**ESCROWAGREEMENT**

          THISESCROW AGREEMENT (this “***Agreement***”)is made and entered into as of November 10, 2005, by and among SUNSET BRANDS,INC., a Nevada corporation (“***Purchaser***”), CONTINENTAL STOCK TRANSFER & TRUSTCOMPANY (the “***Escrow Agent***”),U.S. MILLS, INC., a Delaware corporation (the “***Company***”), and IBF Fund Liquidating LLC, aDelaware limited liability company (the “***Shareholder Representative***”), for itself and asrepresentative of the shareholders of the Company entitled to receive MergerConsideration pursuant to the terms of the Merger Agreement (as defined below)(such shareholders being referred to herein as the “***Selling Parties***”).

**RECITALS**

          A.Purchaser, USM Acquisition Sub, Inc., a Delaware corporation and a wholly-ownedsubsidiary of Purchaser (“***Merger Sub***”), the Company and the ShareholderRepresentative have entered into an Amended and Restated Acquisition Agreementand Plan of Merger dated as of November 10, 2005 (the “***Merger Agreement***”), pursuant to whichPurchaser is acquiring the Company by means of merger transaction pursuant towhich Merger Sub is merging with and into the Company and certain holders ofthe Company’s capital stock are receiving the Merger Consideration (as definedin Section 1.6(b) of the Merger Agreement) from Purchaser. 

          B.Purchaser, the Company, the Shareholder Representative and Continental StockTransfer & Trust Company, as escrow agent (the “***Deposit EscrowAgent***”), have entered into an Escrow Agreement dated asof March 7, 2005 (as amended, the “***Deposit Escrow Agreement***”),pursuant to which Purchaser deposited the Deposit (as defined in Section 1.7 ofthe Merger Agreement) consisting of $1,000,000 in cash (the “***Deposit Cash***”),500,000 shares of common stock of the Purchaser and a confession of judgmentpromissory note in the original principal amount of $1,500,000 (the “***Escrow Note***”), to be held anddisbursed by the Deposit Escrow Agent in accordance with the terms of theDeposit Escrow Agreement.

          C.On May 19, 2005, the Deposit Escrow Agent released the Deposit Cash then in theescrow account established pursuant to the Deposit Escrow Agreement to theCompany.

          D.Pursuant to the Merger Agreement, on the Closing Date, the Deposit Escrow Agentis required, upon receipt of notice of the execution and delivery of thisAgreement, to (i) release the Deposit Shares and the Escrow Note to Purchaserfor cancellation, (ii) deposit any portion of the Prepayment Amount (as definedin the Merger Agreement) that has not previously been released to the Company,if any, into the escrow account established pursuant to this Agreement (the “***Holdback EscrowAccount***”).

          E.As of the date hereof, there is no Prepayment Amount in the escrow accountestablished pursuant to the Deposit Escrow Agreement.

          F.The Merger Agreement contemplates the establishment of the escrow arrangementcontemplated by this Agreement to (i) secure rights to indemnification,

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compensation and reimbursement of the Purchaser andMerger Sub under Article VII of the Merger Agreement, and (ii) provide forpayment of any Working Capital Adjustment (as defined in the Merger Agreement),to the extent set forth in Section 1.9 of the Merger Agreement.

          G.Pursuant to Section 1.17 of the Merger Agreement and Section 11.1 of thisAgreement, the Shareholder Representative has been irrevocably appointed toserve as the Shareholder Representative for, among other things, administrationof the provisions of Sections 1.9, 1.10 and Article VII of the Merger Agreement.

**AGREEMENT**

          Theparties, intending to be legally bound, agree as follows: 

1. **Defined Terms**.Capitalized terms used in this Agreement and not otherwise defined shall havethe meanings given to them in the Merger Agreement.

2. **Account**.

          2.1.**Holdback Escrow Account**. On thedate hereof Purchaser is depositing with the Escrow Agent (A) three hundredthousand dollars ($300,000) in cash (the “***Holdback Cash***”),and (B) 214,286 shares of Series B Preferred Stock of Purchaser (the “***Holdback Shares***”) having anaggregatevalue of one million two hundred thousand dollars ($1,200,000). The number ofHoldback Shares deposited in the Holdback Escrow Account at Closing may beadjusted upward or downward at Closing as a result of any Estimated Working Capital Adjustment; accordingly, the term“***Holdback Shares***” shall be deemed torefer to any such adjusted number of Holdback Shares deposited at Closing. AnyMerger Shares deposited at Closing as the result of any Estimated WorkingCapital Adjustment shall be deemed “***Additional Shares***.” The Holdback Shares and anyAdditional Shares shall be issued in the names of the Selling Parties inaccordance with the Distribution Percentages. The Escrow Agent agrees to acceptdelivery of the Holdback Cash, the Holdback Shares and any Additional Sharessubject to the terms and conditions of this Agreement.

          2.2.**Voting of the Holdback Shares**. Forso long as the Holdback Shares or any Additional Shares remain in the HoldbackEscrow Account, the Holdback Shares and any Additional Shares shall be voted bythe record holder thereof.

          2.3.**Dividends, Etc; Stock Splits**. 

