557,136
36,697(10) 1.73 9.31 10/02/07 190,419 470,065
35,000(11) 1.65 9.31 03/31/08 194,041 485,796
30,000 1.42 7.63 01/20/09 143,954 364,808

Daniel C. Alloway.......... 20,000(4) 0.95 9.31 11/15/04 65,772 150,013
25,000(6) 1.18 9.31 10/20/05 96,817 226,415
63,091(7) 2.98 9.31 03/22/06 261,515 618,621
50,000(9) 2.36 9.31 12/06/06 230,952 557,136
15,000(11) 0.71 9.31 03/31/08 83,161 208,198
30,000 1.42 7.63 01/20/09 143,954 364,808

Leonard J. Konecny......... 1,667(4) 0.08 9.31 11/15/04 5,482 12,504
2,250(5) 0.11 9.31 09/28/05 8,626 20,141
15,000(7) 0.71 9.31 03/22/06 62,176 147,078
20,000(9) 0.95 9.31 12/06/06 92,381 222,855
20,000(11) 0.95 9.31 03/31/08 110,881 277,598
15,000 0.71 7.63 01/20/09 71,977 182,404

Mario M. Galasso........... 3,000(4) 0.14 9.31 11/15/04 9,866 22,502
5,000(5) 0.24 9.31 09/28/05 19,170 44,757
8,900(7) 0.42 9.31 03/22/06 36,891 87,267
20,000(8) 0.95 9.31 09/05/06 88,976 213,145
20,000(9) 0.95 9.31 12/06/06 92,381 222,855
15,000(11) 0.71 9.31 03/31/08 83,161 208,198
15,000 0.71 7.63 01/20/09 71,977 182,404

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13

- ---------------
(1) Options vest over a three- or five-year period from the date of grant.

(2) On September 3, 1998, an aggregate of 1,462,252 options to purchase Common
Stock, including options granted to the executive officers of the Company,
with exercise prices in excess of $9.31 were canceled and new options were
issued in replacement thereof with exercise prices of $9.31 and terms
identical to those canceled.

(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based upon assumed rates of share price appreciation set by the
Securities and Exchange Commission of five percent and ten percent of the
fair value of the Common Stock on the date of grant of the options,
compounded annually from the date of grant to the option expiration dates.
The gains shown are net of the option exercise price, but do not include
deductions for taxes or other expenses associated with the exercise. Actual
gains, if any, are dependent on the performance of the Common Stock and the
date on which the option is exercised. There can be no assurance that the
values reflected will be achieved.

(4) Grants of stock options pursuant to the repricing of options on September
3, 1998, in exchange for the cancellation of Messrs. Montgomery's, Luca's,
Alloway's, Konecny's and Galasso's 50,000, 60,000, 20,000, 1,667 and 3,000,
respectively, outstanding stock options originally granted November 15,
1994.

(5) Grants of stock options pursuant to the repricing of options on September
3, 1998, in exchange for the cancellation of Messrs. Konecny's and
Galasso's 2,250 and 5,000, respectively, outstanding stock options
originally granted September 28, 1995.

(6) Grants of stock options pursuant to the repricing of options on September
3, 1998, in exchange for the cancellation of Messrs. Montgomery's, Luca's
and Alloway's 40,000, 40,000 and 25,000, respectively, outstanding stock
options originally granted October 20, 1995.

(7) Grants of stock options pursuant to the repricing of options on September
3, 1998, in exchange for the cancellation of Messrs. Luca's, Alloway's,
Konecny's and Galasso's 24,715, 63,091, 15,000 and 8,900, respectively,
outstanding stock options originally granted March 22, 1996.

(8) Grant of stock options pursuant to the repricing of options on September 3,
1998, in exchange for the cancellation of Mr. Galasso's 20,000 outstanding
stock options originally granted September 5, 1996.

(9) Grants of stock options pursuant to the repricing of options on September
3, 1998, in exchange for the cancellation of Messrs. Luca's, Alloway's,
Konecny's and Galasso's 50,000, 50,000, 20,000 and 20,000, respectively,
outstanding stock options originally granted December 6, 1996.

