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                                                                    EXHIBIT 10.2

                                CREDIT AGREEMENT

                                (LINE OF CREDIT)

                               (FOREIGN EXCHANGE)

                         (LETTER OF CREDIT SUB-FACILITY)

      This Agreement (the "Agreement") is made and entered into as of August 12,
2003 , by and between BANK OF THE WEST (the "Bank") and STONE BOARDWEAR, INC.
(the "Borrower"), on the terms and conditions that follow:

                                    SECTION

                                       1

                                  DEFINITIONS

1.1   CERTAIN DEFINED TERMS: Unless elsewhere defined in this Agreement, the
      following terms shall have the following meanings (such meanings to be
      generally applicable to the singular and plural forms of the terms
      defined):

      1.1.1 "ADVANCE": shall mean an advance to the Borrower under the credit
            facility (ies) described in Section 2.

      1.1.2 "BUSINESS DAY": shall mean a day, other than a Saturday or Sunday,
            on which commercial banks are open for business in California.

      1.1.3 "CLOSE-OUT DATE": shall mean the Business Day on which the Bank
            closes out and liquidates an FX Transaction.

      1.1.4 "CLOSING VALUE": has the meaning given to it in Section 8.5(i)
            hereof.

      1.1.5 "CLOSING GAIN" AND "CLOSING LOSS" :shall mean the amount determined
            in accordance with Section 8.5(ii) hereof.

      1.1.6 "COLLATERAL": shall mean the property described in Section 3,
            together with any other personal or real property in which the Bank
            may be granted a lien or security interest to secure payment of
            the Obligations.

      1.1.7 "CREDIT PERCENTAGE": shall mean 10%.

      1.1.8 "CURRENT LIABILITIES": shall mean current liabilities as determined
            in accordance with generally accepted accounting principles,
            including any negative cash balance on the Borrower's financial
            statement and Indebtedness for borrowed money under lines of credit
            with the Bank used by the Borrower for working capital purposes.

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      1.1.9  "EFFECTIVE TANGIBLE NET WORTH": shall mean the Borrower's stated
             net worth plus Subordinated Debt but less all intangible assets of
             the Borrower (i.e., goodwill, trademarks, patents, copyrights,
             organization expense, and similar intangible items including, but
             not limited to, investments in and all amounts due from affiliates,
             officers or employees).

      1.1.10 "ENVIRONMENTAL CLAIMS": shall mean all claims, however asserted, by
             any governmental authority or other person alleging potential
             liability or responsibility for violation of any Environmental Law
             or for Discharge or injury to the environment or threat to public
             health, personal injury (including sickness, disease or death),
             property damage, natural resources damage, or otherwise alleging
             liability or responsibility for damages (punitive or otherwise),
             cleanup, removal, remedial or response costs, restitution, civil or
             criminal penalties, injunctive relief, or other type of relief,
             resulting from or based upon (a) the presence, placement,
             discharge, emission or release (including intentional and
             unintentional, negligent and non-negligent, sudden or non-sudden,
             accidental or non-accidental placement, spills, leaks, Discharges,
             emissions or releases) of any Hazardous Material at, in, or from
             property, whether or not owned by the Borrower, or (b) any other
             circumstances forming the basis of any violation, or alleged
             violation, of any Environmental Law.

      1.1.11 "ENVIRONMENTAL LAWS": shall mean all federal, state or local laws,
             statutes, common law duties, rules, regulations, ordinances and
             codes, together with all administrative orders, directed duties,
             requests, licenses, authorizations and permits of, and agreements
             with, any governmental authorities, in each case relating to
             environmental, health, safety and land use matters; including the
             Comprehensive Environmental Response, Compensation and Liability
             Act of 1980 ("CERCLA"), the Clean Air Act, the Federal Water
             Pollution Control Act of 1972, the Solid Waste Disposal Act, the
             Federal Resource Conservation and Recovery Act, the Toxic
             Substances Control Act, the Emergency Planning and Community
             Right-to-Know Act, the California Hazardous Waste Control Law, the
             California Solid Waste Management, Resource, Recovery and Recycling
             Act, the California Water Code and the California Health and Safety
             Code.

      1.1.12 "ENVIRONMENTAL PERMITS": shall have the meaning provided in Section
             5.11 hereof.

      1.1.13 "ERISA": shall mean the Employee Retirement Income Security Act of
             1974, as amended from time to time, including (unless the context
             otherwise requires) any rules or regulations promulgated
             thereunder.

      1.1.14 "EVENT OF DEFAULT": shall have the meaning set forth in Section 7.

      1.1.15 "EXPIRATION DATE": shall mean May 31, 2005, or the date of
             termination of the Bank's commitment to lend under this Agreement
             pursuant to Section 8, whichever shall occur first.

      1.1.16 "FOREIGN CURRENCY": shall mean any legally traded currency other
             than US dollars and which may be transferred by paperless wire
             transfer or cash and in which the Bank regularly trades.

      1.1.17 "FOREIGN EXCHANGE FACILITY": shall mean the credit facility
             described as such in Section 2.

      1.1.18 "FX RISK LIABILITY": shall mean the product of (a) the Credit
             Percentage, times (b) the aggregate of the Notional Values of all
             FX Transactions outstanding, net of any Offsetting Transactions.

      1.1.19 "FX LIMIT": shall mean $500,000.00.

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      1.1.20 "FX TRANSACTION": shall mean any transaction between the Bank and
             the Borrower pursuant to which the Bank has agreed to sell to or to
             purchase from the Borrower a Foreign Currency of an agreed amount
             at an agreed price in US dollars or such other agreed upon Foreign
             Currency, deliverable and payable on an agreed date.

      1.1.21 "HAZARDOUS MATERIALS": shall mean all those substances which are
             regulated by, or which may form the basis of liability under, any
             Environmental Law, including all substances identified under any
             Environmental Law as a pollutant, contaminant, hazardous waste,
             hazardous constituent, special waste, hazardous substance,
             hazardous material, or toxic substance, or petroleum or petroleum
             derived substance or waste.

      1.1.22 "INDEBTEDNESS": shall mean, with respect to the Borrower, (i) all
             indebtedness for borrowed money or for the deferred purchase price
             of property or services in respect of which the Borrower is liable,
             contingently or otherwise, as obligor, guarantor or otherwise, or
             in respect of which the Borrower otherwise assures a creditor
             against loss and (ii) obligations under leases which shall have
             been or should be, in accordance with generally accepted accounting
             principles, reported as capital leases in respect of which the
             Borrower is liable, contingently or otherwise, or in respect of
             which the Borrower otherwise assures a creditor against loss.

      1.1.23 "LETTER OF CREDIT FACILITY": shall mean the credit facility
             described as such in Section 2.

      1.1.24 "LIBOR ADVANCE": shall have the respective meaning as it is defined
             for each facility under Section 2, hereof.

      1.1.25 "LIBOR INTEREST PERIOD": shall have the respective meaning as it is
             defined for each facility under Section 2, hereof.

      1.1.26 "LIBOR RATE": shall have the respective meaning as it is defined
             for each facility under Section 2, hereof.

      1.1.27 "LINE ACCOUNT": shall have the meaning provided in Section 2.4
             hereof.

      1.1.28 "LINE OF CREDIT": shall mean the credit facility described as such
             in Section 2.

      1.1.29 "NOTIONAL VALUE": shall mean the US Dollar equivalent of the price
             at which the Bank agreed to purchase or sell to the Borrower a
             Foreign Currency.

      1.1.30 "OBLIGATIONS": shall mean all amounts owing by the Borrower to the
             Bank pursuant to this Agreement including, but not limited to, the
             unpaid principal amount of any loans or advances.

      1.1.31 "OFFSETTING TRANSACTION": shall mean a FX Transaction to purchase a
             Foreign Currency and a FX Transaction to sell the same Foreign
             Currency , each with the same Settlement Date and designated as an
             Offsetting Transaction at the time of entering into the FX
             Transaction.

      1.1.32 "ORDINARY COURSE OF BUSINESS": shall mean, with respect to any
             transaction involving the Borrower or any of its subsidiaries or
             affiliates, the ordinary course of the Borrower's business, as
             conducted by the Borrower in accordance with past practice and
             undertaken by the Borrower in good faith and not for the purpose of
             evading any covenant or restriction in this Agreement or in any
             other document, instrument or agreement executed in connection
             herewith.

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      1.1.33 "PERMITTED LIENS": shall mean: (i) liens and security interests
             securing indebtedness owed by the Borrower to the Bank; (ii) liens
             for taxes, assessments or similar charges not yet due; (iii) liens
             of materialmen, mechanics, warehousemen, or carriers or other like
             liens arising in the Ordinary Course of Business and securing
             obligations which are not yet delinquent; (iv) purchase money liens
             or purchase money security interests upon or in any property
             acquired or held by the Borrower in the Ordinary Course of Business
             to secure Indebtedness outstanding on the date hereof or permitted
             to be incurred herein; (v) liens and security interests which, as
             of the date hereof, have been disclosed to and approved by the Bank
             in writing; and (vi) those liens and security interests which in
             the aggregate constitute an immaterial and insignificant monetary
             amount with respect to the net value of the Borrower's assets.

