
<PAGE>
 
                                                                  EXHIBIT 10.8.1
                          SANTA BARBARA BANK & TRUST

                                LOAN AGREEMENT
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<S>             <C>           <C>           <C>        <C>     <C>           <C>        <C>        <C>       
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    Principal    Loan Date     Maturity     Loan No    Call    Collateral    Account    Officer    Initials 
$15,000,000.00  12-01-1998    04-01-2001     16450      4a         910        14492       PWM
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References in the shaded area are for Lender's use only and do not limit the applicability of this document to
any particular loan or item.
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</TABLE> 

Borrower:  Balance Bar Company           Lender:  Santa Barbara Bank & Trust
           1015 Mark Avenue                       Main Office
           Carpinteria, CA 93013                  c/o Loan Services
                                                  P.O. Box 1173
                                                  Santa Barbara, CA 93102-1173
================================================================================

THIS LOAN AGREEMENT between Balance Bar Company ("Borrower") and Santa Barbara
Bank & Trust ("Lender") is made and executed on the following terms and
conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans and other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender's sole judgment and discretion; and (c) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement.

TERM. This Agreement shall be effective as of December 1, 1998, and shall 
continue thereafter until all Indebtedness of Borrower to Lender has been 
performed in full and the parties terminate this Agreement in writing.

DEFINITIONS. The following words shall have the following meanings when used in 
this Agreement. Terms not otherwise defined in this Agreement shall have the 
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of 
America.

     Agreement. The word "Agreement" means this Loan Agreement, as this Loan
     Agreement may be amended or modified from time to time, together with all
     exhibits and schedules attached to this Loan Agreement from time to time.

     Account. The word "Account" means a trade account, account receivable, or
     other right to payment for goods sold or services rendered owing to
     Borrower (or to a third party grantor acceptable to Lender).

     Account Debtor. The words "Account Debtor" mean the person or entity
     obligated upon an Account.

     Advance. The word "Advance" means a disbursement of Loan funds under this
     Agreement.

     Borrower. The word "Borrower" means Balance Bar Company. The word
     "Borrower" also includes, as applicable, all subsidiaries and affiliates of
     Borrower as provided below in the paragraph titled "Subsidiaries and
     Affiliates."

     Borrowing Base. The words "Borrowing Base" mean, as determined by Lender 
     from time to time, the lesser of (a) $15,000,000.00; or (b) 80.000% of the
     aggregate amount of Eligible Accounts and 25% of Eligible Inventory as
     defined in Addendum #1.

     Business Day. The words "Business Day" mean a day on which commercial banks
     are open for business in the State of California. 

     CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
     Compensation, and Liability Act of 1980, as amended.

     Cash Flow. The words "Cash Flow" mean net income after taxes, and exclusive
     of extraordinary gains and income, plus depreciation and amortization. 

     Collateral. The word "Collateral" means and includes without limitation all
     property and assets granted as collateral security for a Loan, whether real
     or personal property, whether granted directly or indirectly, whether
     granted now or in the future, and whether granted in the form of a security
     interest, mortgage, deed of trust, assignment, pledge, chattel mortgage,
     chattel trust, factor's lien, equipment trust, conditional sale, trust
     receipt, lien, charge, lien or title retention contract, lease or
     consignment intended as a security device, or any other security or lien
     interest whatsoever, whether created by law, contract, or otherwise. The
     word "Collateral" includes without limitation all collateral described
     below in the section titled "COLLATERAL."

     Debt. The word "Debt" means all of Borrower's liabilities excluding
     Subordinated Debt.

     Eligible Accounts. The words "Eligible Accounts" mean, at any time, all of
     Borrower's Accounts which contain selling terms and conditions acceptable 
     to Lender. The net amount of any Eligible Account against which Borrower
     may borrow shall exclude all returns, discounts, credits, and offsets of
     any nature. Unless otherwise agreed to by Lender in writing, Eligible
     Accounts do not include:

          (a) Accounts with respect to which the Account Debtor is an officer, 
          an employee or agent of Borrower.

          (b) Accounts with respect to which the Account Debtor is a subsidiary
          of, or affiliated with or related to Borrower or its shareholders,
          officers, or directors.

          (c) Accounts with respect to which goods are placed on consignment,
          guaranteed sale, or other terms by reason of which the payment by the
          Account Debtor may be conditional.

          (d) Accounts with respect to which the Account Debtor is not a
          resident of the United States, except to the extent such Accounts are
          supported by insurance, bonds, or other assurances satisfactory to
          Lender.

          (e) Accounts with respect to which Borrower is or may become liable to
          the Account Debtor for goods sold or services rendered by the Account
          Debtor to Borrower.

          (f) Accounts which are subject to dispute, counterclaim, or setoff.

          (g) Accounts with respect to which the goods have not been shipped or
          delivered, or the services have not been rendered, to the Account
          Debtor.

          (h) Accounts with respect to which Lender, in its sole discretion,
          deems the creditworthiness or financial condition of the Account
          Debtor to be unsatisfactory.

          (i) Accounts of any Account Debtor who has filed or has had filed 
          against it a petition in bankruptcy or an application for relief under
          any provision of any state or federal bankruptcy, insolvency, or
          debtor-in-relief acts; or who has had appointed a trustee, custodian,
          or receiver for the assets of such Account Debtor; or who has made an
          assignment for the benefit of creditors or has become insolvent or
          fails generally
<PAGE>
12-01-1998                      LOAN AGREEMENT                            Page 2
Loan No 16450                     (Continued)
================================================================================
 
          to pay its debts (including its payrolls) as such debts become due.

          (j) Accounts with respect to which the Account Debtor is the United
          States government or any department or agency of the United States.

          (k) Accounts which have not been paid in full within 90 days from the
          invoice date.

          (l) That portion of the Accounts of any single Account Debtor which
          exceeds 20.000% of all of Borrower's Accounts.

     ERISA. The word "ERISA" means the Employee Retirement Income Security Act
     of 1974, as amended.

