**JUNIORINTELLECTUAL PROPERTY SECURITY AGREEMENT**

                    ThisJunior Intellectual Property Security Agreement (as amended, supplemented orotherwise modified from time to time, this “IP Security Agreement”) ismade and effective as of November 10, 2005, by SUNSET BRANDS, INC., a Nevadacorporation (“Sunset”) and U.S. MILLS, INC., a Delaware corporation (“USMills”, and collectively with Sunset, the “Grantor”), in favor ofIBF FUND LIQUIDATING LLC, a Delaware limited liability company, as holder ofthe Convertible Debentures (defined below) (the “Debenture Holder”).Capitalized terms used in this IP Security Agreement and not otherwise definedshall have the respective meanings ascribed to such terms in the SecurityAgreement (defined below).

**RECITALS**

                    **WHEREAS,** pursuant to that certain Amended and Restated Acquisition Agreement and Plan ofMerger dated as of the date hereof (as amended, restated, supplemented orotherwise modified from time to time, the “Acquisition Agreement”) byand among Grantor, USM Acquisition Sub, Inc. and the Debenture Holder, Sunsetwill acquire US Mills by merger the “Acquisition”);

                    **WHEREAS,** pursuant to the terms of the AcquisitionAgreement, Sunset shall issue to the Debenture Holder Secured ConvertibleDebentures dated the date hereof in the aggregate original principal amount of$5,000,000 (as such may be replaced, substituted or reissued from time to timein accordance with its terms, collectively, the “Convertible Debentures”)which are convertible into the common stock of Sunset, as payment of a portionof the consideration for the Acquisition; 

                    **WHEREAS,** it is a condition precedent to the agreement of the Debenture Holder to acceptthe Convertible Debentures as a portion of the consideration for theAcquisition that Grantor shall have executed and delivered this IP SecurityAgreement to the Debenture Holder; and

                    **WHEREAS,**Grantor is party to that certainJunior Security Agreement dated as of the date hereof (as amended, restated,supplemented or otherwise modified from time to time, the “SecurityAgreement”), by and among Grantor and the Debenture Holder.

                    **NOW, THEREFORE,** in consideration of the willingness of the Debenture Holder toaccept the Convertible Debentures as a portion of the consideration for theAcquisition, and for other good and valuable consideration, the receipt andsufficiency of which are hereby acknowledged, it is hereby agreed as follows:

          1.Grant of Security Interest. To secure the Grantor’s prompt, punctual andfaithful payment of the Obligations and the performance of all of the Grantor’sobligations under the Security Agreement, Grantor hereby grants to theDebenture Holder a continuing security interest in all of the right, title andinterest of Grantor in and to any and all of the following collateral, whethernow owned or hereafter acquired, but excluding any Intellectual Property forwhich the granting of a security interest therein would terminate, invalidate,void, cancel or abandon such Intellectual Property (the “IP Collateral”):

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                    (a)  The U.S and foreign copyrights, associated copyright registrations and applications  for copyright registration, set forth on Schedule A attached hereto (collectively,  the “Copyrights”);

                    (b)The U.S. and foreign patents and patent applications set forth on Schedule B attached hereto, including, without limitation, divisions, continuations,renewals, reissues, extensions and continuations-in-part of the same(collectively, the “Patents”);

                    (c)The U.S., state and foreign trademark and service mark registrations, trademarkand service mark applications set forth on Schedule C attached heretoand all goodwill associated with the foregoing (collectively, the “Trademarks”);

                    (d)The domain names and registrations set forth on Schedule D attachedhereto and all goodwill associated with the foregoing (collectively, the “DomainNames”);

                    (e)Any and all claims and causes of action for past, present or futureinfringement of any of the IP Collateral, with the right, but not theobligation, to sue for and collect damages for infringement of the IPCollateral; 

                    (f)Any and all licenses or rights granted under any of the IP Collateral, and alllicense fees and royalties arising from such licenses or rights, in each caseto the extent permitted by such licenses or rights; 

                    (g)Any and all amendments, renewals, extensions, reissuances and replacements ofany of the IP Collateral; and

                    (h)Any and all products and proceeds of any of the foregoing.

          2.Requested Recordation. Grantor authorizes and requests that the Registerof Copyrights and the Commissioner of Patents and Trademarks (and any state,foreign or other authority to which this IP Security Agreement is submitted)file and record this IP Security Agreement (and any corresponding or separateforms of such jurisdiction) in order to publicly reflect the interests of theDebenture Holder in the IP Collateral.

          3.Assignment. Upon the occurrence and during the continuance of an Event ofDefault, Grantor shall execute and deliver to the Debenture Holder an absoluteassignment transferring its entire right, title, and interest in and to the IPCollateral to the Debenture Holder.

          4.Power of Attorney. Grantor hereby irrevocably grants to the DebentureHolder, a power of attorney, to act as Grantor’s attorney-in-fact, with fullauthority in the name, place and stead of Grantor, from time to time in theDebenture Holder’s discretion, to take any action and to execute any instrumentthat the Debenture Holder may reasonably deem necessary or advisable to accomplishthe purposes of this IP Security Agreement.This authority includes, without limitation, the following:

 

 

 

          (a)  To modify or amend (in the sole discretion of the Debenture Holder and  without first obtaining Grantor’s approval thereof or signature thereto)  Schedule A, Schedule B, Schedule C, and/or Schedule D hereof, as appropriate,  to include references

 

 

 

to any registered intellectual property (or  application or license therefor) acquired by Grantor after the execution  hereof or to delete any reference to any IP Collateral in which Grantor no  longer has or claims any right, title or interest;

 

 

 

