JUNIOR SUBORDINATION AND INTERCREDITOR
AGREEMENT

This
JUNIORSUBORDINATION AND INTERCREDITOR
AGREEMENT(this Agreement), dated as of November 10,
2005, is among IBFFUND
LIQUIDATING LLC, a Delaware limited liability company, as holder of
the Seller Notes (as defined below) (Senior
Creditor) and IBF FUND LIQUIDATING LLC, a Delaware
limited liability company, as holder of the Convertible Debentures (as defined
below) (the Subordinated Creditor) and acknowledged by SUNSET
BRANDS, INC.,a Nevada corporation(Sunset)and U.S. MILLS, INC.,a Delaware
corporation (US Mills), (Sunset and US Mills sometimes hereinafter are
referred to individually as an Obligor and collectively as the Obligors).

RECITALS

A.The Obligors, Senior Creditor, Subordinated Creditor
and Capital Source Finance LLC have entered into a Master Subordination and
Intercreditor Agreement of even date herewith, as the same hereafter may be
amended, modified, supplemented or restated from time to time, hereinafter is
referred to as the Senior Subordination Agreement).

B.
Pursuant to the Amended and Restated Acquisition Agreement and Plan of Merger,
dated as of November 10, 2005 (the Merger
Agreement), among Senior Creditor, the Obligors and USM Acquisition
Sub, Inc. (Merger Sub), Merger
Sub will be merged with and into US Mills and US Mills will continue as the
surviving corporation as a wholly-owned subsidiary of Sunset (the Acquisition).

C.Pursuant
to the Merger Agreement, Sunset and US Mills will be indebted to Senior
Creditor, and such indebtedness is to be evidenced by, among other things, a
Senior Subordinated Note of even date herewith in the original principal amount
of $5,000,000 (Seller Note 1)
and a Senior Subordinated Note of even date herewith in the original principal
amount of $1,000,000 (Seller Note 2,
and collectively with Seller Note 1, the Seller Notes) made by Sunset and US Mills
in favor of Senior Creditor. Sunset and US Mills are issuing the Seller Notes
in partial payment of the purchase price payable to Senior Creditor pursuant to
the Merger Agreement. To secure the obligations of Sunset and US Mills to
Senior Creditor under the Seller Notes, Sunset and US Mills have granted to
Senior Creditor a security interest in their assets.

D. Pursuant to
the Merger Agreement Sunset has issued to Subordinated Creditor Secured
Convertible Debentures dated the date hereof in the aggregate original
principal amount of $5,000,000 (together with any reissue, substitution or
replacement thereof, collectively, the Convertible
Debentures) which are convertible in shares of the common stock of
Sunset, as payment of a portion of the consideration for the Acquisition. To
secure Sunsets obligations to Subordinated Creditor under the Subordinated
Debt Documents (as defined below) Sunset has granted to Subordinated Creditor a
security interest in its assets and US Mills has guaranteed the obligations of
Sunset.

E.
One of the conditions precedent to Senior Creditors obligations
under the Merger Agreement is that this Agreement shall have been executed and
delivered by all of the parties hereto.

NOW
THEREFORE, the parties hereto hereby agree as follows:

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1. Recitals and Definitions.1.1
  Recitals. The Recitals set forth above are
  acknowledged by the Obligors and by Subordinated Creditor to be true and
  correct and are incorporated herein by this reference.1.2
  Definitions. As used herein, the following
  terms shall have the following meanings:Acquisition
  Documents shall mean the Acquisition Documents, as such term is
  defined in the Security Agreement.Bankruptcy
  Code shall mean Chapter 11 of Title 11 of the United States Code, as
  amended from time to time, any successor statute, and all rules and
  regulations promulgated thereunder.Blockage
  Period shall mean the period (i) commencing on the date Senior Creditor
  notifies Subordinated Creditor that a Senior Default has occurred and (ii)
  ending on the date which is the earlier to occur of (A) the date Senior
  Creditor elects to terminate such period by notice to Subordinated Creditor,
  (B) the date Senior Creditor waives such Senior Default or such Senior
  Default is cured, (C) the date all of the Senior Indebtedness is paid
  indefeasibly in full, in cash,and the Security Agreement has been
  terminated, and (D) if, and only if, the Senior Default is a Senior Covenant
  Default, the date which is 270 days after the commencement of the Blockage
  Period. If the Senior Default that commences a Blockage Period is a Senior
  Payment Default, then the Blockage Period shall end on the earliest to occur
  of the circumstances set forth in clauses (A) through (C).Closing
  Date: shall mean the date of this Agreement.Lien
  shall mean any mortgage, deed of trust, pledge, assignment, lien, charge,
  encumbrance or security interest of any kind, including without limitation,
  those created or arising from the Subordinated Debt Documents, or the
  interest of a vendor or lessor under any conditional sale agreement,
  capitalized lease or other title retention agreement.Person
  shall mean any individual, firm, corporation, limited liability company,
  business enterprise, trust, association, joint venture, partnership,
  government, governmental agency or other entity, whether acting in an
  individual, fiduciary or other capacity.Proceeding
  shall mean any insolvency, bankruptcy, receivership, custodianship,
  liquidation, reorganization, assignment for the benefit of creditors or other
  proceeding for the liquidation, dissolution or other winding up of the
  Obligors (or either of them) or their properties (including, without
  limitation, any such proceeding under the Bankruptcy Code).Security
  Agreement shall mean the Security Agreement, dated as of the date
  hereof, by and among the Obligors and Senior Creditor, as such may be
  amended, restated, supplemented or otherwise modified from time to time.Senior
  Collection Action shall mean any judicial proceeding or other action
  initiated by Senior Creditor against the Obligors (or either of them) to
  collect the Senior Indebtedness, to foreclose the Senior Liens or otherwise
  to enforce the rights of Senior2

Creditor
  under the Security Agreement and the other Acquisition Documents or
  applicable law with respect to the Senior Indebtedness.Senior
  Covenant Default shall mean any Default or Event of Default under the
  Senior Debt Documents or any other occurrence permitting Senior Creditor to
  accelerate the payment of all or any portion of the Senior Indebtedness
  (other than a Senior Payment Default).Senior
  Debt Documents shall mean the Security Agreement, the Seller Notes and
  the other Acquisition Documents, all as the same may be amended, restated,
  supplemented or otherwise modified from time to time.Senior
  Default shall mean any Senior Covenant Default or
  any Senior Payment Default.Senior
  Indebtedness shall mean all obligations, liabilities and indebtedness of
  every nature of each Obligor and each other Person from time to time owed to
  Senior Creditor under the Seller Notes and the other Senior Debt Documents,
  including interest, principal and all fees, costs and expenses now and from
  time to time hereafter owing, due or payable, whether before or after the
  commencement of a Proceeding and whether or not authorized under the
  Bankruptcy Code to collect such interest from either Obligor (including any
  interest accruing at a default or post-judgment rate), together with any
  amendments, modifications, renewals or extensions thereof to the extent not
  prohibited by the terms of this Agreement and any interest accruing thereon
  after the commencement of a Proceeding, whether or not allowed in such
  Proceeding.Senior
  Liens shall mean all Liens now or hereafter granted to Senior Creditor
  to secure the Senior Indebtedness.Senior
  Payment Default shall mean any failure by any Obligor to make any
  required payment of interest or principal, or any material fee or other
  monetary payment, under the Senior Debt Documents, including, without
  limitation, any default in payment of Senior Indebtedness after acceleration
  thereof and/or the filing of a Proceeding, or any
  failure to pay the amounts described in this definition regardless of any
  requirement of notice or lapse of time or both before such failure to pay
  becomes an Event of Default under the Senior Debt Documents.Subordinated
  Collection Action shall mean (i) any acceleration of the Subordinated
  Indebtedness, (ii) to file or initiate, or to join with other Persons in
  filing or initiating, a Proceeding against any Obligor, (iii) any judicial
  proceeding or other action initiated or taken by Subordinated Creditor, or by
  Subordinated Creditor in concert with other Persons, against any Obligor to
  collect the Subordinated Indebtedness or otherwise to enforce the rights of
  Subordinated Creditor under the Subordinated Debt Documents or applicable law
  with respect to the Subordinated Indebtedness or (iv) any action (judicial or
  non-judicial) to exercise rights and remedies against any assets, properties,
  or other interests of any Obligor including, without limitation, actions to
  foreclose, sell or dispose collateral, or enforce Liens, pursuant to the
  Uniform Commercial Code.Subordinated
  Debt Documents shall mean collectively, the Convertible Debentures and
  all related documents, including all other documents, instruments and
  agreements executed and delivered by any Obligor, Subordinated Creditor or
  any other3