                    (a)Any shares of Series B Preferred or Sunset Common distributable or issuable(whether by way of dividend, stock split or otherwise) in respect of or inexchange for any Holdback Shares or Additional Shares (including pursuant to oras a part of a merger, consolidation, acquisition of property or stock,reorganization or liquidation involving the Surviving Corporation) shall not bedistributed or issued to the beneficial owners of such Holdback Shares orAdditional Shares, but rather shall be distributed or issued to and held by theEscrow Agent in the Holdback Escrow Account. Any securities received by theEscrow Agent in respect of any Holdback Shares held in escrow as a result ofany stock split or combination of Holdback Shares held in the Holdback EscrowAccount, payment of a stock dividend or other stock distribution in or onHoldback Shares held in the Holdback Escrow Account or change of 

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any Holdback Shares into any other securities pursuantto or as a part of a merger, consolidation, acquisition of property or stock,reorganization or liquidation involving Purchaser or Surviving Corporation, orotherwise, shall be held by the Escrow Agent as, and shall be included withinthe definition of, Holdback Shares. Any cash dividends, dividends payable insecurities of third parties or other distributions of any kind made in respectof the Holdback Shares (the “***Income***”) will be delivered (net of any withholding orother taxes required to be paid or withheld by Escrow Agent) and held by theEscrow Agent in the Holdback Escrow Account. The Holdback Shares and any Incomethereon are referred to collectively herein as the **“*Holdback Collateral***.**”**

                    (b)All numbers contained in, and all calculations required to be made pursuant to,this Agreement with respect to the Holdback Shares shall be adjusted asappropriate to equitably reflect the effect of any stock split, reverse stocksplit, stock dividend or similar transaction effected by Purchaser after thedate hereof; *provided, however*,that the Escrow Agent shall have received notice of such stock split or otheraction and shall have received the appropriate number of additional shares ofSeries B Preferred, Sunset Common or other property, as applicable, pursuant tothis Section 2.3(b); and *provided, further*,that all calculations required to be made pursuant to this Agreement will bemade by Purchaser and/or the Shareholder Representative, as applicable. Unlessand until the Escrow Agent receives the certificates representing additionalshares of Series B Preferred, Sunset Common or other property, as applicable,pursuant to this Section 2.3(b), the Escrow Agent may assume without inquirythat no such stock or other property has been or is required to be issued withrespect to Holdback Shares. Purchaser undertakes to provide the Escrow Agentprompt notice of any stock split or other event contemplated by this Section2.3(b) and to take reasonable efforts to deliver to the Escrow Agent (whetherby instruction to the transfer agent of Purchaser or otherwise) thecertificates representing additional shares of Series B Preferred, SunsetCommon or other property, as applicable, contemplated by this Section 2.3(b). 

          2.4.**Security Interest in Holdback Escrow Account.**To the extent and so long as any Holdback Shares or Holdback Cash is held inthe Holdback Escrow Account hereunder, Purchaser shall have, and the SellingParties (through the Shareholder Representative) hereby grant, as of and fromthe date of this Agreement, a perfected, first-priority security interest inthe Holdback Shares and Holdback Cash to secure payment of (a) amounts, if any,payable to Purchaser or Merger Sub in respect of Article VII of the MergerAgreement and (b) the Working Capital Adjustment pursuant to Section 1.9 of theMerger Agreement. In connection therewith, each of the Selling Parties (throughthe Shareholder Representative) expressly agrees (y) that the Escrow Agent isacting as Purchaser’s agent to the extent necessary to perfect Purchaser’sfirst-priority security interest in the Holdback Shares and Holdback Cash, and(z) to execute and deliver such instruments as Purchaser may from time to timereasonably request for the purpose of evidencing and perfecting such securityinterest. 

          2.5.**Transferability.** The interests ofthe Selling Parties in the Holdback Cash and Holdback Shares shall not beassignable or transferable, other than by operation of law. No assignment ortransfer of any of such interests by operation of law shall be recognized orgiven effect until Purchaser and the Escrow Agent shall have received writtennotice of such assignment or transfer.

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          2.6.**Escrow Fund.** The Holdback Cash andHoldback Shares held in the Holdback Escrow Account shall be held as an escrowfund and shall not be subject to any lien, attachment, trustee process or anyother judicial process of any creditor of any Selling Party, Purchaser or ofany party hereto. The Escrow Agent shall hold and safeguard the Holdback EscrowAccount until the Termination Date (as defined below) or until the HoldbackCash and the Holdback Shares are released in accordance with this Agreement,provided that if, prior to the Termination Date, the Escrow Agent has receivedfrom Purchaser a Notice of Claim (as defined below) setting forth a claimtimely made under the Merger Agreement that has not been resolved by theTermination Date, then, upon receipt of written instructions signed by thePurchaser, the Escrow Agent shall hold and safeguard the Holdback EscrowAccount (and any remaining Holdback Cash and Holdback Shares) until the claimhas been resolved and all Holdback Cash and Holdback Shares have been releasedin accordance with this Agreement; *provided,however*, that the Escrow Agent shall not hold any portion of theHoldback Cash or Holdback Shares in respect of any such unresolved claim thatis required to be disbursed pursuant to Section 3.