     Event of Default. The words "Event of Default" mean and include without
     limitation any of the Events of Default set forth below in the section
     titled "EVENTS OF DEFAULT."

     Expiration Date. The words "Expiration Date" mean the date of termination
     of Lender's commitment to lend under this Agreement.

     Grantor. The word "Grantor" means and includes without limitation each and
     all of the persons or entities granting a Security Interest in any
     Collateral for the Indebtedness, including without limitation all Borrowers
     granting such a Security Interest.

     Guarantor. The word "Guarantor" means and includes without limitation each
     and all of the guarantors, sureties, and accommodation parties in
     connection with any Indebtedness.

     Indebtedness. The word "Indebtedness" means and includes without limitation
     all Loans, together with all other obligations, debts and liabilities of
     Borrower to Lender, or any one or more of them, as well as all claims by
     Lender against Borrower, or any one or more of them; whether now or
     hereafter existing, voluntary or involuntary, due or not due, absolute or
     contingent, liquidated or unliquidated; whether Borrower may be liable
     individually or jointly with others; whether Borrower may be obligated as a
     guarantor, surety, or otherwise; whether recovery upon such Indebtedness
     may be or hereafter may become barred by any statute of limitations; and
     whether such Indebtedness may be or hereafter may become otherwise
     unenforceable.

     Lender. The word "Lender" means Santa Barbara Bank & Trust, its successors
     and assigns.

     Line of Credit. The words "Line of Credit" mean the credit facility
     described in the Section titled "LINE OF CREDIT" below.

     Liquid Assets. The words "Liquid Assets" mean Borrower's cash on hand plus
     Borrower's readily marketable securities.

     Loan. The word "Loan" or "Loans" means and includes without limitation any
     and all commercial loans and financial accommodations from Lender to
     Borrower, whether now or hereafter existing, and however evidenced,
     including without limitation those loans and financial accommodations
     described herein or described on any exhibit or schedule attached to this
     Agreement from time to time.

     Note. The word "Note" means and includes without limitation Borrower's
     promissory note or notes, if any, evidencing Borrower's Loan obligations in
     favor of Lender, as well as any substitute, replacement or refinancing note
     or notes therefor.

     Permitted Liens. The words "Permitted Liens" mean: (a) liens and security
     interests securing Indebtedness owed by Borrower to Lender; (b) liens for
     taxes, assessments, or similar charges either not yet due or being
     contested in good faith; (c) 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; (d) purchase money
     liens or purchase money security interests upon or in any property acquired
     or held by Borrower in the ordinary course of business to secure
     indebtedness outstanding on the date of this Agreement or permitted to be
     incurred under the paragraph of this Agreement titled "Indebtedness and
     Liens; (e) liens and security interests which, as of the date of this
     Agreement, have been disclosed to and approved by the Lender in writing;
     and (f) those liens and security interests which in the aggregate
     constitute an immaterial and insignificant monetary amount with respect to
     the net value of Borrower's assets.

     Related Documents. The words "Related Documents" mean and include without
     limitation all promissory notes, credit agreements, loan agreements,
     environmental agreements, guaranties, security agreements, mortgages, deeds
     of trust, and all other instruments, agreements and documents, whether now
     or hereafter existing, executed in connection with the Indebtedness.

     Security Agreement. The words "Security Agreement" mean and include without
     limitation any agreements, promises, covenants, arrangements,
     understandings or other agreements, whether created by law, contract, or
     otherwise, evidencing, governing, representing, or creating a Security
     Interest.

     Security Interest. The words "Security Interest" mean and include without
     limitation any type of collateral security, whether in the form of a lien,
     charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
     chattel trust, factor's lien, equipment trust, conditional sale, trust
     receipt, lien or title retention contract, lease or consignment intended as
     a security device, or any other security or lien interest whatsoever,
     whether created by law, contract, or otherwise.

     SARA. The word "SARA" means the Superfund Amendments and Reauthorization
     Act of 1986 as now or hereafter amended.

     Subordinated Debt. The words "Subordinated Debt" mean indebtedness and
     liabilities of Borrower which have been subordinated by written agreement
     to indebtedness owed by Borrower to Lender in form and substance acceptable
     to Lender.

     Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total
     assets excluding all intangible assets (i.e., goodwill, trademarks,
     patents, copyrights, organizational expenses, and similar intangible items,
     but including leaseholds and leasehold improvements) less total Debt.

     Working Capital. The words "Working Capital" mean Borrower's current
     assets, excluding prepaid expenses, less Borrower's current liabilities.

LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time
from the date of this Agreement to the Expiration Date, provided the aggregate
amount of such Advances outstanding at any time does not exceed the Borrowing
Base. Within the foregoing limits, Borrower may borrow, partially or wholly
prepay, and reborrow under this Agreement as follows.

     Conditions Precedent to Each Advance. Lender's obligation to make any
     Advance to or for the account of Borrower under this Agreement is subject
     to the following conditions precedent, with all documents, instruments,
     opinions, reports, and other items required under this Agreement to be in
     form and substance satisfactory to Lender:

          (a) Lender shall have received evidence that this Agreement and all
          Related Documents have been duly authorized, executed, and delivered
          by Borrower to Lender.

          (b) Lender shall have received such opinions of counsel, supplemental
          opinions, and documents as Lender may request.

          (c) The security interests in the Collateral shall have been duly
          authorized, created, and perfected with first lien priority and shall
          be in full force and effect.

          (d) All guaranties required by Lender for the Line of Credit shall
          have been executed by each Guarantor, delivered to Lender, and be in
          full force and effect.

          (e) Lender, at its option and for its sole benefit, shall have
          conducted an audit of Borrower's Accounts, books, records, and
          operations, and




     


     





 





































 

    
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12-01-1998                       LOAN AGREEMENT                           Page 3
Loan No 16450                     (Continued)
================================================================================

          Lender shall be satisfied as to their condition.

          (f) Borrower shall have paid to Lender all fees, costs, and expenses
          specified in this Agreement and the Related Documents as are then due
          and payable. 