      1.1.34 "PRIME RATE": shall mean an index for a variable interest rate
             which is quoted, published or announced by Bank as its prime rate
             and as to which loans may be made by Bank at, above or below such
             rate.

      1.1.35 "SETTLEMENT DATE": shall mean the Business Day on which the
             Borrower has agreed to (a) deliver the required amount of Foreign
             Currency, or (b) pay in US dollars the agreed upon purchase price
             of the Foreign Currency.

      1.1.36 "SUBORDINATED DEBT": shall mean such liabilities of the Borrower
             which have been subordinated to those owed to the Bank in a manner
             acceptable to the Bank.

      1.1.37 "VARIABLE RATE ADVANCE": shall have the respective meaning as it is
             defined for each facility under Section 2, hereof.

      1.1.38 "VARIABLE RATE": shall have the respective meaning as it is defined
             for each facility under Section 2, hereof.

1.2   ACCOUNTING TERMS: All references to financial statements, assets,
      liabilities, and similar accounting items not specifically defined herein
      shall mean such financial statements or such items prepared or determined
      in accordance with generally accepted accounting principles consistently
      applied and, except where otherwise specified, all financial data
      submitted pursuant to this Agreement shall be prepared in accordance with
      such principles.

1.3   OTHER TERMS: Other terms not otherwise defined shall have the meanings
      attributed to such terms in the California Uniform Commercial Code as in
      effect on July 1, 2001 and from time to time thereafter.

                                     SECTION

                                        2

                                CREDIT FACILITIES

2.1   THE LINE OF CREDIT

      2.1.1 THE LINE OF CREDIT: On terms and conditions as set forth herein, the
            Bank agrees to make Advances to the Borrower from time to time from
            the date hereof to the Expiration Date, provided the aggregate
            amount of such Advances outstanding at any time does not exceed
            $8,000,000.00 (the "Line of Credit"). Within the foregoing limits,
            the Borrower may borrow, partially or wholly prepay, and reborrow
            under this Section 2.1. Proceeds of the Line of Credit shall be used
            for working capital needs; provided, however, that not more than an
            aggregate amount of $2,500,000 of the credit facilities provided
            pursuant to this Agreement shall be used for the acquisition of new
            business(es).

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      2.1.2 MAKING LINE ADVANCES: Each Advance shall be conclusively deemed to
            have been made at the request of and for the benefit of the Borrower
            (i) when credited to any deposit account of the Borrower maintained
            with the Bank or (ii) when paid in accordance with the Borrower's
            written instructions. Subject to the requirements of Section 4 and
            provided such request is made in a timely manner as provided in
            Section 2.1.5 below, Advances shall be made by the Bank under the
            Line of Credit.

      2.1.3 REPAYMENT: On the Expiration Date, the Borrower hereby promises and
            agrees to pay to the Bank in full the aggregate unpaid principal
            amount of all Advances then outstanding, together with all accrued
            and unpaid interest thereon.

      2.1.4 INTEREST ON ADVANCES: Interest shall accrue from the date of each
            Advance under the Line of Credit at one of the following rates, as
            quoted by the Bank and as elected by the Borrower below:

            (i)   Variable Rate Advances: A variable rate per annum equivalent
                  to the Prime Rate (the "Variable Rate"). Interest shall be
                  adjusted concurrently with any change in the Prime Rate. An
                  Advance based upon the Variable Rate is hereinafter referred
                  to as a "Variable Rate Advance".

            (ii)  LIBOR Advances: A fixed rate quoted by the Bank for 1 to 6
                  months or for such other period of time that the Bank may
                  quote and offer (provided that any such period of time does
                  not extend beyond the Expiration Date) (the "LIBOR Interest
                  Period") for Advances in the minimum amount of $100,000.00.
                  Such interest rate shall be a percentage approximately
                  equivalent to 1.50% in excess of the Bank's LIBOR Rate which
                  is that rate determined by the Bank's Treasury Desk as being
                  the arithmetic mean (rounded upwards, if necessary, to the
                  nearest whole multiple of one-sixteenth of one percent
                  (1/16%)) of the U. S. dollar London Interbank Offered Rates
                  for such period appearing on page 3750 (or such other page as
                  may replace page 3750) of the Telerate screen at or about
                  11:00 a.m. (London time) on the second Business Day prior to
                  the first days of such period (adjusted for any and all
                  assessments, surcharges and reserve requirements) (the "LIBOR
                  Rate"). An Advance based upon the LIBOR Rate is hereinafter
                  referred to as a "LIBOR Advance".

                  Interest on any Advance shall be computed on the basis of 360
                  days per year, but charged on the actual number of days
                  elapsed.

                  The Borrower hereby promises and agrees to pay interest in
                  arrears on Variable Rate Advances and LIBOR Advances on the
                  last day of each month commencing August 31, 2003.

                  If interest is not paid as and when it is due, it shall be
                  added to the principal, become and be treated as a part
                  thereof, and shall thereafter bear like interest

      2.1.5 NOTICE OF BORROWING: Upon written or telephonic notice which shall
            be received by the Bank at or before 2:00 p.m. (California time) on
            a Business Day, the Borrower may borrow under the Line of Credit by
            requesting:

            (i)   A Variable Rate Advance. A Variable Rate Advance may be made
                  on the day notice is received by the Bank; provided, however,
                  that if the Bank shall not have received notice at or before
                  2:00 p.m. on the day such Advance is requested to be

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                  made, such Variable Rate Advance may, at the Bank's option, be
                  made on the next Business Day.

            (ii)  A LIBOR Advance. Notice of any LIBOR Advance shall be received
                  by the Bank no later than two Business Days prior to the day
                  (which shall be a Business Day) on which the Borrower requests
                  such LIBOR Advance to be made.

      2.1.6 NOTICE OF ELECTION TO ADJUST INTEREST RATE: The Borrower may elect:

            (i)   That interest on a Variable Rate Advance shall be adjusted to
                  accrue at the LIBOR Rate; provided, however, that such notice
                  shall be received by the Bank no later than two Business Days
                  prior to the day (which shall be a Business Day) on which the
                  Borrower requests that interest be adjusted to accrue at the
                  LIBOR Rate.

            (ii)  That interest on a LIBOR Advance shall continue to accrue at a
                  newly quoted LIBOR Rate or shall be adjusted to commence to
                  accrue at the Variable Rate; provided, however, that such
                  notice shall be received by the Bank no later than two
                  Business Days prior to the last day of the LIBOR Interest
                  Period pertaining to such LIBOR Advance. If the Bank shall not
                  have received notice (as prescribed herein) of the Borrower's
                  election that interest on any LIBOR Advance shall continue to
                  accrue at the newly quoted LIBOR Rate, the Borrower shall be
                  deemed to have elected that interest thereon shall be adjusted
                  to accrue at the Variable Rate upon the expiration of the
                  LIBOR Interest Period pertaining to such Advance.

      2.1.7 PREPAYMENT: The Borrower may prepay any Advance in whole or in part,
            at any time and without penalty, provided, however, that: (i) any
            partial prepayment shall first be applied, at the Bank's option, to
            accrued and unpaid interest and next to the outstanding principal
            balance; and (ii) during any period of time in which interest is
            accruing on any Advance on the basis of the LIBOR Rate, no
            prepayment shall be made except on a day which is the last day of
            the LIBOR Interest Period pertaining thereto. If the whole or any
            part of any LIBOR Advance is prepaid by reason of acceleration or
            otherwise, the Borrower shall, upon the Bank's request, promptly pay
            to and indemnify the Bank for all costs and expenses actually
            incurred by the Bank and any loss (including loss of profit
            resulting from the re-employment of funds) deemed sustained by the
            Bank as a consequence of such prepayment.

            The Bank shall be entitled to fund all or any portion of its
            Advances in any manner it may determine in its sole discretion, but
            all calculations and transactions hereunder shall be conducted as
            though the Bank actually funded all Advances through the purchase of
            dollar deposits bearing interest at the same rate as U.S. Treasury
            securities in the amount of the relevant Advance and in maturities
            corresponding to the date of such purchase to the Expiration Date
            hereunder.

      2.1.8 INDEMNIFICATION FOR LIBOR RATE COSTS: During any period of time in
            which interest on any Advance is accruing on the basis of the LIBOR
            Rate, the Borrower shall, upon the Bank's request, promptly pay to
            and reimburse the Bank for all costs incurred and payments made by
            the Bank by reason of any future assessment, reserve, deposit or
            similar requirement or any surcharge, tax or fee imposed upon the
            Bank or as a result of the Bank's compliance with any directive or
            requirement of any regulatory authority pertaining or relating to
            funds used by the Bank in quoting and determining the LIBOR Rate.

