SECURITY AGREEMENT

between

SUNSET BRANDS, INC.
U.S. MILLS, INC.

and

IBF FUND LIQUIDATING LLC

Dated as of 
November 10, 2005

i

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SECURITY AGREEMENT

TABLE OF CONTENTS

PageI.
  DEFINITIONS
  11.1
  General Terms
  1II.
  PAYMENTS AND COLLATERAL
  22.1
  Intentionally Omitted
  22.2
  Intentionally Omitted
  22.3
  Intentionally Omitted
  22.4
  Intentionally Omitted
  22.5
  Intentionally Omitted [moved to Section 2.16]
  22.6
  Intentionally Omitted
  22.7
  Intentionally Omitted
  22.8
  Intentionally Omitted
  22.9
  Intentionally Omitted
  22.10
  Intentionally Omitted
  22.11
  Intentionally Omitted [moved to Section 2.17]
  22.12
  Intentionally Omitted [moved to Section 2.18]
  22.13
  Grant of Security Interest; Collateral
  22.14
  Collateral Administration
  42.15
  Power of Attorney
  52.16
  Lockbox Accounts
  52.17
  Other Mandatory Prepayments
  62.18
  Payments by Seller
  6III.
  INTENTIONALLY OMITTED
  7IV.
  CONDITIONS PRECEDENT
  74.1
  Conditions to Closing
  7V.
  REPRESENTATIONS AND WARRANTIES
  95.1
  Organization and Authority
  95.2
  Acquisition Documents
  105.3
  Subsidiaries, Capitalization and Ownership Interests
  105.4
  Properties
  105.5
  Other Agreements
  115.6
  Litigation
  115.7
  Hazardous Materials
  115.8
  Potential Tax Liability; Tax Returns; Governmental
  Reports
  125.9
  Financial Statements and Reports
  125.10
  Compliance with Law
  125.11
  Intellectual Property
  135.12
  Licenses and Permits; Labor
  135.13
  No Default
  135.14
  Disclosure
  135.15
  Existing Indebtedness; Investments, Guarantees and
  Certain Contracts
  135.16
  Other Agreements
  145.17
  Insurance
  145.18
  Names; Location of Offices, Records and Collateral
  145.19
  Intentionally Omitted
  145.20
  Intentionally Omitted
  145.21
  Survival
  14VI.
  AFFIRMATIVE COVENANTS
  156.1
  Financial Statements, Financial Reports and Other
  Information
  156.2
  Payment of Obligations
  176.3
  Conduct of Business and Maintenance of Existence and
  Assets
  176.4
  Compliance with Legal and Other Obligations
  176.5
  Insurance
  176.6
  True Books
  186.7
  Inspections; Periodic Audits and Reappraisals
  186.8
  Further Assurances; Post Closing
  186.9
  Payment of Indebtedness
  186.10
  Lien Searches
  196.11
  Intentionally Omitted
  196.12
  Collateral Documents; Security Interest in
  Collateral
  196.13
  Intentionally Omitted
  196.14
  Taxes and Other Charges
  196.15
  Payroll Taxes
  206.16
  Inventory Covenants
  20VII.
  NEGATIVE COVENANTS
  207.1
  Financial Covenants
  207.2
  Permitted Indebtedness
  217.3
  Permitted Liens
  217.4
  Investments; New Facilities or Collateral;
  Subsidiaries
  227.5
  Dividends; Redemptions
  227.6
  Transactions with Affiliates
  227.7
  Charter Documents; Fiscal Year; Name; Jurisdiction
  of Organization; Dissolution; Use of Proceeds
  237.8
  Truth of Statements
  237.10
  Transfer of Assets
  24VIII.
  EVENTS OF DEFAULT
  25IX.
  RIGHTS AND REMEDIES AFTER DEFAULT
  279.1
  Rights and Remedies
  279.2
  Application of Proceeds
  289.3
  Rights of Seller to Appoint Receiver
  289.4
  Rights and Remedies not Exclusive
  29X.
  WAIVERS AND JUDICIAL PROCEEDINGS
  2910.1
  Waivers
  2910.2
  Delay; No Waiver of Defaults
  2910.3
  Jury Waiver
  2910.4
  Cooperation in Discovery and Litigation
  30XI.
  EFFECTIVE DATE AND TERMINATION
  3011.1
  Termination and Effective Date Thereof
  30ii

11.2
  Survival
  30XII.
  MISCELLANEOUS
  3112.1
  Governing Law; Jurisdiction; Service of Process;
  Venue
  3112.2
  Successors and Assigns; Participations; New Sellers
  3112.3
  Application of Payments
  3212.4
  Indemnity
  3212.5
  Notice
  3212.6
  Severability; Captions; Counterparts; Facsimile
  Signatures
  3312.7
  Expenses
  3312.8
  Entire Agreement
  3412.9
  Seller Approvals
  3412.10
  Confidentiality and Publicity
  3412.11
  Release of Seller
  3412.12
  Agent
  3512.13
  Agreement Controls
  3512.14
  Master Subordination Agreement
  35ANNEX I
  1FINANCIAL
  COVENANTS
  11)
  Minimum EBITDA
  12)
  Maximum Senior Leverage Ratio (Senior Debt to
  EBITDA)
  13)
  Fixed Charge Coverage Ratio (EBITDA/Fixed Charges)
  1APPENDIX A
  1DEFINITIONS
  1iii

SECURITY
AGREEMENT

THIS
SECURITY AGREEMENT (the Agreement) dated as of November 10,
2005, is entered into betweenSUNSET BRANDS, INC. a Nevada corporation
(Sunset), U.S. MILLS, INC., a Delaware
corporation (US Mills, and
together with Sunset, jointly and severally, the Purchaser), and IBF FUND
LIQUIDATING LLC, a Delaware limited liability company (the Seller).

WHEREAS,
pursuant to that certain Amended and Restated Acquisition Agreement and Plan of
Merger dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the Acquisition
Agreement), by and among US Mills, Sunset, Seller and USM
Acquisition Sub, Inc. (Merger Sub),
Sunset will acquire US Mills by merger (the Acquisition).

WHEREAS,
pursuant to the Acquisition Agreement, US Mills and Sunset shall issue
(i) a Senior Subordinated Note in favor of Seller, dated as of the date
hereof, in the original principal amount of $5,000,000 (as amended, restated,
supplemented or otherwise modified from time to time, Seller Note 1) (ii) a Senior
Subordinated Note in favor of Seller, dated as of the date hereof, in the
original principal amount of $1,000,000 (as amended, restated, supplemented or
otherwise modified from time to time, Seller
Note 2, and together with Seller Note 1, the Promissory Notes), as payment of a
portion
of the consideration for the Acquisition.

WHEREAS,
Sunset and US Mills are party to that certain Revolving Credit, Term Loan and
Security Agreement, dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the Credit Agreement), by and among
Sunset, US
Mills and CapitalSource Finance LLC, as lender (CapitalSource).

WHEREAS,
Seller is party to that certain Master Subordination and Intercreditor
Agreement, dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the Master
Subordination Agreement), by and among Seller, US Mills, Sunset,
CapitalSource and the Debenture Holder (as defined therein).

WHEREAS,
in order to induce Seller to enter into the Acquisition Agreement, Purchaser
has agreed to grant to Seller a continuing security interest in and to the
Collateral in order to secure the Obligations, by the granting of the security
interests contemplated by this Agreement.

NOW,
THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and adequacy of which hereby are acknowledged,
Purchaser and Seller hereby agree as follows:

I.
DEFINITIONS

1.1
General Terms

For
purposes of this Agreement, in addition to the definitions above and elsewhere
in this Agreement, the terms listed in Appendix A and Annex I
hereto shall have the meanings given such terms in Appendix A and Annex
I, which are incorporated herein and made a part hereof.  All capitalized terms used which are not
specifically defined herein shall have meanings provided in Article 9 of
the UCC in effect on the date hereof to the extent the same are used or defined
therein.  Unless otherwise specified
herein or in Appendix A, Annex I, any agreement, contract or
instrument referred to herein or

1

in Appendix A or Annex I shall mean
such agreement, contract or instrument as modified, amended, restated or
supplemented from time to time.  Unless
otherwise specified, as used in the Acquisition Documents or in any
certificate, report, instrument or other document made or delivered pursuant to
any of the Acquisition Documents, all accounting terms not defined in Appendix
A, Annex I or elsewhere in this Agreement shall have the meanings
given to such terms in and shall be interpreted in accordance with GAAP.  References herein to Eastern
Time shall
mean eastern standard time or eastern daylight savings time as in effect on any
date of determination in the eastern United States of America.

II.
PAYMENTS AND COLLATERAL

2.1
Intentionally Omitted

2.2
Intentionally Omitted

2.3
Intentionally Omitted

2.4
Intentionally Omitted

2.5
Intentionally Omitted

2.6
Intentionally Omitted

2.7
Intentionally Omitted

2.8
Intentionally Omitted

2.9
Intentionally Omitted

2.10
Intentionally Omitted

2.11
Intentionally Omitted

2.12
Intentionally Omitted

2.13
Grant of Security Interest; Collateral

(a)
To secure the payment and performance of the Obligations, Purchaser hereby
grants to Seller a continuing security interest in and Lien upon, and pledges
to Seller, all of its right, title and interest in and to the following
(collectively and each individually, the Collateral), which security interest is
intended to be senior in priority to all other security interests except with
respect to the security interest granted to CapitalSource pursuant to the terms
of the Credit Agreement and other Loan Documents (as defined in the Credit
Agreement):

2

(i)
all of such Purchasers tangible personal property, including without limitation
all present and future Inventory, Goods, and Equipment (including items of
equipment which are or become Fixtures), now owned or hereafter acquired;

(ii)
all of such Purchasers intangible personal property, including without
limitation all present and future Accounts, contract rights, Permits, General Intangibles, Payment Intangibles,
Chattel
Paper, Documents, Documents of Title, Instruments, Securities, Financial Assets,
Deposit Accounts, Investment Property, Letter-of-Credit Rights and Supporting
Obligations, rights to the payment of money or other forms of consideration of
any kind, tax refunds, insurance proceeds, now owned or hereafter acquired, and
all intangible and tangible personal property relating to or arising out of any
of the foregoing;

(iii)
all of such Purchasers present and future Government Contracts and rights
thereunder and the related Government Accounts and proceeds thereof, now or
hereafter owned or acquired by such Purchaser; provided, however,
that Seller shall not have a security interest in any rights under any
Government Contract of such Purchaser or in the related Government Account
where the taking of such security interest is a violation of an express
prohibition contained in the Government Contract (for purposes of this
limitation, the fact that a Government Contract is subject to, or otherwise
refers to, Title 31, § 203 or Title 41, § 15 of the United
States Code shall not be deemed an express prohibition against assignment
thereof) or is prohibited by applicable law, unless in any case consent is otherwise
validly obtained; and

(iv)
any and all additions and accessions to any of the foregoing, and any and all
replacements, products and proceeds (including insurance proceeds) of any of
the foregoing.

(b)
Notwithstanding the foregoing provisions of this Section 2.13, such
grant of a security interest shall not extend to, and the term Collateral
shall not include, any General Intangibles of Purchaser to the extent that
(i) such General Intangibles are not assignable or capable of being
encumbered as a matter of law or under the terms of any license or other
agreement applicable thereto (but solely to the extent that any such
restriction shall be enforceable under applicable law) without the consent of
the licensor thereof or other applicable party thereto, and (ii) such
consent has not been obtained; provided, however, that the
foregoing grant of a security interest shall extend to, and the term
Collateral shall include, each of the following: (a) any General
Intangible which is in the nature of an Account or a right to the payment of
money or a proceed of, or otherwise related to the enforcement or collection
of, any Account or right to the payment of money, or goods which are the
subject of any Account or right to the payment of money, (b) any and all
proceeds of any General Intangible that is otherwise excluded to the extent
that the assignment, pledge or encumbrance of such proceeds is not so
restricted, and (c) upon obtaining the consent of any such licensor or
other applicable party with respect to any such otherwise excluded General
Intangible, such General Intangible as well as any and all proceeds thereof
that might theretofore have been excluded from such grant of a security
interest and from the term Collateral.

(c)
In addition to the foregoing, to secure the payment and performance of the
Obligations, Sunset has pledged to Seller all of the securities Sunset owns in
direct subsidiaries of Sunset pursuant to the Stock Pledge Agreement.

(d)
Upon the execution and delivery of this Agreement, and upon the proper filing
of the necessary financing statements recordation of the Collateral Patent,
Trademark and Copyright Assignment in the United States Patent and Trademark
Office and/or the United States Copyright Office, and proper delivery of the
necessary stock certificates, without any further action, Seller will have a

3

good, valid and perfected Lien and security interest
in the Collateral, subject to no transfer or other restrictions or Liens of any
kind in favor of any other Person except for Permitted Liens.  No financing statement relating to any of
the Collateral is on file in any public office except those (i) on behalf
of Seller, and/or (ii) in connection with Permitted Liens.

2.14
Collateral Administration

(a)
All Collateral (except Deposit Accounts) will at all times be kept by Purchaser
at the locations set forth on Schedule 5.18B hereto and shall not,
without thirty calendar days prior written notice to Seller, be moved
therefrom, and in any case shall not be moved outside the continental United
States.

(b)
Purchaser shall keep accurate and complete records of its Accounts and all
payments and collections thereon and shall submit such records to Seller on
such periodic bases as Seller may request.

(c)
Whether or not an Event of Default has occurred, any of Sellers officers,
employees, representatives or agents shall have the right, at any time during
normal business hours, in the name of Seller, any designee of Seller or
Purchaser, to verify the validity, amount or any other matter relating to any
Accounts of Purchaser.  Purchaser shall
cooperate fully with Seller in an effort to facilitate and promptly conclude
such verification process.

(d)
To expedite collection, subject to the terms of the Master Subordination
Agreement, Purchaser shall endeavor in the first instance to make collection of
its Accounts for Seller.  Subject to the
terms of the Master Subordination Agreement, Seller shall have the right at all
times after the occurrence and during the continuance of an Event of Default to
notify Account Debtors owing Accounts to Purchaser that their Accounts have
been assigned to Seller and to collect such Accounts directly in its own name
and to charge collection costs and expenses, including reasonable attorneys
fees, to Purchaser.

(e)
As and when determined by Seller in its sole discretion, Seller will perform
the searches described in clauses (i) and (ii) below against Purchaser (the
results of which are to be consistent with Purchasers representations and
warranties under this Agreement), all at Purchasers expense:  (i) UCC searches with the Secretary of State
of the jurisdiction of organization of Purchaser and the Secretary of State and
local filing offices of each jurisdiction where Purchaser maintain their
respective executive offices, a place of business or assets; (ii) lien
searches with the United States Patent and Trademark Office and the United
States Copyright Office;and (iii) judgment, federal tax lien
and corporate and partnership tax lien searches, in each jurisdiction searched
under clause (i) above.

(f)
Upon notice from Seller that the Master Subordination Agreement has been
terminated, Purchaser (i) shall provide prompt written notice to its current
bank to transfer all items, collections and remittances to the Concentration
Account, (ii) shall provide prompt written notice to each Account Debtor that
Seller has been granted a lien and security interest in, upon and to all
Accounts applicable to such Account Debtor and shall direct each Account Debtor
to make payments to the appropriate Lockbox Account, and Purchaser hereby
authorizes Seller, upon any failure to send such notices and directions within
ten calendar days after the date of this Agreement (or ten calendar days after
the Person becomes an Account Debtor), to send any and all similar notices and
directions to such Account Debtors, and (iii) shall do anything further that
may be lawfully required by Seller to create and perfect Sellers lien on any
collateral and effectuate the intentions of the Acquisition Documents.  Upon notice from Seller that the Master
Subordination
Agreement has been terminated, Purchaser shall

4

immediately deliver to Seller all items for which
Seller must receive possession to obtain a perfected security interest and all
notes, certificates, and documents of title, Chattel Paper, warehouse receipts,
Instruments, and any other similar instruments constituting Collateral
(collectively, Control Collateral).  Until such time as the Master Subordination
Agreement has terminated, all Control Collateral shall be held by CapitalSource
for the benefit of Seller for the purpose of perfecting Sellers security
interest therein.  Concurrently with the
termination of the Master Subordination Agreement, CapitalSource shall deliver
all Control Collateral to Seller.