          (g) There shall not exist at the time of any Advance a condition which
          would constitute an Event of Default under this Agreement, and
          Borrower shall have delivered to Lender the compliance certificate
          called for in the paragraph below titled "Compliance Certificate."

     Making Loan Advances. Advances under the credit facility, as well as
     directions for payment from Borrower's accounts, may be requested orally or
     in writing by authorized persons. Lender may, but need not, require that
     all oral requests be confirmed in writing. Each Advance shall be
     conclusively deemed to have been made at the request of and for the benefit
     of Borrower (a) when credited to any deposit account of Borrower maintained
     with Lender or (b) when advanced in accordance with the instructions of an
     authorized person. Lender, at its option, may set a cutoff time, after
     which all requests for Advances will be treated as having been requested on
     the next succeeding Business Day.

     Mandatory Loan Repayments. If at any time the aggregate principal amount of
     the outstanding Advances shall exceed the applicable Borrowing Base,
     Borrower, immediately upon written or oral notice from Lender, shall pay to
     Lender an amount equal to the difference between the outstanding principal
     balance of the Advances and the Borrowing Base. On the Expiration Date,
     Borrower shall pay to Lender in full the aggregate unpaid principal amount
     of all Advances then outstanding and all accrued unpaid interest, together
     with all other applicable fees, costs and charges, if any, not yet paid.

     Loan Account. Lender shall maintain on its books a record of account in
     which Lender shall make entries for each Advance and such other debits and
     credits as shall be appropriate in connection with the credit facility.
     Lender shall provide Borrower with periodic statements of Borrower's
     account, which statements shall be considered to be correct and
     conclusively binding on Borrower unless Borrower notifies Lender to the
     contrary within thirty (30) days after Borrower's receipt of any such
     statement which Borrower deems to be incorrect.

COLLATERAL. To secure payment of the Line of Credit and performance of all other
Loans, obligations and duties owed by Borrower to Lender, Borrower (and others, 
if required) shall grant to Lender Security Interests in such property and 
assets as Lender may require (the "Collateral"), including without limitation 
Borrower's present and future Accounts and general intangibles. Lender's 
Security Interests in the Collateral shall be continuing liens and shall 
include the proceeds and products of the Collateral, including without 
limitation the proceeds of any insurance. With respect to the Collateral, 
Borrower agrees and represents and warrants to Lender:

     Perfection of Security Interests. Borrower agrees to execute such financing
     statements and to take whatever other actions are requested by Lender to
     perfect and continue Lender's Security Interests in the Collateral. Upon
     request of Lender, Borrower will deliver to Lender any and all of the
     documents evidencing or constituting the Collateral, and Borrower will note
     Lender's interest upon any and all chattel paper if not delivered to Lender
     for possession by Lender. Contemporaneous with the execution of this
     Agreement, Borrower will execute one or more UCC financing statements and
     any similar statements as may be required by applicable law, and will file
     such financing statements and all such similar statements in the
     appropriate location or locations. Borrower hereby appoints Lender as its
     irrevocable attorney-in-fact for the purpose of executing any documents
     necessary to perfect or to continue any Security Interest. Lender may at
     any time, and without further authorization from Borrower, file a carbon,
     photograph, facsimile, or other reproduction of any financing statement for
     use as a financing statement. Borrower will reimburse Lender for all
     expenses for the perfection, termination, and the continuation of the
     perfection of Lender's security interest in the Collateral. Borrower
     promptly will notify Lender of any change in Borrower's name including any
     change to the assumed business names of Borrower. Borrower also promptly
     will notify Lender of any change in Borrower's Social Security Number or
     Employer Identification Number. Borrower further agrees to notify Lender in
     writing prior to any change in address or location of Borrower's principal
     governance office or should Borrower merge or consolidate with any other
     entity.

     Collateral Records. Borrower does now, and at all times hereafter shall,
     keep correct and accurate records of the Collateral, all of which records
     shall be available to Lender or Lender's representative upon demand for
     inspection and copying at any reasonable time. With respect to the
     Accounts, Borrower agrees to keep and maintain such records as Lender may
     require, including without limitation information concerning Eligible
     Accounts and Account balances and agings.

     Collateral Schedules. Concurrently with the execution and delivery of this
     Agreement, Borrower shall execute and deliver to Lender a schedule of
     Accounts and Eligible Accounts, in form and substance satisfactory to the
     Lender. Thereafter Borrower shall execute and deliver to Lender such
     supplemental schedules of Eligible Accounts and such other matters and
     information relating to Borrower's Accounts as Lender may request.
     Supplemental schedules shall be delivered according to the following
     schedule: Quarterly.
 
     Representations and Warranties Concerning Accounts. WIth respect to the
     Accounts, Borrower represents and warrants to Lender: (a) Each Account
     represented by Borrower to be an Eligible Account for purposes of this
     Agreement conforms to the requirements of the definition of an Eligible
     Account; (b) All Account information listed on schedules delivered to
     Lender will be true and correct, subject to immaterial variance; and (c)
     Lender, its assigns, or agents shall have the right at any time and at
     Borrower's expense to inspect, examine, and audit Borrower's records and to
     confirm with Account Debtors the accuracy of such Accounts.

ADDITIONAL CREDIT FACILITIES.  In addition to the Line of Credit facility, the 
following credit accommodations are either in place or will be made available to
Borrower:

REPRESENTATIONS AND WARRANTIES.  Borrower represents and warrants to Lender, as 
of the date of this Agreement, as of the date of each disbursement of Loan 
proceeds, as of the date of any renewal, extension or modification of any Loan, 
and at all times any indebtedness exists:

     Organization. Borrower is a corporation which is duly organized, validly
     existing, and in good standing under the laws of the State of Delaware and
     is validly existing and in good standing in all states in which Borrower is
     doing business. Borrower has the full power and authority to own its
     properties and to transact the businesses in which it is presently engaged
     or presently proposes to engage. Borrower also is duly qualified as a
     foreign corporation and is in good standing in all states in which the
     failure to so qualify would have a material adverse effect on its
     businesses or financial condition.