      2.1.9 CONVERSION FROM LIBOR RATE TO VARIABLE RATE: In the event that the
            Bank shall at any time determine that the accrual of interest on the
            basis of the LIBOR Rate (i) is infeasible because the Bank is unable
            to determine the LIBOR Rate due to the unavailability of U.S.

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            dollar deposits, contracts or certificates of deposit in an amount
            approximately equal to the amount of the relevant Advance and for a
            period of time approximately equal to relevant LIBOR Interest Period
            or (ii) is or has become unlawful or infeasible by reason of the
            Bank's compliance with any new law, rule, regulation, guideline or
            order, or any new interpretation of any present law, rule,
            regulation, guideline or order, then the Bank shall give telephonic
            notice thereof (confirmed in writing) to the Borrower, in which
            event any Advance bearing interest at the LIBOR Rate shall be deemed
            to be a Variable Rate Advance and interest shall thereupon
            immediately accrue at the Variable Rate.

2.2   LETTER OF CREDIT SUB-FACILITY

      2.2.1 LETTER OF CREDIT SUB-FACILITY: The Bank agrees to issue commercial
            and/or standby letters of credit (each a "Letter of Credit") on
            behalf of the Borrower of up to $4,000,000.00. At no time, however,
            shall the total principal amount of all Advances outstanding under
            the Line of Credit, together with the total face amount of all
            Letters of Credit outstanding, less any partial draws paid by the
            Bank, exceed the Line of Credit.

            (i)   Upon the Bank's request, the Borrower shall promptly pay to
                  the Bank issuance fees and such other fees, commissions, costs
                  and any out-of-pocket expenses charged or incurred by the Bank
                  with respect to any Letter of Credit.

            (ii)  The commitment by the Bank to issue Letters of Credit shall,
                  unless earlier terminated in accordance with the terms of the
                  Agreement, automatically terminate on the Expiration Date of
                  the Line of Credit and no Letter of Credit shall expire on a
                  date which is more than 90 days after the Expiration Date.

            (iii) Each Letter of Credit shall be in form and substance
                  satisfactory to the Bank and in favor of beneficiaries
                  satisfactory to the Bank, provided that the Bank may refuse to
                  issue a Letter of Credit due to the nature of the transaction
                  or its terms or in connection with any transaction where the
                  Bank, due to the beneficiary or the nationality or residence
                  of the beneficiary, would be prohibited by any applicable law,
                  regulation or order from issuing such Letter of Credit.

            (iv)  Prior to the issuance of each Letter of Credit, but in no
                  event later than 10:00 a.m. (California time) on the day such
                  Letter of Credit is to be issued (which shall be a Business
                  Day), the Borrower shall deliver to the Bank a duly executed
                  form of the Bank's standard form of application for issuance
                  of a Letter of Credit with proper insertions.

            (v)   The Borrower shall, upon the Bank's request, promptly pay to
                  and reimburse the Bank for all costs incurred and payments
                  made by the Bank by reason of any future assessment, reserve,
                  deposit or similar requirement or any surcharge, tax or fee
                  imposed upon the Bank or as a result of the Bank's compliance
                  with any directive or requirement of any regulatory authority
                  pertaining or relating to any Letter of Credit.

      In the event that the Borrower fails to pay any drawing under any Letter
      of Credit or the balances in the depository account or accounts maintained
      by the Borrower with Bank are insufficient to pay such drawing, without
      limiting the rights of Bank hereunder or waiving any Event of Default
      caused thereby, Bank may, and Borrower hereby authorizes Bank to create an
      Advance bearing interest at the rate or rates provided in Section 9.2
      hereof to pay such drawing.

2.3   FOREIGN EXCHANGE FACILITY

      2.3.1 FOREIGN EXCHANGE FACILITY: The Bank agrees to enter into FX
            Transactions with the

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            Borrower, at the Borrower's request therefor made prior to the
            Expiration Date, provided however, that at no time shall the
            aggregate FX Risk Liability of the Borrower exceed the FX Limit.
            Each FX Transaction shall be used to hedge the Borrower's foreign
            exchange exposure.

            (i)   REQUESTS. Each request for a FX Transaction shall be made by
                  telephone to the Bank's Treasury Department ("Request"), shall
                  specify the Foreign Currency to be purchased or sold, the
                  amount of such Foreign Currency and the Settlement Date. Each
                  Request shall be communicated to the Bank no later than 3:00
                  p.m. California time on the Business Day on which the FX
                  Transaction is requested.

            (ii)  TENOR. No FX Transaction shall have a Settlement Date which is
                  more than 365 days after the date of entry into such FX
                  Transaction, and provided further, no FX Transaction shall
                  expire on a date which is more than 90 days after the
                  Expiration Date.

            (iii) AVAILABILITY. Bank may refuse to enter into a FX Transaction
                  with the Borrower where the Bank, at its sole discretion,
                  determines that (1) the requested Foreign Currency is
                  unavailable, or (2) the Bank is not then dealing in the
                  requested Foreign Currency, or (3) the Bank would be
                  prohibited by any applicable law, rule, regulation or order
                  from purchasing such Foreign Currency.

            (iv)  PAYMENT. Payment is due on the Settlement Date of the relevant
                  FX Transaction. The Bank is hereby authorized by the Borrower
                  to charge the full settlement price of any FX Transaction
                  against the depository account or accounts maintained by the
                  Borrower with the Bank on the Settlement Date. In the event
                  that the Borrower fails to pay the settlement price of any FX
                  Transaction on the Settlement Date or the balances in the
                  depository account or accounts maintained with Bank are
                  insufficient to pay the settlement price, without limiting the
                  rights of Bank hereunder or waiving any Event of Default
                  caused thereby, Bank may , and Borrower hereby authorizes Bank
                  to, create an Advance bearing interest at the Variable Rate to
                  pay the settlement price on the Settlement Date.

            (v)   INCREASED COSTS. Borrower shall promptly pay to and reimburse
                  the Bank for all costs incurred and payments made by the Bank
                  by reason of any assessment, reserve, deposit, capital
                  maintenance or similar requirement or any surcharge, tax or
                  fee imposed upon the Bank or as a result of the Bank's
                  compliance with any directive or requirement of any regulatory
                  authority pertaining or relating to any FX Transaction.

            (vi)  IMPOSSIBILITY OF PERFORMANCE. In the event that the Borrower
                  or the Bank cannot perform under a FX Transaction due to force
                  majeure or an act of State or it becomes unlawful or
                  impossible to perform, all in the good faith judgement of the
                  Borrower or the Bank, then upon notice to the other party, the
                  Borrower or the Bank may require the close-out and liquidation
                  of the affected FX Transaction in accordance with the
                  provisions of this Agreement.

2.4   LINE ACCOUNT: The Bank shall maintain on its books a record of account in
      which the Bank shall make entries for each Advance and such other debits
      and credits as shall be appropriate in connection with the credit
      facilities granted hereunder (the "Line Account"). The Bank shall provide
      the Borrower with a statement of the Borrower's Line Account, which
      statement shall be considered to be correct and conclusively binding on
      the Borrower unless the Borrower notifies the Bank to the contrary within
      60 days after the Borrower's receipt of any such statement which it deems
      to be incorrect.

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2.5   PAYMENTS: If any payment required to be made by the Borrower hereunder
      becomes due and payable on a day other than a Business Day, the due date
      thereof shall be extended to the next succeeding Business Day and interest
      thereon shall be payable at the then applicable rate during such
      extension. All payments required to be made hereunder shall be made to the
      office of the Bank designated for the receipt of notices herein or such
      other office as Bank shall from time to time designate.

2.6   LATE PAYMENT: In addition to any other rights the Bank may have hereunder,
      if any payment of principal or interest or any portion thereof, under this
      Agreement is not paid within 5 days of when due, a late payment charge
      equal to five percent (5%) of such past due payment may be assessed and
      shall be immediately payable.

                                     SECTION

                                        3

                                   COLLATERAL

3.1   THE COLLATERAL: To secure payment and performance of all the Borrower's
      Obligations under this Agreement and all other liabilities, loans,
      guarantees, covenants and duties owed by the Borrower to the Bank, whether
      or not evidenced by this or by any other agreement, absolute or
      contingent, due or to become due, now existing or hereafter and howsoever
      created, the Borrower hereby grants the Bank a security interest in and to
      all of the following property ("Collateral"):

            (i)   EQUIPMENT. All goods now owned or hereafter acquired by the
                  Borrower or in which the Borrower now has or may hereafter
                  acquire any interest, including, but not limited to, all
                  machinery, equipment, furniture, furnishings, fixtures, tools,
                  supplies and motor vehicles of every kind and description, and
                  all additions, accessions, improvements, replacements and
                  substitutions thereto and thereof (the "Equipment").

            (ii)  INVENTORY. All inventory now owned or hereafter acquired by
                  the Borrower, including, but not limited to, all raw
                  materials, work in process, finished goods, inventory leased
                  to others or held for lease, merchandise, parts and supplies
                  of every kind and description, including inventory temporarily
                  out of the Borrower's custody or possession, together with all
                  returns on accounts (the "Inventory").