(10) Grant of stock options pursuant to the repricing of options on September 3,
1998, in exchange for the cancellation of Mr. Luca's 36,697 outstanding
stock options originally granted October 2, 1997.

(11) Grants of stock options pursuant to the repricing of options on September
3, 1998, in exchange for the cancellation of Messrs. Luca's, Alloway's,
Konecny's and Galasso's 35,000, 15,000, 20,000 and 15,000, respectively,
outstanding stock options originally granted March 31, 1998.

11
14

The following table sets forth certain information with respect to the
aggregate exercises of stock options and unexercised stock options held as of
July 3, 1999, by the executive officers named in the Summary Compensation Table
above.

AGGREGATE OPTIONS EXERCISED IN FISCAL 1999 AND
FISCAL 1999 YEAR END OPTION VALUES

NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT JULY 3, 1999 OPTIONS AT JULY 3, 1999(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------

Joseph S. Montgomery........... -- $-- 128,750 100,000 $549,725 $119,000
William A. Luca................ -- -- 147,565 151,697 436,642 288,564
Daniel C. Alloway.............. -- -- 135,216 95,000 455,600 199,550
Leonard J. Konecny............. -- -- 18,917 55,000 29,700 111,550
Mario M. Galasso............... -- -- 30,233 56,667 47,466 114,167

- ---------------
(1) The values in this column represent the closing sales price of the Company's
Common Stock on the Nasdaq National Market on July 2, 1999, $10.88, less the
respective option exercise price.

EMPLOYMENT AGREEMENTS AND SEPARATION PLAN

On January 3, 1994, the Company entered into an employment agreement with
William Luca, pursuant to which Mr. Luca agreed to serve as Chief Financial
Officer of the Company. The annual base salary to be paid under such agreement
to Mr. Luca was $150,000 per annum. The agreement may be terminated either by
Mr. Luca or the Company upon at least 14 days prior written notice, or by the
Company effective immediately for cause. The agreement also contains a
non-competition provision which requires, among other things, that Mr. Luca not
perform functions or provide the same or substantially similar services to those
performed or provided by him for the Company for any competitor of the Company
for a period of one year following the termination of his employment for any
reason.

On June 6, 1994, the Company entered into an employment agreement with
Leonard Konecny, pursuant to which Mr. Konecny agreed to serve as Vice President
of Purchasing of the Company. The annual base salary to be paid under such
agreement to Mr. Konecny was $80,000 per annum. The agreement may be terminated
either by Mr. Konecny or the Company upon at least 14 days prior written notice,
or by the Company effective immediately for cause. The agreement also contains a
non-competition provision which requires, among other things, that Mr. Konecny
not perform functions or provide the same or substantially similar services to
those performed or provided by him for the Company for any competitor of the
Company for a period of one year following the termination of his employment for
any reason.

On February 5, 1998, the Company entered into Change-of-Control Employment
Agreements with Joseph Montgomery, William Luca and Daniel Alloway (each, an
"Executive"). Each agreement is identical and provides that upon a Change of
Control (as defined in each agreement), the Company will continue to employ the
Executive for three years after the Change of Control occurs (the "Employment
Period"), unless the agreement is terminated earlier in accordance with its
terms. During the Employment Period, each Executive will receive an annual base
salary at least equal to 12 times the highest monthly base salary paid or
payable to each respective Executive for the 12-month period prior to the Change
of Control ("Annual Base Salary"). In addition, each Executive is entitled to
receive an annual profit-sharing bonus at lease equal to the highest
profit-sharing bonus paid to each respective Executive in the past three fiscal
years ("Annual Bonus"). Pursuant to the terms of each agreement, each
Executive's employment with the Company may be terminated by the Executive at
any time and for any reason or no reason at all. Upon a termination of a
Change-of-Control Employment Agreement (other than for death or disability (as
defined in each agreement)), the Company shall pay to the Executive the
aggregate of the following amounts: (1) the Executive's Annual Base Salary
through the Date of Termination (as defined in each agreement) to the extent not
already paid; (2) the

