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                                                                   EXHIBIT 10.49

                    SETTLEMENT AGREEMENT AND MUTUAL RELEASE

PARTIES:

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<S>                                   <C>
ADIDAS AMERICA, INC.                   ("ADIDAS")

GARGOYLES, INC.                        ("GARGOYLES")

CONQUEST SPORTS, INC.                  ("CONQUEST")

AXCENT SPORTS, INC.                    ("AXCENT")

SPORTS PERFORMANCE PRODUCTS, INC.      ("SPPI")

DOUGLAS HAUFF                          ("HAUFF")

TRILLIUM CORPORATION                   ("TRILLIUM")
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                                    RECITALS

      A.    AXCENT currently owes GARGOYLES and CONQUEST over $200,001, which
constitute accounts receivables for GARGOYLES and CONQUEST, respectively. These
debts are reflected in the "Other Payables" section of AXCENT's balance sheet.

      B.    On or about February 12, 1997, ADIDAS filed a complaint with the
United States District Court for the District of Oregon, Case No. 97-239-JE
(the "Action"), against GARGOYLES, CONQUEST, AXCENT, and SPPI (GARGOYLES,
CONQUEST, AXCENT, and SPPI are hereinafter referred to collectively as
"DEFENDANTS".) In the Action, ADIDAS asserted breach of contract claims against
each of the DEFENDANTS. Based on GARGOYLES' alleged relationship with AXCENT,
ADIDAS also asserted claims against GARGOYLES under the theories of piercing
the corporate veil and promoter liability. Among other things, ADIDAS demands
damages of $603,904.56 against each DEFENDANT.

      C.    HAUFF and TRILLIUM have executed Indemnity Agreements with GARGOYLES
and CONQUEST. GARGOYLES and CONQUEST have tendered to HAUFF and TRILLIUM the
claims asserted against them by ADIDAS.

      D.    To avoid the expense and uncertainty of litigation, ADIDAS and
DEFENDANTS desire to settle and compromise their differences under the terms
and conditions set forth in this Settlement Agreement and Mutual Release
("Agreement"). Likewise, HAUFF and TRILLIUM have agreed to accept GARGOYLES and
CONQUEST's tenders under the following terms.

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NOW, THEREFORE, IT IS AGREED:

      1.    PAYMENTS BY HAUFF AND TRILLIUM AND ASSIGNMENT BY AXCENT, HAUFF and
TRILLIUM agree that they are jointly and severally liable to make payments on
the following schedule to ADIDAS: $50,000 on July 15, 1997; $50,000 on August
1, 1997; $50,000 on November 1, 1997; and $50,000 on February 1, 1998. In
consideration and exchange for HAUFF's and TRILLIUM's agreement to make the
above payments, GARGOYLES and CONQUEST assign to HAUFF and TRILLIUM all rights
that they have in the over $200,001 of accounts receivable remaining due and
outstanding from AXCENT. Likewise, in consideration and exchange for HAUFF's
and TRILLIUM's agreements to make the above payments, ADIDAS assigns to HAUFF
and TRILLIUM all rights and claims it has against AXCENT.

      2.    INTEREST. Any payments not made on or before the dates indicated in
paragraph 1 herein shall bear interest at the rate of 1% per month, or at the
highest rate allowed by law, whichever is less, from the scheduled payment date
until paid in full.

      3.    DISMISSAL. ADIDAS agrees to dismiss with prejudice, and without
award of costs or fees, the Action within ten business days of the date this
Agreement is signed by the DEFENDANTS, HAUFF and TRILLIUM.

      4.    RELEASES. In consideration for the provisions of this Agreement,
and except for the obligations of this Agreement and the assigned rights and
claims by ADIDAS to HAUFF and TRILLIUM (as more fully described in paragraph 1
above), ADIDAS, on the one hand, and the DEFENDANTS, HAUFF and TRILLIUM, on the
other hand, for themselves and each of their respective agents, officers,
directors, employees, representatives, executors, heirs and assigns, hereby
release each other, together with each of their respective agents, officers,
directors, employees, representatives, executors, heirs and assigns, from any
and all claims and disputes that may exist between them as of the date of this
Agreement, whether known or  unknown, arising out of the facts that gave rise
to the Action.

      5.    NO ADMISSION OF LIABILITY. The parties understand, agree and
acknowledge that this Agreement is in compromise of disputed claims, and that
the agreements hereunder are not to be construed as admissions of liability.
The parties acknowledge that this agreement is a fair and equitable settlement
of each Parties' claims.


      6.    AUTHORITY. The parties to this Agreement represent that they have
the power and authority to execute and deliver this Agreement, and to perform
all terms and conditions hereof to be performed by them.

      7.    BINDING ON SUCCESSORS AND ASSIGNS. All for the covenants,
agreements, conditions and terms contained in this Agreement shall be binding
upon, apply and inure to the benefit of the successors and assigns of the
respective parties.

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     8.   INTEGRATION. This Agreement constitutes a final and complete
statement of the agreement between the parties.

     9.   COUNSEL. Each of the parties hereto acknowledges that each party has
been represented by counsel in connection with the preparation and execution of
this Agreement and that each party has thoroughly reviewed this Agreement with
that party's counsel. For all purposes, including the construction and
interpretation hereof, this Agreement shall be deemed to have been prepared or
drafted jointly by all parties hereto.

     10.  ATTORNEY FEES. If a lawsuit, action or other legal proceeding is
brought to interpret or enforce this Agreement, any judgment therein shall
award the prevailing party all costs thereof, including but not limited to
reasonable attorney and legal assistance fees (including, without limitation,
such fees incurred on any appeal, arbitration or voluntary or involuntary
bankruptcy case).

     11.  COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute but one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto affix their respective signatures.
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<S>                                          <C> 
ADIDAS AMERICA, INC.                         SPORTS PERFORMANCE PRODUCTS, INC.

By:    [SIG]                                 By:   /s/  DOUGLAS B. HAUFF
    ----------------------------------           ------------------------------
Title: Secretary and General Counsel         Title: President
       -------------------------------              ---------------------------
Date:  7/14/97                               Date:  July 14, 1997
      --------------------------------             ----------------------------


GARGOYLES, INC.                              TRILLIUM CORPORATION

By:    /s/  DOUGLAS B. HAUFF                 By:    /s/  PAUL PIEN
    ----------------------------------           ------------------------------
Title: President & CEO                       Title:  Vice President, General Counsel
       -------------------------------              ---------------------------
Date:  July 14, 1997                         Date:  July 14, 1997
      --------------------------------             ----------------------------


CONQUEST SPORTS, INC.

By:    /s/  DOUGLAS B. HAUFF                 By:   /s/ DOUGLAS HAUFF
    ----------------------------------           ------------------------------
Title: President                                       Douglas Hauff
       -------------------------------       
Date:  July 14, 1997                         Date: July 14, 1997
      --------------------------------             ----------------------------


AXCENT SPORTS, INC.

By:   /s/ DOUGLAS HAUFF
    ----------------------------------
Title: President
       -------------------------------
Date:  July 14, 1997
      --------------------------------

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