Person
  evidencing, governing the terms of repayment of or otherwise pertaining to
  Subordinated Indebtedness, all as the same may be amended, restated,
  supplemented or otherwise modified from time to time; provided, however,
  notwithstanding the foregoing, the term Subordinated Debt Documents shall
  in no event include any documents, instruments or agreements now or hereafter
  entered into by Subordinated Creditor through which Subordinated Creditor (a)
  sells or otherwise transfers all (or any portion) of the Convertible
  Debentures or (b) secures the obligations of the proposed purchaser with
  respect to any such sale or transfer.Subordinated
  Indebtedness shall mean all obligations, liabilities and indebtedness of
  every nature of each Obligor and each other Person from time to time owed to
  Subordinated Creditor in respect of the Subordinated Debt Documents, together
  with all accrued and unpaid interest thereon and all fees, costs and expenses
  now and from time to time hereafter owing, due or payable in connection with
  any of the foregoing, whether before or after the commencement of a Proceeding
  or a Subordinated Collection Action.Subordinated
  Securities shall mean any securities of any Obligor issued in connection
  with a Proceeding, the payment of which is junior or otherwise subordinated,
  at least to the extent provided in this Agreement, to the payment of all
  Senior Indebtedness and to the payment of all securities issued in exchange
  therefor to the holders of the Senior Indebtedness.2. Subordination of the Subordinated
  Indebtedness to the Senior Indebtedness.2.1
  Payment Subordination. Upon the terms and
  conditions contained in this Agreement the payment of any and all of the
  Subordinated Indebtedness hereby expressly is subordinated to the prior
  indefeasible payment in full in cash of the Senior Indebtedness and the
  termination of the Security Agreement.2.2
  Lien
  Subordination. Subordinated
  Creditor hereby unconditionally agrees that: (i) all Liens of Subordinated
  Creditor in any property of either Obligor shall be and hereby are
  subordinated to the Senior Liens, and (ii) other than as set forth in Section
  2.7(b), Subordinated Creditor shall have no right to possession of any
  property of any Obligor or to take any Subordinated Collection Action, unless
  and until all the Senior Indebtedness shall have been fully paid and
  satisfied and the Security Agreement has been terminated. Notwithstanding any
  rights or remedies available to Subordinated Creditor under applicable law
  (including, without limitation, under the Bankruptcy Code) or under any
  Subordinated Debt Document, Subordinated Creditor shall not, without the
  prior written consent of Senior Creditor, be permitted to take any action to
  foreclose, repossess, marshal, control or exercise any remedies with respect
  to any property of either Obligor or take any other action which would
  interfere with or impair the Senior Liens or the rights of Senior Creditor
  against either Obligors property, until the payment in full of the Senior
  Indebtedness and the termination of the Security Agreement. Notwithstanding
  the date, manner or order of grant, attachment or perfection of any Liens or
  any Senior Liens, and notwithstanding any provision of the UCC or any other
  applicable law or the provisions of any Subordinated Debt Document or any
  other Senior Debt Document or any other circumstance whatsoever, Subordinated
  Creditor, hereby agrees that (a) any Senior Liens now or hereafter held by or
  for the benefit of Senior Creditor shall be senior in right, priority,4