2.15
Power of Attorney

Seller
is hereby irrevocably made, constituted and appointed the true and lawful
attorney for Purchaser (without requiring Seller to act as such) with full
power of substitution to, subject to the terms of the Master Subordination
Agreement, do the following: (i) endorse the name of any such Person upon any
and all checks, drafts, money orders, and other instruments for the payment of
money that are payable to such Person and constitute collections on its or
their Accounts; (ii) execute in the name of such Person any financing
statements, schedules, assignments, instruments, documents, and statements that
it is or they or are obligated to give Seller under any of the Acquisition
Documents; and (iii) do such other and further acts and deeds in the name of
such Person that Seller may deem necessary or desirable to enforce any Account
or other Collateral or to perfect Sellers security interest or lien in any
Collateral.  If any such Person breaches
its obligation hereunder to direct payments of Accounts or the proceeds of any
other Collateral to the appropriate Lockbox Account, Seller, as the irrevocably
made, constituted and appointed true and lawful attorney for such Person
pursuant to this paragraph, may, by the signature or other act of any of Sellers
officers or authorized signatories (without requiring any of them to do so),
direct, subject to the terms of the Master Subordination Agreement, any
federal, state or private payor or fiscal intermediary to pay proceeds of
Accounts or any other Collateral to the appropriate Lockbox Account.

2.16
Lockbox Accounts

Purchaser
shall maintain one or more lockbox accounts (individually and collectively, the
Lockbox
Account) with one or more banks acceptable to Seller (each, a Lockbox
Bank), and shall execute with each Lockbox Bank one or more
agreements acceptable to Seller (individually and collectively, the Lockbox
Agreement), and such other agreements related thereto as Seller may
require.  Each Purchaser shall ensure
that all collections of Purchasers Accounts and all other cash payments
received by any Purchaser are paid and delivered directly from Account Debtors
and other Persons into the appropriate Lockbox Account; provided, however,
that all invoices for Purchasers Accounts shall bear Purchasers name as the
addressee for payments thereunder.  The
Lockbox Agreements shall provide that the Lockbox Banks immediately will
transfer all funds paid into the Lockbox Accounts into a depository account or
accounts maintained at a financial institution approved in advance by Seller
(the Concentration
Account).  The Concentration
Account shall be subject at all times to a deposit account control agreement in
form and substance satisfactory to Seller which perfects the Sellers security interest
in the Concentration Account.
Notwithstanding and without limiting any other provision of any
Acquisition Document, upon the occurrence and during the continuance of an
Event of Default, Seller shall apply, on a daily basis, all funds transferred into
the Concentration Account pursuant to the Lockbox Agreement and this Section 2.16
in such order and manner as determined by Seller.  To the extent that any Accounts are collected by Purchaser or
any
other cash payments received by Purchaser are not sent directly to the
appropriate Lockbox Account but are received by Purchaser or any of Purchasers
Affiliates, such collections and proceeds shall be held in trust for the
benefit of Seller and immediately remitted (and in any event within two
Business Days), in the form received, to the appropriate Lockbox Account for
immediate transfer to the Concentration Account.  Purchaser

5

acknowledges and agrees that compliance with the terms
of this Section 2.16 is an essential term of this Agreement, and that, in
addition to and notwithstanding any other rights Seller may have hereunder,
under any other Acquisition Document, under applicable law or at equity, upon
each and every failure by Purchaser or any of Purchasers Affiliates to comply
with any such terms Seller shall be entitled to assess the Lockbox
Non-Compliance Fee which shall operate to increase the interest rate payable
with respect to Seller Note 1 by one percent per annum during any period of
non-compliance, whether or not a Default or an Event of Default occurs or is
declared, provided that nothing shall prevent Seller from considering any
failure to comply with the terms of this Section 2.16to be a
Default or an Event of Default.  If
applicable, at any time prior to the execution of all or any of the Lockbox
Agreements and operation of all or any of the Lockbox Accounts, Purchaser and
Purchasers Affiliates shall direct all collections or proceeds it receives on
Accounts or from other Collateral to the accounts(s) and in the manner
specified by Seller in its sole discretion.
The provisions of
this Section 2.16 shall not become operative until the termination of
the Master Subordination Agreement, and until such time, the Lockbox Accounts
of Purchaser shall be controlled by CapitalSource for the purpose of perfecting
Sellers security interest therein.
Upon or promptly after termination of the Master Subordination
Agreement, Purchaser shall obtain in favor of Seller an authenticated Lockbox
Agreement from each bank holding a Lockbox Account that, immediately prior to
such termination, was subject to a Lockbox Agreement in favor of CapitalSource.

2.17Other Mandatory
Prepayments

In
addition to and without limiting any provision of any Acquisition Document:

(a)
if a Change of Control occurs, on or prior to the first Business Day following
the date of such Change of Control, subject to the terms of the Master
Subordination Agreement, Purchaser shall prepay the Obligations, in full in
cash together with accrued interest thereon to the date of prepayment and all
other amounts owing to Seller under the Acquisition Documents; and

(b)
if any Purchaser (i) sells any of its assets or properties other than in the
ordinary course of its business, (ii) sells or issues any subordinated debt
other than the transactions set forth on Schedule 2.17 or (iii) receives any
property damage insurance award which is not used to repair or replace the
property covered thereby or incurs any Indebtedness except for Permitted
Indebtedness, then, subject to the terms of the Master Subordination Agreement,
it shall apply 100% of the proceeds thereof to the prepayment of the
Obligations owing to Seller under the Acquisition Documents, such payment to be
applied at such time and in such manner and order as Seller shall decide in its
sole discretion.

2.18
Payments by Seller

Should
any amount required to be paid under any Acquisition Document be unpaid, such
amount may be paid by Seller, which payment shall be added to the outstanding
principal amount of Seller Note 1 as of the date such payment is due, and
Purchaser irrevocably authorizes disbursement of any such funds to Seller by
way of direct payment of the relevant amount, interest or Obligations.  No payment or prepayment of any amount by
Seller or any other Person shall entitle any Person to be subrogated to the
rights of Seller under any Acquisition Document unless and until the
Obligations have been fully performed and paid irrevocably in cash and this
Agreement has been terminated.  Any sums
expended by Seller as a result of Purchasers failure to pay, perform or comply
with any Acquisition Document or any of the Obligations may be added to the
outstanding principal amount of Seller Note 1 and added to the Obligations.

6

III. INTENTIONALLY OMITTED

IV.
CONDITIONS PRECEDENT

4.1
Conditions to Closing

The
obligations of Seller to consummate the transactions contemplated herein and in
the Acquisition Agreement, are subject to the satisfaction, in the sole
judgment of Seller, of the following:

(a)
(i) Purchaser shall have delivered to Seller (A) the Acquisition Documents
to which it is a party, each duly executed by an authorized officer of
Purchaser and the other parties thereto (including the Stock Pledge Agreement,
the Junior Management Fee Subordination Agreement and the Intellectual Property
Security Agreement) (B) intentionally omitted, (C) audited annual consolidated and
consolidating financial statements of Purchaser for Purchasers most recently
ended fiscal year, including notes thereto, consisting of a balance sheet at
the end of such completed fiscal year and the related statements of income,
retained earnings, cash flows and owners equity for such completed fiscal
year, which financial statements shall be prepared and certified without
qualification by an independent certified public accounting firm reasonably
satisfactory to Seller in accordance with GAAP consistently applied with prior
periods, and (D) unaudited consolidated and consolidating financial statements
of Purchaser consisting of a balance sheet and statements of income,
retained earnings, cash flows and owners equity for the period from the
beginning of the current fiscal year through the end of the most recently ended
calendar month, which financial statements shall be prepared in accordance with
GAAP consistently applied with prior periods;

(b)
all in form and substance satisfactory to Seller in its sole discretion, Seller
shall have received (i) a report of Uniform Commercial Code financing
statement, tax and judgment lien searches performed with respect to Purchaser
in each jurisdiction determined by Seller in its sole discretion, and such
report shall show no Liens on the Collateral (other than Permitted Liens),
(ii) each document (including, without limitation, any Uniform Commercial
Code financing statement) required by any Acquisition Document or under law or
requested by Seller to be filed, registered or recorded to create in favor of
Seller, a perfected security interest upon the Collateral that is senior in
priority to all other security interests except with respect to the security
interest granted to CapitalSource pursuant to the terms of the Credit Agreement
and other Loan Documents (as defined in the Credit Agreement), and
(iii) evidence of each such filing, registration or recordation and of the
payment by Purchaser of any necessary fee, tax or expense relating thereto;

(c)
Seller shall have received (i) the Charter and Good Standing Documents, all in
form and substance acceptable to Seller, (ii) a certificate of the corporate
secretary or assistant secretary of Purchaser dated the Closing Date, as to the
incumbency and signature of the Persons executing the Acquisition Documents, in
form and substance acceptable to Seller, and (iii) the written legal opinion of
counsel for Purchaser, in form and substance satisfactory to Seller and its
counsel;

(d)
Seller shall have received a certificate of the chief financial officer (or, in
the absence of a chief financial officer, the chief executive officer) of
Purchaser, in form and substance satisfactory to Seller (each, a Solvency
Certificate), certifying (i) the solvency of such Person after
giving effect to the transactions contemplated by the Acquisition Documents,
and (ii) as to such Persons financial resources and ability to meet its
obligations and liabilities as they become due, to the effect that as of the
Closing Date and after giving effect to such transactions contemplated herein
and in the Acquisition Agreement: (A) the assets of such Person, at a Fair
Valuation, exceed the total liabilities

7

(including contingent, subordinated, unmatured and
unliquidated liabilities) of such Person, and (B) no unreasonably small capital
base with which to engage in its anticipated business exists with respect to
such Person;

(e)
Seller shall have completed examinations, the results of which shall be satisfactory
in form and substance to Seller, of the Collateral, the financial statements
and the books, records, business, obligations, financial condition and
operational state of each Purchaser, and each such Person shall have
demonstrated to Sellers satisfaction that (i) its operations comply, in
all respects deemed material by Seller, in its sole judgment, with all
applicable federal, state, foreign and local laws, statutes and regulations,
(ii) its operations are not the subject of any governmental investigation,
evaluation or any remedial action which could result in any expenditure or
liability deemed material by Seller, in its sole judgment, and (iii) it
has no liability (whether contingent or otherwise) that is deemed material by
Seller, in its sole judgment;

(f) Seller shall have received all fees, charges and expenses payable to Seller
on or prior to the Closing Date pursuant to the Acquisition Documents;

(g) all in form and substance satisfactory to Seller in its sole discretion,
Seller shall have received such consents, approvals and agreements, including,
without limitation, any applicable Landlord Waivers and Consents with respect
to any and all leases set forth on Schedule 5.4, from such third parties
as Seller and its counsel shall determine are necessary or desirable with
respect to (i) the Acquisition Documents and/or the transactions
contemplated thereby, and/or (ii) claims against any Purchaser or the
Collateral;

(h) Purchaser shall be in compliance with Section 6.5, and Seller shall
have received copies of all insurance policies or binders, original
certificates of all insurance policies of Purchaser confirming that they are in
effect and that  the premiums due and
owing with respect thereto have been paid in full and endorsements of such
policies issued by the applicable Insurers and in each case naming Seller as
loss payee or additional insured, as appropriate;

(i) all corporate and other proceedings, documents, instruments and other legal
matters in connection with the transactions contemplated by the Acquisition
Documents (including, but not limited to, those relating to corporate and
capital structures of Purchaser) shall be satisfactory to Seller;

(j) Seller shall have received, in form and substance satisfactory to Seller,
(i) evidence of the repayment in full and termination of all current indebtedness and obligations being
paid off at Closing and all
related documents, agreements and instruments and of all Liens, security
interests and Uniform Commercial Code financing statements relating thereto,
and (ii) release and termination of any and all Liens, security interest
and/or Uniform Commercial Code financing statements in, on, against or with
respect to any of the Collateral (other than Permitted Liens);

(k) Seller shall have received a fully executed copy of the Credit Agreement
(including all schedules, annexes, appendices and other attachments thereto).

(l)
Purchaser shall have received a minimum equity infusion of $1,500,000 in a
form, and under terms and conditions, acceptable to Seller in its sole
discretion;

8

(m)
Seller shall have received such other documents, certificates, information or
legal opinions as Seller may reasonably request, all in form and substance
reasonably satisfactory to Seller;

(n)
Purchaser shall have issued convertible debentures in favor of the Seller in
the amount of $5,000,000 in a form, and under terms and conditions, acceptable
to the Seller in its sole discretion;

(o)
Purchaser shall have issued the Promissory Notes in favor of the Seller on
terms and conditions acceptable to the Seller in its sole discretion;

(p)
Purchaser shall have issued to Seller Series B preferred stock having an
aggregate value equal to $1,500,000, plus the additional Series B preferred
stock issued to Seller with respect to the Working Capital Adjustment under the
Acquisition Agreement, all of which shall be on terms and conditions acceptable
to the Seller in its sole discretion;

(q)
each of the representations and warranties made by Purchaser in or pursuant to
this Agreement shall be accurate, and no Default or Event of Default shall have
occurred or be continuing or would exist after giving effect to the
transactions contemplated herein and in the Acquisition Agreement;

(r)
except as disclosed in the historical financial statements, there shall be no
liabilities or obligations with respect to Purchaser of any nature whatsoever
which, either individually or in the aggregate, would reasonably be likely to
have a Material Adverse Effect;

(s)
Seller shall have received duly executed signature pages from all other parties
to the Junior Subordination Agreement and the Prepayment Letter Agreement; and

(t)
Seller shall have received a copy of an order entered in the bankruptcy case
for InterBank Funding Corp. (Case No. 02-41590-brl in the Southern District of
New York) approving the revised terms of the Acquisition Agreement and
otherwise in form and detail satisfactory to Seller (the Sale Order); and

(u)
No appeal of the Sale Order or stay of the transactions covered by the Sale
Order shall have occurred prior to the Closing.

V.
REPRESENTATIONS AND WARRANTIES

Purchaser,
jointly and severally, represents and warrants as of the date hereof, the Closing
Date, as follows:

5.1
Organization and Authority

Purchaser
is a corporation duly organized, validly existing
and in good standing under the laws of its state of formation.  Purchaser (i) has all requisite
corporate or entity power and authority to own its properties and assets and to
carry on its business as now being conducted and as contemplated in the
Acquisition Documents, (ii) is duly qualified to do business in every
jurisdiction in which failure so to qualify would reasonably be likely to have
a Material Adverse Effect, and (iii) has all requisite power and authority
(A) to execute, deliver and perform the Acquisition Documents to which it
is a party, (B) to borrow hereunder, (C) to consummate the transactions
contemplated under the Acquisition Documents,

9

and (D) to grant the Liens with regard to the
Collateral pursuant to the Security Documents to which it is a party.  No Purchaser is an investment
company
registered or required to be registered under the Investment Company Act of
1940, as amended, or is controlled by such an investment company.

5.2
Acquisition Documents

The
execution, delivery and performance by Purchaser of the Acquisition Documents
to which it is a party, and the consummation of the transactions contemplated
thereby, (i) have been duly authorized by all requisite action of each
such Person and have been duly executed and delivered by or on behalf of each
such Person; (ii) do not violate any provisions of (A) applicable law,
statute, rule, regulation, ordinance or tariff, (B) any order of any
Governmental Authority binding on any such Person or any of their respective
properties, or (C) the certificate of incorporation or bylaws (or any
other equivalent governing agreement or document) of any such Person, or any
agreement between any such Person and its respective stockholders, members,
partners or equity owners or among any such stockholders, members, partners or
equity owners; (iii) except as set forth in Schedule 5.2, are not in
conflict with, and do not result in a breach or default of or constitute an
event of default, or an event, fact, condition or circumstance which, with
notice or passage of time, or both, would constitute or result in a conflict,
breach, default or event of default under, any indenture, agreement or other
instrument to which any such Person is a party, or by which the properties or
assets of such Person are bound; (iv) except as set forth therein, will
not result in the creation or imposition of any Lien of any nature upon any of
the properties or assets of any such Person, and (v) except as set forth
on Schedule 5.2, do not require the consent, approval or authorization
of, or filing, registration or qualification with, any Governmental Authority
or any other Person.  When executed and
delivered, each of the Acquisition Documents to which Purchaser is a party will
constitute the legal, valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms, subject to the effect of any
applicable bankruptcy, moratorium, insolvency, reorganization or other similar
law affecting the enforceability of creditors rights generally and to the
effect of general principles of equity which may limit the availability of
equitable remedies (whether in a proceeding at law or in equity).

5.3 Subsidiaries, Capitalization
and Ownership
Interests

Except
as listed on Schedule 5.3, Purchaser has no Subsidiaries.  Schedule 5.3 states the
authorized and issued capitalization of Purchaser, the number and class of
equity securities and/or ownership, voting or partnership interests issued and
outstanding of Purchaser and the record and beneficial owners thereof
(including options, warrants and other rights to acquire any of the
foregoing).  The ownership or
partnership interests of Purchaser that is a limited partnership or a limited
liability company are not certificated, the documents relating to such
interests do not expressly state that the interests are governed by Article 8
of the Uniform Commercial Code, and the interests are not held in a securities
account.  The outstanding equity
securities and/or ownership, voting or partnership interests of Purchaser have
been duly authorized and validly issued and are fully paid and nonassessable,
and each Person listed on Schedule 5.3 owns beneficially and of
record all the equity securities and/or ownership, voting or partnership
interests it is listed as owning free and clear of any Liens other than Liens
created by the Security Documents.  Schedule 5.3
also lists the directors, members, managers and/or partners of Purchaser.  Except as listed on Schedule
5.3,
Purchaser does not own an interest in, participate in or engage in any joint
venture, partnership or similar arrangements with any Person.