12
15

product of (x) the higher of (i) the amount of any Annual Bonus, annualized in
the event the Executive was not employed for the full fiscal year relating
thereto and (ii) the Annual 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 12 full months or during which the Executive
was employed for less than 12 full months), for the most recently completed
fiscal year during the Employment Period, if any (such higher amount being
referred to as the "Highest Annual Bonus") times (y) a fraction, the numerator
of which is the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365; (3) any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to the extent not
already paid; (4) the amount equal to the product of (i) three times (ii) the
sum of (x) the Executive's Annual Base Salary and (y) the Highest Annual Bonus;
and (5) any Gross-Up Payments (as defined in each agreement) for certain tax
obligations of the Executive. Each Executive shall also be entitled to certain
benefits and limited payments relating to specific obligations of the Company.
During the Employment Period, the Company may terminate each Executive's
employment with the Company upon an Executive's death or disability with
specified payment obligations in each instance for accrued obligations and other
benefits.

Leonard Konecny is a participant in the Company's Change-of-Control
Separation Plan A. The plan provides that Mr. Konecny will continue to be a
participant in the plan until he ceases to be employed by the Company or his
designation as a participant of the plan is rescinded by the Board of Directors.
Upon a Change of Control (as defined in the plan), the Company will be obligated
to pay Mr. Konecny, subject to certain federal tax limitations, the aggregate of
the following amounts if he is terminated for any reason other than for cause
(as defined in the plan), death or disability (as defined in the plan): (1) his
annual base salary at the time of a Change of Control ("Annual Base Salary")
through the Date of Termination (as defined in the plan) to the extent not
already paid; (2) any compensation previously deferred (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in each case
to the extent not already paid; and (3) the amount equal to the product of (i)
one and one-half times (ii) Mr. Konecny's Annual Base Salary. Upon such
termination, Mr. Konecny shall also be entitled to certain benefits and limited
payments relating to specific obligations of the Company. After a Change of
Control, the Company may also terminate Mr. Konecny for death or disability with
specified payment obligations in each instance for accrued obligations.

Mario Galasso is a participant in the Company's Change-of-Control
Separation Plan B. The plan provides that Mr. Galasso will continue to be a
participant in the plan until he ceases to be employed by the Company or his
designation as a participant of the plan is rescinded by the Board of Directors.
Upon a Change of Control (as defined in the plan), the Company will be obligated
to pay Mr. Galasso, subject to certain federal tax limitations, the aggregate of
the following amounts if he is terminated for any reason other than for cause
(as defined in the plan), death or disability (as defined in the plan): (1) his
annual base salary at the time of a Change of Control ("Annual Base Salary")
through the Date of Termination (as defined in the plan) to the extent not
already paid; and (2) any compensation previously deferred (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in each case
to the extent not already paid; and (3) the amount equal to Mr. Galasso's Annual
Base Salary. Upon such termination, Mr. Galasso shall also be entitled to
certain benefits and limited payments relating to specific obligations of the
Company. After a Change of Control, the Company may also terminate Mr. Galasso
for death or disability with specified payment obligations in each instance for
accrued obligations.

13
16

COMPARISON OF CUMULATIVE TOTAL RETURNS

The following graph compares the performance of the Company's Common Stock
with the performance of the Nasdaq Stock Market (U.S. Companies) Stock Price
Index (the "Nasdaq Index") and a peer group index created by the Company, over
the period from November 16, 1994 (the first day of public trading of the
Company's Common Stock) to July 2, 1999. The graph assumes that $100 was
invested on November 16, 1994, in each of the Company's Common Stock, the Nasdaq
Index and the peer group index, and that all dividends were reinvested.

The peer group index created by the Company is composed of companies in
bicycle or other recreational product lines of business. The common stock of the
following companies has been included in the peer group index: K2, Inc., Bell
Sports Corp., Callaway Golf Company, GT Bicycles, Inc., The Coleman Company,
Inc., First Team Sports, Inc., Huffy Corporation, Ride Inc. and Rockshox Inc.