     Authorization. The execution, delivery, and performance of this Agreement
     and all Related Documents by Borrower, to the extent to be executed,
     delivered or performed by Borrower, have been duly authorized by all
     necessary action by Borrower; do not require the consent or approval of any
     other person, regulatory authority or governmental body; and do not
     conflict with, result in a violation of, or constitute a default under (a)
     any provision of its articles of incorporation or organization, or bylaws,
     or any agreement or other instrument binding upon Borrower or (b) any law,
     governmental regulation, court decree, or order applicable to Borrower.

     Financial Information. Each financial statement of Borrower supplied to
     Lender truly and completely disclosed Borrower's financial condition as of
     the date of the statement, and there has been no material adverse change in
     Borrower's financial condition subsequent to the date of the most recent
     financial statement supplied to Lender. Borrower has no material contingent
     obligations except as disclosed in such financial statements.

     Legal Effect. This Agreement constitutes, and any instrument or agreement
     required hereunder to be given by Borrower when delivered will constitute,
     legal, valid and binding obligations of Borrower enforceable against
     Borrower in accordance with their respective terms.

     Properties. Except for Permitted Liens, Borrower owns and has good title to
     all of Borrower's properties free and clear of all Security Interests,


<PAGE>
 
12-01-1998                     LOAN AGREEMENT                             Page 4
Loan No 16450                    (Continued)       
================================================================================

     and has not executed any security documents or financing statements 
     relating to such properties. All of Borrower's properties are titled in
     Borrower's legal name, and Borrower has not used, or filed a financing
     statement under, any other name for at least the last five (5) years.

     Hazardous Substances. The terms "hazardous waste," "hazardous substance,"
     "disposal," "release," and "threatened release," as used in this Agreement,
     shall have the same meanings as set forth in the "CERCLA," "SARA," the
     Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.,
     the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
     seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and
     Safety Code, Section 25100, et seq., or other applicable state or Federal
     laws, rules, or regulations adopted pursuant to any of the foregoing.
     Except as disclosed to and acknowledged by Lender in writing, Borrower
     represents and warrants that: (a) During the period of Borrower's ownership
     of the properties, there has been no use, generation, manufacture, storage,
     treatment, disposal, release or threatened release of any hazardous waste
     or substance by any person on, under, about or from any of the properties.
     (b) Borrower has no knowledge of, or reason to believe that there has been
     (i) any use, generation, manufacture, storage, treatment, disposal,
     release, or threatened release of any hazardous waste or substance on,
     under, about or from the properties by any prior owners or occupants of
     any of the properties, or (ii) any actual or threatened litigation or
     claims of any kind by any person relating to such matters. (c) Neither
     Borrower nor any tenant, contractor, agent or other authorized user of any
     of the properties shall use, generate, manufacture, store, treat, dispose
     of, or release any hazardous waste or substance on, under, about or from
     any of the properties; and any such activity shall be conducted in
     compliance with all applicable federal, state, and local laws, regulations,
     and ordinances, including without limitation those laws, regulations and
     ordinances described above. Borrower authorizes Lender and its agents to
     enter upon the properties to make such inspections and tests as Lender may
     deem appropriate to determine compliance of the properties with this
     section of the Agreement. Any inspections or tests made by Lender shall be
     at Borrower's expense and for Lender's purposes only and shall not be
     construed to create any responsibility or liability on the part of Lender
     to Borrower or to any other person. The representations and warranties
     contained herein are based on Borrower's due diligence in investigating the
     properties for hazardous waste and hazardous substances. Borrower hereby
     (a) releases and waives any future claims against Lender for indemnity or
     contribution in the event Borrower becomes liable for cleanup or other
     costs under any such laws, and (b) agrees to indemnify and hold harmless
     Lender against any and all claims, losses, liabilities, damages, penalties,
     and expenses which Lender may directly or indirectly sustain or suffer
     resulting from a breach of this section of the Agreement or as a
     consequence of any use, generation, manufacture, storage, disposal, release
     or threatened release of a hazardous waste or substance on the properties.
     The provisions of this section of the Agreement, including the obligation
     to indemnify, shall survive the payment of the Indebtedness and the
     termination or expiration of this Agreement and shall not be affected by
     Lender's acquisition of any interest in any of the properties, whether by
     foreclosure or otherwise.

     Litigation and Claims. No litigation, claim, investigation, administrative
     proceeding or similar action (including those for unpaid taxes) against
     Borrower is pending or threatened, and no other event has occurred which
     may materially adversely affect Borrower's financial condition or
     properties, other than litigation, claims, or other events, if any, that
     have been disclosed to and acknowledged by Lender in writing.

     Taxes. To the best of Borrower's knowledge, all tax returns and reports of
     Borrower that are or were required to be filed, have been filed, and all
     taxes, assessments and other governmental changes have been paid in full,
     except those presently being or to be contested by Borrower in good faith
     in the ordinary course of business and for which adequate reserves have
     been provided.

     Lien Priority. Unless otherwise previously disclosed to Lender in writing,
     Borrower has not entered into or granted any Security Agreements, or
     permitted the filing or attachment of any Security Interests on or
     affecting any of the Collateral directly or indirectly securing repayment
     of Borrower's Loan and Note, that would be prior or that may in any way be
     superior to Lender's Security Interests and rights in and to such
     Collateral.

     Binding Effect. This Agreement, the Note, all Security Agreements directly
     or indirectly securing repayment of Borrower's Loan and Note and all of the
     Related Documents are binding upon Borrower as well as upon Borrower's
     successors, representatives and assigns, and are legally enforceable in
     accordance with their respective terms.

     Commercial Purposes. Borrower intends to use the Loan proceeds solely for 
     business or commercial related purposes.