          2.7.**Disposition of Holdback Shares**.The Escrow Agent may not exchange any Holdback Cash or Holdback Shares held byit for cash or any other security; *providedhowever*, (i) Purchaser may redeem any of the Holdback Shares inaccordance with the provisions of the Investor Rights Agreement attached asExhibit B to the MergerAgreement, and (ii) upon receipt of joint written instruction from the Companyand the record owner of the Holdback Shares in question, the Escrow Agent shallallow the conversion of the Holdback Shares into Sunset Common or the sale ofany shares Sunset Common in accordance with the terms of the Merger Agreement,the Investor Rights Agreement, and applicable state and federal securities laws(after receipt of an opinion of counsel to Purchaser that such sale ispermitted under such laws); provided that all shares of Sunset Common issuedupon any such exchange and the net proceeds (after broker’s commissions) fromthe sale of any Sunset Common are deposited in the Holdback Escrow Account andheld and/or distributed in accordance with the terms of this Agreement. 

3. **Release ofHoldback Cash for Working Capital Adjustment.**

          3.1.On the Closing Date, the Company shall deliver to Escrow Agent a copy of thecalculation of the Estimated Working Capital Adjustment. On or before thirty(30) days after the Closing Date, Purchaser shall deliver to the ShareholderRepresentative and the Escrow Agent a balance sheet dated as of the ClosingDate, prepared in accordance with GAAP consistently applied, along with acalculation of the Proposed Working Capital Adjustment which shall also specifythe distribution of the Holdback Cash and Holdback Collateral to Purchaser andthe Selling Parties that would result from such Proposed Working CapitalAdjustment pursuant to the terms of the Merger Agreement. Within twenty (20)Business Days following the Shareholder Representative’s receipt of suchProposed Working Capital Adjustment, the Shareholder Representative may deliverto the Purchaser and the Escrow Agent a written response (a “***Balance Sheet DisputeNotice***”) inwhich the Shareholder Representative disputes the Proposed Working CapitalAdjustment delivered by the Purchaser and the distribution of the Holdback Cashand the Holdback Collateral specified by Purchaser. If a Balance Sheet DisputeNotice is not delivered by the Shareholder Representative within such twenty(20) Business Day period, the Proposed Working Capital Adjustment shall bedeemed the Final Working Capital Adjustment and the Escrow Agent shall, uponreceipt of written instructions signed by the Purchaser and the ShareholderRepresentative, within five (5) Business Days following the

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 expiration of suchtwenty (20) Business Day period, deliver to the Purchaser and the ShareholderRepresentative Holdback Cash and Holdback Collateral as described in theProposed Working Capital Adjustment.

          3.2.  If the Shareholder Representative delivers aBalance Sheet Dispute Notice in a timely manner, upon receipt of writteninstructions signed by the Shareholder Representative, the Escrow Agent shallnot release any of the Holdback Cash or Holdback Collateral (other thanpursuant to Section 4 of this Agreement) until the earlier of (i) receipt ofjoint instructions from the Purchaser and the Shareholder Representative (the “***Working Capital JointInstructions***”)instructing the Escrow Agent to release the Holdback Cash and HoldbackCollateral to Purchaser or the Shareholder Representative, as the case may be,in specified amounts or (ii) receipt by the Escrow Agent of the Closing BalanceSheet and Final Working Capital Adjustment submitted by the IndependentAccountant retained by the parties which Closing Balance Sheet and FinalWorking Capital Adjustment may be relied upon by the Escrow Agent. ThePurchaser and the Shareholder Representative shall provide the Escrow Agentwith written notice of the identity of the Independent Accountant at the timesuch Independent Accountant is appointed pursuant to Section 1.9 of the MergerAgreement. Within five (5) Business Days of the receipt of the Working Capital Joint Instructions orthe Closing Balance Sheet and Final Working Capital Adjustment from theIndependent Accountant, upon receipt of written instructions signed by thePurchaser and the Shareholder Representative, the Escrow Agent shall deliverthe Holdback Cash and the Holdback Collateral to the Purchaser and theShareholder Representative in accordance with such instructions. 

          3.3.Within five (5) Business Days of the receipt of the Final Working CapitalAdjustment, to the extent that the Final Working Capital Adjustment differsfrom the Estimated Working Capital Adjustment (the difference being referred toas the “***Post-Closing Adjustment***”), thefollowing distributions of Holdback Cash and Holdback Collateral shall occur:

                    (a)to the extent that the Post-Closing Adjustment is negative (e.g. the WorkingCapital reflected on the Closing Balance Sheet is less than the Working Capitalreflected in the calculation of the Estimated Working Capital Adjustment),within five (5) Business Days following receipt of the Closing Balance Sheetand Final Working Capital Adjustment, the Escrow Agent shall, upon receipt ofwritten instructions signed by the Purchaser and the ShareholderRepresentative, cause the following to be released to the Purchaser: (1)Additional Shares, if any were issued and delivered to Escrow Agent at Closing,having an aggregate face value (determined in a manner consistent with Section1.8 of the Merger Agreement) equal to the amount of the Post-ClosingAdjustment, with any remaining Additional Shares being released to the SellingParties in accordance with the Distribution Percentages, (2) to the extentthat the negative Post-Closing Adjustment is greater than the face value of anyAdditional Shares, Holdback Cash in an amount equal to the amount by which thePost-Closing Adjustment exceeds the face value of the Additional Shares, withall but $300,000 of any remaining Holdback Cash (after payment of thePost-Closing Adjustment) being released to the Selling Parties in accordancewith the Distribution Percentages and (3) to the extent the Post-ClosingAdjustment is greater than the face value of any Additional Shares plus theHoldback Cash, Holdback Shares having an aggregate face value (determined in amanner consistent with Section 1.8 of the Merger Agreement) equal to the amountby which the Post-Closing Adjustment exceeds the face value of any AdditionalShares plus the Holdback Cash; or 