            (iii) ACCOUNTS. All accounts, letter of credit rights, commercial
                  tort claims, contract rights and general intangibles,
                  including software and payment intangibles, now owned or
                  hereafter created or acquired by the Borrower, including, but
                  not limited to, all receivables, including as-extracted
                  receivables, credit card receivables, health care receivables,
                  insurance receivables, software receivables and license fees,
                  goodwill, trademarks, trademark applications, trade styles,
                  trade names, patents, patent applications, copyrights and
                  copyright applications, customer lists, business, records and
                  computer programs, tapes, disks and related data processing
                  software that at any time evidence or contain information
                  relating to any of the Collateral.

            (iv)  DOCUMENTS. All documents, instruments and chattel paper,
                  whether electronic or tangible, now owned or hereafter
                  acquired by the Borrower, including, but not limited to,
                  warehouse and other receipts, bills of sale, promissory notes
                  and bills of lading.

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            (v)   MONIES. All monies, deposit accounts, certificates of deposit,
                  investment property and securities of the Borrower now or
                  hereafter in the Bank's or its agents' possession.

            (vi)  ASSETS. All assets of the Borrower, whether now existing or
                  hereafter acquired, and the products and proceeds thereof.

The Bank's security interest in the Collateral shall be a continuing lien and
shall include the proceeds and products of the Collateral including, but not
limited to, the proceeds of any insurance thereon.

Borrower hereby consents to and instructs Bank to file financing statements in
all locations deemed appropriate by the Bank from time to time.

The security interest granted to Bank in the Collateral shall not secure or be
deemed to secure any Indebtedness of the Borrower to the Bank which is, at the
time of its creation, subject to the provisions of any state or federal consumer
credit or truth-in-lending disclosure statutes.

                                     SECTION

                                        4

                              CONDITIONS PRECEDENT

4.1   CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT: The obligation of
      the Bank to make the initial Advance or the first extension of credit to
      or on account of the Borrower hereunder is subject to the conditions
      precedent that the Bank shall have received before the date of such
      initial Advance or such first extension of credit all of the following, in
      form and substance satisfactory to the Bank:

            (i)   AUTHORITY TO BORROW. Evidence that the execution, delivery and
                  performance by the Borrower of this Agreement and any
                  document, instrument or agreement required hereunder have been
                  duly authorized.

            (ii)  FEES. Payment of a documentation and examination fee in the
                  amount of $10,000.00 for all of the Bank's out-of-pocket
                  expenses and courtesy audit in connection with the preparation
                  and negotiation of this Agreement.

            (iii) FINANCING STATEMENTS. UCC-1 financing statement(s) describing
                  the Collateral, which have been filed with the Secretary of
                  State or the county recorder as a lien of first priority.

            (iv)  MISCELLANEOUS. Such other evidence as the Bank may request to
                  establish the consummation of the transaction contemplated
                  hereunder and compliance with the conditions of this
                  Agreement.

4.2   CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT: The obligation of the
      Bank to make each Advance or each other extension of credit, as the case
      may be, to or on account of the Borrower (including the initial Advance or
      the first extension of credit) shall be subject to the further conditions
      precedent that, on the date of each Advance or each extension of credit
      and after the making of such Advance or extension of credit:

            (i)   REPORTING REQUIREMENTS. The Bank shall have received the
                  documents set forth in Section 6.1.

                                      -10-
<PAGE>

            (ii)  SUBSEQUENT APPROVALS. The Bank shall have received such
                  supplemental approvals, opinions or documents as the Bank may
                  reasonably request.

            (iii) REPRESENTATIONS AND WARRANTIES. The representations contained
                  in Section 5 and in any other document, instrument or
                  certificate delivered to the Bank hereunder are true, correct
                  and complete.

            (iv)  EVENT OF DEFAULT. No event has occurred and is continuing
                  which constitutes, or with the lapse of time or giving of
                  notice or both, would constitute an Event of Default.

            (v)   COLLATERAL. The security interest in the Collateral has been
                  duly authorized, created and perfected with first priority and
                  is in full force and effect.

The Borrower's acceptance of the proceeds of any loan, Advance or extension of
credit, or the Borrower's applying for any Letter of Credit, or the Borrower's
execution of any document or instrument evidencing or creating any Obligation
hereunder shall be deemed to constitute the Borrower's representation and
warranty that all of the above statements are true and correct.

                                    SECTION

                                       5

                         REPRESENTATIONS AND WARRANTIES

The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:

5.1   STATUS: The Borrower's correct legal name is as stated in this Agreement
      and the Borrower is a corporation duly organized and validly existing
      under the laws of the state of California and with its chief executive
      office in the state of California and is properly licensed and is
      qualified to do business and in good standing in, and, where necessary to
      maintain the Borrower's rights and privileges, has complied with the
      fictitious name statute of every jurisdiction in which the Borrower is
      doing business.

5.2   AUTHORITY: The execution, delivery and performance by the Borrower of this
      Agreement and any instrument, document or agreement required hereunder
      have been duly authorized and do not and will not: (i) violate any
      provision of any law, rule, regulation, order, writ, judgment, injunction,
      decree, determination or award presently in effect having application to
      the Borrower; (ii) result in a breach of or constitute a default under any
      material indenture or loan or credit agreement or other material
      agreement, lease or instrument to which the Borrower is a party or by
      which it or its properties may be bound or affected; or (iii) require any
      consent or approval of its stockholders or violate any provision of its
      articles of incorporation or by-laws.

5.3   LEGAL EFFECT: This Agreement constitutes, and any instrument, document or
      agreement required hereunder when delivered hereunder will constitute,
      legal, valid and binding obligations of the Borrower enforceable against
      the Borrower in accordance with their respective terms.

5.4   FICTITIOUS TRADE STYLES: All fictitious trade styles used by the Borrower
      in connection with its business operations and each state in which each
      such fictitious trade style is used are listed below. The Borrower shall
      notify the Bank not less than 30 days prior to effecting any change in the
      matters described below or prior to using any other fictitious trade style
      at any future date, indicating the trade style and state(s) of its use.

                                      -11-
<PAGE>

      TRADE STYLE                          STATE OF USE

      Volcom                               California
      Veeco Productions                    California
      Volcom Entertainment                 California

5.5   FINANCIAL STATEMENTS: All financial statements, information and other data
      which may have been or which may hereafter be submitted by the Borrower to
      the Bank are true, accurate and correct and have been or will be prepared
      in accordance with generally accepted accounting principles consistently
      applied and accurately represent the financial condition or, as
      applicable, the other information disclosed therein. Since the most recent
      submission of such financial information or data to the Bank, the Borrower
      represents and warrants that no material adverse change in the Borrower's
      financial condition or operations has occurred which has not been fully
      disclosed to the Bank in writing.

5.6   LITIGATION: Except as have been disclosed to the Bank in writing, there
      are no actions, suits or proceedings pending or, to the knowledge of the
      Borrower, threatened against or affecting the Borrower or the Borrower's
      properties before any court or administrative agency which, if determined
      adversely to the Borrower, would have a material adverse effect on the
      Borrower's financial condition or operations or on the Collateral.

5.7   TITLE TO ASSETS: The Borrower has good and marketable title to all of its
      assets (including, but not limited to, the Collateral) and the same are
      not subject to any security interest, encumbrance, lien or claim of any
      third person except for Permitted Liens.

5.8   ERISA: If the Borrower has a pension, profit sharing or retirement plan
      subject to ERISA, such plan has been and will continue to be funded in
      accordance with its terms and otherwise complies with and continues to
      comply with the requirements of ERISA.

5.9   TAXES: The Borrower has filed all tax returns required to be filed and
      paid all taxes shown thereon to be due, including interest and penalties,
      other than such taxes which are currently payable without penalty or
      interest or those which are being duly contested in good faith.

5.10  MARGIN STOCK. The proceeds of any loan or advance hereunder will not be
      used to purchase or carry margin stock as such term is defined under
      Regulation U of the Board of Governors of the Federal Reserve System.

5.11  ENVIRONMENTAL COMPLIANCE. The operations of the Borrower comply, and
      during the term of this Agreement will at all times comply, in all
      respects with all Environmental Laws; the Borrower has obtained all
      licenses, permits, authorizations and registrations required under any
      Environmental Law ("Environmental Permits") and necessary for its ordinary
      course operations, all such Environmental Permits are in good standing,
      and the Borrower is in compliance with all material terms and conditions
      of such Environmental Permits; neither the Borrower nor any of its present
      property or operations is subject to any outstanding written order from or
      agreement with any governmental authority nor subject to any judicial or
      docketed administrative proceeding, respecting any Environmental Law,
      Environmental Claim or Hazardous Material; there are no Hazardous
      Materials or other conditions or circumstances existing, or arising from
      operations prior to the date of this Agreement, with respect to any
      property of the Borrower that would reasonably be expected to give rise to
      Environmental Claims; provided, however, that with respect to property
      leased from an unrelated third party, the foregoing representation is made
      to the best knowledge of the Borrower. In addition, (i) the Borrower does
      not have any underground storage tanks that are not properly registered or
      permitted under applicable Environmental Laws, or that are leaking or
      disposing of Hazardous Materials off-site, and (ii) the Borrower has
      notified all of their employees of the existence, if any, of any health
      hazard arising from the conditions of their employment and have met all
      notification requirements under Title III of CERCLA and all other
      Environmental Laws.