operation, effect and all other respects to any and all Subordinated
  Creditor Liens and (b) any Subordinated Creditor Lien now or hereafter held
  by or for the benefit of any Subordinated Creditor shall be junior and
  subordinate in right, priority, operation, effect and all other respects to
  any and all Senior Liens. The Senior Liens shall be and remain senior in
  right, priority, operation, effect and all other respects to any Subordinated
  Creditor Liens for all purposes, whether or not any Senior Liens are
  subordinated in any respect to any other Lien securing any other obligation
  of either Obligor, any other grantor or any other Person and regardless of
  whether the Lien purported to be granted is found to be improperly granted,
  improperly perfected, a fraudulent conveyance or legally or otherwise
  deficient in any manner. Each of Senior Creditor and Subordinated Creditor,
  agrees that it will not, and hereby waives any right to, directly or
  indirectly, contest or support any other Person in contesting, in any
  proceeding (including any Proceeding), the priority, validity or enforceability
  of any Senior Lien, or the validity or enforceability of the priorities,
  rights or obligations established by this Agreement; provided that nothing in this Agreement
  shall be construed to prevent or impair the rights of Senior Creditor to
  enforce this Agreement. Each Obligor, by its execution of this Agreement, hereby
  acknowledges and agrees to the provisions of this paragraph, notwithstanding
  anything to the contrary in any document to which such Obligor is
  a party.2.3
  Payment Restrictions. Notwithstanding any
  provision of the Subordinated Debt Documents to the contrary and in addition
  to any other limitations set forth herein or therein, no payment of any
  principal, interest, fees, costs, expenses or any other amount due with
  respect to the Subordinated Indebtedness shall be made, and no Subordinated
  Creditor shall exercise any right of set-off or recoupment with respect to
  any Subordinated Indebtedness, until all of the Senior Indebtedness is
  indefeasibly paid in full in cash and the Security Agreement has been
  terminated, except that at any time, Obligors may make and Subordinated
  Creditor may receive prepayments of the principal of the Convertible
  Debentures, but only if (1) no Default or Event of Default has occurred and
  is continuing under the Senior Debt Documents; (2) such payment will not
  result in, cause, or create a Default or Event of Default under the Senior
  Debt Documents; (3) the source of such payment is entirely from a new capital
  infusion into the Obligors on terms and conditions satisfactory to Senior
  Creditor which shall include, without limitation, a provision that the
  provider of new capital infusion will agree to subordinate its debt and any
  Liens in any property of either Obligor to Senior Creditor on terms no less
  favorable that those contained herein; and (4) Obligors have provided 30
  calendar days prior written notice to Senior Creditor of all of the foregoing
  prior to making any such prepayment.2.4
  Proceedings. In the event of any Proceeding,
  (a) all Senior Indebtedness first shall be indefeasibly paid in full in cash
  and the Security Agreement shall have been terminated before any payment of
  or with respect to the Subordinated Indebtedness shall be made, other than
  any payment consisting of Subordinated Securities; (b) any payment which, but
  for the terms hereof, otherwise would be payable or deliverable in respect of
  the Subordinated Indebtedness (other than Subordinated Securities) shall be
  paid or delivered directly to Senior Creditor (to be held and/or applied by
  Senior Creditor in accordance with the terms of the Security Agreement) until
  all Senior Indebtedness is indefeasibly paid in full in cash and
  the Security Agreement has been terminated, and Subordinated Creditor
  irrevocably authorizes, empowers and directs all receivers, trustees,
  liquidators, custodians, conservators and others having authority in the
  premises to effect all such payments and deliveries and further irrevocably
  authorizes and empowers Senior Creditor to demand, sue for, collect and
  receive every such payment or distribution; (c) Subordinated Creditor agrees
  to execute and deliver to Senior Creditor or its representative all such
  further instruments requested by Senior Creditor confirming the authorization
  referred to in the foregoing clause (b); (d) Subordinated Creditor agrees (i)
  not to waive, discharge, release or compromise any claim of Subordinated
  Creditor in respect of the Subordinated Indebtedness without the prior
  written consent of Senior Creditor, which consent will not be unreasonably withheld,
  and (ii) to take all actions as Senior Creditor reasonably may request in
  order to enable Senior Creditor to enforce all claims upon or in respect of
  the Subordinated Indebtedness; (e) Subordinated Creditor expressly
  consents to the granting by the5