5.4
Properties

Purchaser
(i) is the sole owner and has good, valid and marketable title to, or a valid

10

leasehold interest in, all of its properties and
assets, including the Collateral, whether personal or real, subject to no
transfer restrictions or Liens of any kind except for Permitted Liens, and
(ii) is in compliance in all material respects with each lease to which it
is a party or otherwise bound.  Schedule 5.4
lists all real properties (and their locations) owned or leased by or to, and
all other assets or property that are leased or licensed by, Purchaser and all
leases (including leases of leased real property) covering or with respect to
such properties and assets all warehouses, fulfillment houses or other
locations at which any of Purchasers Inventory is located.  Purchaser enjoys peaceful and undisturbed
possession under all such leases and such leases are all the leases necessary
for the operation of such properties and assets, are valid and subsisting and
are in full force and effect.

5.5
Other Agreements

Purchaser
is not (i) a party to any judgment, order or decree or any agreement, document
or instrument, or subject to any restriction, which would affect its ability to
execute and deliver, or perform under, any Acquisition Document or to pay the
Obligations, (ii) in default in the performance, observance or fulfillment of
any obligation, covenant or condition contained in any agreement, document or
instrument to which it is a party or to which any of its properties or assets
are subject, which default, if not remedied within any applicable grace or cure
period would reasonably be likely to have a Material Adverse Effect, nor is
there any event, fact, condition or circumstance which, with notice or passage
of time or both, would constitute or result in a conflict, breach, default or
event of default under, any of the foregoing which, if not remedied within any
applicable grace or cure period would reasonably be likely to have a Material
Adverse Effect; or (iii) a party or subject to any agreement, document or
instrument with respect to, or obligation to pay any, management or service fee
with respect to, the ownership, operation, leasing or performance of any of its
business or any facility, nor is there any manager with respect to any such
facility.

5.6
Litigation

There is no action, suit, proceeding or investigation
pending or, to their knowledge, threatened against Purchaser that (i) questions
or could prevent the validity of any of the Acquisition Documents or the right
of Purchaser to enter into any Acquisition Document or to consummate the
transactions contemplated thereby, (ii) would reasonably be likely to be or
have, either individually or in the aggregate, any Material Adverse Change or
Material Adverse Effect, or (iii) would reasonably be likely to result in
any Change of Control or other change in the current ownership, control or
management of Purchaser.  Purchaser is
not aware that there is any basis for the foregoing.  Purchaser is not a party or subject to any order, writ,
injunction, judgment or decree of any Governmental Authority.  There is no action, suit, proceeding or
investigation initiated by Purchaser currently pending.  Purchaser has no existing accrued and/or
unpaid Indebtedness to any Governmental Authority or any other governmental
payor.

5.7
Hazardous Materials

Purchaser
is in compliance in all material respects with all applicable Environmental
Laws.  Purchaser has not been notified
of any action, suit, proceeding or investigation (i) relating in any way
to compliance by or liability of Purchaser under any Environmental Laws, (ii)
which otherwise deals with any Hazardous Substance or any Environmental Law, or
(iii) which seeks to suspend, revoke or terminate any license, permit or
approval necessary for the generation, handling, storage, treatment or disposal
of any Hazardous Substance.

11

5.8
Potential Tax Liability; Tax Returns; Governmental Reports

(a)
Except as disclosed in Schedule 5.8, Purchaser (i) has not received any
oral or written communication from the Internal Revenue Service with respect to
any investigation or assessment relating to the Purchaser directly, or relating
to any consolidated tax return which was filed on behalf of Purchaser, (ii) is
not aware of any year which remains open pending tax examination or audit by
the IRS, and (iii) is not aware of any information that could give rise to an
IRS tax liability or assessment.

(b)
Except as disclosed in Schedule 5.8, Purchaser (i) has filed all
federal, state, foreign (if applicable) and local tax returns and other reports
which are required by law to be filed by Purchaser, (ii) has paid all taxes,
assessments, fees and other governmental charges, including, without
limitation, payroll and other employment related taxes, in each case that are
due and payable, except only for items that Purchaser is currently contesting
in good faith with adequate reserves under GAAP, which contested items are
described on Schedule 5.8.

5.9 Financial Statements and
Reports

All
financial statements and financial information relating to Purchaser that have
been or may hereafter be delivered to Seller by Purchaser are accurate and
complete and have been prepared in accordance with GAAP consistently applied
with prior periods.  Purchaser has no
material obligations or liabilities of any kind not disclosed in such financial
information or statements, and since the date of the most recent financial
statements submitted to Seller, there has not occurred any Material Adverse
Change, Material Adverse Effect to Purchasers knowledge, any other event or
condition that would reasonably be likely to have a Material Adverse Effect.

5.10 Compliance with
Law

To
the best of Purchasers knowledge after making all due inquiry, Purchaser
(i) is in compliance with all laws, statutes, rules, regulations, ordinances
and tariffs of any Governmental Authority applicable to Purchaser and/or
Purchasers business, assets or operations, including, without limitation,
ERISA, and (ii) is not in violation of any order of any Governmental Authority
or other board or tribunal, except where noncompliance or violation could not
reasonably be expected to have a Material Adverse Effect.  There is no event, fact, condition or
circumstance which, with notice or passage of time, or both, would constitute
or result in any noncompliance with, or any violation of, any of the foregoing,
in each case except where noncompliance or violation could not reasonably be
expected to have a Material Adverse Effect.
Purchaser has not received any notice that Purchaser is not in
compliance in any respect with any of the requirements of any of the
foregoing.  Purchaser has (a) not
engaged in any Prohibited Transactions as defined in Section 406 of ERISA
and Section 4975 of the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder, (b) not failed to meet any
applicable minimum funding requirements under Section 302 of ERISA in
respect of its plans and no funding requirements have been postponed or
delayed, (c) no knowledge of any amounts due but unpaid to the Pension Benefit
Guaranty Corporation, or of any event or occurrence which would cause the
Pension Benefit Guaranty Corporation to institute proceedings under Title IV of
ERISA to terminate any of the employee benefit plans, (d) no fiduciary
responsibility under ERISA for investments with respect to any plan existing
for the benefit of Persons other than its employees or former employees, or (e)
not withdrawn, completely or partially, from any multi-employer pension plans
so as to incur liability under the MultiEmployer Pension Plan Amendments of
1980.  With respect to Purchaser, there
exists no event described in Section 4043 of ERISA, excluding
Subsections 4043(b)(2)

12

and 4043(b)(3) thereof, for which the thirty (30) day
notice period contained in 12 C.F.R. § 2615.3 has not been waived.

5.11
Intellectual Property

Except
as set forth on Schedule 5.11, Purchaser does not own, license or
utilize, and is not a party to, any patents, patent applications, trademark
registrations, trademark applications, registered copyrights, copyright
applications, trade names, or any material licenses of any registered patents,
trademarks or copyrights (collectively, the Intellectual Property).  Purchaser shall update
Schedule 5.11
within 15 days after the end of any month in which Purchaser acquires rights in
new Intellectual Property.  All of the
Intellectual Property is in full force and effect and not in known conflict
with the rights of others.

5.12
Licenses and Permits; Labor

Purchaser
is in compliance, in all material respects and where non-compliance would not
have a Material Adverse Effect on its business, with and has all Permits
necessary or required by applicable law or Governmental Authority for the
operation of its businesses.  All of the
foregoing are in full force and effect and not in known conflict with the
rights of others.  Purchaser is not (i)
in breach of or default under the provisions of any of the foregoing, nor is
there any event, fact, condition or circumstance which, with notice or passage
of time or both, would constitute or result in a conflict, breach, default or
event of default under, any of the foregoing which, if not remedied within any
applicable grace or cure period would reasonably be likely to have a Material
Adverse Effect, (ii) a party to or subject to any agreement, instrument or
restriction that is so unusual or burdensome that it might have a Material
Adverse Effect, and/or (iii) and has not been, involved in any labor dispute,
strike, walkout or union organization which would reasonably be likely to have
a Material Adverse Effect.

5.13
No Default

There
does not exist any Default or Event of Default or any event, fact, condition or
circumstance which, with the giving of notice or passage of time or both, would
constitute or result in a Default or Event of Default.

5.14
Disclosure

No
Acquisition Document nor any other agreement, document, certificate, or
statement furnished to Seller by or on behalf of Purchaser in connection with
the transactions contemplated by the Acquisition Documents, nor any
representation or warranty made by Purchaser in any Acquisition Document,
contains any untrue statement of material fact or omits to state any fact
necessary to make the statements therein not materially misleading.  There is no fact known to Purchaser which
has not been disclosed to Seller in writing which would reasonably be likely to
have a Material Adverse Effect.

5.15
Existing Indebtedness; Investments, Guarantees and Certain Contracts

Except
as contemplated by the Acquisition Documents or as otherwise set forth on Schedule 5.15A,
Purchaser (i) has no outstanding Indebtedness, (ii) is not subject or party to
any mortgage, note, indenture, indemnity or guarantee of, with respect to or
evidencing any Indebtedness of any other Person, or (iii) does not own or hold
any equity or long-term debt investments in, and does not

13

have any outstanding advances to or any outstanding
guarantees for the obligations of, or any outstanding borrowings from, any
Person.  Purchaser has performed all
material obligations required to be performed by Purchaser pursuant to or in
connection with any items listed on Schedule 5.15A and there has
occurred no breach, default or event of default under any document evidencing
any such items or any fact, circumstance, condition or event which, with the
giving of notice or passage of time or both, would constitute or result in a
breach, default or event of default thereunder.  Schedule 5.15B sets forth all Indebtedness with a maturity
date during the term of this Agreement, and identifies such maturity date.

5.16
Other Agreements

Except
as set forth on Schedule 5.16, (i) there are no existing or proposed
agreements,  arrangements,
understandings or transactions between Purchaser and any of Purchasers
officers, members, managers, directors, stockholders, partners, other interest
holders, employees or Affiliates or any members of their respective immediate
families, and (ii) none of the foregoing Persons are directly or indirectly,
indebted to or have any direct or indirect ownership, partnership or voting
interest in, to Purchasers knowledge, any Affiliate of Purchaser or any Person
that competes with Purchaser (except that any such Persons may own stock in
(but not exceeding two (2%) percent of the outstanding capital stock of) any
publicly traded company that may compete with Purchaser.

5.17 Insurance

Purchaser
has in full force and effect such insurance policies as are customary in its
industry and as may be required pursuant to Section 6.5 hereof.  All such insurance policies are listed and
described on Schedule 5.17.

5.18
Names; Location of Offices, Records and Collateral

During
the preceding five years, Purchaser has not conducted business under or used
any name (whether corporate, partnership or assumed) other than as shown on Schedule
5.18A.  Purchaser is the sole owner
of all of its names listed on Schedule 5.18A, and any and all business
done and invoices issued in such names are Purchasers sales, business and
invoices.  Each trade name of Purchaser
represents a division or trading style of Purchaser.  Purchaser maintains its places of business and chief
executive
offices only at the locations set forth on Schedule 5.18B, and all
Accounts of Purchaser arise, originate and are located, and all of the
Collateral, including Inventory and all books and records in connection
therewith or in any way relating thereto or evidencing the Collateral are
located and shall only be located, in and at such locations.  All of the Collateral is located only in the
continental United States.

5.19
Intentionally Omitted

5.20
Intentionally Omitted

5.21
Survival

Purchaser
makes the representations and warranties contained herein with the knowledge
and intention that Seller is relying and will rely thereon.  All such representations and warranties will

14

survive the execution and delivery of this Agreement
until all Obligations have been indefeasibly paid in full and this Agreement
has been terminated.

VI.
AFFIRMATIVE COVENANTS

Purchaser,
jointly and severally, covenants and agrees that, until full performance and
satisfaction, and indefeasible payment in full in cash, of all the Obligations
and termination of this Agreement:

6.1 Financial Statements,
Financial Reports and Other
Information

(a)
Financial Reports.  Purchaser
shall furnish to Seller (i) upon filing thereof with the Securities and
Exchange Commission (provided such filing is within the time prescribed in the
securities laws and regulations) and in any event within 105 calendar days
after the end of each fiscal year of Purchaser, audited annual consolidated and
consolidating financial statements of Purchaser, including the notes thereto,
consisting of a consolidated and consolidating balance sheet at the end of such
completed fiscal year and the related consolidated and consolidating statements
of income, retained earnings, cash flows and owners equity for such completed
fiscal year, which financial statements shall be prepared and certified without
qualification as to scope by an independent certified public accounting firm
satisfactory to Seller and accompanied by related management letters, if
available, and (ii) as soon as available and in any event within
twenty-five calendar days after the end of each calendar month, unaudited
consolidated and consolidating financial statements of Purchaser consisting of
a balance sheet and statements of income, retained earnings, cash flows and
owners equity as of  the end of the
immediately preceding calendar month.
All such financial statements shall be prepared in accordance with GAAP
consistently applied with prior periods.
With each such financial statement, Purchaser shall also deliver a
certificate of its chief financial officer in substantially the form of Exhibit
B hereto (a Compliance Certificate) stating that (A) such person has reviewed
the relevant terms of the Acquisition Documents and the condition of Purchaser,
(B) no Default or Event of Default has occurred or is continuing, or, if any of
the foregoing has occurred or is continuing, specifying the nature and status
and period of existence thereof and the steps taken or proposed to be taken
with respect thereto, and (C) Purchaser is in compliance with all
financial covenants attached as Annex I hereto.  Such certificate shall be accompanied by the calculations
necessary to show compliance with the financial covenants in a form
satisfactory to Seller.

(b)
Other Materials.  Purchaser shall
furnish to Seller as soon as available, and in any event:  (i) within ten calendar days after the
filing thereof with the Securities and Exchange Commission, copies of such
financial statements (other than those required to be delivered pursuant to Section 6.1(a))
prepared by, for or on behalf of Purchaser and any other notes, reports and
other materials related thereto, including, without limitation, any pro forma
financial statements, which Purchaser files with the Securities and Exchange
Commission, (ii) concurrently with the distribution thereof to the Purchasers
stockholders, any reports, returns, information, notices and other materials
that Purchaser shall send to its stockholders, members, partners or other
equity owners at any time, and (iii) copies of material licenses and permits
required by any applicable federal, state, foreign or local law, statute
ordinance or regulation or Governmental Authority for the operation of its
business, where the failure to obtain such license or permit would have a
Material Adverse Effect on the Purchasers business, (iv) within fifteen
calendar days after the end of each calendar month for such month, (1) a sales
and collection report and accounts receivable and accounts payable aging
schedule, including a report of sales, credits issued and collections received,
all such reports showing a reconciliation to the amounts reported in the
monthly financial statements, and (2) evidence satisfactory to Seller that
all amounts

15

owing to all warehouses as of the end of such month
have been paid in full, (v) promptly upon receipt thereof, copies of any
reports submitted to Purchaser by its independent accountants in connection
with any interim audit of the books of such Person or any of its Affiliates and
copies of each management control letter provided by such independent
accountants, and (vi) within five calendar days of any request thereof, such
additional information, documents, statements, reports and other materials as
Lender may reasonably request from a credit or security perspective or otherwise
from time to time.

(c)
Notices.  Purchaser shall
promptly, and in any event within five Business Days after Purchaser or any
authorized officer of Purchaser obtains knowledge thereof, notify Seller in
writing of (i) any pending or threatened litigation, suit, investigation,
arbitration, dispute resolution proceeding or administrative proceeding brought
or initiated by Purchaser or otherwise affecting or involving or relating to
Purchaser or any of its property or assets to the extent (A) the amount in controversy
exceeds $40,000, or (B) to the extent any of the foregoing seeks injunctive or
declarative relief, (ii) any Default or Event of Default, which notice shall
specify the nature and status thereof, the period of existence thereof and what
action is proposed to be taken with respect thereto, (iii) any other
development, event, fact, circumstance or condition that would reasonably be
likely to have a Material Adverse Effect, in each case describing the nature
and status thereof and the action proposed to be taken with respect thereto,
(iv) any notice received by Purchaser from any payor of a claim, suit or
other action such payor has, claims or has filed against Purchaser, (v) any
matter(s) affecting the value, enforceability or collectability of any of the
Collateral, including, without limitation, claims or disputes in the amount of
$40,000 or more, singly or in the aggregate, in existence at any one time, (vi)
any notice given by Purchaser to any other lender of Purchaser, which notice to
Seller shall be accompanied by a copy of the applicable notice given to the
other lender, (vii) receipt of any notice or request from any Governmental
Authority or governmental payor regarding any liability or claim of liability,
(viii) receipt of any notice by Purchaser regarding termination of any manager
of any facility owned, operated or leased by Purchaser, (ix) any Account
becoming evidenced or secured by an Instrument or Chattel Paper, and/or (x)
receipt of any notice from any Account Debtor under a material contract
notifying Purchaser of a material breach under or termination of such contract.