                                      -12-
<PAGE>

5.12  INVENTORY:

           (i)    The Borrower keeps correct and accurate records, (itemizing
                  and describing the kind, type, quality and quantity of
                  inventory, the Borrower's cost therefor and selling price
                  thereof, and the daily withdrawals therefrom and additions
                  thereto).

            (ii)  All inventory is of good and merchantable quality, free from
                  defects.

            (iii) The inventory is not stored with a bailee, warehouseman or
                  similar party.

                                     SECTION

                                       6

                                    COVENANTS

The Borrower covenants and agrees that, during the term of this Agreement, and
so long thereafter as the Borrower is indebted to the Bank under this Agreement,
the Borrower will, unless the Bank shall otherwise consent in writing:

6.1   REPORTING AND CERTIFICATION REQUIREMENTS: Deliver or cause to be delivered
      to the Bank in form and detail satisfactory to the Bank:

            (i)   Not later than 120 days after the end of each of the
                  Borrower's fiscal years, a copy of the annual audited
                  financial report of the Borrower for such year, prepared by a
                  firm of certified public accountants acceptable to Bank and
                  accompanied by an unqualified opinion of such firm.

            (ii)  Not later than 30 days after filing with the appropriate
                  Federal agency, a copy of the Borrower's federal income tax
                  returns.

            (iii) Not later than 30 days after the end of each quarter, a copy
                  of the Borrower's financial statement as of the end of such
                  period.

            (iv)  Not later than 15 days after the end of each quarter, an aging
                  of accounts payable and accounts receivable.

            (v)   Not later than 15 days after the end of each quarter, a
                  schedule of inventory specifying the value, cost and quantity
                  thereof and such other information as the Bank may reasonably
                  request.

            (vi)  Promptly upon the Bank's request, such other information
                  pertaining to the Borrower, the Collateral or any guarantor
                  hereunder as the Bank may reasonably request.

6.2   FINANCIAL CONDITION: The Borrower promises and agrees, during the term of
      this Agreement and until payment in full of all of the Borrower's
      Obligations, the Borrower will maintain at all times, to be measured on a
      quarterly basis:

            (i)   A minimum Effective Tangible Net Worth of at least
                  $8,000,000.00.

            (ii)  A ratio of the sum of cash, cash equivalents and accounts
                  receivable to Current Liabilities of not less than 1 to 1.

                                      -13-
<PAGE>

            (iii) A minimum net profit after tax (and after deduction of
                  Borrower's distributions to shareholders) of at least
                  $500,000.00 at each fiscal quarter end on a rolling four
                  quarter basis.

6.3   PRESERVATION OF EXISTENCE; COMPLIANCE WITH APPLICABLE LAWS: Maintain and
      preserve its existence and all rights and privileges now enjoyed; and
      conduct its business and operations in accordance with all applicable
      laws, rules and regulations.

6.4   MERGE OR CONSOLIDATE: Not liquidate or dissolve, merge or consolidate with
      or into, or acquire any other business organization; provided however,
      that this Section 6.4 shall not apply to transactions in which Borrower is
      the surviving entity, and provided further, that Borrower may make
      business acquisitions of up to $4,000,000.00 in the aggregate.

6.5   MAINTENANCE OF INSURANCE: Keep and maintain the Collateral insured for not
      less than its full replacement value against all risks of loss and damage
      and maintain insurance in such amounts and covering such risks as is
      usually carried by companies engaged in similar businesses and owning
      similar properties in the same general areas in which the Borrower
      operates and maintain such other insurance and coverages as may be
      required by the Bank. All such insurance shall be in form and amount and
      with companies satisfactory to the Bank.

      With respect to insurance covering properties in which the Bank maintains
      a security interest or lien, such insurance shall name the Bank as loss
      payee pursuant to a loss payable endorsement satisfactory to the Bank and
      shall not be altered or canceled except upon 10 days' prior written notice
      to the Bank. Upon the Bank's request, the Borrower shall furnish the Bank
      with the original policy or binder of all such insurance.

6.6   MAINTENANCE OF COLLATERAL AND OTHER PROPERTIES: Except for Permitted
      Liens, keep and maintain the Collateral free and clear of all levies,
      liens, encumbrances and security interests (including, but not limited to,
      any lien of attachment, judgment or execution) and defend the Collateral
      against any such levy, lien, encumbrance or security interest; comply with
      all laws, statutes and regulations pertaining to the Collateral and its
      use and operation; execute, file and record such statements, notices and
      agreements, take such actions and obtain such certificates and other
      documents as necessary to perfect, evidence and continue the Bank's
      security interest in the Collateral and the priority thereof; maintain
      accurate and complete records of the Collateral which show all sales,
      claims and allowances; and properly care for, house, store and maintain
      the Collateral in good condition, free of misuse, abuse and deterioration,
      other than normal wear and tear. The Borrower shall also maintain and
      preserve all its properties in good working order and condition in
      accordance with the general practice of other businesses of similar
      character and size, ordinary wear and tear excepted.

6.7   PAYMENT OF OBLIGATIONS AND TAXES: Make timely payment of all assessments
      and taxes and all of its liabilities and obligations including, but not
      limited to, trade payables, unless the same are being contested in good
      faith by appropriate proceedings with the appropriate court or regulatory
      agency. For purposes hereof, the Borrower's issuance of a check, draft or
      similar instrument without delivery to the intended payee shall not
      constitute payment.

6.8   DEPOSITORY RELATIONSHIPS: Maintain its primary business depository
      relationship with Bank, including general, operating and administrative
      deposit accounts and cash management services.

6.9   INSPECTION RIGHTS AND ACCOUNTING RECORDS: The Borrower will maintain
      adequate books and records in accordance with generally accepted
      accounting principles consistently applied and in a manner otherwise
      acceptable to Bank, and, at any reasonable time and from time to time,
      permit the Bank or any representative thereof to examine and make copies
      of the records and visit the properties of the Borrower and discuss the
      business and operations of the Borrower with any employee or
      representative thereof. If the Borrower shall maintain any records
      (including, but not

                                      -14-
<PAGE>

      limited to, computer generated records or computer programs for the
      generation of such records) in the possession of a third party, the
      Borrower hereby agrees to notify such third party to permit the Bank free
      access to such records at all reasonable times and to provide the Bank
      with copies of any records which it may request, all at the Borrower's
      expense, the amount of which shall be payable immediately upon demand.

6.10  REDEMPTION OR REPURCHASE OF STOCK: Not redeem or repurchase any class of
      the Borrower's stock now or hereafter outstanding, except stock limited to
      10% of outstanding stock in any one year.

6.11  ADDITIONAL INDEBTEDNESS: Not, after the date hereof, create, incur or
      assume, directly or indirectly, any additional Indebtedness other than (i)
      Indebtedness owed or to be owed to the Bank or (ii) Indebtedness to trade
      creditors incurred in the Ordinary Course of Business or (iii)
      Indebtedness of up to $500,000.00 in any one fiscal year.

6.12  LOANS: Not make any loans or advances or extend credit to any third
      person, including, but not limited to, directors, officers, shareholders,
      partners, employees, affiliated entities and subsidiaries of the Borrower,
      except for credit extended in the Ordinary Course of Business as presently
      conducted and except up to $500,000.00 in any one fiscal year.

6.13  LIENS AND ENCUMBRANCES: Not create, assume or permit to exist any security
      interest, encumbrance, mortgage, deed of trust, or other lien (including,
      but not limited to, a lien of attachment, judgment or execution) affecting
      any of the Borrower's properties, or execute or allow to be filed any
      financing statement or continuation thereof affecting any of such
      properties, except for Permitted Liens or as otherwise provided in this
      Agreement, and except liens and security interests associated with
      Indebtedness of up to $500,000.00 in any one fiscal year.

6.14  TRANSFER ASSETS: Not, after the date hereof, sell, contract for sale,
      convey, transfer, assign, lease or sublet, any of its assets (including,
      but not limited to, the Collateral) except in the Ordinary Course of
      Business and, then, only for full, fair and reasonable consideration.

6.15  CHANGE IN NATURE OF BUSINESS: Not make any material change in its
      financial structure or the nature of its business as existing or conducted
      as of the date hereof.

6.16  MAINTENANCE OF JURISDICTION: Borrower shall maintain the jurisdiction of
      its organization and chief executive office, or if applicable, principal
      residence, as set forth herein and not change such jurisdiction name or
      form of organization without 30 days prior written notice to Bank.