Obligors to
  Senior Creditor of senior priority Liens on the Obligors property and assets
  in connection with any financing provided to the Obligors after the
  commencement of such Proceeding; (f) Subordinated Creditor shall not propose
  or support any plan, financing, or order which would have the effect of
  canceling, modifying or amending, to the detriment of Senior Creditor, the
  relative Lien priorities set forth in this Agreement; and (g) Subordinated
  Creditor agrees to execute, verify, deliver and file any proofs of claim in
  respect of the Subordinated Indebtedness requested by Senior Creditor in
  connection with any such Proceeding and hereby irrevocably authorizes,
  empowers and appoints Senior Creditor its agent and attorney-in-fact to
  execute, verify, deliver and file such proofs of claim upon the failure of
  Subordinated Creditor to do so at least ten Business Days prior to the bar
  date for filing such proofs of claim. The provisions of this Agreement shall
  continue in full force and effect notwithstanding the occurrence of a
  Proceeding against any Obligor or
  any of its property. To the extent of Subordinated Creditors
  subordinated lien in any property of any Obligor, and to the extent
  Subordinated Creditor has or acquires any rights under Section 363, Section
  364 or Section 1126 of the Bankruptcy Code with respect to such property of
  such Obligor, Subordinated Creditor hereby agrees not to assert such rights
  without the prior written consent of Senior Creditor. In the event and during
  the continuation of any Proceeding, Subordinated Creditor shall not object to
  or oppose any cash collateral order or plan in each case approved by Senior
  Creditor.2.5
  Incorrect Payments. If before all Senior
  Indebtedness is indefeasibly paid in full in cash and the Security Agreement
  has been terminated (a) any payment not permitted under Section 2.3 is
  received by Subordinated Creditor on account of the Subordinated Indebtedness
  (other than Subordinated Securities), or (b) any cash payment not permitted
  under Section 7.5(i) of the Security Agreement is received by Subordinated
  Creditor, such payment shall not be commingled with any asset of Subordinated
  Creditor, shall be held in trust by Subordinated Creditor for the benefit of
  Senior Creditor and shall be paid over to Senior Creditor, or its designated
  representative, for application (in accordance with the Security Agreement)
  to the payment of the Senior Indebtedness then remaining unpaid, until all of
  the Senior Indebtedness is indefeasibly paid in full in cash and the Security
  Agreement has been terminated; provided, that Subordinated Creditor
  shall not be responsible for making any such payment to Senior Creditor
  unless Senior Creditor has requested such payment from Subordinated Creditor
  within 90 days of Senior Creditor having actual knowledge that a payment was
  made to Subordinated Creditor in violation of this Section 2.5; provided,
  further that notwithstanding the foregoing, such 90 day limitation
  shall not apply to any payments received by Subordinated Creditor that
  Subordinated Creditor has knowledge that it received in violation of this
  Section 2.5.2.6
  Sale, Transfer. No Subordinated Creditor
  shall sell, assign, dispose of or otherwise transfer all or any portion of
  the Subordinated Indebtedness owing to such Subordinated Creditor unless,
  prior to the consummation of any such action, (a) such Subordinated Creditor shall give Senior Creditor at least
  five (5) Business Days prior written notice of any such Transfer, and (b) the
  transferee thereof executes and delivers to Senior Creditor a written
  acknowledgement and joinder, in form and detail reasonably satisfactory to
  Senior Creditor, that the transferee is a party to this Agreement as a
  Subordinated Creditor, and shall be bound by all of the terms and conditions
  of this Agreement. Notwithstanding the failure to execute or deliver any such
  agreement, the subordination effected hereby shall survive any sale,
  assignment, disposition or other transfer of all or any portion of the
  Subordinated Indebtedness, and the terms of this Agreement shall be binding
  upon the successors and assigns of Subordinated Creditor, as provided in
  Section 12 below.6