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                    (b)to the extent that the Post-Closing Adjustment is positive (e.g. the WorkingCapital reflected on the Closing Balance Sheet is greater than the WorkingCapital reflected in the calculation of the Estimated Working CapitalAdjustment), within five (5) Business Days following receipt of the FinalWorking Capital Adjustment (1) the Escrow Agent shall cause Additional Shares,if any were issued and delivered to Escrow Agent at Closing, to be released tothe Selling Parties in accordance with the Distribution Percentages, (2) theEscrow Agent shall cause all but $300,000 of the Holdback Cash to be releasedto the Selling Parties in accordance with the Distribution Percentages, and (3)the Purchaser shall issue and deliver to the Selling Parties additional MergerShares (in accordance with the Distribution Percentages) as provided in Section1.9 d. (ii) of the Merger Agreement. Notwithstanding anything to the contrarycontained in this Agreement, in no event shall the Final Working Capital Adjustment,if positive, be greater than $1,000,000. 

          3.4.All calculations required to be made pursuant to this Agreement shall be madeby the Purchaser and/or the Shareholder Representative, as applicable, and notby the Escrow Agent, whose responsibility shall be limited to responding towritten instructions as set forth herein with respect to specific amounts.

4. **Release ofHoldback Shares to Purchaser to Satisfy Claims for Damages**.

          4.1.If Purchaser is of the opinion that any Purchaser Claim has occurred, Purchasermay, on or prior to the date that is the first Business Day following the oneyear anniversary of the Closing (the “***Termination Date***”), deliver a claim notice (a “***Notice ofClaim***”)to the Shareholder Representative (with a copy to the Escrow Agent). EachNotice of Claim shall describe with reasonable specificity the nature andamount of such asserted Purchaser Claim and shall request a disbursement ofHoldback Cash and Holdback Collateral from the Holdback Escrow Account having afair market value (valued in accordance with Section 4.6 herein) equal to theamount of the Purchaser Claim (the “***Claimed Amount***”).

          4.2.Within thirty (30) days after the Shareholder Representative’s receipt of aNotice of Claim, the Shareholder Representative may deliver to the Purchaser(with a copy to the Escrow Agent) a written response (the “***Response Notice***”)in which the Shareholder Representative: (a) agrees that the Holdback Cash andthe Holdback Collateral having a combined value (valued in accordance withSection 4.6 herein) equal to the full Claimed Amount may be released to thePurchaser; (b) agrees that Holdback Cash and Holdback Collateral having acombined value (valued in accordance with Section 4.6 herein) equal to part, butnot all, of the Claimed Amount (the “***Agreed Amount***”)may be released from the Escrow Account to the Purchaser; or (c) indicates thatno part of the Holdback Cash or the Holdback Collateral may be released to thePurchaser in respect of the Claimed Amount. Any part of the Claimed Amount thatis not agreed to be released to the Purchaser in accordance with the precedingsentence pursuant to the Response Notice shall be the “***Contested Amount.***” If a Response Notice is notdelivered to the Purchaser (with a copy to Escrow Agent) within such 30-dayperiod, then the Shareholder Representative shall be conclusively deemed tohave agreed that the full Claimed Amount may be released to the Purchaser fromthe Holdback Cash and Holdback Collateral in the Holdback Escrow Account. 

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          4.3.If the Shareholder Representative delivers a Response Notice agreeing that thefull Claimed Amount may be released from the Holdback Cash and HoldbackCollateral in the Holdback Escrow Account to the Purchaser, or if the ShareholderRepresentative does not deliver a Response Notice on a timely basis inaccordance with Section 4.2, the Escrow Agent shall within five (5) BusinessDays following the receipt of such Response Notice (or, if the Escrow Agent hasnot received a Response Notice, within five Business Days following theexpiration of the 30-day period referred to in Section 4.2), and upon receiptof written instructions signed by the Purchaser, deliver to the Purchaser outof the Holdback Escrow Account, Holdback Cash and Holdback Collateral having acombined value (valued in accordance with Section 4.6 herein) equal to theClaimed Amount. 

          4.4.If the Shareholder Representative delivers a Response Notice indicating that anAgreed Amount may be released from the Escrow Account to the Purchaser, theEscrow Agent shall, within five Business Days following the receipt of suchResponse Notice, deliver to the Purchaser Holdback Cash and Holdback Collateralhaving a combined value (valued in accordance with Section 4.6 herein) in anamount equal to the applicable Agreed Amount. Such delivery shall not be deemedto be made in full satisfaction of the Purchaser Claim described in such Noticeof Claim, but shall count toward the satisfaction of the Purchaser Claimdescribed in such Notice of Claim.