6.17  COMPENSATION OF EMPLOYEES: Compensate its employees for services rendered
      at an hourly rate at least equal to the minimum hourly rate prescribed by
      any applicable federal or state law or regulation.

6.18  Notice: Give the Bank prompt written notice of any and all (i) Events of
      Default; (ii) litigation, arbitration or administrative proceedings to
      which the Borrower is a party and in which the claim or liability exceeds
      $200,000.00 or which affects the Collateral; (iii) other matters which
      have resulted in, or might result in a material adverse change in the
      Collateral or the financial condition or business operations of the
      Borrower, and (iv) any enforcement, cleanup, removal or other governmental
      or regulatory actions instituted, completed or threatened against the
      Borrower or any of its properties.

6.19  ENVIRONMENTAL COMPLIANCE: The Borrower shall conduct its operations and
      keep and maintain all of its property in compliance with all Environmental
      Laws and, upon the written request of the Bank, the Borrower shall submit
      to the Bank, at the Borrower's sole cost and expense, at reasonable
      intervals, a report providing the status of any environmental, health or
      safety compliance, hazard or liability.

                                      -15-
<PAGE>

6.20  INVENTORY:

            (i)   Except as provided herein below, the Borrower's inventory
                  shall, at all times, be in the Borrower's physical possession,
                  shall not be held by others on consignment, sale on approval,
                  or sale or return and shall be kept only at: 1740 Monrovia
                  Avenue, Gosta Mesa, CA; Volcom Retail Store, 125 La Brea, Los
                  Angeles, CA; Massive, 1621 E. Spring Street, Long Beach, CA,
                  and NRI Distribution, 1835 Dallas Drive East, Kamloops,
                  British Columbia, V2C6P4.

            (ii)  The Borrower shall keep correct and accurate records.

            (iii) All inventory shall be of good and merchantable quality, free
                  from defects.

            (iv)  The inventory shall not at any time or times hereafter be
                  stored with a bailee, warehouseman or similar party without
                  the Bank's prior written consent and, in such event, the
                  Borrower will concurrently therewith cause any such bailee,
                  warehouseman or similar party to issue and deliver to the
                  Bank, in form acceptable to the Bank, warehouse receipts in
                  the Bank's name evidencing the storage of inventory.

            (v)   At any reasonable time and from time to time, allow Bank to
                  have the right, upon demand, to inspect and examine inventory
                  and to check and test the same as to quality, quantity, value
                  and condition and the Borrower agrees to reimburse the Bank
                  for the Bank's reasonable costs and expenses in so doing.

6.21  LOCATION AND MAINTENANCE OF EQUIPMENT.:

            (i)   The Equipment shall at all times be in the Borrower's physical
                  possession, shall not be held for sale or lease, and shall be
                  kept only at the following location(s): 1740 Monrovia Avenue,
                  Costa Mesa, CA.

                  The Borrower shall not secrete, abandon or remove, or permit
                  the removal of, the Equipment, or any part thereof, from the
                  location(s) shown above or remove or permit to be removed any
                  accessories now or hereafter placed upon the Equipment.

            (ii)  Upon the Bank's demand, the Borrower shall immediately provide
                  the Bank with a complete and accurate description of the
                  Equipment including, as applicable, the make, model,
                  identification number and serial number of each item of
                  Equipment. In addition, the Borrower shall immediately notify
                  the Bank of the acquisition of any new or additional Equipment
                  or the replacement of any existing Equipment and shall supply
                  the Bank with a complete description of any such additional or
                  replacement Equipment.

            (iii) The Borrower shall, at the Borrower's sole cost and expense,
                  keep and maintain the Equipment in a good state of repair and
                  shall not destroy, misuse, abuse, illegally use or be
                  negligent in the care of the Equipment or any part thereof.
                  The Borrower shall not remove, destroy, obliterate, change,
                  cover, paint, deface or alter the name plates, serial numbers,
                  labels or other distinguishing numbers or identification marks
                  placed upon the Equipment or any part thereof by or on behalf
                  of the manufacturer, any dealer or rebuilder thereof, or the
                  Bank. The Borrower shall not be released from any liability to
                  the Bank hereunder because of any injury to or loss or
                  destruction of the Equipment. The Borrower shall allow the
                  Bank and its representatives free access to and the right to
                  inspect the Equipment at all times and shall comply with the
                  terms and conditions of any leases covering the real

                                      -16-
<PAGE>

                  property on which the Equipment is located and any orders,
                  ordinances, laws, regulations or rules of any federal, state
                  or municipal agency or authority having jurisdiction of such
                  real property or the conduct of the business of the persons
                  having control or possession of the Equipment.

            (iv)  The Equipment is not now and shall not at any time hereafter
                  be so affixed to the real property on which it is located as
                  to become a fixture or a part thereof. The Equipment is now
                  and shall at all times hereafter be and remain personal
                  property of the Borrower.

                                    SECTION

                                       7

                               EVENTS OF DEFAULT

      Any one or more of the following described events shall constitute an
      event of default (an "Event of Default") under this Agreement:

7.1   NON-PAYMENT: Any Borrower shall fail to pay the principal amount of any
      Obligations when due or interest on the Obligations within 5 days of when
      due.

7.2   PERFORMANCE UNDER THIS AGREEMENT: The Borrowers shall fail in any material
      respect to perform or observe any term, covenant or agreement contained in
      this Agreement or in any document, instrument or agreement relating to
      this Agreement or any other document or agreement executed by the
      Borrowers with or in favor of Bank and any such failure shall continue
      unremedied for more than 30 days after written notice from the Bank to the
      Borrowers of the existence and character of such Event of Default.

7.3   REPRESENTATIONS AND WARRANTIES; FINANCIAL STATEMENTS: Any representation
      or warranty made by the Borrower under or in connection with this
      Agreement or any financial statement given by the Borrower or any
      guarantor shall prove to have been incorrect in any material respect when
      made or given or when deemed to have been made or given.

7.4   OTHER AGREEMENTS: If there is a default under any agreement to which
      Borrower is a party with Bank or with a third party or parties resulting
      in a right by the Bank or by such third party or parties, whether or not
      exercised, to accelerate the maturity of any Indebtedness.

7.5   INSOLVENCY: The Borrower or any guarantor shall: (i) become insolvent or
      be unable to pay its debts as they mature; (ii) make an assignment for the
      benefit of creditors or to an agent authorized to liquidate any
      substantial amount of its properties and assets; (iii) file a voluntary
      petition in bankruptcy or seeking reorganization or to effect a plan or
      other arrangement with creditors; (iv) file an answer admitting the
      material allegations of an involuntary petition relating to bankruptcy or
      reorganization or join in any such petition; (v) become or be adjudicated
      a bankrupt; (vi) apply for or consent to the appointment of, or consent
      that an order be made, appointing any receiver, custodian or trustee, for
      itself or any of its properties, assets or businesses; or (vii) in an
      involuntary proceeding, any receiver, custodian or trustee shall have been
      appointed for all or substantial part of the Borrower's or guarantor's
      properties, assets or businesses and shall not be discharged within 30
      days after the date of such appointment.

7.6   EXECUTION: Any writ of execution or attachment or any judgment lien shall
      be issued against any property of the Borrower and shall not be discharged
      or bonded against or released within 30 days after the issuance or
      attachment of such writ or lien.

                                      -17-
<PAGE>

7.7   SUSPENSION: The Borrower shall voluntarily suspend the transaction of
      business or allow to be suspended, terminated, revoked or expired any
      permit, license or approval of any governmental body necessary to conduct
      the Borrower's business as now conducted.

7.8   MATERIAL ADVERSE CHANGE: If there occurs a material adverse change in the
      Borrower's business or financial condition, or if there is a material
      impairment of the prospect of repayment of any portion of the Obligations
      or there is a material impairment of the value or priority of the Bank's
      security interest in the Collateral, or if a Borrower who is a natural
      person shall die.

7.9   CHANGE IN OWNERSHIP: There shall occur a sale, transfer, disposition or
      encumbrance (whether voluntary or involuntary), or an agreement shall be
      entered into to do so, with respect to more than 10% of the issued and
      outstanding capital stock of the Borrower.

7.10  IMPAIRMENT OF COLLATERAL. There shall occur any material injury or damage
      to all or any part of the Collateral or all or any part of the Collateral
      shall be lost, stolen or destroyed.

                                     SECTION

                                       8

                               REMEDIES ON DEFAULT

Upon the occurrence of any Event of Default, the Bank may, at its sole and
absolute election, without demand and only upon such notice as may be required
by law:

8.1   ACCELERATION: Declare any or all of the Borrower's indebtedness owing to
      the Bank, whether under this Agreement or any other document, instrument
      or agreement, immediately due and payable, whether or not otherwise due
      and payable.

8.2   CEASE EXTENDING CREDIT: Cease making Advances or otherwise extending
      credit to or for the account of the Borrower under this Agreement or under
      any other agreement now existing or hereafter entered into between the
      Borrower and the Bank.