     Employee Benefit Plans. Each employee benefit plan as to which Borrower may
     have any liability complies in all material respects with all applicable
     requirements of law and regulations, and (i) no Reportable Event nor
     Prohibited Transaction (as defined in ERISA) has occurred with respect to
     any such plan, (ii) Borrower has not withdrawn from any such plan or
     initiated steps to do so, (iii) no steps have been taken to terminate any
     such plan, and (iv) there are no unfunded liabilities other than those
     previously disclosed to Lender in writing.

     Location of Borrower's Offices and Records. Borrower's place of business,
     or Borrower's Chief executive office, if Borrower has more than one place
     of business, is located at 1015 Mark Avenue, Carpinteria, CA 93013. Unless
     Borrower has designated otherwise in writing this location is also the
     office or offices where Borrower keeps its records concerning the
     Collateral.

     Information. All information heretofore or contemporaneously herewith
     furnished by Borrower to Lender for the purposes of or in connection with
     this Agreement or any transaction contemplated hereby is, and all
     information hereafter furnished by or on behalf of Borrower to Lender will
     be, true and accurate in every material respect on the date as of which
     such information is dated or certified; and none of such information is or
     will be incomplete by omitting to state any material fact necessary to
     make such information not misleading.

     Survival of Representations and Warranties. Borrower understands and agrees
     that Lender, without independent investigation, is relying upon the above
     representations and warranties in extending Loan Advances to Borrower.
     Borrower further agrees that the foregoing representations and warranties
     shall be continuing in nature and shall remain in full force and effect
     until such time as Borrower's Indebtedness shall be paid in full, or until
     this Agreement shall be terminated in the manner provided above, whichever
     is the last to occur.

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while 
this Agreement is in effect, Borrower will:

     Litigation. Promptly inform Lender in wiring of (a) all material adverse
     changes in Borrower's financial condition, and (b) all existing and all
     threatened litigation, claims, investigations, administrative proceedings
     or similar actions affecting Borrower or any Guarantor which could
     materially affect the financial condition of Borrower or the financial
     condition of any Guarantor.

     Financial Records. Maintain its books and records in accordance with
     generally accepted accounting principles, applied on a consistent basis,
     and permit Lender to examine and audit Borrower's books and records at all
     reasonable times.

     Financial Statements. Furnish Lender with, as soon as available, but in no
     event later than ninety (90) days after the end of each fiscal year,
     Borrower's balance sheet and income statement for the year ended, audited
     by a certified public accountant satisfactory to Lender, and, as soon as
     available, but in no event later than thirty (30) days after the end of
     each fiscal quarter, Borrower's balance sheet and profit and loss statement
     for the period ended, prepared and certified as correct to the best
     knowledge and belief by Borrower's chief financial officer or other officer
     or person acceptable to Lender. All financial reports required to be
     provided under this Agreement shall be prepared in accordance with
     generally accepted accounting principles, applied on a consistent basis,
     and certified by Borrower as being true and correct.

     Additional Information. Furnish such additional information and statements,
     lists of assets and liabilities, agings of receivables and payables,
     inventory schedules, budgets, forecasts, tax returns, and other reports
     with respect to Borrower's financial condition and business operations as
     Lender may request form time to time.

     Financial Covenants and Ratios. Comply with the following covenants and
     ratios:
     
<PAGE>
 
12-01-1998                      LOAN AGREEMENT                            Page 5
Loan No 16450                     (Continued)
================================================================================

          Net Worth Ratio. Maintain a ratio of Total Liabilities to Tangible Net
          Worth of less than 2.50 to 1.00.

          Current Ratio. Maintain a ratio of Current Assets to Current
          Liabilities in excess of 1.75 to 1.00.

          Cash Flow Requirements. Maintain Cash Flow at not less than the
          following level: greater than or equal to 1.25 to 1.00 defined as Net
          Income plus Depreciation and other Non-Cash Charges divided by current
          maturities of Long Term Debt and Capital Leases. Except as provided
          above, all computations made to determine compliance with the
          requirements contained in this paragraph shall be made in accordance
          with generally accepted accounting principles, applied on a consistent
          basis, and certified by Borrower as being true and correct.

          Insurance. Maintain fire and other risk insurance, public liability
          insurance, and such other insurance as Lender may require with respect
          to Borrower's properties and operations, in form, amounts, coverages
          and with insurance companies reasonably acceptable to Lender.
          Borrower, upon request of Lender, will deliver to Lender form time to
          time the policies of certificates of insurance in form satisfactory to
          Lender, including stipulations that coverages will not be cancelled or
          diminished without at least ten (10) days' prior written notice to
          Lender. Each insurance policy also shall include an endorsement
          providing that coverage in favor of Lender will not be impaired in any
          way by any act, omission or default of Borrower or any other person.
          In connection with all policies covering assets in which Lender holds
          or is offered a security interest for the Loans, Borrower will provide
          Lender with such loss payable or other endorsements as Lender may
          require.

     Insurance Reports. Furnish to Lender, upon request of Lender, reports on
     each existing insurance policy showing such information as Lender may
     reasonably request, including without limitation the following: (a) the
     name of the insurer; (b) the risks insured; (c) the amount of the policy;
     (d) the properties insured; (e) the then current property values on the
     basis of which insurance has been obtained, and the manner of determining
     those values; and (f) the expiration date of the policy. In addition, upon
     request of Lender (however not more often than annually), Borrower will
     have an independent appraiser satisfactory to Lender determine, as
     applicable, the actual cash value or replacement cost of any Collateral.
     The costs of such appraisal shall be paid by Borrower.

     Other Agreements. Comply with all terms and conditions of all other
     agreements, whether now or hereafter existing, between Borrower and any
     other party and notify Lender immediately in writing of any default in
     connection with any other such agreements.

     Loan Proceeds. Use all Loan proceeds solely for Borrower's business
     operations, unless specifically consented to the contrary by Lender in
     writing.