          4.5.If the Shareholder Representative delivers a Response Notice indicatingthat there is a Contested Amount, the Escrow Agent shall hold Holdback Cash andHoldback Collateral having an aggregate fair market value (valued in accordancewith Section 4.6 herein) equal to the Contested Amount until the earlier ofreceipt by the Escrow Agent of (i)joint instructions from Purchaser and the Shareholder Representative (the “***Escrow JointInstructions***”) instructing theEscrow Agent to release Holdback Cash and Holdback Collateral to the SellingParties and/or the Purchaser in satisfaction of the Purchaser Claim asserted inthe Notice of Claim and specifying the amount of Holdback Cash and HoldbackCollateral to be released to the Selling Parties and the amount and number tobe released to Purchaser in satisfaction of the Purchaser Claim, or (ii)receipt by Escrow Agent of a final, non-appealable award of any court orarbitrator having jurisdiction over the matter specifying the amount ofHoldback Cash and Holdback Collateral to be released to Purchaser insatisfaction of the Purchaser Claim specified in the Notice of Claim orspecifying that Purchaser has no right to such Holdback Cash and HoldbackCollateral (a “***Final Award***”). Upon the Escrow Agent’s receipt of the Escrow Joint Instructions orthe Final Award, the Escrow Agent shall disburse the Holdback Cash and HoldbackCollateral, or a portion thereof, under the terms of the Escrow JointInstructions or Final Award.

          4.6.For the purposes of this Agreement, the cash and securities held by EscrowAgent in the Holdback Escrow Account shall be valued as follows: (i) allHoldback Shares held by the Escrow Agent in the Holdback Escrow Account shallbe valued at $1,200,000 in the aggregate at the time of deposit with the EscrowAgent; (ii) all shares of Sunset Common issued upon the conversion of HoldbackShares shall be valued at the face value of the Holdback Shares so converted;and (iii) all cash (including interest earned thereon) received upon the saleof any Sunset Common or as a result of the payment of any dividends byPurchaser on any Holdback Shares in the Holdback Escrow Account shall be valuedat its face amount. 

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          4.7.Any release of Holdback Cash and Holdback Shares in satisfaction of anyPurchaser Claim shall be made proportionately to the amount of Holdback Cashand Holdback Shares then in the Holdback Escrow Account (e.g. solely by way of example, if there was$300,000 of Holdback Cash and $1,200,000 of Holdback Shares, 20% of thePurchaser Claim would be paid in Holdback Cash and 80% of the Purchaser Claimwould be paid in Holdback Shares); provided, however, any Purchaser Claimresulting from Dissenter Claims shall be paid first out of any Holdback Cash.To the extent that any of the Holdback Cash or Holdback Collateral is requiredto be retained in the Holdback Escrow Account subsequent to the Release Date, the retained amount shall be madeproportionately to the amount of Holdback Cash and Holdback Shares then in the HoldbackEscrow Account.

          4.8.Notwithstanding anything herein to the contrary, if the Escrow Agent isrequired pursuant to this Agreement to release Holdback Shares in denominationsother than in denominations represented by the certifcate(s) held by the EscrowAgent, the Escrow Agent shall deliver the certificate(s) representing theHoldback Shares to the Purchaser’s transfer agent in exchange for certificatesrepresenting (a) such number of shares as it is required to release and (b)such number of shares as it is required to hold as Holdback Shares after suchrelease.

5. **Release ofHoldback Escrow Account**.

          5.1.On the second Business Day following the twelve (12) month anniversary of theClosing Date (the “***Release Date***”),the Escrow Agent shall automatically, upon written request by the ShareholderRepresentative and with no written notice from the Purchaser, distribute orcause to be distributed to the Shareholder Representative, for the benefit ofthe Selling Parties, all of the Holdback Cash and Holdback Collateral remainingin the Holdback Escrow Account; *provided,however*, that if prior to the Release Date, Purchaser has timelygiven a Notice of Claim containing a claim which has not been resolved prior tothe Termination Date in accordance with the Merger Agreement and the proceduresin Section 4 of this Agreement, Escrow Agent shall retain in the HoldbackEscrow Account after the Release Date Holdback Cash and Holdback Collateralcollectively having a value (valued in accordance with Section 4.6 above) equalto the amount necessary to satisfy any unsatisfied claims specified in anyNotice of Claim theretofore delivered to the Escrow Agent prior to the ReleaseDate, which Holdback Cash and Holdback Collateral shall remain in the HoldbackEscrow Account until such claims have been resolved. Any Holdback Cash andHoldback Collateral so retained shall be retained from the respective SellingParties in amounts determined on a pro rata basis based on their respective DistributionPercentages.

          5.2.The Escrow Agent shall automatically, upon written request by the ShareholderRepresentative and with no written notice from Purchaser, distribute to theShareholder Representative, for the benefit of the Selling Parties, all of theHoldback Collateral on the Release Date, less any amount of Holdback Collateralrequired to be retained pursuant to Section 6.1.

          5.3. The Escrow Agent shall provide a written accountto Purchaser and the Shareholder Representative at the end of each calendarquarter (beginning with the quarter ended December 31, 2005) prior to theTermination Date (and thereafter to the extent any amounts 

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remain in the Holdback Escrow Account pursuant to thisAgreement) listing any transactions with respect to the Holdback Escrow Accountduring the immediately preceding quarter.