8.3   TERMINATION: Terminate this Agreement as to any future obligation of the
      Bank without affecting the Borrower's obligations to the Bank or the
      Bank's rights and remedies under this Agreement or under any other
      document, instrument or agreement.

8.4   LETTERS OF CREDIT: Require the Borrower to pay immediately to the Bank,
      for application against drawings under any outstanding Letters of Credit,
      the outstanding principal amount of any such Letters of Credit which have
      not expired. Any portion of the amount so paid to the Bank which is not
      applied to satisfy draws under any such Letters of Credit or any other
      obligations of the Borrower to the Bank shall be repaid to the Borrower
      without interest.

8.5   CLOSE-OUT AND LIQUIDATION: Close-out and liquidate each outstanding FX
      Transaction so that each FX Transaction is canceled in accordance with the
      following:

            (i)   CLOSING VALUE. The Bank shall calculate value of such canceled
                  FX Transaction by converting (1) in the case of a FX
                  Transaction whose Settlement Date is the same as or later than
                  the Close-Out Date, the amount of Foreign Currency into US
                  dollars at a rate of exchange at which the Bank can buy or
                  sell US dollars with or against the Foreign Currency for
                  delivery on the Settlement Date of the relevant FX
                  Transaction; or (2) in the case of a FX Transaction whose
                  Settlement Date precedes the Close-Out Date, the amount of the
                  Foreign Currency adjusted by adding interest with respect
                  thereto at the Variable Rate from the Settlement Date to the
                  Close-Out Date, into US Dollars at a rate of exchange at which
                  the Bank can

                                      -18-
<PAGE>

                  buy or sell US dollars with or against the Foreign Currency
                  for delivery on the Close-Out Date.

            (ii)  CLOSING GAIN OR LOSS. (1) For a FX Transaction for which the
                  Bank agreed to purchase a Foreign Currency, the amount by
                  which the Closing Value exceeds the Notional Value shall be a
                  Closing Loss and the amount by which the Closing Value is less
                  than the Notional Value shall be a Closing Gain; and (2) For a
                  FX Transaction for which the Bank agreed to sell a Foreign
                  Currency, the amount by which the Closing Value exceeds the
                  Notional Value shall be a Closing Gain and the amount by which
                  the Closing Value is less than the Notional Value shall be a
                  Closing Loss.

            (iii) NET PRESENT VALUE. The Closing Gain or Closing Loss for each
                  Settlement Date falling after the Close-out Date will be
                  discounted by the Bank to it net present value.

            (iv)  PAYMENT. To the extent that the net amount of the aggregate
                  Closing Gains exceeds the Closing Losses, such amount shall
                  be payable by the Bank to the Borrower. To the extent that the
                  aggregate net amount of the Closing Losses exceeds the Closing
                  Gains, such amount shall be payable by the Borrower to the
                  Bank.

8.6   PROTECTION OF SECURITY INTEREST: Make such payments and do such acts as
      the Bank, in its sole judgment, considers necessary and reasonable to
      protect its security interest or lien in the Collateral. The Borrower
      hereby irrevocably authorizes the Bank to pay, purchase, contest or
      compromise any encumbrance, lien or claim which the Bank, in its sole
      judgment, deems to be prior or superior to its security interest. Further,
      the Borrower hereby agrees to pay to the Bank, upon demand therefor, all
      expenses and expenditures (including attorneys' fees) incurred in
      connection with the foregoing.

8.7   USE OF TRADEMARKS AND INTELLECTUAL PROPERTY. Bank is hereby granted a
      license or other right to use, without charge, Borrower's labels, patents,
      copyrights, rights of use of any name, trade secrets, trade names,
      trademarks and advertising matte, or any property of a similar nature, as
      it pertains to the Collateral, in completing production, of advertising
      for sale and selling any Collateral, and Borrower's rights under all
      licenses and all franchise agreements shall inure to the Bank's benefit.

8.8   FORECLOSURE: Enforce any security interest or lien given or provided for
      under this Agreement or under any security agreement, mortgage, deed of
      trust or other document, in such manner and such order, as to all or any
      part of the properties subject to such security interest or lien, as the
      Bank, in its sole judgment, deems to be necessary or appropriate and the
      Borrower hereby waives any and all rights, obligations or defenses now or
      hereafter established by law relating to the foregoing. In the enforcement
      of its security interest or lien, the Bank is authorized to enter upon the
      premises where any Collateral is located and take possession of the
      Collateral or any part thereof, together with the Borrower's records
      pertaining thereto, or the Bank may require the Borrower to assemble the
      Collateral and records pertaining thereto and make such Collateral and
      records available to the Bank at a place designated by the Bank. The Bank
      may sell the Collateral or any portions thereof, together with all
      additions, accessions and accessories thereto, giving only such notices
      and following only such procedures as are required by law, at either a
      public or private sale, or both, with or without having the Collateral
      present at the time of the sale, which sale shall be on such terms and
      conditions and conducted in such manner as the Bank determines in its sole
      judgment to be commercially reasonable. The Collateral may be disposed of
      in its then condition without any preparation or processing. In connection
      with any disposition of the Collateral, the Bank may disclaim any warranty
      relating to title, possession or quiet enjoyment. Any deficiency which

                                      -19-
<PAGE>

      exists after the disposition or liquidation of the Collateral shall be a
      continuing liability of the Borrower to the Bank and shall be immediately
      paid by the Borrower to the Bank.

8.9   NON-EXCLUSIVITY OF REMEDIES: Exercise one or more of the Bank's rights set
      forth herein or seek such other rights or pursue such other remedies as
      may be provided by law, in equity or in any other agreement now existing
      or hereafter entered into between the Borrower and the Bank, or otherwise.

8.10  APPLICATION OF PROCEEDS: All amounts received by the Bank as proceeds from
      the disposition or liquidation of the Collateral shall be applied to the
      Borrower's indebtedness to the Bank as follows: first, to the costs and
      expenses of collection, enforcement, protection and preservation of the
      Bank's lien in the Collateral, including court costs and reasonable
      attorneys' fees, whether or not suit is commenced by the Bank; next, to
      those costs and expenses incurred by the Bank in protecting, preserving,
      enforcing, collecting, liquidating, selling or disposing of the
      Collateral; next, to the payment of accrued and unpaid interest on all of
      the Obligations; next, to the payment of the outstanding principal balance
      of the Obligations; and last, to the payment of any other indebtedness
      owed by the Borrower to the Bank. Any excess Collateral or excess proceeds
      existing after the disposition or liquidation of the Collateral will be
      returned or paid by the Bank to the Borrower.

      If any non-cash proceeds are received in connection with any sale of
      Collateral, the Bank shall not apply such non-cash proceeds to the
      Obligations unless and until such proceeds are converted to such;
      provided, however, that if such non-cash proceeds are not expected on the
      date of receipt thereof to be converted to cash within one year after such
      date, the Bank shall use commercially reasonable efforts to convert such
      non-cash proceeds to cash within such one year period.

                                     SECTION

                                       9

                                  MISCELLANEOUS

9.1   AMOUNTS PAYABLE ON DEMAND: If the Borrower shall fail to pay on demand any
      amount so payable under this Agreement, the Bank may, at its option and
      without any obligation to do so and without waiving any default occasioned
      by the Borrower having so failed to pay such amount, create an Advance
      under this Agreement in an amount equal to the amount so payable, which
      Advance shall thereafter bear interest as provided hereunder.

9.2   DEFAULT INTEREST RATE: If an Event of Default, or an event which, with
      notice or passage of time could become an Event of Default, has occurred
      or is continuing, the Borrower shall pay to the Bank interest on any
      Indebtedness or amount payable under this Agreement at a rate which is 3%
      in excess of the rate or rates then in effect under this Agreement.

9.3   RELIANCE AND FURTHER ASSURANCES: Each warranty, representation covenant,
      obligation and agreement contained in this Agreement shall be conclusively
      presumed to have been relied upon by the Bank regardless of any
      investigation made or information possessed by the Bank and shall be
      cumulative and in addition to any other warranties, representations,
      covenants and agreements which the Borrower now or hereafter shall give,
      or cause to be given, to the Bank. Borrower agrees to execute all
      documents and instruments and to perform such acts as the Bank may
      reasonably deem necessary to confirm and secure to the Bank all rights and
      remedies conferred upon the Bank by this agreement and all other documents
      related thereto.

9.4   ATTORNEYS' FEES: Borrower shall pay to the Bank all costs and expenses,
      including but not limited to reasonable attorneys fees, incurred by Bank
      in connection with the administration, enforcement, including any
      bankruptcy, appeal or the enforcement of any judgment or any refinancing
      or

                                      -20-
<PAGE>

      restructuring of this Agreement or any document, instrument or agreement
      executed with respect to, evidencing or securing the indebtedness
      hereunder.