(d)
Consents.  Purchaser shall obtain
and deliver from time to time all required consents, approvals and agreements
from such third parties as Seller shall determine are necessary or desirable in
its sole discretion, each of which must be satisfactory to Seller in its sole
discretion, with respect to (i) the Acquisition Documents and the transactions
contemplated thereby, (ii) claims against Purchaser or the Collateral, and/or
(iii) any agreements, consents, documents or instruments to which Purchaser is
a party or by which any properties or assets of Purchaser or any of the
Collateral is or are bound or subject, including, without limitation, Landlord
Waivers and Consents with respect to leases.

(e)
Operating Budget.  Purchaser
shall furnish to Seller on or prior to the Closing Date and for each fiscal
year of Purchaser thereafter not less than thirty calendar days prior to the
commencement of such fiscal year, consolidated and consolidating month by month
projected operating budgets, annual projections, profit and loss statements,
balance sheets and cash flow reports of and for Purchaser for such upcoming
fiscal year (including an income statement for each month and a balance sheet
as at the end of the last month in each fiscal quarter), in each case prepared
in accordance with GAAP consistently applied with prior periods.

16

6.2
Payment of Obligations

Purchaser
shall make full and timely indefeasible payment in cash of all Obligations.

6.3
Conduct of Business and Maintenance of Existence and Assets

Purchaser
shall (i) conduct its business in accordance with good business practices
customary to the industry, (ii) engage principally in the same or similar lines
of business substantially as heretofore conducted, (iii) collect its Accounts
in the ordinary course of business, (iv) maintain all of its material
properties, assets and equipment used or useful in its business in good repair,
working order and condition (normal wear and tear excepted and except as may be
disposed of in the ordinary course of business and in accordance with the terms
of the Acquisition Documents and otherwise as determined by Purchaser using
commercially reasonable business judgment), (v) from time to time to make all
necessary or desirable repairs, renewals and replacements thereof, as
determined by Purchaser using commercially reasonable business judgment, (vi)
maintain and keep in full force and effect its existence and all material
Permits and qualifications to do business and good standing in each
jurisdiction in which the ownership or lease of property or the nature of its
business makes such Permits or qualification necessary and in which failure to
maintain such Permits or qualification could reasonably be likely to have a
Material Adverse Effect; and (vii) remain in good standing and maintain
operations in all jurisdictions in which currently located.

6.4
Compliance with Legal and Other Obligations

Purchaser
shall (i) comply with all laws, statutes, rules, regulations, ordinances
and tariffs of all Governmental Authorities applicable to it or its business,
assets or operations; (ii) pay
all taxes, assessments, fees, governmental charges, claims for labor, supplies,
rent and all other obligations or liabilities of any kind, except liabilities
being contested in good faith and against which adequate reserves have been
established in accordance with GAAP, (iii) perform in accordance with its terms
each contract, agreement or other arrangement to which it is a party or by
which it or any of the Collateral is bound, except where the failure to comply,
pay or perform could not reasonably be expected to have a Material Adverse
Effect, and (iv) maintain and comply with all Permits necessary to conduct its
business and comply with any new or additional requirements that may be imposed
on it or its business.

6.5
Insurance

Purchaser shall (i) keep all of its insurable
properties and assets including, without limitation, Inventory that is in
transit (whether by vessel, air or land) adequately insured in all material
respects against losses, damages and hazards as are customarily insured against
by businesses engaging in similar activities or owning similar assets or
properties and at least the minimum amount required by applicable law,
including, without limitation, professional liability insurance, as applicable;
and maintain general public liability insurance at all times against liability
on account of damage to persons and property having such limits, deductibles,
exclusions and co-insurance and other provisions as are customary for a
business engaged in activities similar to those of Purchaser; and (ii) maintain
insurance under all applicable workers compensation laws; all of the foregoing
insurance policies to (A) be satisfactory in form and substance to Seller,
(B) name Seller as loss payee and additional insured thereunder, and (C)
expressly provide that they cannot be altered, amended, modified or canceled
without thirty Business Days prior written notice to Seller and that they
inure to the benefit of Seller notwithstanding any action or omission or
negligence of or by Purchaser or any insured thereunder.

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6.6
True Books

Purchaser
shall (i) keep true, complete and accurate books of record and account in
accordance with commercially reasonable business practices in which true and
correct entries are made of all of its and their dealings and transactions in
all material respects; and (ii) set up and maintain on its books such reserves
as may be required by GAAP with respect to doubtful accounts and all taxes,
assessments, charges, levies and claims and with respect to its business, and
include such reserves in its quarterly as well as year end financial
statements.

6.7
Inspections; Periodic Audits and Reappraisals

Purchaser
shall permit the representatives of Seller, at the expense of Purchaser, from
time to time during normal business hours upon reasonable notice, to (i) visit
and inspect any of its offices or properties or any other place where Collateral
is located to inspect the Collateral and/or to examine or audit all of its
books of account, records, reports and other papers, (ii) make copies and
extracts therefrom, and (iii) discuss its business, operations, prospects,
properties, assets, liabilities, condition and/or Accounts and Inventory with
its officers and independent public accountants (and by this provision such
officers and accountants are authorized to discuss the foregoing).  Seller is also authorized from time to time
to conduct or obtain audits and to obtain updated appraisals of Inventory and
intellectual property by appraisers acceptable to the Seller in its
discretion.  Other than during the
occurrence and continuance of a Default or an Event of Default, not more than
four such inspections, audits or appraisals related to any 12-month period
shall be at the expense of Purchaser.
Seller may increase the frequency of inspections or audits that are at
Purchasers expense during the occurrence and continuance of a Default or an
Event of Default.

6.8
Further Assurances; Post Closing

At
Purchasers cost and expense, Purchaser shall (i) take such further actions,
obtain such consents and approvals and duly execute and deliver such further
agreements, assignments, instructions or documents as Seller may request with
respect to the purposes, terms and conditions of the Acquisition Documents and
the consummation of the transactions contemplated thereby, and
(ii) without limiting and notwithstanding any other provision of any
Acquisition Document, execute and deliver, or cause to be executed and
delivered, such agreements and documents, and take or cause to be taken such
actions, and otherwise perform, observe and comply with such obligations, as
are set forth on Schedule 6.8.

6.9
Payment of Indebtedness

Except
as otherwise prescribed in the Acquisition Documents, Purchaser shall pay,
discharge or otherwise satisfy at or before maturity (subject to applicable
grace periods and, in the case of trade payables, to ordinary course payment
practices) all of its material obligations and liabilities, except when the
amount or validity thereof is being contested in good faith by appropriate
proceedings and such reserves as Seller may deem proper and necessary in its
sole discretion shall have been made, but in no event shall such reserve exceed
the amount of the obligations or liabilities so contested.

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6.10
Lien Searches

If
Liens other than Permitted Liens exist, Purchaser immediately shall take,
execute and deliver all actions, documents and instruments necessary to release
and terminate such Liens.

6.11
Intentionally Omitted

6.12
Collateral Documents; Security Interest in Collateral

Purchaser
shall (i) execute, obtain, deliver, file, register and/or record any and all
financing statements, continuation statements, stock powers, instruments and
other documents, or cause the execution, filing, registration, recording or
delivery of any and all of the foregoing, that are necessary or required under
law or otherwise or reasonably requested by Seller to be executed, filed,
registered, obtained, delivered or recorded to create, maintain, perfect,
preserve, validate or otherwise protect the pledge of the Collateral to Seller
and Sellers perfected Lien on the Collateral that is senior in priority to all
other security interests except with respect to the security interest granted
to CapitalSource pursuant to the terms of the Credit Agreement and other Loan
Documents (as defined in the Credit Agreement)(and Purchaser irrevocably grants
Seller the right, at Sellers option, to file any or all of the foregoing),
(ii) immediately upon learning thereof, report to Seller any reclamation,
return or repossession of goods in excess of $20,000 (individually or in the
aggregate), and (iii) defend the Collateral and Sellers perfected Lien thereon
against all claims and demands of all Persons at any time claiming the same or
any interest therein adverse to Seller, and pay all reasonable costs and
expenses (including, without limitation, in-house documentation and diligence
fees and legal expenses and reasonable attorneys fees and expenses) in
connection with such defense, which may at Sellers discretion be added to the
Obligations.

6.13
Intentionally Omitted

6.14
Taxes and Other Charges

(a)
 All payments and reimbursements to Seller
made under any Acquisition Document shall be free and clear of and without
deduction for all taxes, levies, imposts, deductions, assessments, charges or
withholdings, and all liabilities with respect thereto of any nature
whatsoever, excluding taxes to the extent imposed on Sellers net income.  If Purchaser shall be required by
law to
deduct any such amounts from or in respect of any sum payable under any
Acquisition Document to Seller, then the sum payable to Seller shall be
increased as may be necessary so that, after making all required deductions,
Seller receives an amount equal to the sum it would have received had no such
deductions been made.  Notwithstanding
any other provision of any Acquisition Document, if at any time after the Closing
(i) any change in any existing law, regulation, treaty or directive or in
the interpretation or application thereof, (ii) any new law, regulation, treaty
or directive enacted or any interpretation or application thereof, or
(iii) compliance by Seller with any request or directive (whether or not
having the force of law) from any Governmental Authority:  (A) subjects Seller to any tax, levy,
impost, deduction, assessment, charge or withholding of any kind whatsoever
with respect to any Acquisition Document, or changes the basis of taxation of
payments to Seller of any amount payable thereunder (except for net income
taxes, or franchise taxes imposed in lieu of net income taxes, imposed
generally by federal, state or local taxing authorities with respect to
interest or commitment fees or other fees payable hereunder or changes in the
rate of tax on the overall net income of Seller), or (B) imposes on Seller any
other condition or increased cost in connection with the transactions
contemplated thereby or participations

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therein, then, in any such case, Purchaser shall
promptly pay to Seller any additional amounts necessary to compensate Seller,
on an after-tax basis, for such additional cost or reduced amount as determined
by Seller.  If Seller becomes entitled
to claim any additional amounts pursuant to this Section 6.14 it shall
promptly notify Purchaser of the event by reason of which Seller has become so
entitled, and each such notice of additional amounts payable pursuant to this Section
6.14 submitted by Seller to Purchaser shall, absent manifest error, be
final, conclusive and binding for all purposes.

(b)
 Purchaser shall promptly, and in any event
within five Business Days after Purchaser or any authorized officer of
Purchaser obtains knowledge thereof, notify Seller in writing of any oral or
written communication from the Internal Revenue Service or otherwise with
respect to any (i) tax investigations, relating to the Purchaser directly,
or relating to any consolidated tax return which was filed on behalf of
Purchaser, (ii) notices of tax assessment or possible tax assessment, (iii)
years that are designated open pending tax examination or audit, and (iv)
information that could give rise to an IRS tax liability or assessment.

6.15
Payroll Taxes

Without
limiting or being limited by any other provision of any Acquisition Document,
Purchaser at all times shall retain and use a Person acceptable to Seller to
process, manage and pay its payroll taxes and shall cause to be delivered to
Seller within ten calendar days after the end of each calendar month a report
of its payroll taxes for the immediately preceding calendar month and evidence
of payment thereof.

6.16
Inventory Covenants

With
respect to the Inventory, Purchaser:
(a) shall at all times maintain inventory records reasonably
satisfactory to Seller, keeping correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, Purchasers cost
therefore and daily withdrawals therefrom and additions thereto; (b) shall not
remove any Inventory from the locations set forth or permitted herein, without
the prior written consent of Seller, which consent shall not be unreasonably
denied or delayed, except for sales of Inventory in the ordinary course of
Purchasers business and except to move Inventory directly from one location
set forth or permitted herein to another such location; (c) shall produce,
use store, ship and maintain the Inventory with all reasonable care and caution
and in accordance with applicable standards of any insurance and in conformity
with applicable laws (including the requirements of the Federal Fair Labor
Standards Act of 1938, as amended and all rules, regulations and orders related
thereto); (d) assumes all responsibility and liability arising from or relating
to the production, use, sale or other disposition of the Inventory; (e) shall
not sell Inventory to any customer on approval, or any other basis which
entitles the customer to return or may obligate Purchaser to repurchase such
Inventory; (f) shall keep the Inventory in good and marketable condition; and
(g) shall not, without prior written notice to Seller, acquire or accept any
Inventory on consignment or approval.

VII. NEGATIVE
COVENANTS

Each
Purchaser, jointly and severally, covenants and agrees that, until full
performance and satisfaction, and indefeasible payment in full in cash, of all
of the Obligations and termination of this Agreement:

7.1
Financial Covenants

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Purchaser
shall not violate the financial covenants set forth on Annex I to this
Agreement, which is incorporated herein and made a part hereof.

7.2
Permitted Indebtedness

Purchaser
shall not create, incur, assume or suffer to exist any Indebtedness, except the
following (collectively, Permitted Indebtedness): (i) Indebtedness
under the Acquisition Documents, (ii) any Indebtedness set forth on Schedule 7.2,
(iii) Capitalized Lease Obligations incurred after the Closing Date and
Indebtedness incurred pursuant to purchase money Liens permitted by Section 7.3(v),
provided that the aggregate amount of such Capitalized Lease Obligations and
purchase money indebtedness outstanding at any time shall not exceed $75,000, (iv) Indebtedness in connection
with advances made by a stockholder in order to cure any default of the financial
covenants set forth on Annex I; provided, however, that
such Indebtedness shall be on an unsecured basis, subordinated in right of
repayment and remedies to all of the Obligations and to all of Sellers rights
pursuant to a subordination agreement in form and substance satisfactory to
Seller; (v) accounts payable to trade creditors and current operating
expenses (other than for borrowed money) which are not aged more than 120
calendar days from the billing date or more than 30 days from the due date, in
each case incurred in the ordinary course of business and paid within such time
period, unless the same are being contested in good faith and by appropriate
and lawful proceedings and such reserves, if any, with respect thereto as are
required by GAAP and deemed adequate by Purchasers independent accountants
shall have been reserved; (vi) borrowings incurred in the ordinary course
of business and not exceeding $40,000 individually or in the aggregate
outstanding at any one time, provided, however, that such
Indebtedness shall be on an unsecured basis, subordinated in right of repayment
and remedies to all of the Obligations and to all of Sellers rights pursuant
to a subordination agreement in form and substance satisfactory to Seller; and
(vii) Permitted Subordinated Debt and (viii) Indebtedness under the Credit
Agreement.  Purchaser shall not make
prepayments on any existing or future Indebtedness to any Person other than
(i) to Capital Source in accordance with the terms of the Credit
Agreement, (ii) to Seller subject to the terms of the Master Subordination
Agreement, or (iii) to the Debenture Holder subject to the terms of the
Junior Subordination Agreement or (iv) to the extent specifically permitted by
this Agreement or any subsequent agreement between Purchaser and Seller.

7.3
Permitted Liens

Purchaser
shall not create, incur, assume or suffer to exist any Lien upon, in or
against, or pledge of, any of the Collateral or any of its properties or assets
or any of its shares, securities or other equity or ownership or partnership
interests, whether now owned or hereafter acquired, except the following
(collectively, Permitted Liens): (i) Liens under the Acquisition Documents
or otherwise arising in favor of Seller, (ii) Liens imposed by law for taxes
(other than payroll taxes), assessments or charges of any Governmental
Authority for claims not yet due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves or other
appropriate provisions are being maintained by such Person in accordance with
GAAP to the satisfaction of Seller in its sole discretion, (iii) (A) statutory
Liens of landlords (provided that any such landlord has executed a Landlord
Waiver and Consent in form and substance satisfactory to Seller) and of
carriers, warehousemen, mechanics, materialmen, and (B) other Liens
imposed by law or that arise by operation of law in the ordinary course of
business from the date of creation thereof, in each case only for amounts not
yet due or which are being contested in good faith by appropriate proceedings
and with respect to which adequate reserves or other appropriate provisions are
being maintained by such Person in accordance with GAAP to the satisfaction of
Seller in its sole discretion, (iv) Liens (A) incurred or deposits made in the
ordinary course of business (including, without limitation, surety bonds and
appeal bonds) in

21

connection
with workers compensation, unemployment insurance and other types of social
security benefits or to secure the performance of tenders, bids, leases,
contracts (other than for the repayment of Indebtedness), statutory obligations
and other similar obligations, or (B) arising as a result of progress payments
under government contracts, (v) purchase money Liens (A) securing Indebtedness
permitted under Section 7.2(iii), or (B) in connection with the purchase
by such Person of equipment in the normal course of business, provided
that such payables shall not exceed any limits on Indebtedness provided for
herein and shall otherwise be Permitted Indebtedness hereunder, (vi) Liens
securing Permitted Subordinated Debt, provided that such Liens
are subordinated to the Liens in favor of Seller pursuant to a written
agreement acceptable to Seller; (vii) Liens disclosed on Schedule 7.3;
and (viii) Liens in favor of Capital Source granted pursuant to the Security
Documents (as defined in the Credit Agreement).