6. **Fees and Expenses**.

          6.1.The Escrow Agent shall be entitled to receive from time to time fees inaccordance with **Exhibit A**. Inaccordance with **Exhibit A**, theEscrow Agent will also be entitled to reimbursement for reasonable anddocumented out-of-pocket expenses incurred by the Escrow Agent in theperformance of its duties hereunder and the execution and delivery of thisAgreement. Any fees and expenses shall be paid out of the Holdback Cash, as maybe directed by the Escrow Agent from time to time consistent with **Exhibit A**.

7. **Limitation ofEscrow Agent’s Liability**.

          7.1.Anything contained herein to the contrary notwithstanding, the Escrow Agentundertakes to perform such duties as are specifically set forth in writteninstructions delivered pursuant to this Agreement only and shall have no dutyunder any other agreement or document, and no implied covenants or obligationsshall be read into this Agreement against the Escrow Agent. The Escrow Agentshall incur no liability with respect to any action taken by it or for anyinaction on its part in reliance upon any notice, direction, instruction,consent, statement or other document believed by it in good faith to be genuineand duly authorized, nor for any other action or inaction except for its owngross negligence or willful misconduct. In all questions arising under thisAgreement, the Escrow Agent may rely on the advice of counsel, and for anythingdone, omitted or suffered in good faith by the Escrow Agent based upon suchadvice the Escrow Agent shall not be liable to anyone. In no event shall theEscrow Agent be liable for incidental, punitive or consequential damages.

          7.2.Purchaser, the Company, the Shareholder Representative and the Selling Parties(through the Shareholder Representative, acting on behalf of the SellingParties) hereby agree to indemnify the Escrow Agent and its officers,directors, employees and agents for, and hold it and them harmless against, anyloss, liability or expense incurred without gross negligence or willfulmisconduct on the part of Escrow Agent, arising out of or in connection withthe Escrow Agent carrying out its duties hereunder; *provided, however*, that promptly after the receipt by theEscrow Agent of notice of any claim or commencement of any suit, action orproceeding, the Escrow Agent shall, if a claim of indemnification in respectthereof is to be made against any of the other parties hereto or beneficiarieshereof, notify such other parties (or, in the case of the Selling Parties, theShareholders’ Representative); and *provided,further*, that the indemnifying party or parties shall be entitled,upon the consent of the Escrow Agent, which consent shall not be withheld forany reason other than the reasonable belief by the Escrow Agent that suchindemnifying party does not have sufficient assets to defend such claim,jointly or severally and at their own expense, to participate in or assume thedefense of any such action, suit or proceeding. This right of indemnification,compensation and reimbursement shall survive the termination of this Agreement,and the resignation of the Escrow Agent.

8. **Termination**.This Agreement shall terminate on the Release Date or, if earlier, upon therelease by the Escrow Agent of the entire amount of the Holdback Cash andHoldback Collateral in accordance with this Agreement; *provided, however*, that if the EscrowAgent has received 

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from the Shareholder Representative a Balance SheetDispute Notice, or from Purchaser a Notice of Claim, in any case setting fortha claim that has not been resolved by the Release Date, and such Balance SheetDispute Notice or Notice of Claim was timely given and was received by EscrowAgent prior to the Termination Date, then this Agreement shall continue in fullforce and effect until the claim has been resolved by either joint agreement orcourt order and all amounts in the Holdback Escrow Account released inaccordance with this Agreement.

9. **Successor EscrowAgent**. In the event the Escrow Agent becomes unavailable orunwilling to continue as escrow agent under this Agreement, the Escrow Agentmay resign and be discharged from its duties and obligations hereunder bygiving its written resignation to the parties to this Agreement. Suchresignation shall take effect not less than thirty (30) days after it is givento all parties hereto. In such event, the Shareholder Representative andPurchaser may appoint a successor escrow agent. If the ShareholderRepresentative and Purchaser fail to appoint a successor escrow agent withinfifteen (15) days after receiving the Escrow Agent’s written resignation, theEscrow Agent shall have the right to apply to a court of competent jurisdictionfor the appointment of a successor escrow agent. The successor escrow agentshall execute and deliver to the Escrow Agent an instrument accepting suchappointment, and the successor escrow agent shall, without further acts, bevested with all the estates, property rights, powers and duties of thepredecessor Escrow Agent as if originally named as Escrow Agent herein. TheEscrow Agent shall act in accordance with joint written instructions from theShareholder Representative and Purchaser as to the transfer of the Holdback EscrowAccount to a successor escrow agent.

10. **ShareholderRepresentative**. As provided in the Merger Agreement, the SellingParties shall be deemed to have approved the appointment of IBF FundLiquidating LLC as the Shareholder Representative, to give and receive noticesand communications, to object to such deliveries, to agree to, negotiate, enterinto settlements and compromises of, and comply with orders of courts withrespect to claims of Purchaser hereunder, and to take all actions necessary orappropriate in the reasonable judgment of the Shareholder Representative forthe accomplishment of the foregoing.