PREPARED BY THE CENTER FOR RESEARCH IN SECURITY PRICES

[5-YR CUMULATIVE TOTAL RETURNS GRAPH]

NASDAQ STOCK MARKET (US
CANNONDALE|CORPORATION COMPANIES) SELF-DETERMINED|PEER GROUP
---------------------- ----------------------- --------------------------

11/16/94 100 100 100
91.818 97.562 94.17
74.545 97.827 95.292
88.182 98.389 94.836
94.545 103.59 98.193
90.909 106.665 95.183
110.909 110.25 88.36
114.545 112.871 93.771
06/30/95 101.818 122.011 95.985
127.273 130.972 100.512
119.091 133.63 100.506
120 136.707 99.105
116.364 135.919 96.724
103.636 139.107 106.165
115.455 138.372 115.511
110 139.064 106.885
112.727 144.365 120.161
133.636 144.85 127.89
161.818 156.85 131.712
160 164.046 140.808
06/28/96 147.273 156.651 142.083
143.636 142.706 126.289
132.727 150.71 131.749
169.091 162.231 131.165
140 160.435 118.121
140 170.389 120.878
163.636 170.246 116.788
169.091 182.328 126.047
148.182 172.243 121.191
134.545 161.013 112.605
141.818 166.027 118.847
127.273 184.834 128.531
06/30/97 129.091 190.515 139.551
129.091 210.59 136.334
129.091 210.275 131.544
163.636 222.743 133.513
160.909 211.14 122.432
151.364 212.265 118.801
158.182 208.612 113.181
147.727 215.214 104.18
149.545 235.453 127.833
120.455 244.139 137.795
115.455 248.251 117.746
102.727 234.471 98.928
06/30/98 97.273 250.848 84.554
80 247.915 67.71
69.091 198.924 59.07
67.955 226.542 58.897
79.091 236.332 56.72
72.273 260.231 63.644
65.455 293.99 55.005
53.636 336.728 57.175
91.818 306.533 55.277
60.909 328.794 50.018
69.091 338.098 62.069
64.545 330.264 67.998
06/30/99 82.727 359.762 64.577

Companies in the Self-Determined Peer Group
BELL SPORTS CORP CALLAWAY GOLF CO
COLEMAN CO FIRST TEAM SPORTS INC
G T BICYCLES INC HUFFY CORP
K 2 INC RIDE INC
ROCKSHOX INC

NOTES:
A. The lines represent monthly index levels derived from compounded daily returns that
include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the previous
trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day, the
preceding trading day is used.
D. The index level for all series was set to $100.0 on 11/16/94.

14
17

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Joseph Montgomery is the sole shareholder of JSM. JSM owned a Cessna
Citation Jet aircraft that it sold to the Company on June 30, 1998. The Company
purchased the Cessna Citation Jet aircraft from JSM for $2.8 million (which was
determined by the Company based on independent valuations of the market value of
the aircraft). The Company also assumed the obligations of JSM Aviation, LLC
("JSM LLC"), a Connecticut limited liability company in which Mr. Montgomery and
Michael Stimola are each members, as sublessee under a hangar lease which houses
the Cessna Citation Jet aircraft. As part of the assumption of the hangar lease
obligations, the Company reimbursed JSM LLC $160,922 for the cost of certain
leasehold improvements made to the hangar by JSM LLC. The Company currently uses
the Cessna Citation Jet aircraft largely for transporting personnel between its
Connecticut headquarters and its Pennsylvania manufacturing facilities and
anticipates that it will have an increased need for an aircraft in connection
with planned growth of the business.