7.4
Investments; New Facilities or Collateral; Subsidiaries

Purchaser,
directly or indirectly, shall not (i) purchase, own, hold, invest in or
otherwise acquire obligations or stock or securities of, or any other interest
in, or all or substantially all of the assets of, any Person or any joint
venture, or (ii) make or permit to exist any loans, advances or guarantees to
or for the benefit of any Person or assume, guarantee, endorse, contingently
agree to purchase or otherwise become liable for or upon or incur any
obligation of any Person (other than those created by the Acquisition Documents
and Permitted Indebtedness and other than (A) trade credit extended in the
ordinary course of business, (B) advances for business travel and similar
temporary advances made in the ordinary course of business to officers,
directors and employees, and (C) the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business). Purchaser, directly or indirectly, shall not purchase, own, operate,
hold, invest in or otherwise acquire any facility, property or assets or any
Collateral that is not located at the locations set forth on Schedule 5.18B
unless Purchaser shall first obtain the written consent of the Seller, which
consent shall not be unreasonably withheld. Purchaser shall have no
Subsidiaries other than those Subsidiaries, if any, existing at Closing and set
forth in Schedule 5.3.

7.5
Dividends; Redemptions

Purchaser
shall not (i) declare, pay or make any dividend or Distribution on any shares
of capital stock or other securities or interests other than dividends or
Distributions payable in its stock, of split-ups or reclassifications of its
stock , (ii) apply any of its funds, property or assets to the acquisition,
redemption or other retirement of any capital stock or other securities or
interests or of any options to purchase or acquire any of the foregoing
(provided, however, that Purchaser may (1) redeem its capital stock from
terminated employees pursuant to, but only to the extent required under the
terms of the related employment agreements, and (2) prepay certain Permitted
Indebtedness if allowed to do so under the terms and conditions of the Subordination
Agreements, as long as no Default or Event of Default has occurred and is
continuing or would be cause by or result therefrom), (iii) otherwise make any
payments or Distributions to any stockholder, member, partner or other equity
owner in such Persons capacity as such, or (iv) make any payment of any
management or service fee except as permitted in writing by Seller in advance,
and provided further, that Purchaser shall not make or suffer to exist any such
payment described in (i) through (iv) above if a Default or Event of Default
has occurred and is continuing or would result therefrom.

7.6
Transactions with Affiliates

Except
as set forth in Schedule 7.6, Purchaser shall not enter into or
consummate any transaction of any kind with any of its Affiliates or any of
their respective Affiliates other than: (i) salary, bonus, employee stock
option and other compensation and employment arrangements with directors or

22

officers in
the ordinary course of business, provided, that no payment of any type
of any compensation listed above shall be permitted if a Default or Event of
Default has occurred and remains in effect or would be caused by or result from
such payment, (ii) Distributions and dividends permitted pursuant to Section
7.5, (iii) transactions with Seller or any Affiliate of Seller, and (iv)
payments permitted under and pursuant to written agreements entered into by and
between Purchaser and one or more of its Affiliates that both (A) reflect and
constitute transactions on overall terms at least as favorable to Purchaser as
would be the case in an arms-length transaction between unrelated parties of
equal bargaining power, and (B) are subject to such terms and conditions as
determined by Seller in its sole discretion; provided, that
notwithstanding the foregoing Purchaser shall not (W) enter into or consummate
any transaction or agreement pursuant to which it becomes a party to any
mortgage, note, indenture or guarantee evidencing any Indebtedness of any of
its Affiliates or otherwise to become responsible or liable, as a guarantor, surety or otherwise, pursuant
to agreement for any Indebtedness of any such Affiliate, (X) make any payment
to any of its Affiliates in excess of $40,000 without the prior written consent
of Seller, (Y) make any payment that is restricted or prohibited by the Junior
Management Fee Subordination Agreement or (Z) make any payment for any present
or future obligation of any Subsidiary or other Affiliate of Purchaser
(including, without limitation any amounts owing by Low Carb Creations, Inc. to
(i) Wells Fargo Bank, N.A. (or any of its Affiliates) or (ii) the Langdon
Family Revocable Trust).

7.7
Charter Documents; Fiscal Year; Name; Jurisdiction of Organization;
Dissolution; Use of Proceeds

Purchaser
shall not (i) amend, modify, restate or change its certificate of incorporation
or formation or bylaws or similar charter documents in a manner that would be
adverse to Seller, (ii) change its fiscal year unless Purchaser demonstrates to
Sellers satisfaction compliance with the covenants contained herein for both
the fiscal year in effect prior to any change and the new fiscal year period by
delivery to Seller of appropriate interim and annual pro forma, historical and
current compliance certificates for such periods and such other information as
Seller may reasonably request, (iii) without at least twenty (20) days prior
written notice to Seller, change its name or change its jurisdiction of
organization; (iv) amend, alter or suspend or terminate or make provisional in
any material way, any Permit without the prior written consent of Seller, which
consent shall not be unreasonably withheld, or (v) wind up, liquidate or
dissolve (voluntarily or involuntarily) or commence or suffer any proceedings
seeking or that would result in any of the foregoing.

7.8
Truth of Statements

Purchaser
shall not furnish to Seller any certificate or other document that contains any
untrue statement of a material fact or that omits to state a material fact
necessary to make it not misleading in light of the circumstances under which
it was furnished.

7.9
IRS Form 8821

Purchaser
shall not alter, amend, restate, or otherwise modify, or withdraw, terminate or
re-file the IRS Form 8821 required to be filed pursuant to the Conditions
Precedent in Section 4.1 hereof.

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7.10
Transfer of Assets

Notwithstanding
any other provision of this Agreement or any other Security Document, Purchaser
shall not sell, lease, transfer, assign or otherwise dispose of any interest in
any properties or assets (other than obsolete equipment or excess equipment no
longer needed in the conduct of the business in the ordinary course of business
and sales of Inventory in the ordinary course of business), or agree to do any
of the foregoing at any future time, except that:

(a) Purchaser may lease
  (as lessee) real or personal property or surrender all or a portion of a
  lease of the same, in each case in the ordinary course of business (so long
  as such lease does not create or result in and is not otherwise a Capitalized
  Lease Obligation prohibited under this Agreement), provided that a
  Landlord Waiver and Consent and such other consents as are required by Seller
  are signed and delivered to Seller with respect to any lease of real or other
  property, as applicable;(b) Purchaser may arrange
  for warehousing, fulfillment or storage of Inventory at locations not owned
  or leased by Purchaser in each case in the ordinary course of business,
  provided that a Warehouse Waiver and Consent and such other consents as are
  required by Seller are signed and delivered to Seller with respect to any
  such location;(c) Purchaser may license or
  sublicense Intellectual Property or customer lists from third parties in the
  ordinary course of business, provided, that such licenses or
  sublicenses shall not interfere with the business or other operations of
  Purchaser and that Purchasers rights, title and/or interest in or to such
  Intellectual Property and customer lists and interests therein are pledged to
  Seller as further security for the Obligations and included as part of the
  Collateral;(d) Purchaser agrees not
  sell, transfer, amend or dispose of any of its rights relating to (a) any
  registered Intellectual Property (or any applications therefor), or (b) any
  other material Intellectual Property, without first providing to Seller
  written notice of its intent and providing Seller with the opportunity to
  object in writing within ten (10) days of the receipt of such notice; and(e)
  Purchaser may consummate such other sales or dispositions of property or
  assets (including any sale or transfer or disposition of all or any part of
  its assets and thereupon and within one year thereafter rent or lease the
  assets so sold or transferred) only to the extent prior written notice has
  been given to Seller and to the extent Seller has given its prior written
  consent thereto, subject in each case to such conditions as may be set forth
  in such consent.7.11
Payment on Permitted Subordinated Debt

Purchaser
shall not, unless expressly permitted under the Subordination Agreements, (i)
make any prepayment of any part or all of any Permitted Subordinated Debt, (ii)
repurchase, redeem or retire any instrument evidencing any such Permitted
Subordinated Debt prior to maturity, or (iii) enter into any agreement (oral or
written) which could in any way be construed to amend, modify, alter or
terminate any one or more instruments or agreements evidencing or relating to
any Permitted Subordinated Debt in a manner adverse to Seller, as determined by
Seller in its sole discretion.

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VIII. EVENTS OF DEFAULT

The
occurrence of any one or more of the following shall constitute an Event of
Default:

(a)
Purchaser shall fail to pay any amount on the Obligations or provided for in
any Acquisition Document when due (whether on any payment date, at maturity, by
reason of acceleration, by notice of intention to prepay, by required
prepayment or otherwise);

(b)
any representation, statement or warranty made or deemed made by Purchaser in
any Acquisition Document or in any other certificate, document, report or
opinion delivered in conjunction with any Acquisition Document to which it is a
party, shall not be true and correct in all material respects or shall have
been false or misleading in any material respect on the date when made or
deemed to have been made (except to the extent already qualified by
materiality, in which case it shall be true and correct in all respects and
shall not be false or misleading in any respect);

(c)
Purchaser or other party thereto other than Seller shall be in violation,
breach or default of, or shall fail to perform, observe or comply with any
covenant, obligation or agreement set forth in, any Acquisition Document and
such violation, breach, default or failure shall not be cured within the
applicable period set forth in the applicable Acquisition Document; provided
that, with respect to the affirmative covenants set forth in Article VI
(other than Sections 6.1(c), 6.2, 6.3, 6.5, 6.8 and 6.9 for which there
shall be no cure period), there shall be a twenty calendar day cure period
commencing from the earlier of (i) Receipt by such Person of written notice of
such breach, default, violation or failure, and (ii) the time at which such
Person or any authorized officer thereof knew or became aware, or should have
known or been aware, of such failure, violation, breach or default;

(d)
(i) any of the Acquisition Documents ceases to be in full force and effect, or
(ii) except as set forth herein or under any applicable Acquisition Document, any
Lien created thereunder ceases to constitute a valid perfected Lien on the
Collateral in accordance with the terms thereof, or Seller ceases to have a
valid perfected security interest in any of the Collateral or any securities
pledged to Seller pursuant to the Security Documents that is senior in priority
to all other security interests except with respect to the security interest
granted to CapitalSource pursuant to the terms of the Credit Agreement and
other Loan Documents (as defined in the Credit Agreement);

(e)
one or more tax assessments, judgments or decrees is rendered against any
Purchaser in an amount in excess of $40,000 individually or $75,000 in the
aggregate, which is/are not satisfied, stayed, vacated or discharged of record
within thirty-five calendar days of being rendered or is/are not subject to a
good faith dispute for which adequate reserves have been put aside;

(f)
(i) any default occurs, which is not cured or waived, (x) in the payment of any
amount with respect to any Indebtedness (other than the Obligations) of
Purchaser in excess of $40,000, (y) in the performance, observance or
fulfillment of any material provision contained in any agreement, contract,
document or instrument to which Purchaser is a party or to which any of their
properties or assets are subject or bound under or pursuant to which any
Indebtedness was issued, created, assumed, guaranteed or secured and such
default continues for more than any applicable grace period or permits the
holder of any Indebtedness to accelerate the maturity thereof, or (z) in the
performance, observance or fulfillment of any provision contained in any
agreement, contract, document or instrument between Purchaser and Seller or any Affiliate of Seller (other than the
Acquisition Documents) and such default continues for more than any
applicable grace period (if any), or
(ii) any Indebtedness of Purchaser is declared to be due and payable or is
required to be prepaid (other than by a regularly scheduled payment) prior to
the stated maturity thereof, or any obligation of such Person for the payment
of Indebtedness

25

(other than
the Obligations) is not paid when due or within any applicable grace period, or
any such obligation becomes or is declared to be due and payable before the
expressed maturity thereof, or there occurs an event which, with the giving of
notice or lapse of time, or both, would cause any such obligation to become, or
allow any such obligation to be declared to be, due and payable;

(g)
Purchaser shall (i) be unable to pay its debts generally as they become due,
(ii) have total liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) that exceed its assets, at a Fair Valuation, (iii) have
an unreasonably small capital base with which to engage in its anticipated
business, (iv) file a petition under any insolvency statute, (v) make a general
assignment for the benefit of its creditors, (vi) commence a proceeding for the
appointment of a receiver, trustee, liquidator or conservator of itself or of
the whole or any substantial part of its property, or (vii) file a petition
seeking reorganization or liquidation or similar relief under any Debtor Relief
Law or any other applicable law or statute;

(h)
(i) a court of competent jurisdiction shall (A) enter an order, judgment or
decree appointing a custodian, receiver, trustee, liquidator or conservator of
Purchaser or the whole or any substantial part of any such Persons properties,
which shall continue unstayed and in effect for a period of thirty-five
calendar days, (B) shall approve a petition filed against Purchaser seeking
reorganization, liquidation or similar relief under the any Debtor Relief Law
or any other applicable law or statute, which is not dismissed within
thirty-five calendar days or, (C) under the provisions of any Debtor Relief Law
or other applicable law or statute, assume custody or control of any Purchaser
or of the whole or any substantial part of any such Persons properties, which
is not irrevocably relinquished within thirty-five calendar days, or (ii) there
is commenced against Purchaser any proceeding or petition seeking
reorganization, liquidation or similar relief under any Debtor Relief Law or any
other applicable law or statute and either (A) any such proceeding or petition
is not unconditionally dismissed within thirty-five calendar days after the
date of commencement, or (B) Purchaser takes any action to indicate its
approval of or consent to any such proceeding or petition;

(i)
(i) any Change of Control occurs or any agreement or commitment to cause or
that may result in any such Change of Control is entered into, (ii) any
Material Adverse Effect, or Material Adverse Change occurs or is reasonably
expected to occur, or (iii) any Purchaser ceases a material portion of its
business operations as currently conducted;

(j)
Seller receives any indication or evidence that Purchaser may have directly or
indirectly been engaged in any type of activity which, in Sellers judgment,
might result in forfeiture of any property to any Governmental Authority which
shall have continued unremedied for a period of fifteen calendar days after
written notice from Seller;

(k)
an Event of Default occurs under any
other Acquisition Document after notice (if required) and the expiration of any
applicable grace period;

(l)
uninsured damage to, or loss, theft or destruction of, any portion of the
Collateral occurs that exceeds $40,000 in the aggregate;

(m)
Purchaser or any of their respective directors or senior officers is criminally
indicted or convicted under any law that could lead to a forfeiture of any
Collateral;

(n)
The common stock
of Sunset shall cease to be quoted for trading or listed for trading on either
the NASD OTC Bulletin Board, Nasdaq SmallCap Market, New York Stock Exchange,

26

American Stock Exchange or
the Nasdaq National Market and shall not again be quoted or listed for trading
thereon within seven Business Days of such delisting;

(o)
the issuance of any process for levy, attachment or garnishment or execution
upon or prior to any judgment against any Purchaser or any of their property or
assets; or

(p)
Purchaser does, or enters into or becomes a party to any agreement or
commitment to do, or cause to be done, any of the things described in this
Article VIII or otherwise prohibited by any Acquisition Document (subject to
any cure periods set forth therein); then, and in any such event,
notwithstanding any other provision of any Acquisition Document, Seller may,
without notice or demand, elect all or any of the Obligations to be due and
payable immediately (except in the case of an Event of Default under Section
8(d), (g), (h) or (i)(iii), in which event all of the
foregoing shall automatically and without further act by Seller be due and
payable, provided that, with respect to non-material breaches or
violations that constitute Events of Default under clause (ii) of Section
8(d), there shall be a three (3) Business Day cure period commencing from
the earlier of (A) Receipt by the applicable Person of written notice of such
breach or violation or of any event, fact or circumstance constituting or
resulting in any of the foregoing, and (B) the time at which such Person or any
authorized officer thereof knew or became aware, or should have known or been
aware, of such breach or violation and resulting Event of Default or of any
event, fact or circumstance constituting or resulting in any of the foregoing),
in each case without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by Purchaser.