11. **Holdback Cash;Purchaser**. With respect to the release of any amount of HoldbackCash payable to Purchaser pursuant to the terms and conditions of thisAgreement, Purchaser hereby instructs the Escrow Agent, and Escrow Agentagrees, to release such Holdback Cash to CapitalSource Finance LLC via wiretransfer at the following account:

 

 

 

 

Bank:

Bank of America, NY

 

ABA:

026009593

 

Account:

003930250176

 

Account Name:

CapitalSource Finance LLC

 

Ref:

Sunset Brands

12. **Miscellaneous**.

          12.1.**Attorneys’ Fees**. In any action atlaw or suit in equity to enforce or interpret this Agreement or the rights ofany of the parties hereunder, the prevailing party in such action or suit shallbe entitled to receive a reasonable sum for its attorneys’ fees and all otherreasonable costs 

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and expenses incurred in such action or suit.

          12.2.**Notices**. Any notice or othercommunication required or permitted to be delivered to any party under thisAgreement shall be in writing and shall be deemed properly delivered, given andreceived (a) when delivered by hand, or (b) two (2) business days after sent byregistered mail, or (c) one (1) business day after sent by courier or expressdelivery service, or (d) upon electronic confirmation of receipt after sent byfacsimile, to the address or facsimile telephone number set forth below (or tosuch other address or facsimile telephone number as such party shall havespecified in a written notice given to the other parties hereto):

 

 

 

 

 

**If to Purchaser:**

 

Sunset Brands, Inc.

 

 

 

10990 Wilshire Boulevard

 

 

 

Suite 1220

 

 

 

Los Angeles, California 90024

 

 

 

Attention: Chief Executive Officer

 

 

 

Fax: (310) 478–4601

 

 

 

 

 

With a copy to:

 

Hodgson Russ LLP

 

 

 

60 East 42nd Street, 37th  Floor

 

 

 

New York, NY 10165

 

 

 

Attention: Jeffrey A. Rinde

 

 

 

Telephone: (212) 661-3535

 

 

 

Facsimile: (212) 972-1677

 

 

 

 

 

**If to the Shareholder**

 

 

 

**Representative:**

 

 

 

 

 

IBF Fund Liquidating LLC

 

 

 

c/o Kaye Scholer LLP

 

 

 

425 Park Avenue

 

 

 

New York, New York 10022

 

 

 

Attention: Arthur J. Steinberg, Manager

 

 

 

Fax: (212) 836-8564

 

 

 

 

 

With a copy to:

 

Kaye Scholer LLP

 

 

 

425 Park Avenue

 

 

 

New York, NY 10022

 

 

 

Attention: Emanuel S. Cherney, Esq.

 

 

 

Fax: (212) 836-7152

 

 

 

 

 

**If to the Company:**

 

U.S. Mills, Inc.

 

 

 

200 Reservoir Street

 

 

 

Needham, MA 02494-3146

 

 

 

Attention: President

 

 

 

Fax: (781) 444-3411

 

 

 

 

 

**If to Escrow Agent:**

 

Continental Stock Transfer and Trust Company 

 

 

 

17 Battery Place

11

 

 

 

 

 

 

 

New York, NY 10004

 

 

 

Attention: Compliance Department

 

 

 

Telephone: (212) 509-4000

 

 

 

Telecopier: (212) 616-7616

The Escrow Agent may assume that any Notice of Claim,Response Notice or other notice of any kind required to be delivered to theEscrow Agent and any other Person has been received by such other Person on thedate it has been received by the Escrow Agent, but the Escrow Agent need notinquire into or verify such receipt.

          12.3.**Headings**. The bold-faced headingscontained in this Agreement are for convenience of reference only, shall not bedeemed to be a part of this Agreement and shall not be referred to inconnection with the construction or interpretation of this Agreement.

          12.4.**Counterparts**. This Agreement maybe executed in several counterparts, each of which shall constitute an originaland all of which, when taken together, shall constitute one agreement.

          12.5.**Applicable Law; Jurisdiction**. ThisAgreement shall be governed by and construed in accordance with the laws of NewYork that might otherwise govern under applicable principles of conflicts oflaw. Each of the parties hereto irrevocably consents to the exclusivejurisdiction of (a) the Supreme Court of the State of New York, New YorkCounty, and (b) the United States District Court for the Southern District ofNew York, for the purposes of any Action arising out of this Agreement, anyrelated document or certificate or any transaction contemplated hereby orthereby. Each of the parties hereto agrees to commence any Action relatinghereto either in the United States District Court for the Southern District ofNew York or if such Action may not be brought in such court for jurisdictionalreasons, in the Supreme Court of the State of New York, New York County. Eachof the parties hereto further agrees that service of any process, summons,notice or document by U.S. registered mail to such party’s respective addressset forth in Section 12.2 shall be effective service of process for any Actionin New York with respect to any matters to which it has submitted tojurisdiction in this Section 12.5. Each of the parties hereto irrevocably andunconditionally waives any objection to the laying of venue of any Actionarising out of this Agreement, or any transaction contemplated hereby in (i)the Supreme Court of the State of New York, New York County, or (ii) the UnitedStates District Court for the Southern District of New York, and hereby furtherirrevocably and unconditionally waives and agrees not to plead or claim in anysuch court that any such Action brought in any such court has been brought inan inconvenient forum.