     Taxes, Charges and Liens. Pay and discharge when due all of its
     indebtedness and obligations, including without limitation all assessments,
     taxes, governmental charges, levies and liens, of every kind and nature,
     imposed upon Borrower or its properties, income, or profits, prior to the
     date on which penalties would attach, and all lawful claims that, if
     unpaid, might become a lien or charge upon any of Borrower's properties,
     income, or profits. Provided however, Borrower will not be required to pay
     and discharge any assessment, tax, charge, levy, lien or claim so long as
     (a) the legality of the same shall be contested in good faith by
     appropriate proceedings, and (b) Borrower shall have established on its
     books adequate reserves with respect to such contested assessment, tax,
     charge, levy, lien, or claim in accordance with generally accepted
     accounting practices. Borrower, upon demand of Lender, will furnish to
     Lender evidence of payment of the assessments, taxes, charges, levies,
     liens and claims and will authorize the appropriate governmental official
     to deliver to Lender at any time a written statement of any assessments,
     taxes, charges, levies, liens and claims against Borrower's properties,
     income, or profits.

     Performance. Perform and comply with all terms, conditions, and provisions
     set forth in this Agreement and in the Related Documents in a timely
     manner, and promptly notify Lender if Borrower learns of the occurrence of
     any event which constitutes an Event of Default under this Agreement or
     under any of the Related Documents.

     Operations. Maintain executive and management personnel with substantially
     the same qualifications and experience as the present executive and
     management personnel; provide written notice to Lender of any change in
     executive and management personnel; conduct its business affairs in a
     reasonable and prudent manner and in compliance with all applicable
     federal, state and municipal laws, ordinances, rules and regulations
     respecting its properties, charters, businesses and operations, including
     without limitation, compliance with the Americans With Disabilities Act and
     with all minimum funding standards and other requirements of ERISA and
     other laws applicable to Borrower's employee benefit plans.

     Inspection. Permit employees or agents of Lender at any reasonable time to
     inspect any and all Collateral for the Loan or Loans and Borrower's other
     properties and to examine or audit Borrower's books, accounts, and records
     and to make copies and memoranda of Borrower's books, accounts, and
     records. If Borrower now or at any time hereafter maintains any records
     (including without limitation computer generated records and computer
     software programs for the generation of such records) in the possession of
     a third party, Borrower, upon request of Lender, shall notify such party to
     permit Lender free access to such records at all reasonable times and to
     provide Lender with copies of any records it may request, all at Borrower's
     expense.

     Compliance Certificate. Unless waived in writing by Lender, provide Lender
     Quarterly and at the time of each disbursement of Loan proceeds with a
     certificate executed by Borrower's chief financial officer, or other
     officer or person acceptable to Lender, certifying that the representations
     and warranties set forth in this Agreement are true and correct as of the
     date of the certificate and further certifying that, as of the date of the
     certificate, no Event of Default exists under this Agreement.

     Environmental Compliance and Reports. Borrower shall comply in all respects
     with all environmental protection federal, state and local laws, statutes,
     regulations and ordinances; not cause or permit to exist, as a result of an
     intentional or unintentional action or omission on its part or on the part
     of any third party, on property owned and/or occupied by Borrower, any
     environmental activity where damage may result to the environment, unless
     such environmental activity is pursuant to and in compliance with the
     conditions of a permit issued by the appropriate federal, state or local
     governmental authorities; shall furnish to Lender promptly and in any event
     within thirty (30) days after receipt thereof a copy of any notice,
     summons, lien, citation, directive, letter or other communication from any
     governmental agency or instrumentality concerning any intentional or
     unintentional action or omission on Borrower's part in connection with any
     environmental activity whether or not there is damage to the environment
     and/or other natural resources.

     Additional Assurances. Make, execute and deliver to Lender such promissory
     notes, mortgages, deeds of trust, security agreements, financing
     statements, instruments, documents and other agreements as Lender or its
     attorneys may reasonably request to evidence and secure the Loans and to
     perfect all Security Interests.

NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this 
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:

     Indebtedness and Liens. (a) Except for trade debt incurred in the normal
     course of business and indebtedness to Lender contemplated by this
     Agreement, create, incur or assume indebtedness for borrowed money,
     including capital leases, (b) except as allowed as a Permitted Lien, sell,
     transfer, mortgage, assign, pledge, lease, grant a security interest in, or
     encumber any of Borrower's assets, or (c) sell with recourse any of
     Borrower's accounts, except to Lender.

     Continuity of Operations. (a) Engage in any business activities
     substantially different than those in which Borrower is presently engaged,
     (b) cease operations, liquidate, merge, transfer, acquire or consolidate
     with any other entity, change ownership, change its name, dissolve or
     transfer or sell Collateral out of the ordinary course of business, (c) pay
     any dividends on Borrower's stock (other than dividends payable in its
     stock), provided, however that notwithstanding the foregoing, but only so
     long as no Event of Default has occurred and is continuing or would result
     from

<PAGE>


12-01-1998                           LOAN AGREEMENT                       Page 6
Loan No 16450                         (Continued)                       
================================================================================

     the payment of dividends, if Borrower is a "Subchapter S Corporation" (as
     defined in the Internal Revenue Code of 1986, as amended), Borrower may pay
     cash dividends on its stock to its shareholders from time to time in
     amounts necessary to enable the shareholders to pay income taxes and make
     estimated income tax payments to satisfy their liabilities under federal
     and state law which arise solely from their status as Shareholders of a
     Subchapter S Corporation because of their ownership of shares of stock of
     Borrower, or (d) purchase or retire any of Borrower's outstanding shares 
     or alter or amend Borrower's capital structure.

     Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or
     assets, (b) purchase, create or acquire any interest in any other
     enterprise or entity, or (c) incur any obligation as surety or guarantor
     other than in the ordinary course of business.

CESSATION OF ADVANCES.  If Lender has made any commitment to make any Loan to 
Borrower, whether under this Agreement or under any other agreement, Lender 
shall have no obligation to make Loan Advances or to disburse Loan proceeds if: 
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender; or (e) any Lender in good faith deems itself insecure,
even though no Event of Default shall have occurred.