IX. RIGHTS AND REMEDIES AFTER DEFAULT

9.1
Rights and Remedies

(a)
In addition to the acceleration provisions set forth in Article VIII
above, upon the occurrence and continuation of an Event of Default, subject to
the terms of the Master Subordination Agreement, Seller shall have the right to
exercise any and all rights, options and remedies provided for in the
Acquisition Documents, under the UCC or at law or in equity, including, without
limitation, the right to (i) apply any property of Purchaser held by Seller to
reduce the Obligations, (ii) foreclose the Liens created under the Security
Documents, (iii) realize upon, take possession of and/or sell any Collateral or
securities pledged with or without judicial process, (iv) exercise all rights
and powers with respect to the Collateral as any Purchaser, as applicable,
might exercise, (v) collect and send notices regarding the Collateral, with or
without judicial process, (vi) by its own means or with judicial assistance,
enter any premises at which Collateral and/or pledged securities are located,
or render any of the foregoing unusable or dispose of the Collateral and/or
pledged securities on such premises without any liability for rent, storage,
utilities, or other sums, and no Purchaser shall resist or interfere with such
action, (vii) at Purchasers expense, require that all or any part of the
Collateral be assembled and made available to Seller at any place designated by
Seller, (viii) intentionally omitted, (ix) assess the Non-Compliance Fee,
and/or (x) relinquish or abandon any Collateral or securities pledged or any
Lien thereon. Notwithstanding any provision of any Acquisition Document,
Seller, in its sole discretion, shall have the right, at any time that
Purchaser fails to do so, and from time to time, without prior notice, to: (i)
obtain insurance covering any of the Collateral to the extent required
hereunder; (ii) pay for the performance of any of Obligations; (iii) discharge
taxes or Liens on any of the Collateral that are in violation of any
Acquisition Document unless Purchaser is in good faith with due diligence by
appropriate proceedings contesting those items; and (iv) pay for the
maintenance and preservation of the Collateral. Such expenses and advances
shall be added to the Obligations until reimbursed to Seller and shall be
secured

27

by the
Collateral, and such payments by Seller shall not be construed as a waiver by
Seller of any Event of Default or any other rights or remedies of Seller.

(b)
Purchaser agrees that notice received by it at least ten calendar days before
the time of any intended public sale, or the time after which any private sale
or other disposition of Collateral is to be made, shall be deemed to be
reasonable notice of such sale or other disposition. If permitted by applicable
law, any perishable Collateral which threatens to speedily decline in value or
which is sold on a recognized market may be sold immediately by Seller without
prior notice to Purchaser. At any sale or disposition of Collateral or
securities pledged, Seller may (to the extent permitted by applicable law)
purchase all or any part thereof free from any right of redemption by Purchaser
which right is hereby waived and released. Purchaser covenants and agrees not
to, and not to permit or cause any of its Subsidiaries to, interfere with or
impose any obstacle to Sellers exercise of its rights and remedies with
respect to the Collateral. Seller, in dealing with or disposing of the
Collateral or any part thereof, shall not be required to give priority or
preference to any item of Collateral or otherwise to marshal assets or to take
possession or sell any Collateral with judicial process.

9.2
Application of Proceeds

In
addition to any other rights, options and remedies Seller has under the
Acquisition Documents, the UCC, at law or in equity, subject to the terms of
the Master Subordination Agreement, all dividends, interest, rents, issues,
profits, fees, revenues, income and other proceeds collected or received from
collecting, holding, managing, renting, selling, or otherwise disposing of all
or any part of the Collateral or any proceeds thereof upon exercise of its
remedies hereunder shall be applied in the following order of priority: (i) first,
to the payment of all costs and expenses of such collection, storage, lease,
holding, operation, management, sale, disposition or delivery and of conducting
Purchasers business and of maintenance, repairs, replacements, alterations,
additions and improvements of or to the Collateral, and to the payment of all
sums which Seller may be required or may elect to pay, if any, for taxes,
assessments, insurance and other charges upon the Collateral or any part
thereof, and all other payments that Seller may be required or authorized to
make under any provision of this Agreement (including, without limitation, in
each such case, in-house documentation and diligence fees and legal expenses,
search, audit, recording, professional and filing fees and expenses and
reasonable attorneys fees and all expenses, liabilities and advances made or
incurred in connection therewith); (ii) second, to the payment of all
Obligations as provided herein; (iii) third, to the satisfaction of
Indebtedness secured by any subordinate security interest of record in the
Collateral if written notification of demand therefore is received before
distribution of the proceeds is completed, provided, that, if requested
by Seller, the holder of a subordinate security interest shall furnish
reasonable proof of its interest, and unless it does so, Seller need not
address its claims; and (iv) fourth, to the payment of any surplus then
remaining to Purchaser, unless otherwise provided by law or directed by a court
of competent jurisdiction, provided that Purchaser shall be liable for
any deficiency if such proceeds are insufficient to satisfy the Obligations or
any of the other items referred to in this section.

9.3
Rights of Seller to Appoint Receiver

Without
limiting and in addition to any other rights, options and remedies Seller has
under the Acquisition Documents, the UCC, at law or in equity, upon the
occurrence and continuation of an Event of Default, subject to the terms of the
Master Subordination Agreement, Seller shall have the right to apply for and
have a receiver appointed by a court of competent jurisdiction in any action
taken by Seller to enforce its rights and remedies in order to manage, protect,
preserve, sell or dispose the Collateral and continue the operation of the
business of Purchaser and to collect all revenues and profits thereof and apply
the same to the payment of all expenses and other charges of such receivership

28

including the compensation
of the receiver and to the payments as aforesaid until a sale or other
disposition of such Collateral shall be finally made and consummated.

9.4
Rights and Remedies not Exclusive

Subject
to the terms of the Master Subordination Agreement, Seller shall have the right
in its sole discretion to determine which rights, Liens and/or remedies Seller
may at any time pursue, relinquish, subordinate or modify, and such
determination will not in any way modify or affect any of Sellers rights,
Liens or remedies under any Acquisition Document, applicable law or equity. The
enumeration of any rights and remedies in any Acquisition Document is not
intended to be exhaustive, and all rights and remedies of Seller described in
any Acquisition Document are cumulative and are not alternative to or exclusive
of any other rights or remedies which Seller otherwise may have. The partial or
complete exercise of any right or remedy shall not preclude any other further
exercise of such or any other right or remedy.

X. WAIVERS AND JUDICIAL PROCEEDINGS

10.1
Waivers

Except
as expressly provided for herein, Purchaser hereby waives setoff, counterclaim,
demand, presentment, protest, all defenses with respect to any and all
instruments and all notices and demands of any description, and the pleading of
any statute of limitations as a defense to any demand under any Acquisition
Document. Purchaser hereby waives any and all defenses and counterclaims it may
have or could interpose in any action or procedure brought by Seller to obtain
an order of court recognizing the assignment of, or Lien of Seller in and to,
any Collateral. With
respect to any action hereunder, Seller conclusively may rely upon, and shall
incur no liability to Purchaser in acting upon, any request or other communication
that Seller reasonably believes to have been given or made by a person
authorized on Purchasers behalf, whether or not such person is listed on the
incumbency certificate delivered pursuant to Section 4.1 hereof. In each
such case, Purchaser hereby waives the right to dispute Sellers action based
upon such request or other communication, absent manifest error.

10.2
Delay; No Waiver of Defaults

No
course of action or dealing, renewal, release or extension of any provision of
any Acquisition Document, or single or partial exercise of any such provision,
or delay, failure or omission on Sellers part in enforcing any such provision
shall affect the liability of Purchaser or operate as a waiver of such
provision or affect the liability of any Purchaser or preclude any other or
further exercise of such provision. No waiver by any party to any Acquisition
Document of any one or more defaults by any other party in the performance of
any of the provisions of any Acquisition Document shall operate or be construed
as a waiver of any future default, whether of a like or different nature, and
each such waiver shall be limited solely to the express terms and provisions of
such waiver. Notwithstanding any other provision of any Acquisition Document,
by completing the Closing under this Agreement, Seller does not waive any
breach of any representation or warranty under any Acquisition Document, and
all of Sellers claims and rights resulting from any such breach or
misrepresentation are specifically reserved.

10.3
Jury Waiver

EACH
PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM OR CAUSE OF ACTION ARISING UNDER THE

29

ACQUISITION
DOCUMENTS OR IN ANY WAY CONNECTED WITH OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES WITH RESPECT TO THE ACQUISITION DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE. EACH PARTY HEREBY AGREES AND CONSENTS
THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART
OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF
THE PARTIES TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.

10.4
Cooperation in Discovery and Litigation

In
any litigation, arbitration or other dispute resolution proceeding relating to
any Acquisition Document, Purchaser waives any and all defenses, objections and
counterclaims it may have or could interpose with respect to (i) any of its
directors, officers, employees or agents being deemed to be employees or
managing agents of Purchaser for purposes of all applicable law or court rules
regarding the production of witnesses by notice for testimony (whether in a
deposition, at trial or otherwise), (ii) Sellers counsel examining any such
individuals as if under cross-examination and using any discovery deposition of
any of them as if it were an evidence deposition, and/or (iii) using all
commercially reasonable efforts to produce in any such dispute resolution
proceeding, at the time and in the manner requested by Seller, all Persons,
documents (whether in tangible, electronic or other form) and/or other things
under its control and relating to the dispute.

XI. EFFECTIVE DATE AND TERMINATION

11.1
Termination and Effective Date Thereof

(a)
This Agreement shall continue in full force and effect until the full
performance and indefeasible payment in cash of all Obligations, unless
terminated sooner as provided in this Section 11.1. Purchaser may
terminate this Agreement at any time upon not less than ninety calendar days
prior written notice to Seller and upon full performance and indefeasible
payment in full in cash of all Obligations on or prior to such ninetieth
calendar day after Receipt by Seller of such written notice.All
of the Obligations shall be immediately due and payable upon any such
termination on the termination date stated in any notice of termination (the Termination Date); provided
that,
notwithstanding any other provision of any Acquisition Document, the
Termination Date shall be effective no earlier than the first Business Day of
the month following the expiration of the ninety calendar days prior written
notice period. Notwithstanding any other provision of any Acquisition Document,
no termination of this Agreement shall affect Sellers rights or any of the
Obligations existing as of the effective date of such termination, and the
provisions of the Acquisition Documents shall continue to be fully operative
until the Obligations have been fully performed and indefeasibly paid in cash
in full. The Liens granted to Seller under the Security Documents and the
financing statements filed pursuant thereto and the rights and powers of Seller
shall continue in full force and effect until all of the Obligations have been
fully performed and indefeasibly paid in full in cash and this Agreement has
been terminated.

11.2
Survival

All
obligations, covenants, agreements, representations, warranties, waivers and
indemnities made by Purchaser in any Acquisition Document shall survive the
execution and delivery of

30

the
Acquisition Documents, the Closing, and any termination of this Agreement until
all Obligations are fully performed and indefeasibly paid in full in cash. The
obligations and provisions of Sections 3.4, 3.5, 6.13, 10.1, 10.3, 11.1,
11.2, 12.4, 12.7 and 12.10 shall survive termination of the Acquisition
Documents and any payment, in full or in part, of the Obligations.

XII. MISCELLANEOUS

12.1 Governing Law; Jurisdiction; Service of Process;
Venue

The
Acquisition Documents shall be governed by and construed in accordance with the
internal laws of the State of New York without giving effect to its choice of
law provisions. Any judicial proceeding against Purchaser with respect to the
Obligations, any Acquisition Document or any related agreement may be brought
in any federal or state court of competent jurisdiction located in the State of
New York. By execution and delivery of each Acquisition Document to which it is
a party, Purchaser (i) accepts the non-exclusive jurisdiction of the aforesaid
courts and irrevocably agrees to be bound by any judgment rendered thereby,
(ii) waives personal service of process, (iii) agrees that service of process
upon it may be made by certified or registered mail, return receipt requested,
pursuant to Section 12.5 hereof, (iv) waives any objection to
jurisdiction and venue of any action instituted hereunder and agrees not to
assert any defense based on lack of jurisdiction, venue or convenience, and (v) agrees that Seller has
accepted in New York the
Acquisition Documents executed by Purchaser. Nothing shall affect the
right of Seller to serve process in any manner permitted by law or shall limit
the right of Seller to bring proceedings against Purchaser in the courts of any
other jurisdiction having jurisdiction. Any judicial proceedings against Seller
involving, directly or indirectly, the Obligations, any Acquisition Document or
any related agreement shall be brought only in a federal or state court located
in the State of New York. All parties acknowledge that they participated in the
negotiation and drafting of this Agreement and that, accordingly, no party
shall move or petition a court construing this Agreement to construe it more
stringently against one party than against any other.

12.2 Successors and Assigns; Participations; New
Sellers

The
Acquisition Documents shall inure to the benefit of Seller, Transferees and all
future holders of the Promissory Notes, the Obligations and/or any of the
Collateral, and each of their respective successors and assigns. Each
Acquisition Document shall be binding upon the Persons other than Seller that
are parties thereto and their respective successors and assigns, and no such
Person may assign, delegate or transfer any Acquisition Document or any of its
rights or obligations thereunder without the prior written consent of Seller.
No rights are intended to be created under any Acquisition Document for the
benefit of any third party done, creditor or incidental beneficiary of
Purchaser. Nothing contained in any Acquisition Document shall be construed as
a delegation to Seller of any other Persons duty of performance. PURCHASER
ACKNOWLEDGES AND AGREES THAT SELLER AT ANY TIME AND FROM TIME TO TIME MAY (I)
DIVIDE AND RESTATE ANY NOTE, AND/OR (II) SELL, ASSIGN OR GRANT PARTICIPATING
INTERESTS IN OR TRANSFER ALL OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER ANY
ACQUISITION DOCUMENT, THE PROMISSORY NOTES, THE OBLIGATIONS AND/OR THE
COLLATERAL TO OTHER PERSONS (EACH SUCH TRANSFEREE, ASSIGNEE OR PURCHASER, A TRANSFEREE).
Each Transferee shall have all of the rights and benefits with respect to the
Obligations, the Promissory Notes, Collateral and/or Acquisition Documents held
by it as fully as if the original holder thereof, and either Seller or any
Transferee may be designated as the sole agent to manage the transactions and
obligations contemplated therein; provided that, notwithstanding
anything to the contrary in any Acquisition Document, Purchaser shall not be
obligated to pay under this Agreement to any Transferee any sum in excess of
the sum which

31

Purchaser
would have been obligated to pay to Seller had such participation not been
effected. Notwithstanding any other provision of any Acquisition Document,
Seller may disclose to any Transferee all information, reports, financial
statements, certificates and documents obtained under any provision of any
Acquisition Document.

12.3
Application of Payments

To
the extent that any payment made or received with respect to the Obligations is
subsequently invalidated, determined to be fraudulent or preferential, set
aside or required to be repaid to a trustee, debtor in possession, receiver,
custodian or any other Person under any Debtor Relief Law, common law or
equitable cause or any other law, then the Obligations intended to be satisfied
by such payment shall be revived and shall continue as if such payment had not
been received by Seller. Any payments with respect to the Obligations received
shall be credited and applied in such manner and order as Seller shall decide
in its sole discretion.

12.4
Indemnity

Purchaser
jointly and severally shall indemnify Seller, its Affiliates and its and their
respective managers, members, officers, employees, Affiliates, agents,
representatives, successors, assigns, accountants and attorneys (collectively,
the Indemnified
Persons) from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
reasonable fees and disbursements of counsel and in-house documentation and
diligence fees and legal expenses) which may be imposed on, incurred by or asserted
against any Indemnified Person with respect to or arising out of, or in any
litigation, proceeding or investigation instituted or conducted by any Person
with respect to any aspect of, or any transaction contemplated by or referred
to in, or any matter related to, any Acquisition Document or any agreement,
document or transaction contemplated thereby, whether or not such Indemnified
Person is a party thereto, except to the extent that any of the foregoing
arises out of the gross negligence or willful misconduct of such Indemnified
Person. If any Indemnified Person uses in-house counsel for any purpose for
which Purchaser is responsible to pay or indemnify, each Purchaser expressly
agrees that its indemnification obligations include reasonable charges for such
work commensurate with the fees that would otherwise be charged by outside
legal counsel selected by such Indemnified Person in its sole discretion for
the work performed. Seller agrees to give Purchaser reasonable notice of any
event of which Seller becomes aware for which indemnification may be required
under this Section 12.4, and Seller may elect (but is not obligated) to
direct the defense thereof, provided that the selection of counsel shall be
subject to Purchasers consent, which consent shall not be unreasonably
withheld or delayed. Any Indemnified Person may, in its reasonable discretion,
take such actions as it deems necessary and appropriate to investigate, defend
or settle any event or take other remedial or corrective actions with respect
thereto as may be necessary for the protection of such Indemnified Person or
the Collateral. Notwithstanding the foregoing, if any Insurer agrees to
undertake the defense of an event (an Insured Event), Seller agrees not to
exercise its right to select counsel to defend the event if that would cause
Purchasers Insurer to deny coverage; provided, however, that
Seller reserves the right to retain counsel to represent any Indemnified Person
with respect to an Insured Event at its sole cost and expense. To the extent
that Seller obtains recovery from a third party other than an Indemnified
Person of any of the amounts that any Purchaser has paid to Seller pursuant to
the indemnity set forth in this Section 12.4, then Seller shall promptly
pay to Purchaser the amount of such recovery.