9.5   NOTICES: All notices, payments, requests, information and demands which
      either party hereto may desire, or may be required to give or make to the
      other party hereto, shall be given or made to such party by hand delivery
      or through deposit in the United States mail, postage prepaid, or by
      facsimile delivery, or to such other address as may be specified from time
      to time in writing by either party to the other.

      TO THE BORROWER:                  TO THE BANK:

      STONE BOARDWEAR, INC.             BANK OF THE WEST
      1740 Monrovia Avenue              Newport Beach Office (CBC)
      Costa Mesa, CA 92627              4400 MacArthur Boulevard, Suite 150
      Attn: Douglas Collier, CFO        Newport Beach, CA 92660
                                        Attn: Stephen J. Popovich
      FAX: (949) 764-1298                     Vice President
                                        FAX: (949)797-1959

9.6   WAIVER: Neither the failure nor delay by the Bank in exercising any right
      hereunder or under any document, instrument or agreement mentioned herein
      shall operate as a waiver thereof, nor shall any single or partial
      exercise of any right hereunder or under any other document, instrument or
      agreement mentioned herein preclude other or further exercise thereof or
      the exercise of any other right; nor shall any waiver of any right or
      default hereunder, or under any other document, instrument or agreement
      mentioned herein, constitute a waiver of any other right or default or
      constitute a waiver of any other default of the same or any other term or
      provision.

9.7   CONFLICTING PROVISIONS: To the extent the provisions contained in this
      Agreement are inconsistent with those contained in any other document,
      instrument or agreement executed pursuant hereto, the terms and provisions
      contained herein shall control. Otherwise, such provisions shall be
      considered cumulative.

9.8   BINDING EFFECT; ASSIGNMENT: This Agreement shall be binding upon and inure
      to the benefit of the Borrower and the Bank and their respective
      successors and assigns, except that the Borrower shall not have the right
      to assign its rights hereunder or any interest herein without the prior
      written consent of the Bank. The Bank may sell, assign or grant
      participation in all or any portion of its rights and benefits hereunder.
      The Borrower agrees that, in connection with any such sale, grant or
      assignment, the Bank may deliver to the prospective buyer, participant or
      assignee financial statements and other relevant information relating to
      the Borrower and any guarantor.

9.9   JURISDICTION: This Agreement, any notes issued hereunder, the rights of
      the parties hereunder to and concerning the Collateral, and any documents,
      instruments or agreements mentioned or referred to herein shall be
      governed by and construed according to the laws of the State of California
      without regard to conflict of law principles, to the jurisdiction of whose
      courts the parties hereby submit.

9.10  WAIVER OF JURY TRIAL: THE BORROWER AND THE BANK EACH WAIVE THEIR
      RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
      UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
      DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
      ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
      PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO
      CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWER AND THE BANK EACH
      AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT
      TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
      AGREE

                                      -21-
<PAGE>

      THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
      THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH
      SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
      THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
      THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
      SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
      DOCUMENTS.

9.11  TELEPHONE RECORDING: The Borrower agrees that the Bank may electronically
      record all telephone conversations between the Borrower and the Bank with
      respect to any FX Transaction and that any such recording may be submitted
      in evidence in any arbitration or other legal proceeding. Such recording
      shall be deemed to be conclusive evidence as to the terms of any FX
      Transaction in the event of a dispute.

9.12  COUNTERPARTS: This Agreement may be executed in any number of counterparts
      and all such counterparts taken together shall be deemed to constitute one
      and the same instrument.

9.13  HEADINGS: The headings herein set forth are solely for the purpose of
      identification and have no legal significance.

9.14  ENTIRE AGREEMENT AND AMENDMENTS: This Agreement and all documents,
      instruments and agreements mentioned herein together with the letter
      agreement dated on or about July 16, 2003, between Bank and Borrower
      constitute the entire and complete understanding of the parties with
      respect to the transactions contemplated hereunder. All previous
      conversations, memoranda and writings between the parties pertaining to
      the transactions contemplated hereunder not incorporated or referenced in
      this Agreement or in such documents, instruments and agreements are
      superseded hereby. This Agreement may be amended only by an instrument in
      writing signed by the Borrower and the Bank.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first hereinabove written.

BANK:                                           BORROWER:

BANK OF THE WEST                                STONE BOARDWEAR,INC.

BY: /s/ Stephen J. Popovich,                    BY: /s/ Richard R. Woolcott,
    ----------------------------                    ----------------------------
NAME: Stephen J. Popovich, Vice President       NAME: Richard R. Woolcott,
                                                       President and CEO

                                                BY: /s/ Douglas Collier;
                                                    ----------------------------
                                                NAME: Douglas Collier; CFO and
                                                      Secretary

                                      -22-<PAGE>
                                                                    EXHIBIT 10.3

                       FIRST AMENDMENT TO CREDIT AGREEMENT

      This FIRST Amendment to Credit Agreement (the "Amendment") is made and
entered into as of October 8, 2004, by and between BANK OF THE WEST (the "Bank")
and STONE BOARDWEAR, INC. (the "Borrower") with respect to the following:

      This Amendment shall be deemed to be a part of and subject to that certain
Credit Agreement dated as of August 12, 2003, as it may be amended from time to
time, and any and all addenda and riders thereto (collectively the "Agreement").
Unless otherwise defined herein, all terms used in this Amendment shall have the
same meanings as in the Agreement. To the extent that any of the terms or
provisions of this Amendment conflict with those contained in the Agreement, the
terms and provisions contained herein shall control.

      WHEREAS, the Borrower and the Bank mutually desire to extend and/or modify
the Agreement.

      NOW THEREFORE, for value received and hereby acknowledged, the Borrower
and the Bank agree as follows:

1.    EXTENSION OF EXPIRATION DATE. The Expiration Date provided for in Section
      1.1.15 of the Agreement shall be extended to May 31,2006.

2.    MODIFICATION OF CERTAIN DEFINED TERMS/"FX LIMIT". The dollar amount
      provided for in Section 1.1.19 of the Agreement shall be changed to
      $750,000.00.

3.    CHANGE IN LINE OF CREDIT DOLLAR AMOUNT. The dollar amount for Line of
      Credit provided for in Section 2.1.1 of the Agreement shall be changed to
      $10,000,000.00.

4.    MODIFICATION OF REPORTING AND CERTIFICATION REQUIREMENTS/FINANCIAL
      STATEMENTS. Section 6.1 (i) of the Agreement is modified and amended as
      follows: The number of days contained in this Section 6.1 (i) which is
      currently 90 days is hereby amended to be 120 days.

5.    MODIFICATION OF FINANCIAL CONDITION/EFFECTIVE TANGIBLE NET WORTH. Section
      6.2 (i) of the Agreement is modified and amended as follows: The dollar
      amount contained in this Section 6.2 (i) which is currently $8,000,000.00
      is hereby amended to be $12,000,000.00.

6.    MODIFICATION OF FINANCIAL CONDITION/MINIMUM NET PROFIT. Section 6.2 (iii)
      of the Agreement is modified and amended as follows: The dollar amount
      contained in this Section 6.2 (iii) which is currently $500,000.00 is
      hereby amended to be $500,000.00 through December 31, 2004 and
      $2,000,000.00 thereafter.

7.    MODIFICATION OF ADDITIONAL INDEBTEDNESS. Section 6.11 of the Agreement is
      modified and amended as follows: The dollar amount contained in this
      Section 6.11 which is currently $500,000.00 is hereby amended to be
      $1,000,000.00.

8.    REPRESENTATIONS AND WARRANTIES. The Borrower hereby reaffirms the
      representations and warranties contained in the Agreement and represents
      that no event, which with notice or lapse of time, could become an Event
      of Default, has occurred or is continuing.

                                      -1-
<PAGE>

9.    CONFIRMATION OF OTHER TERMS AND CONDITIONS OF THE AGREEMENT. Except as
      specifically provided in this Amendment, all other terms, conditions and
      covenants of the Agreement unaffected by this Amendment shall remain
      unchanged and shall continue in full force and effect and the Borrower
      hereby covenants and agrees to perform and observe all terms, covenants
      and agreements provided for in the Agreement, as hereby amended.

10.   GOVERNING LAW. This Amendment shall be governed and construed in
      accordance with the laws of the State of California to which jurisdiction
      the parties hereto hereby consent and submit.

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

      IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto
as of the date first hereinabove written.

BANK:                                      BORROWER:

BANK OF THE WEST                           STONE BOARDWEAR, INC.

By: /s/ Stephen J. Popovich                By: /s/ Richard F. Woolcott
    -------------------------------------      ---------------------------------
NAME: Stephen J. Popovich, Vice President  NAME: Richard F. Woolcott, President
                                                 and CEO

                                           By: /s/ Douglas Collier,
                                               ---------------------------------
                                           NAME: Douglas Collier, CFO and
                                                 Secretary

                                           ADDRESS:

                                              1740 Monrovia Avenue
                                              Costa Mesa, CA 92627

                                      -2-

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