          (b)  To execute, file and pursue (in the sole discretion of the Debenture Holder  and without first obtaining Grantor’s approval thereof or signature thereto,  unless otherwise prohibited by applicable law) any application, form or other  document in order to perfect, maintain, continue or otherwise protect the  Debenture Holder’s interest or Grantor’s rights in the IP Collateral, including,  without limitation, executing and filing (i) any financing statement, any  continuation statement or any amendment thereto, and (ii) any document in any  proceeding before the United States Patent and Trademark Office, the United  States Copyright Office or the relevant office of any state or foreign  jurisdiction (including, without limitation, the filing of applications for  renewal, affidavits of use, affidavits of incontestability and opposition,  interference and cancellation proceedings) and to pay any fees and taxes in  connection therewith or otherwise; 

 

 

 

          (c)  To execute any document required to acknowledge, register or perfect the  interest of the Debenture Holder in any part of the IP Collateral without the  signature of Grantor unless prohibited by applicable law; and

 

 

 

          (d)  Upon the occurrence and during the continuation of an Event of Default, to  (i) endorse the Grantor’s name on all applications, documents, papers and  instruments necessary or desirable for the Debenture Holder in the use of the  IP Collateral, (ii) take any other actions with respect to the IP Collateral  as the Debenture Holder deems to be in the best interest of the Debenture  Holder, (iii) grant or issue any exclusive or non-exclusive license under the  IP Collateral to anyone or (iv) assign, pledge, convey or otherwise transfer  title in or dispose of the IP Collateral to anyone.

The foregoing power of attorney is coupled with aninterest and is irrevocable until the obligations secured hereby have been unconditionallyand indefeasibly paid or performed in full and the Security Agreement has beenterminated (except for any obligations designated under the Security Agreementas continuing on an unsecured basis).

          5.Release. Unless otherwise agreed in writing by the parties, the securityinterests granted herein will terminate (and all rights to the IP Collateralwill revert to the Grantor) upon satisfaction of the following conditions:  (a)  payment and performance infull of all the Obligations secured hereby (unconditionally and indefeasibly)and (b) the termination of the Security Agreement (except for any obligationsdesignated under the Security Agreement as continuing on an unsecuredbasis).  Upon any such termination, theDebenture Holder (at the Grantor’s request and sole expense) will promptlyexecute and deliver to the Grantor (without any representation, warranty orrecourse of any kind whatsoever) such documents as the Grantor may reasonablyrequest and as are provided to the Debenture Holder to evidence suchtermination.

          6.Newly Registered Copyrights, Patents and Trademarks. Grantor herebyagrees to provide the Debenture Holder, every three (3) months, a schedule ofnewly registered

Copyrights, Patents and Trademarks (if any).

          7.Miscellaneous.

 

 

 

          (a)  This IP Security Agreement has been entered into in conjunction with the  provisions of and the security interest granted to the Debenture Holder under  the Security Agreement.  The rights  and remedies of the Grantor and the Debenture Holder with respect to the  security interests granted herein are in addition and without prejudice to  those set forth in the Security Agreement, all terms and provisions of which  are hereby incorporated herein by reference.  In the event that any provisions of this IP Security Agreement are  deemed to conflict with the Security Agreement or the other Acquisition  Documents, the provisions of the Security Agreement or the other Acquisition  Documents shall govern.

 

 

 

          (b)  This IP Security Agreement may be executed in any number of counterparts with  the same effect as if all the signatures on such counterparts appeared on one  document.  Each such counterpart will  be deemed to be an original, but all counterparts together will constitute  one and the same instrument.

          8.Subordination.

THE LIENS IN THE IP COLLATERAL GRANTED HEREIN ARESUBORDINATED TO THE LIENS IN THE IP COLLATERAL GRANTED TO CAPITALSOURCE FINANCELLC IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN MASTERSUBORDINATION AND INTERCREDITOR AGREEMENT, DATED AS OF THE DATE HEREOF, AMONGSUNSET BRANDS, INC., U.S. MILLS, INC., IBF FUND LIQUIDATING LLC, THE DEBENTUREHOLDER AND CAPITALSOURCE FINANCE LLC.

THE LIENS IN THE IP COLLATERAL GRANTED HEREIN ARE SUBORDINATEDTO THE LIENS IN THE IP COLLATERAL GRANTED TO IBF FUND LIQUIDATING LLC IN THEMANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN JUNIOR SUBORDINATION ANDINTERCREDITOR AGREEMENT, DATED AS OF THE DATE HEREOF, AMONG SUNSET BRANDS,INC., U.S. MILLS, INC., IBF FUND LIQUIDATING LLC AND THE DEBENTURE HOLDER.

***[Remainder of PageIntentionally Blank; Signature Page Follows]***

                    **INWITNESS WHEREOF,** the parties hereto haveexecuted this IP Security Agreement as of the date first written above.

 

 

 

 

 

**GRANTOR:**

 

 

 

**SUNSET  BRANDS, INC.**

 

 

 

By: /s/  Todd Sanders

 

 

 

 

 

Name: Todd Sanders

 

Title: President & CEO 

 

 

 

**U.S. MILLS,  INC.**

 

 

 

By: /s/  Todd Sanders

 

 

 

 

 

Name: Todd Sanders

 

Title: CEO 

 

 

 

By: /s/  Charles Verde

 

 

 

 

 

Name: Charles Verde

 

Title: President

 

 

 

**DEBENTURE  HOLDER:**

 

 

 

**IBF  FUND LIQUIDATING LLC**

 

 

 

By:

  /s/ Arthur J. Steinberg

 

 

 

 

Name: Arthur J. Steinberg

 

Title: Manager