          12.6.**Successors and Assigns**. ThisAgreement shall be binding upon and shall inure to the benefit of each of theparties hereto and each of their respective permitted successors, assigns,heirs and legatees, if any. 

          12.7.**Waiver**. No failure on the part ofany Person to exercise any power, right, privilege or remedy under thisAgreement, and no delay on the part of any Person in exercising any power,right, privilege or remedy under this Agreement, shall operate as a waiver ofsuch power, right, privilege or remedy; and no single or partial exercise ofany such power, right, privilege or remedy shall preclude any other or furtherexercise thereof or of any other power,

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 right, privilege or remedy. No Personshall be deemed to have waived any claim arising out of this Agreement, or anypower, right, privilege or remedy under this Agreement,unless the waiver of such claim, power, right, privilege or remedy is expresslyset forth in a written instrument duly executed and delivered on behalf of suchPerson; and any such waiver shall not be applicable or have any effect except inthe specific instance in which it is given.

          12.8.**Amendment**. This Agreement may notbe amended, modified, altered or supplemented other than by means of a writteninstrument duly executed and delivered on behalf of all of the parties hereto; *provided, however*, that any amendmentexecuted and delivered by the Shareholder Representative shall be deemed tohave been approved by and duly executed and delivered by all of the SellingParties. Furthermore, Section 11 of this Agreement shall not be amended,modified, altered or supplemented other than by means of a written instrumentduly executed and delivered by CapitalSource Finance LLC.

          12.9.**Severability**. In the event thatany provision of this Agreement, or the application of any such provision toany person or set of circumstances, shall be determined to be invalid,unlawful, void or unenforceable to any extent, the remainder of this Agreement,and the application of such provision to persons or circumstances other thanthose as to which it is determined to be invalid, unlawful, void orunenforceable, shall not be impaired or otherwise affected and shall continueto be valid and enforceable to the fullest extent permitted by law.

          12.10.**Parties in Interest**. Except asexpressly provided herein, none of the provisions of this Agreement, express orimplied, is intended to provide any rights or remedies to any Person other thanthe parties hereto and their respective successors and assigns, if any.

          12.11.**Entire Agreement**. This Agreement,the Merger Agreement and the other agreements referred to herein and thereinset forth the entire agreement among the parties hereto with respect to thesubject matter hereof and thereof and supersede all prior agreements andunderstandings, both written and oral, among or between any of the parties withrespect to the subject matter hereof and thereof.

          12.12.**Waiver of Jury Trial**. Each of theparties hereto hereby irrevocably waives any and all right to trial by jury inany action arising out of or related to this Agreement or the transactionscontemplated hereby.

          12.13.**Cooperation**. Each of the partieshereto agrees to cooperate fully with the other parties to this Agreement andto execute and deliver such further documents, certificates, agreements andinstruments and to take such other actions as may be reasonably requested bythe other parties hereto in order to evidence or reflect the transactionscontemplated by this Agreement and to carry out the intent and purposes of thisAgreement.

          12.14.**Construction**.

                    (a)For purposes of this Agreement, whenever the context requires: the singularnumber shall include the plural, and vice versa; the masculine gender shallinclude the feminine and neuter genders; the feminine gender shall include themasculine and neuter genders; and the neuter gender shall include masculine andfeminine genders.

13

                    (b)The parties hereto agree that any rule of construction to the effect thatambiguities are to be resolved against the drafting party shall not be appliedin the construction or interpretation of this Agreement.

                    (c)As used in this Agreement, the words “***include***” and “***including,***” and variationsthereof, shall not be deemedto be terms of limitation, but rather shall be deemed to be followed by thewords “***without limitation.***”

                    (d)Except as otherwise indicated, all references in this Agreement to “***Sections***” and“***Exhibits***” areintended to refer to Sections of this Agreement and Exhibits to this Agreement.

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          INWITNESS WHEREOF, the parties hereto have caused this Agreement to be executedas of the date first above written.

 

 

 

 

“***Purchaser***”

 

 

 

SUNSET  BRANDS, INC., a Nevada corporation

 

 

 

 

By

/s/ Todd Sanders

 

 

 

 

     Name:  Todd Sanders

 

 

     Title:  President & CEO

 

 

 

 

 

 

“***Company***”

 

 

 

U.S. MILLS,  INC., a Delaware corporation

 

 

 

 

By

/s/ Todd Sanders

 

 

 

 

     Name:  Todd Sanders

 

 

     Title:  CEO

 

 

 

By

/s/ Charles Verde

 

 

 

 

     Name:  Charles Verde

 

 

     Title: President

 

 

 

 

 

 

 

 

“***Shareholder  Representative***”

 

 

 

IBF FUND  LIQUIDATING LLC

 

 

 

 

By:

/s/  Arthur J. Steinberg

 

 

 

      Arthur  J. Steinberg, Manager

 

 

 

 

 

 

“***Escrow Agent***”

 

 

 

CONTINENTAL  STOCK TRANSFER AND TRUST COMPANY 

 

 

 

 

By

/s/ R. Bernhammer

 

 

 

 

     Name: R. Bernhammer

 

 

     Title: Vice President

15