12.5
Notice

32

Any
notice or request under any Acquisition Document shall be given to any party to
this Agreement at such partys address set forth beneath its signature on the
signature page to this Agreement, or at such other address as such party may
hereafter specify in a notice given in the manner required under this Section
12.5. Any notice or request hereunder shall be given only by, and shall be
deemed to have been received upon (each, a Receipt):
(i) registered or certified mail, return receipt requested, on the date on
which received as indicated in such return receipt, (ii) delivery by a
nationally recognized overnight courier, one (1) Business Day after deposit
with such courier, or (iii) facsimile transmission, in each case upon telephone
or further electronic communication from the recipient acknowledging receipt
(whether automatic or manual from recipient), as applicable.

12.6
Severability; Captions; Counterparts; Facsimile Signatures

If
any provision of any Acquisition Document is adjudicated to be invalid under
applicable laws or regulations, such provision shall be inapplicable to the
extent of such invalidity without affecting the validity or enforceability of
the remainder of the Acquisition Documents which shall be given effect so far
as possible. The captions in the Acquisition Documents are intended for
convenience and reference only and shall not affect the meaning or
interpretation of the Acquisition Documents. The Acquisition Documents may be
executed in one or more counterparts (which taken together, as applicable,
shall constitute one and the same instrument) and by facsimile transmission,
which facsimile signatures shall be considered original executed counterparts.
Each party to this Agreement agrees that it will be bound by its own facsimile
signature and that it accepts the facsimile signature of each other party.

12.7
Expenses

Purchaser
shall pay, whether or not the Closing occurs, all costs and expenses incurred
by Seller and/or its Affiliates, including, without limitation, documentation
and diligence fees and expenses, all search, audit, appraisal, recording,
professional and filing fees and expenses and all other out-of-pocket charges
and expenses (including, without limitation, UCC and judgment and tax lien
searches and UCC filings and fees for post-Closing UCC and judgment and tax
lien searches and wire transfer fees and audit expenses), and reasonable attorneys
fees and expenses, (i) in any effort to enforce, protect or collect payment of
any Obligation or to enforce any Acquisition Document or any related agreement,
document or instrument, (ii) in connection with entering into, negotiating,
preparing, reviewing and executing the Acquisition Documents and/or any related
agreements, documents or instruments, (iii) arising in any way out of
administration of the Obligations, (iv) in connection with instituting,
maintaining, preserving, enforcing and/or foreclosing on Sellers Liens in any
of the Collateral or securities pledged under the Acquisition Documents,
whether through judicial proceedings or otherwise, (v) in defending or
prosecuting any actions, claims or proceedings arising out of or relating to Sellers
transactions with Purchaser, (vi) in seeking, obtaining or receiving any advice
with respect to its rights and obligations under any Acquisition Document and
any related agreement, document or instrument, and/or (vii) in connection with
any modification, restatement, supplement, amendment, waiver or extension of
any Acquisition Document and/or any related agreement, document or instrument.
All of the foregoing shall be charged to Purchasers and shall be part of the
Obligations. If Seller or any of its Affiliates uses in-house counsel for any
purpose under any Acquisition Document for which Purchaser is responsible to
pay or indemnify, Purchaser expressly agrees that its Obligations include
reasonable charges for such work commensurate with the fees that would
otherwise be charged by outside legal counsel selected by Seller or such
Affiliate in its sole discretion for the work performed. Without limiting the
foregoing, Purchaser shall pay all taxes (other than taxes based upon or
measured by

33

Sellers
income or revenues or any personal property tax), if any, in connection with
the issuance of the Promissory Notes and the filing and/or recording of any
documents and/or financing statements.

12.8
Entire Agreement

This
Agreement and the other Acquisition Documents to which Purchaser is a party
constitute the entire agreement between Purchaser and Seller with respect to
the subject matter hereof and thereof, and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof or thereof. Any
promises, representations, warranties or guarantees not herein contained and
hereinafter made shall have no force and effect unless in writing signed by
Purchaser and Seller. No provision of this Agreement may be changed, modified,
amended, restated, waived, supplemented, discharged, canceled or terminated
orally or by any course of dealing or in any other manner other than by an
agreement in writing signed by Seller and Purchaser. Each party hereto acknowledges
that it has been advised by counsel in connection with the negotiation and
execution of this Agreement and is not relying upon oral representations or
statements inconsistent with the terms and provisions hereof.

12.9
Seller Approvals

Unless
expressly provided herein to the contrary, any approval, consent, waiver or
satisfaction of Seller with respect to any matter that is subject of any
Acquisition Document may be granted or withheld by Seller in its sole and
absolute discretion.

12.10
Confidentiality and Publicity

(a)
Purchaser agrees, and agrees to cause each of its Affiliates, (i) not to
transmit or disclose provisions of any Acquisition Document to any Person
(other than to Purchasers advisors and officers on a need-to-know basis or as
otherwise may be required by law) without Sellers prior written consent,
except as required by applicable law or any regulations thereunder, (ii) to
inform all Persons of the confidential nature of the Acquisition Documents and
to direct them not to disclose the same to any other Person and to require each
of them to be bound by these provisions. Purchaser agrees to submit to Seller
and Seller reserves the right to review and approve all materials that Purchaser
or any of its Affiliates prepares that contain Sellers name or describe or
refer to any Acquisition Document, any of the terms thereof or any of the
transactions contemplated thereby. Purchaser shall not, and shall not permit
any of its Affiliates to, use Sellers name (or the name of any of Sellers
Affiliates) in connection with any of its business operations, including
without limitation, advertising, marketing or press releases or such other
similar purposes, without Sellers prior written consent. Nothing contained in
any Acquisition Document is intended to permit or authorize Purchaser or any of
its Affiliates to contract on behalf of Seller.

(b)
Purchaser hereby agrees that Seller or any Affiliate of Seller may (i) disclose
a general description of transactions arising under the Acquisition Documents
for advertising, marketing or other similar purposes and (ii) use Purchasers
name, logo or other indicia germane to such party in connection with such
advertising, marketing or other similar purposes.

12.11
Release of Seller

Notwithstanding
any other provision of any Acquisition Document, Purchaser voluntarily,
knowingly, unconditionally and irrevocably, with specific and express intent,
for and on behalf of itself, its managers, members, directors, officers,
employees, stockholders, Affiliates, agents,

34

representatives,
accountants, attorneys, successors and assigns and their respective Affiliates
(collectively, the Releasing Parties),
hereby fully and completely releases and forever discharges the Indemnified
Persons and any other Person or Insurer which may be responsible or liable for
the acts or omissions of any of the Indemnified Persons, or who may be liable
for the injury or damage resulting therefrom (collectively, with the
Indemnified Persons, the Released Parties),
of and from any and all actions, causes of action, damages, claims,
obligations, liabilities, costs, expenses and demands of any kind whatsoever,
at law or in equity, matured or unmatured, vested or contingent, that any of
the Releasing Parties has against any of the Released Parties as of the date of
the Closing. Purchaser acknowledges that the foregoing release is a material
inducement to Sellers decision to enter into the Acquisition Agreement and has
been relied upon by Seller in agreeing to enter into the Acquisition Agreement.

12.12
Agent

Seller
and its successors and assigns hereby (i) designate and appoint IBF Fund
Liquidating LLC, a Delaware limited liability company, and its successors and
assigns (IBF), to act as agent for Seller and its successors and assigns
under this Agreement and all other Acquisition Documents, (ii) irrevocably
authorize IBF to take all actions on its behalf under the provision of this
Agreement and all other Acquisition Documents, and (iii) to exercise all such
powers and rights, and to perform all such duties and obligations hereunder and
thereunder. IBF, on behalf of Seller, shall hold all Collateral, payments of
principal and interest, fees, charges and collections received pursuant to this
Agreement and all other Acquisition Documents. Purchaser acknowledges that
Seller and its successors and assigns transfer and assign to IBF the right to
act as Sellers agent to enforce all rights and perform all obligations of
Seller contained herein and in all of the other Acquisition Documents. Purchaser shall within ten
Business Days after Sellers reasonable request, take such further actions,
obtain such consents and approvals and duly execute and deliver such further
agreements, amendments, assignments, instructions or documents as Seller may
request to evidence the appointment and designation of IBF as agent for Seller
and other financial institutions from time to time party hereto and to the
other Acquisition Documents.

12.13
Agreement Controls

In
the event of any inconsistency between this Agreement and any other Acquisition
Documents, the terms of this Agreement shall control.

12.14
Master Subordination Agreement

Notwithstanding
anything contained herein to the contrary, this Agreement and the exercise of
any right or remedy hereunder by Seller are subject to the terms of the Master
Subordination Agreement. The Liens in the Collateral granted herein are
subordinated to the Liens in the Collateral granted to CapitalSource in the
manner and to the extent set forth in the Master Subordination Agreement.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

35

IN
WITNESS WHEREOF, each of the parties has duly executed this Security Agreement
as of the date first written above.

SUNSET BRANDS, INC.By:
  /s/ Todd SandersName: Todd SandersIts: President & CEOAddress for
  Notices:Sunset
  Brand, Inc.10990
  Wilshire Blvd., Suite 1220Los Angeles,
  CA 90024Attention:
  PresidentTelephone:
  (310) 478-4600FAX: (310)
  478-4601U.S. MILLS, INC.By:
    /s/ Todd SandersName: Todd SandersIts: CEOBy:
    /s/ Charles VerdeName: Charles VerdeIts: PresidentAddress for
  Notices:U.S. Mills,
  Inc.200
  Reservoir StreetNeedham, MA
  02494Attention:
  PresidentTelephone:
  (781) 444-0440FAX: (781)
  444-3411IBF FUND LIQUIDATING LLCBy:
    /s/ Arthur J. SteinbergName: Arthur J. SteinbergIts:
  ManagerAddress for
  Notices:c/o Kaye
  Scholer LLP425 Park
  AvenueNew York, NY
  10022Attention:
  Arthur J. Steinberg, Esq., ManagerTelephone:
  (212) 836-8564FAX: (212)
  836-615736

SCHEDULES

Schedule 2.17
  --
  Other Mandatory PaymentsSchedule 5.2
  --
  Required ConsentsSchedule 5.3
  --
  Capitalization, Organization Chart (including all subsidiaries,
  authorized/issued capitalization, owners, directors, officers and managers)
  and Joint VenturesSchedule 5.4
  --
  Liens; Real and Personal Property Owned or Leased; LeasesSchedule 5.8
  --
  TaxesSchedule 5.11
  --
  Intellectual PropertySchedule 5.15A
  --
  Existing IndebtednessSchedule 5.15B
  --
  Indebtedness Maturing During TermSchedule 5.16
  --
  Other AgreementsSchedule 5.17
  --
  InsuranceSchedule 5.18A
  --
  Corporate NamesSchedule 5.18B
  --
  Places of BusinessSchedule 6.8
  --
  Further Assurances/Post ClosingSchedule 7.2
  --
  Permitted IndebtednessSchedule 7.3
  --
  Permitted LiensSchedule 7.5
  --
  DividendsSchedule 7.6
  --
  Transactions with Affiliates37

ANNEX I

FINANCIAL COVENANTS

1)
Minimum EBITDAM

For
the Test Period ending on November 30, 2005 and for the Test Periods ending on
the last day of each calendar month thereafter, Purchaser shall not permit its
EBITDAM to be less than the following amounts on the Test Periods set forth
below:

Test Period Ended
  
  Min. EBITDAM Covenant
  LevelNovember 30, 2005
  
  $  170,000December 31, 2005
  
  $  317,900January 31, 2006
  
  $  451,350February 28, 2006
  
  $  586,500March 31, 2006
  
  $  711,450April 30, 2006
  
  $  779,450May 31, 2006
  
  $  641,750June 30, 2006 and the last day of each month thereafter
  
  $  595,0002)
Maximum Senior Leverage Ratio (Senior Debt to EBITDAM)

For the Test Period ending on November 30, 2005 and
for each Test Period ending on the last day of each calendar month thereafter,
Purchaser shall not permit its Maximum Senior Leverage Ratio to be more than
4.0 to 1.0.

3)
Minimum Fixed Charge Coverage Ratio (EBITDAM/Fixed Charges)

For
the Test Period ending on November 30, 2005 and for the Test Periods ending on
the last day of each calendar month thereafter, Purchaser shall not permit its
Minimum Fixed Charge Coverage Ratio to be less than the following amounts on
the Test Periods set forth below:

Test Period Ended
  
  Minimum Fixed Charge
  Coverage RatioNovember 30, 2005 throughand including October 31,
  2006
  
  0.94 to 1.0November 30, 2006 throughand including October 31,
  2007
  
  1.02 to 1.0November 30, 2007 and the last dayof each month
  thereafter
  
  1.11 to 1.04)
Minimum Liquidity

1

At
Closing and at all other times Purchaser shall have not less than $250,000 of
Available Cash on hand.

For
purposes of the covenants set forth in this Annex I, the terms listed below
shall have the following meanings:

Available
Cash shall mean, for and on any date, the sum without duplication of the
following for Purchaser: (a) unrestricted cash on hand on such date, (b) Cash
Equivalents held on such date, and (c) the unborrowed Availability (as such
term is defined in the Credit Agreement) on and as of such date.

Cash
Equivalents shall mean (a) securities issued, or directly and fully
guaranteed or insured, by the United States or any agency or instrumentality
thereof (provided that the full faith and credit of the United States is
pledged in support thereof) having maturities of not more than six months from
the date of acquisition, (b) U.S. dollar denominated time deposits,
certificates of deposit and bankers acceptances of (i) any domestic commercial
bank of recognized standing having capital and surplus in excess of
$500,000,000, or (ii) any bank (or the parent company of such bank) whose short-term
commercial paper rating from Standard & Poors Ratings Services (S&P) is at least A-2 or the
equivalent thereof or from Moodys Investors Service, Inc. (Moodys) is at least P-2 or the
equivalent thereof in each case with maturities of not more than six months
from the date of acquisition (any bank meeting the qualifications specified in
clauses (b)(i) or (ii), an Approved Bank),
(c) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (a), above, entered into
with any Approved Bank, (d) commercial paper issued by any Approved Bank or by
the parent company of any Approved Bank and commercial paper issued by, or
guaranteed by, any industrial or financial company with a short-term commercial
paper rating of at least A-2 or the equivalent thereof by S&P or at least
P-2 or the equivalent thereof by Moodys, or guaranteed by any industrial
company with a long term unsecured debt rating of at least A or A2, or the
equivalent of each thereof, from S&P or Moodys, as the case may be, and in
each case maturing within six months after the date of acquisition and (e)
investments in money market funds substantially all of whose assets are
comprised of securities of the type described in clauses (a) through (d) above.

EBITDAM
shall mean, for any Test Period, the sum, without duplication, of the following
for Purchaser, on a consolidated basis: Net Income determined in accordance
with GAAP, plus, (a) Interest Expense, (b) taxes on income, whether
paid, payable or accrued, (c) depreciation expense, (d) amortization
expense, (e) all other non-cash, non-recurring charges and expenses, excluding
accruals for cash expenses made in the ordinary course of business, (f) loss from
any sale of assets, other than sales in the ordinary course of business, all of
the foregoing determined in accordance with GAAP, and (g) plus any management
fees paid or accrued by Purchaser during such period, minus (a) gains
from any sale of assets, other than sales in the ordinary course of business
and (b) other extraordinary or non-recurring gains.

Fixed
Charge Coverage Ratio shall mean, for Purchaser collectively on a
consolidated basis, the ratio of (a) EBITDAM for the Test Period, to (b)
Fixed Charges for the Test Period.

Fixed
Charges shall mean, the sum of the following: (a) Total Debt Service,
(b) Capital Expenditures, (c) income taxes paid in cash or accrued, (d)
dividends paid or accrued or declared, and (e) management fees paid or accrued.

2

Interest
Expense shall mean, for any Test Period, total interest expense (including
attributable to Capital Leases in accordance with GAAP) fees with respect to
all outstanding Indebtedness including capitalized interest but excluding
commissions, discounts and other fees owed with respect to letters of credit
and bankers acceptance financing and net costs under Interest Rate Agreements.

Interest
Rate Agreement shall mean any interest rate swap, cap or collar agreement
or other similar agreement or arrangement designed to hedge the position with
respect to interest rates.

Total
Senior Leverage Ratio shall mean, at any date of determination, for
Purchaser individually and collectively on a consolidated and consolidating
basis, the ratio of (i) Total Senior Debt on such date, to
(ii) EBITDAM for the Test Period most recently ended on such date (taken
as one accounting period) multiplied by the factor necessary to convert
such Test Period EBITDAM into an annualized basis.