ADDITIONAL COVENANTS. Borrower covenants and agrees with lender that while this 
agreement is in effect, borrower shall provide the following:

1.  Accounts Receivables and Inventory audits as of July 1, of each year, with 
cost paid by Borrower.

2.  No payment of dividends or repurchase of common shares without prior written
approval from the Bank, except as defined under the change of ownership section 
described below.

EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default 
under this Agreement:

     Default on Indebtedness.  Failure of Borrower to make any payment when due 
     on the Loans.

     Other Defaults. Failure of Borrower or any Grantor to comply with or to
     perform when due any other term, obligation, covenant or condition
     contained in this Agreement or in any of the Related Documents, or failure
     of Borrower to comply with or to perform any other term, obligation,
     covenant or condition contained in any other agreement between Lender and
     Borrower.

     Default in Favor of Third Parties. Should Borrower of any Grantor default
     under any loan, extension of credit, security agreement, purchase or sales
     agreement, or any other agreement, in favor of any other creditor or person
     that may materially affect any of Borrower's property or Borrower's or any
     Grantor's ability to repay the Loans or perform their respective
     obligations under this Agreement or any of the Related Documents.

     False Statements. Any warranty, representation or statement made or
     furnished to Lender by or on behalf of Borrower or any Grantor under this
     Agreement or the Related Documents is false or misleading in any material
     respect at the time made or furnished, or becomes false or misleading at
     any time thereafter.
     
     Defective Collateralization. This Agreement or any of the Related Documents
     ceases to be in full force and effect (including failure of any Security
     Agreement to create a valid and perfected Security Interest) at any time
     and for any reason.

     Insolvency.  The dissolution or termination of Borrower's existence as a
     going business, the insolvency of Borrower, the appointment of a receiver
     for any part of Borrower's property, any assignment for the benefit of
     creditors, any type of creditor workout, or the commencement of any
     proceeding under any bankruptcy or insolvency laws by or against Borrower.

     Creditor or Forfeiture Proceedings. Commencement of foreclosure or
     forfeiture proceedings, whether by judicial proceeding, self-help,
     repossession or any other method, by any creditor of Borrower, any creditor
     of any Grantor against any collateral securing the Indebtedness, or by any
     governmental agency. This includes a garnishment, attachment or levy on or
     of any of Borrower's deposit accounts with Lender. However, this Event of
     Default shall not apply if there is a good faith dispute by Borrower or
     Grantor, as the case may be, as to the validity or reasonableness of the
     claim which is the basis of the creditor or forfeiture proceeding, and if
     Borrower or Grantor gives Lender written notice of the creditor or
     forfeiture proceeding and furnishes reserves or a surety bond for the
     creditor or forfeiture proceeding satisfactory to Lender.
     
     Events Affecting Guarantor. Any of the preceding events occurs with respect
     to any Guarantor of any of the Indebtedness or any Guarantor dies or
     becomes incompetent, or revokes or disputes the validity of, or liability
     under, any Guaranty of the Indebtedness. Lender, at its option, may but
     shall not be required to, permit the Guarantor's estate to assume
     unconditionally the obligations arising under the guaranty in a manner
     satisfactory to Lender, and, in doing so, cure the Event of Default.

     Adverse Change. A material adverse change occurs in Borrower's financial
     condition, or Lender believes the prospect of payment or performance of the
     Indebtedness is impaired.

     Insecurity. Lender, in good faith, deems itself insecure.

     Right to Cure. If any default, other than a Default on Indebtedness, is
     curable and if Borrower of Grantor, as the case may be, has not been given
     a notice of a similar default within the preceding twelve (12) months, it
     may be cured (and no Event of Default will have occurred) if Borrower or
     Grantor, as the case may be, after receiving written notice from Lender
     demanding cure of such default: (a) cures the default within fifteen (15)
     days; or (b) if the cure requires more than fifteen (15) days, immediately
     initiates steps which Lender deems in Lender's sole discretion to be
     sufficient to cure the default and thereafter continues and completes all
     reasonable and necessary steps sufficient to produce compliance as soon as
     reasonably practical.

EFFECT OF AN EVENT OF DEFAULT.  If any Event of Default shall occur, except 
where otherwise provided in this Agreement or the Related Documents, all 
commitments and obligations of Lender under this Agreement or the Related 
Documents or any other agreement immediately will terminate (including any 
obligation to make Loan Advances or disbursements), and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any 
kind to Borrower, except that in the case of Event of Default of the type 
described in the "Insolvency" subsection above, such acceleration shall be 
automatic and not optional.  In addition, Lender shall have all the rights and 
remedies provided  in the Related Documents or available law, in equity, or 
otherwise.  Except as may be prohibited by applicable law, all of Lender's 
rights and remedies shall be cumulative and may be exercised singularly or 
concurrently.  Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to 
perform an obligation of Borrower or of any Grantor shall not affect Lender's 
right to declare a default and to exercise its rights and remedies.

MISCELLANEOUS PROVISIONS.  The following miscellaneous provisions are a part of 
this Agreement:

     Amendments. This Agreement, together with any Related Documents,
     constitutes the entire understanding and agreement of the parties as to the
     matters set forth in this Agreement. No alteration of or amendment to this
     Agreement shall be effective unless given in writing and signed by the
     party of parties sought to be charged or bound by the alteration or
     amendment.




    
<PAGE>
 
12-01-1998                      LOAN AGREEMENT                            Page 7
Loan No 16450                     (Continued)
================================================================================

     Applicable Law. This Agreement has been delivered to Lender and accepted by
     Lender in the State of California. If there is a lawsuit, Borrower agrees
     upon Lender's request to submit to the jurisdiction of the courts of Santa
     Barbara County, the State of California. This Agreement shall be governed
     by and construed in accordance with the laws of the State of California.

     Caption Headings. Caption headings in this Agreement are for convenience
     purposes only and are not to be used to interpret or define the provisions
     of this Agreement.

     Multiple Parties; Corporate Authority. All obligations of Borrower under
     this Agreement shall be joint and several, and all references to Borrower
     shall mean each and every Borrower. This means that each of the persons
     signing below is responsible for all obligations in this Agreement.