In connection with the purchase of the Cessna Citation Jet aircraft, the
Company also purchased, for $500,000, JSM's right to acquire a Learjet aircraft.
JSM had entered into a contract with Learjet, Inc. ("Learjet") to purchase an
aircraft and had paid Learjet $500,000 as a deposit with respect to such
purchase. The Company has assumed JSM's rights and obligations under this
contract. In connection with these transactions, JSM obtained a right of first
refusal with respect to the Cessna Citation Jet aircraft and the Learjet
aircraft under certain limited circumstances. It is not the intent of the
Company to operate both the Cessna Citation Jet aircraft and the Learjet
aircraft simultaneously.

During the third quarter of fiscal 1999, the Company entered into a $2.9
million sale-leaseback transaction for the Cessna Citation Jet purchased from
JSM. The lease provides JSM with the right of first refusal should the Company
purchase the aircraft pursuant to the terms of the lease agreement.

The Company has entered into an agreement with Joseph Montgomery pursuant
to which he agrees to pay the Company for any personal use of the Cessna
Citation Jet aircraft being leased by the Company. This agreement does not
require the Company to make the aircraft available to Mr. Montgomery, but
governs payments to be made by Mr. Montgomery for such personal use as may be
agreed to by the Company from time to time. Payment for such personal use is at
the rate established from time to time by the Internal Revenue Service as
reasonable for personal use of employer-owned aircraft. During fiscal 1999, Mr.
Montgomery's personal use of the aircraft was valued at $28,804.

Sandvick, of which Mr. Stimola is the President and majority stockholder,
has been the construction manager and general contractor for several
construction projects of the Company in Connecticut and Pennsylvania, including
the construction of the Company's headquarters and research and development
facility and the expansion of its Bedford, Pennsylvania bicycle manufacturing
facility. In fiscal 1999, Sandvick was the construction manager and general
contractor for the construction of a new 100,000 square foot facility in
Bedford, Pennsylvania to house production of the Company's motorcycle and to
provide additional warehousing space. In fiscal 1999, the Company paid Sandvick
$6.3 million for the construction of this new facility.

In fiscal 1997, the Company agreed to provide up to $450,000 in
interest-free loans to William Luca to enable him to purchase a home in the
vicinity of the Company's headquarters. In fiscal 1999, the Company agreed to
provide Mr. Luca up to an additional $200,000 of interest-free loans under the
same terms and conditions as the original loan. As of October 1, 1999, $650,000
had been advanced to Mr. Luca. The loans mature on December 29, 2006, at which
time the entire principal balance is due. The loans are secured by a mortgage on
Mr. Luca's residence.

In fiscal 1997, the Company agreed to provide up to $125,000 in
interest-free loans to Leonard Konecny to enable him to purchase a home in the
vicinity of the Company's headquarters. As of October 1, 1999, $125,000 had been
advanced to Mr. Konecny. The loans mature on September 1, 2007, at which time
the entire principal balance is due. The loans are secured by a mortgage on Mr.
Konecny's residence.

In fiscal 1999, the Company provided Daniel Alloway with an $80,000
interest-free advance against his future salary. This advance is still
outstanding as of October 1, 1999.
15
18

In April 1998, the Company provided Joseph Montgomery with a loan in the
principal amount of $2,000,000 to enable him to meet certain tax obligations. In
June 1998, the Company provided Mr. Montgomery with an additional loan in the
principal amount of $10,000,000 for the purchase of certain real property, which
loan was combined with the previous $2,000,000 loan made in April 1998. The loan
matures on August 1, 2003, at which time the entire principal balance is due.
The interest rate on the loan is set at the prime rate as published in the Wall
Street Journal from time to time, and the loan is secured by a pledge to the
Company of all of the shares of the Company's common stock held by Mr.
Montgomery and by a mortgage on such real property. The Company has agreed to
defer the first interest payment of approximately $900,000 payable by Mr.
Montgomery to the Company due August 1, 1999 pursuant to the terms of the loan.
Under the terms of the deferral, Mr. Montgomery is obligated to sell 75,000
shares of his stock in the Company per quarter commencing in the Company's third
quarter of fiscal 2000. The net proceeds of such sales will be remitted to the
Company to pay the deferred interest. The stock selling program by Mr.
Montgomery is subject to applicable securities laws and other restrictions which
may preclude Mr. Montgomery from selling 75,000 shares per quarter. This selling
program will continue until the balance of the deferred interest is paid by Mr.
Montgomery in its entirety. As of October 1, 1999, $13,070,902, including
interest and deferred interest, was outstanding on the loan.