2.7
  Restriction on Action by Subordinated Creditor/Right to Purchase.(a)
Until the Senior Indebtedness is indefeasibly paid in full in cash and
the Security Agreement has been terminated and notwithstanding anything
contained in the Subordinated Debt Documents or the Security Agreement and
the other Senior Debt Documents to the contrary, Subordinated Creditor shall
not agree to any amendment or modification of, or supplement to, the
Subordinated Debt Documents as in effect on the date hereof if such amendment, modification or supplement would
be adverse to Senior Creditor. Subordinated Creditor agrees to provide Senior
Creditor with a copy of any proposed amendment, modification or supplement to
the Subordinated Debt Documents at least three (3) Business Days prior to
their execution.(b)
  Until the Senior Indebtedness is indefeasibly paid in full in cash and the
  Security Agreement has been terminated no Subordinated Creditor shall take
  any Subordinated Collection Action, except that Subordinated Creditor may
  declare the entire Subordinated Indebtedness to be due and payable
  immediately if either (i) such acceleration of the Subordinated Indebtedness
  is allowed under terms of the Subordinated Debt Documents, (ii) Subordinated
  Creditor has given the Senior Creditor at least thirty days notice of its
  intent to accelerate the Subordinated Indebtedness, and (iii) there is no
  Blockage Period in effect, or the Senior Indebtedness has been accelerated.
  Following acceleration of the Subordinated Indebtedness, Subordinated
  Creditor may take no further Subordinated Collection Action until the Senior
  Indebtedness is indefeasibly paid in full in cash and the Security
  Agreement has been terminated.(c)
  Following acceleration of the Senior Indebtedness, nothing contained herein
  is intended, or shall be deemed, to restrict or modify the ability of
  Subordinated Creditor from purchasing the Senior Indebtedness from Senior
  Creditor at a cash purchase price equal to the amount of all Obligations
  owing to Senior Creditor under the Senior Debt Documents at the time of such
  acceleration.2.8
  No Restriction on Action by Senior Creditor.
  Nothing contained in this Agreement shall be deemed to restrict or limit the
  right of Senior Creditor to extend additional financing to any Obligor or any
  of their respective subsidiaries of affiliates or increase the Senior
  Indebtedness or the rate of interest or fees payable thereon, to extend the
  maturity date of the Senior Indebtedness, or to agree to any other amendment
  or modification of, or supplement to, the Security Agreement or the other
  Senior Debt Documents or to take any Senior Collection Action, whether prior
  or subsequent to the initiation of any Proceeding. Subordinated Creditor
  hereby consents to and waives any right of notice of any such amendment,
  modification or supplement and agrees that the subordination effective hereby
  shall continue in full force and effect notwithstanding any such amendment,
  modification or supplement.2.9
  Subrogation. Subject to the payment in full
  in cash of all Senior Indebtedness and the termination of the Security
  Agreement Subordinated Creditor shall be subrogated to the rights of Senior
  Creditor to receive payments or distributions of assets of the Obligors
  applicable to the Senior Indebtedness until the principal of, and interest
  and premium, if any, on, and all other amounts payable in respect of the
  Subordinated Indebtedness shall be paid in full. For purposes of such
  subrogation, no payment or distribution to Senior Creditor under the
  provisions hereof to which Subordinated Creditor would have been entitled but
  for the provisions of this Agreement, and no payment pursuant to the
  provisions of this Agreement to Senior Creditor by Subordinated Creditor, as
  between any Obligor and its creditors other than Senior Creditor, shall be
  deemed to be a payment by any Obligor to or on account of the Senior
  Indebtedness. Notwithstanding the foregoing provisions of this Section 2.9,
  the holders of the Subordinated7

Indebtedness
  shall have no claim against Senior Creditor for any impairment of any
  subrogation rights herein granted to the holders of the Subordinated
  Indebtedness.2.10
  Legend. Until the Senior Indebtedness is
  indefeasibly paid in full in cash and the Security Agreement has been
  terminated, the Subordinated Debt Documents at all times shall contain in a
  conspicuous manner the following legend:The obligations evidenced hereby are subordinate in the
        manner and to the extent set forth in that certain Junior Subordination
        and Intercreditor Agreement (the Subordination Agreement)
        dated as of November 10, 2005, among Sunset Brands, Inc. (Sunset),
        U.S. Mills, Inc. (US Mills), IBF Fund Liquidating LLC, as
        Senior Creditor, and Subordinated Creditor (as such term is defined in
        the Subordination Agreement) to the obligations (including interest) owed
        by Sunset and US Mills to Senior Creditor from time to time. Each holder
        hereof, by its acceptance hereof, shall be bound by the provisions of
        the Subordination Agreement.2.11
Limitation on Application. Notwithstanding anything contained in this
Agreement to the contrary, this Section 2 and the other terms and provisions of
this Agreement shall not apply to (i) any documents, instruments or agreements
now or hereafter entered into by Subordinated Creditor through which
Subordinated Creditor (a) sells or otherwise transfers all (or any portion) of
the Convertible Debentures or (b) secures the obligations of the proposed
purchaser with respect to any such sale or transfer, or (ii) Subordinated
Creditors enforcement of its rights and remedies (including realization on any
collateral) under any such documents, instruments or agreements. This Section
2.11 does not limit the applicability of Section 2.6 hereof to any Transfer.