     Consent to Loan Participation. Borrower agrees and consents to Lender's
     sale or transfer, whether now or later, of one or more participation
     interests in the Loans to one or more purchasers, whether related or
     unrelated to Lender. Lender may provide, without any limitation whatsoever,
     to any one or more purchasers, or potential purchasers, any information or
     knowledge Lender may have about Borrower or about any other matter relating
     to the Loan, and Borrower hereby waives any rights to privacy it may have
     with respect to such matters. Borrower additionally waives any and all
     notices of sale of participation interests, as well as all notices of any
     repurchase of such participation interests. Borrower also agrees that the
     purchasers of any such participation interests will be considered as the
     absolute owners of such interests in the Loans and will have all the rights
     granted under the participation agreement or agreements governing the sale
     of such participation interests. Borrower further waives all rights of
     offset or counterclaim that it may have now or later against Lender or
     against any purchaser of such a participation interest and unconditionally
     agrees that either Lender or such purchaser may enforce Borrower's
     obligation under the Loans irrespective of the failure or insolvency of any
     holder of any interest in the Loans. Borrower further agrees that the
     purchaser of any such participation interests may enforce its interests
     irrespective of any personal claims or defenses that Borrower may have
     against Lender.

     Costs and Expenses. Borrower agrees to pay upon demand all of Lender's
     expenses, including without limitation attorneys' fees, incurred in
     connection with the preparation, execution, enforcement, modification and
     collection of this Agreement or in connection with the Loans made pursuant
     to this Agreement. Lender may pay someone else to help collect the Loans
     and to enforce this Agreement, and Borrower will pay that amount. This
     includes, subject to any limits under applicable law, Lender's attorneys'
     fees and Lender's legal expenses, whether or not there is a lawsuit,
     including attorneys' fees for bankruptcy proceedings (including efforts to
     modify or vacate any automatic stay or injunction), appeals, and any
     anticipated post-judgment collection services. Borrower also will pay any
     court costs, in addition to all other sums provided by law.

     Notices. All notices required to be given under this Agreement shall be
     given in writing, may be sent by telefacsimile (unless otherwise required
     by law), and shall be effective when actually delivered or when deposited
     with a nationally recognized overnight courier or deposited in the United
     States mail, first class, postage prepaid, addressed to the party to whom
     the notice is to be given at the address shown above. Any party may change
     its address for notices under this Agreement by giving formal written
     notice to the other parties, specifying that the purpose of the notice is
     to change the party's address. To the extent permitted by applicable law,
     if there is more than one Borrower, notice to any Borrower will constitute
     notice to all Borrowers. For notice purposes, Borrower will keep Lender
     informed at all times of Borrower's current address(es).

     Severability. If a court of competent jurisdiction finds any provision of
     this Agreement to be invalid or unenforceable as to any person or
     circumstance, such finding shall not render that provision invalid or
     unenforceable as to any other persons or circumstances. If feasible, any
     such offending provision shall be deemed to be modified to be within the
     limits of enforceability or validity, however, if the offending provision
     cannot be so modified, it shall be stricken and all other provisions of
     this Agreement in all other respects shall remain valid and enforceable.

     Subsidiaries and Affiliates of Borrower. To the extent the context of any
     provisions of this Agreement makes it appropriate, including without
     limitation any representation, warranty or covenant, the word "Borrower" as
     used herein shall include all subsidiaries and affiliates of Borrower.
     Notwithstanding the foregoing however, under no circumstances shall this
     Agreement be construed to require Lender to make any Loan or other
     financial accommodation to any subsidiary or affiliate of Borrower.
     
     Successors and Assigns. All covenants and agreements contained by or on
     behalf of Borrower shall bind its successors and assigns and shall inure to
     the benefit of Lender, its successors and assigns. Borrower shall not,
     however, have the right to assign its rights under this Agreement or any
     interest therein, without the prior written consent of Lender.

     Survival. All warranties, representations, and covenants made by Borrower
     in this Agreement or in any certificate or other instrument delivered by
     Borrower to Lender under this Agreement shall be considered to have been
     relied upon by Lender and will survive the making of the Loan and delivery
     to Lender of the Related Documents, regardless of any investigation made by
     Lender or on Lender's behalf.

     Time is of the Essence.  Time is of the essence in the performance of this 
     Agreement.

     Waiver. Lender shall not be deemed to have waived any rights under this
     Agreement unless such waiver is given in writing and signed by Lender. No
     delay or omission on the part of Lender in exercising any right shall
     operate as a waiver of such right or any other right. A waiver by Lender of
     a provision of this Agreement shall not prejudice or constitute a waiver of
     Lender's right otherwise to demand strict compliance with that provision or
     any other provision of this Agreement. No prior waiver by Lender, nor any
     course of dealing between Lender and Borrower, or between Lender and any
     Grantor, shall constitute a waiver of any of Lender's rights or of any
     obligations of Borrower or of any Grantor as to any future transactions.
     Whenever the consent of Lender is required under this Agreement, the
     granting of such consent by Lender in any instance shall not constitute
     continuing consent in subsequent instances where such consent is required,
     and in all cases such consent may be granted or withheld in the sole
     discretion of Lender.




















<PAGE>
 
12-01-1998                        LOAN AGREEMENT                         Page 8
LOAN NO 16450                       (CONTINUED)
================================================================================

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN AGREEMENT, AND
BORROWER AGREES TO ITS TERMS.  THIS AGREEMENT IS DATED AS OF DECEMBER 1, 1998.

BORROWER:

Balance Bar Company

By:   /s/ James A. Wolfe
   -------------------------------
   James A. Wolfe, Chief Executive Officer

By:  /s/ Thomas J. Flahie
   -------------------------------
   Thomas J. Flahie, Senior Vice President, Finance & Adminstration

LENDER:

Santa Barbara Bank & Trust

By:
   -------------------------------
   Authorized Officer

===============================================================================