The Board of Directors of the Company believes that the terms of the
transactions described above (other than those involving loans to employees)
were on terms no less favorable to the Company than those that could have been
obtained from unaffiliated parties; and that the transactions involving loans to
employees were fair and reasonable under the circumstances. The Company
anticipates that future transactions with affiliated parties will be approved by
a majority of the Company's disinterested directors and will be on terms no less
favorable to the Company than those that could be obtained from unaffiliated
parties.

ITEM 2 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS

The Company has appointed Ernst & Young LLP as the Company's independent
accountants for fiscal 2000. Ernst & Young LLP has served as the Company's
independent accountants since 1993. Services provided to the Company and its
subsidiaries by Ernst & Young LLP with respect to fiscal 1999 included the audit
of the Company's consolidated financial statements, limited reviews of quarterly
reports, services related to filings with the Securities and Exchange Commission
and consultations on various tax matters. Representatives of Ernst & Young LLP
will be present at the Annual Meeting to respond to appropriate questions and to
make such statements as they may desire.

Ratification of the selection of Ernst & Young LLP as the Company's
independent accountants for fiscal 2000 will require the affirmative vote of a
majority of the shares of Common Stock represented in person or by proxy and
entitled to vote at the Annual Meeting. In the event stockholders do not ratify
the appointment of Ernst & Young LLP as the Company's independent accountants
for the forthcoming fiscal year, such appointment will be reconsidered by the
Audit Committee and the Board of Directors.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR
FISCAL 2000.

OTHER MATTERS

As of the date of this proxy statement, the Company knows of no business
that will be presented for consideration at the Annual Meeting other than the
items referred to above. Proxies in the enclosed form will be voted in respect
of any other business that is properly brought before the Annual Meeting in
accordance with the judgment of the person or persons voting the proxies.

STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING

Pursuant to the Securities and Exchange Commission rules promulgated under
the Securities Exchange Act of 1934, any proposal of a stockholder intended to
be presented at the Company's 2000 Annual Meeting of

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Stockholders must be received by the Secretary of the Company, for inclusion in
the Company's proxy statement relating to the 2000 Annual Meeting, by June 16,
2000. In accordance with the advance notice provisions contained in the
Company's Bylaws, the Company generally must receive notice of stockholder's
intent to propose any business at an annual meeting no later than the close of
business on the 70th day and no earlier than the close of business on the 90th
day prior to the first anniversary of this year's Annual Meeting (November 17,
2000).

ADDITIONAL INFORMATION

The cost of soliciting proxies in the enclosed form will be borne by the
Company. Officers and regular employees of the Company may, but without
compensation other than their regular compensation, solicit proxies by further
mailing or personal conversations, or by telephone, telex or facsimile. The
Company will, upon request, reimburse brokerage firms and others for their
reasonable expenses in forwarding solicitation material to the beneficial owners
of stock.

October 15, 1999
By Order of the Board of Directors

/s/ John T. Capetta

John T. Capetta
Secretary

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PROXY

CANNONDALE CORPORATION

ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Joseph S. Montgomery and William A. Luca, and
each of them individually, as proxies, each with the power of substitution, and
hereby authorizes them to vote all shares of Common Stock of the undersigned at
the Annual Meeting of the Company, to be held at the Ethan Allen Inn, 21 Lake
Avenue Extension, Danbury, Connecticut, on Wednesday, November 17, 1999 at
10:00 a.m., Eastern Standard Time, and at any adjournments or postponements
thereof.

WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED "FOR" THE ELECTION OF DIRECTORS AND "FOR" THE PROPOSALS SET FORTH ON THE
REVERSE SIDE.