Test
Period shall mean the six most recent calendar months then ended (taken as
one accounting period), or such other period as specified in the Agreement or
any Annex thereto; except that for the period prior to the six month
anniversary of the Closing Date, the Test Period shall be equal to the trailing
number of months then elapsed since November 1, 2005.

Total
Senior Debt shall mean, at any date of determination, for Purchaser
individually and collectively on a consolidated and consolidating basis, the
total Indebtedness owed to CapitalSource under the Credit Agreement and secured
by liens on the Purchasers assets on such date less cash and Cash Equivalents
held on such date.

Total
Debt Service shall mean the sum of (i) all payments of principal on
Indebtedness, and (ii) cash Interest Expense, in each case for such period.

3

APPENDIX A

DEFINITIONS

Accounts
shall mean all accounts (as defined in the UCC) of Purchaser (or, if
referring to another Person, of such other Person), including without
limitation, accounts, accounts receivables, monies due or to become due and
obligations in any form (whether arising in connection with contracts, contract
rights, Instruments, General Intangibles or Chattel Paper), in each case
whether arising out of goods sold or services rendered or from any other
transaction and whether or not earned by performance, now or hereafter in
existence, and all documents of title or other documents representing any of
the foregoing, and all collateral security and guaranties of any kind, now or
hereafter in existence, given by any Person with respect to any of the foregoing.

Account
Debtor shall mean any Person who is obligated under an Account.

Acquisition
Documents shall mean, collectively and each individually, the Acquisition
Agreement, this Agreement, the Promissory Notes, the Intellectual Property
Security Agreement, the Stock Pledge Agreements, the Lockbox Agreements, the
Junior Management Fee Subordination Agreement, the Uniform Commercial Code
Financing Statements, the Subordination Agreements, the Landlord Waiver and Consents,
and all other agreements, documents, instruments and certificates heretofore or
hereafter executed or delivered to Seller in connection with this Agreement or
the Acquisition Agreement, as the same may be amended, modified or supplemented
from time to time. Acquisition Documents shall not include the Series B
Preferred (as such term is defined in the Acquisition Agreement).

Affiliate
shall mean, as to any Person, any other Person (a) that, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person, (b) who is a director or officer (i) of such
Person, (ii) of any Subsidiary of such Person, or (iii) of any Person
described in clause (a) above with respect to such Person, or (c) which,
directly or indirectly through one or more intermediaries, is the beneficial or
record owner (as defined in Rule 13d-3 of the Securities Exchange Act of 1934,
as amended, as the same is in effect on the date hereof) of five percent (5%)
or more of any class of the outstanding voting stock, securities or other
equity or ownership interests of such Person. For purposes of this definition,
the term control (and the correlative terms, controlled by and under
common control with) shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies, whether
through ownership of securities or other interests, by contract or otherwise.
Affiliate shall include any Subsidiary.

Business
Day shall mean any day other than a Saturday, Sunday or other day on which
the Federal Reserve is closed.

Capital
Expenditures shall mean, for any Test Period, the sum (without
duplication) of all expenditures (whether paid in cash or accrued as
liabilities) during the Test Period that are or should be treated as capital
expenditures under GAAP.

1

Capital
Lease shall mean, as to any Person, a lease of any interest in any kind of
property or asset by that Person as lessee that is, should be or should have
been recorded as a capital lease in accordance with GAAP.

Capitalized Lease Obligations shall mean all obligations of any Person
under Capital Leases, in each case, taken at the amount thereof accounted for
as a liability in accordance with GAAP.

Change of Control shall mean, with respect to Purchaser, the
occurrence of any of the following: (i) a merger, consolidation,
reorganization, recapitalization or share or interest exchange, sale or
transfer or any other transaction or series of transactions in which its
stockholders, managers, partners or interest holders immediately prior to such
transaction or series of transactions receive, in exchange for the stock or
interests owned by them, cash, property or securities of the resulting or
surviving entity or any Affiliate thereof, and, as a result thereof, Persons
who, individually or in the aggregate, were holders of 50% or more of its voting
stock, securities or equity, partnership or ownership interests immediately
prior to such transaction or series of transactions hold less than 50% of the
voting stock, securities or other equity, partnership or ownership interests of
the resulting or surviving entity or such Affiliate thereof, calculated on a
fully diluted basis, (ii) a direct or indirect sale, transfer or other
conveyance or disposition, in any single transaction or series of transactions,
of all or substantially all of its assets, (iii) the initial public offering of
its securities, or (iv) any change in/of control or sale or disposition
or similar event as defined in any document governing indebtedness of such
Person which gives the holder of such indebtedness the right to accelerate or
otherwise require payment of such indebtedness prior to the maturity date
thereof.

Charter
and Good Standing Documents shall mean, for Purchaser (i) a copy of the
certificate of incorporation or formation (or other charter document) certified
as of a date satisfactory to Seller before the Closing Date by the applicable
Governmental Authority of the jurisdiction of incorporation or organization of
Purchaser, (ii) a copy of the bylaws or similar organizational documents certified
as of a date satisfactory to Seller before the Closing Date by the corporate
secretary or assistant secretary of Purchaser, (iii) an original
certificate of good standing as of a date acceptable to Seller issued by the
applicable Governmental Authority of the jurisdiction of incorporation or
organization of such Purchaser and of every other jurisdiction in which
Purchaser has an office or conducts business or is otherwise required to be in
good standing, and (iv) copies of the resolutions of the Board of
Directors or managers (or other applicable governing body) and, if required,
stockholders, members or other equity owners authorizing the execution,
delivery and performance of the Acquisition Documents to which Purchaser is a
party, certified by an authorized officer of such Person as of the Closing
Date.

Closing
shall mean the satisfaction, or written waiver by Seller, of all of the
conditions precedent set forth in the Agreement required to be satisfied prior
to the consummation of the transactions contemplated hereby.

Closing
Date shall mean the date of this Agreement.

Collateral
shall have the meaning given such term in Section 2.13.

Collateral
Patent, Trademark and Copyright Assignment shall mean (i) the Intellectual
Property Security Agreement dated as of the date hereof made by Purchaser in
favor of Seller or (ii) any patent, trademark, or copyright assignment or
acknowledgement executed by and between Purchaser and Seller, as such may be
modified, amended or supplemented from time to time.

2

Concentration
Account shall have the meaning given such term in Section 2.16.

Control
Collateral shall have the meaning given such term in Section 2.14.

Debenture
Holder shall mean collectively, the holders at such time of any portion of
the outstanding principal amount of the Secured Convertible Debentures issued
by Sunset to Seller on the Closing Date in the aggregate original principal
amount of $5,000,000 which are convertible into shares of the common stock of
Sunset, as such Secured Convertible Debentures may be replaced, substituted or
reissued from time to time in accordance with its terms.

Debtor
Relief Law shall mean, collectively, the Bankruptcy Code of the United
States of America and all other applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization
or similar debtor relief laws from time to time in effect affecting the rights
of creditors generally, as amended from time to time.

Default
shall mean any event, fact, circumstance or condition that, with the giving of
applicable notice or passage of time or both, would constitute or be or result
in an Event of Default.

Distribution
shall mean any fee, payment, bonus or other remuneration of any kind, and any
repayment of or debt service on loans or other indebtedness.

Environmental
Laws shall mean, collectively and each individually, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Superfund
Amendment and Reauthorization Act of 1986, the Resource Conservation and Recovery
Act, the Toxic Substances Control Act, the Clean Air Act, the Clean Water Act,
any other Superfund or Superlien law and all other federal, state and local
and foreign environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, ordinances and codes relating to the protection of
the environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances, in each case, as amended, and the rules, regulations, policies,
guidelines, interpretations, decisions, orders and directives of Governmental
Authorities with respect thereto.

ERISA
shall mean the Employee Retirement Income Security Act of 1974, as amended, and
the regulations thereunder.

Event
of Default shall mean the occurrence of any event set forth in Article VIII.

Fair
Valuation shall mean the determination of the value of the consolidated
assets of a Person on the basis of the amount which may be realized by a
willing seller within a reasonable time through collection or sale of such
assets at market value on a going concern basis to an interested buyer who is
willing to purchase under ordinary selling conditions in an arms length
transaction.

GAAP
shall mean generally accepted accounting principles in the United States of
America in effect from time to time as applied by nationally recognized
accounting firms.

Government Account
shall be
defined to mean all Accounts arising out of or with respect to any Government
Contract.

3

Government Contract
shall be
defined to mean all contracts with the United States Government or with any
agency thereof, and all amendments thereto.

Governmental Authority shall mean any federal, state, municipal,
national, local or other governmental department, court, commission, board,
bureau, agency or instrumentality or political subdivision thereof, or any
entity or officer exercising executive, legislative or judicial, regulatory or
administrative functions of or pertaining to any government or any court, in
each case, whether of the United States or a state, territory or possession
thereof, a foreign sovereign entity or country or jurisdiction or the District
of Columbia.

Hazardous Substances shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances
or related materials as defined in or subject to any applicable Environmental
Law.

Indebtedness
of any Person shall mean, without duplication, (a) all items which, in
accordance with GAAP, would be included in determining total liabilities as
shown on the liability side of the balance sheet of such Person as of the date
as of which Indebtedness is to be determined, including any lease which, in
accordance with GAAP would constitute Indebtedness, (b) all indebtedness
secured by any mortgage, pledge, security, Lien or conditional sale or other
title retention agreement to which any property or asset owned or held by such
Person is subject, whether or not the indebtedness secured thereby shall have
been assumed, (c) all indebtedness of others which such Person has directly or
indirectly guaranteed, endorsed (otherwise than for collection or deposit in
the ordinary course of business), discounted or sold with recourse or agreed
(contingently or otherwise) to purchase or repurchase or otherwise acquire, or
in respect of which such Person has agreed to supply or advance funds (whether
by way of loan, stock, equity or other ownership interest purchase, capital
contribution or otherwise) or otherwise to become directly or indirectly
liable.

Indemnified
Person shall have the meaning given such term in Section 12.4.

Insured
Event shall have the meaning given such term in Section 12.4.

Insurer
shall mean a Person that insures another Person against any costs incurred in
the receipt by such other Person of Services, or that has an agreement with
Purchaser to compensate it for providing services to such Person.

Intellectual
Property Security Agreement shall mean that certain Intellectual Property
Security Agreement dated as of the date hereof entered into among Sunset, US
Mills and Seller, as such agreement may be modified, amended, restated or
supplemented from time to time.

Inventory
shall mean all inventory (as defined in the UCC) of Purchaser (or, if
referring to another Person, of such other Person), now owned or hereafter
acquired, and all documents of title or other documents representing any of the
foregoing, and all collateral security and guaranties of any kind, now or
hereafter in existence, given by any Person with respect to any of the
foregoing.

Junior
Subordination Agreement shall mean that certain Junior Subordination and
Intercreditor Agreement dated as of the date hereof entered into among Sunset,
US Mills, Seller and the Debenture
Holder, as such agreement may be modified, amended, restated or
supplemented from time to time.

4

Landlord
Waiver and Consent shall mean a waiver/consent in form and substance
satisfactory to Seller from the owner/lessor of any premises not owned by
Purchaser at which any of the Collateral is now or hereafter located for the
purpose of providing Seller access to such Collateral, in each case as such may
be modified, amended or supplemented from time to time.

Lien
shall mean any mortgage, pledge, security interest, encumbrance, restriction,
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement or any lease
in the nature thereof), or any other arrangement pursuant to which title to the
property is retained by or vested in some other Person for security purposes.

Lockbox
Accounts shall have the meaning given such term in Section 2.16.

Lockbox
Agreement shall have the meaning given such term in Section 2.16.

Lockbox
Bank shall have the meaning given such term in Section 2.16.

Junior
Management Fee Subordination Agreement shall mean that certain Junior
Management Fee Subordination Agreement dated as of the date hereof entered into
by and among Sunset International Holdings, Inc., Sunset and the Seller, as
such agreement may be modified, amended or restated or supplemented from time
to time.

Master
Subordination Agreement shall have the meaning given such term in the
recitals of this Agreement.

Material
Adverse Effect or Material Adverse Change shall mean any event,
condition or circumstance or set of events, conditions or circumstances or any
change(s) which (i) has, had or would reasonably be likely to have any
material adverse effect upon or change in the validity or enforceability of any
Acquisition Document, (ii) has been or would reasonably be likely to be
material and adverse to the value of any of the Collateral, to the priority of
the Sellers security interest in the Collateral, or to the business,
operations, prospects, properties, assets, liabilities or condition of
Purchaser, either individually or taken as a whole, or (iii) has materially impaired
or would reasonably be likely to materially impair the ability of any Purchaser
to pay any portion of the Obligations or to otherwise perform the Obligations
or to consummate the transactions under the Acquisition Documents executed by
such Person.

Non-Compliance
Fee shall mean a daily fee payable by Purchaser equal to the greater of
(i) $500, or (ii) five one-hundredths of one percent (0.05%) of the outstanding
principal balance of the Obligations as of any date of determination.

Obligations
shall mean all present and future obligations, Indebtedness and liabilities of
Purchaser to Seller at any time and from time to time of every kind, nature and
description, direct or indirect, secured or unsecured, joint and several,
absolute or contingent, due or to become due, matured or unmatured, now
existing or hereafter arising, contractual or tortious, liquidated or
unliquidated, under any of the Acquisition Documents or otherwise relating to
the Promissory Notes, including, without limitation, all applicable fees,
charges and expenses and/or all amounts paid or advanced by Seller on behalf of
or for the benefit of any Purchaser for any reason at any time, including in
each case obligations of performance as well as obligations of payment and
interest that accrue after the commencement of any proceeding under any Debtor
Relief Law by or against any such Person.

5

Permit shall mean collectively all licenses, leases, powers, permits,
franchises, certificates, authorizations, approvals, certificates of need,
provider numbers and other rights.

Permitted
Indebtedness shall have the meaning given such term in Section 7.2.

Permitted
Liens shall have the meaning given such term in Section 7.3.

Permitted
Subordinated Debt shall mean indebtedness incurred by Purchaser which is
subordinated to the indebtedness of Purchaser owed to Seller pursuant to the
Junior Subordination Agreement or another written agreement approved by Seller
in writing.

Person
shall mean an individual, a partnership, a corporation, a limited liability
company, a business trust, a joint stock company, a trust, an unincorporated
association, a joint venture, a Governmental Authority or any other entity of
whatever nature.

Promissory
Notes shall have the meaning given such terms in the recitals of this
Agreement.

Receipt
shall have the meaning given such term in Section 12.5.

Released
Parties shall have the meaning given such term in Section 12.11.

Releasing
Parties shall have the meaning given such term in Section 12.11.

Security
Documents shall mean the Promissory Notes, this Agreement, the Stock
Pledge Agreement, Collateral Patent, Trademark, and Copyright Assignment, the
Intellectual Property Security Agreement, Lockbox Agreements, Uniform
Commercial Code Financing Statements and all other documents or instruments
necessary to create or perfect the Liens in the Collateral, as such may be
modified, amended or supplemented from time to time.

Seller
shall mean IBF Fund Liquidating LLC.

Solvency
Certificate shall have the meaning given such term in Section 4.1(d).

Stock
Pledge Agreement shall mean that certain Stock Pledge Agreement by and
between Purchaser and Seller executed in connection herewith as such may be
modified, amended or supplemented from time to time.

Subordination
Agreements shall mean, collectively and each individually, (i) the
Master Subordination Agreement,
(ii) the Junior Subordination and Intercreditor Agreement, and (iii) and any other
subordination agreements (the terms of which shall be satisfactory to Seller)
to which Seller and other creditors of any Purchaser are a party, as such
agreements may be modified, amended, restated or supplemented from time to
time.

Subsidiary
shall mean, (i) as to Purchaser, any Person in which more than 50% of all
equity, membership, partnership or other ownership interests is owned directly
or indirectly by Purchaser or one or more of its Subsidiaries, and (ii) as to
any other Person, any Person in which more than 50% of all equity, membership,
partnership or other ownership interests is owned directly or indirectly by
such Person or by one or more of such Persons Subsidiaries.

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Term
shall mean the period commencing on the date set forth on the first page hereof
and ending on the third anniversary hereof.

Termination
Date shall have the meaning given such term in Section 11.1.

Transferee
shall have the meaning given such term in Section 12.2.

UCC
shall mean the Uniform Commercial Code as in effect in the State of New York
from time to time.

Warehouse
Waiver and Consent shall mean a waiver/consent in form and substance
satisfactory to Seller from any warehouseman, fulfillment house or other person
owning a facility not owned by Purchaser at which any Inventory is now or
hereafter located for the purpose of providing Seller access to such Inventory,
in each case as may be modified, amended or supplemented from time to time.

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