SEE REVERSE SIDE SEE REVERSE SIDE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE.

- -------------------------------------------------------------------------------
[UP ARROW] FOLD AND DETACH HERE [UP ARROW]

21
Please mark
votes as in [X]
this example.

The Board of Directors recommends a vote FOR proposals 1 and 2.

1. Election of Class II Directors. FOR WITHHOLD authority to
Nominees: John Sanders, James Scott ALL nominees vote for ALL nominees
Montgomery and Sally G. Palmer [ ] [ ]

[ ]
------------------------------------------------
For nominees except as noted above

2. Selection of Independent Accountants. FOR AGAINST ABSTAIN
[ ] [ ] [ ]

3. The proxies are authorized to vote upon such other business that may properly
come before the meeting in accordance with the judgment of the person or
persons voting this proxy.

MARK HERE FOR ADDRESS CHANGE AND [ ]
----- NOTE AT LEFT
|
|
|

Signature Date
------------------------------------------- -----------------------

Signature
-------------------------------------------

Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.

- --------------------------------------------------------------------------------
x FOLD AND DETACH HERE x

CONTACT:
WILLIAM A. LUCA
VICE PRESIDENT AND CFO
(203) 749-7000

FOR IMMEDIATE RELEASE

CANNONDALE CORPORATION
EXPECTS FISCAL 2000 FIRST QUARTER REVENUES AND EARNINGS
TO BE BELOW ANALYSTS' EXPECTATIONS

Bethel, CT (October 7, 1999) - Cannondale Corporation (Nasdaq: BIKE) today
announced that it expects that revenues will be approximately $6.0 million below
analysts' estimates for its first fiscal quarter ending October 2, 1999.
Earnings per share will be a loss of approximately 20 cents. Cannondale's
revenues and earnings for the first quarter of fiscal 2000 were adversely
affected by the continued retail inventory realignment in the European market
and by component shortages caused by the September earthquake in Taiwan.

Despite a soft bicycle industry, the outlook for Cannondale remains strong as it
continues to innovate at a faster pace than its competitors. Cannondale recently
introduced significant new innovations including the Raven II, the single-sided
HeadShok Lefty suspension fork, the CAAD5 mountain frame and two CODA disc
brakes. Demand currently exceeds Cannondale's ability to supply these
innovations - an imbalance which Cannondale expects will be corrected in the
next two fiscal quarters. Cannondale expects to introduce additional innovations
during the balance of the 2000 fiscal year.

Consistent with the maturing market, consolidation is increasingly evident at
both the supplier and retail levels of the cycling industry. Cannondale's strong
positioning enables it to partner with the best bicycle retailers, who are
looking for the strongest brands to carry. Cannondale's patented,
vertically-integrated technology is a key point of differentiation as bicycle
retailers are increasingly consolidating the number of bike lines they carry. As
this consolidation takes place, Cannondale products receive correspondingly
stronger retail emphasis.

Cannondale will begin manufacturing its MX400 motorcycle in the second quarter
of fiscal 2000 (October to December), with shipments early in the third quarter.
Currently, MX400 orders from motor-sport dealers exceed the MX400 sales forecast
for fiscal 2000.

This press release contains forward-looking statements, as defined under the
Private Securities Litigation Reform Act of 1995. Actual results may differ
materially from those anticipated as a result of various risks and
uncertainties, including risks described in this press release, as well as those
detailed from time to time in the Company's periodic reports on Forms 10-K, 10-Q
and 8-K filed with the Securities and Exchange Commission. Readers are cautioned
not to place undue reliance on these forward-looking statements which speak only
as of the date hereof. The Company undertakes no obligation to publish revised
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.

Cannondale Corporation is the world's leading manufacturer of high-performance
aluminum bicycles. The Company's bicycles and bicycle accessories, which include
clothing, packs and bags, HeadShok suspension forks and CODA components, are
marketed under the Cannondale brand name and "Handmade in USA" logo, and are
sold in the U.S. and in more than 60 foreign countries.

1357-PR-99