3.
Continued Effectiveness of this Agreement. The
terms of this Agreement, the subordination effected hereby, and the rights and
the obligations of Subordinated Creditor and Senior Creditor arising hereunder,
shall not be affected, modified or impaired in any manner or to any extent by
(a) any amendment or modification of or supplement to the Security Agreement,
the other Senior Debt Documents or any of the Subordinated Debt Documents, and
Subordinated Creditor hereby irrevocably consents to, and waives any claim it
may have against Senior Creditor or any Obligor as a result of, any amendment,
modification or supplement of the Security Agreement or the other Senior Debt
Documents; (b) the validity or enforceability of any of such documents; or (c)
any exercise or non-exercise of any right, power or remedy under or in respect
of the Senior Indebtedness or the Subordinated Indebtedness or any of the
instruments or documents referred to in clause (a) above. The Senior
Indebtedness shall continue to be treated as Senior Indebtedness and the
provisions of this Agreement shall continue to govern the relative rights and
priorities of the holders of Senior Indebtedness and Subordinated Creditor even
if all or part of the Senior Liens are subordinated, set aside, avoided or
disallowed in connection with any Proceeding (or if all or part of the Senior
Indebtedness is subordinated, set aside, avoided or disallowed in connection
with any Proceeding as a result of the fraudulent conveyance or fraudulent
transfer provisions under the Bankruptcy Code or under any state fraudulent
conveyance or fraudulent transfer statute or if any interest accruing on the
Senior Indebtedness following the commencement of such Proceeding is otherwise
disallowed) and this Agreement shall be reinstated if at any time any payment
of any of the Senior Indebtedness is rescinded or must otherwise be returned by
any holder of Senior Indebtedness or any representative of such holder.

4.
Representations and Warranties. Subordinated
Creditor hereby represents and warrants to Senior Creditor as follows:

4.1
  Binding Agreements. This Agreement, when
  executed and delivered, will constitute the valid and legally binding obligation
  of Subordinated Creditor enforceable against it8

in
  accordance with its terms, except as such enforceability may be limited by
  applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
  affecting the enforcement of creditors rights generally and by equitable
  principles.4.2
  No Conflicts. Subordinated Creditor is the
  current owner and holder of the Subordinated Debt Documents free and clear of
  any Liens. No provisions of any mortgage, indenture, contract, agreement,
  statute, rule, regulation, judgment, decree or order binding on Subordinated
  Creditor or affecting the property of Subordinated Creditor conflicts with,
  or requires any consent which has not already been obtained under, or would
  in any way prevent the execution, delivery or performance of the terms of
  this Agreement. No pending or, to the best of Subordinated Creditors
  knowledge, threatened, litigation, arbitration or other proceedings if
  adversely determined would in any way prevent the performance by Subordinated
  Creditor of the terms of this Agreement.4.3
  Copy of Subordinated Debt Documents. There is
  attached to this Agreement a true, correct and complete copy of the
  Subordinated Debt Documents.5.
Cumulative Rights, No Waivers. Each and every
right, remedy and power granted to Senior Creditor hereunder shall be
cumulative and in addition to any other right, remedy or power specifically
granted herein, in the Security Agreement and the other Senior Debt Documents
or in the Subordinated Debt Documents or now or hereafter existing in equity,
at law, by virtue of statute or otherwise, and may be exercised by Senior
Creditor, from time to time, concurrently or independently and as often and in
such order as Senior Creditor may deem expedient. Any failure or delay on the
part of Senior Creditor in exercising any such right, remedy or power, or
abandonment or discontinuance of steps to enforce the same, shall not operate
as a waiver thereof or affect Senior Creditors right thereafter to exercise
the same, and any single or partial exercise of any such right, remedy or power
shall not preclude any other or further exercise thereof or the exercise of any
other right, remedy or power, and no such failure, delay, abandonment or single
or partial exercise of Senior Creditors rights hereunder shall be deemed to
establish a custom or course of dealing or performance among the parties
hereto.

6.
Provisions Define Relative Rights. This
Agreement is intended solely for the purpose of defining the relative rights of
the Senior Creditor on the one hand and Subordinated Creditor on the other, and
no other person shall have any right, benefit or other interest under this
Agreement. Except as expressly set forth in this Agreement, nothing herein
shall (a) impair, as between any Obligor and Senior Creditor and any Obligor
and Subordinated Creditor, the obligation of such Obligor, which is absolute
and unconditional, to pay the Senior Indebtedness to Senior Creditor, on the
one hand, and the Subordinated Indebtedness to Subordinated Creditor, on the
other hand, in each case in accordance with their respective terms; or (b)
affect the relative rights of the Senior Creditor or Subordinated Creditor with
respect to any other creditors of any Obligor.

7. Bailee
For Perfection.

(a)
  Subject to the terms of the Senior Subordination Agreement, Senior Creditor
  agrees to hold any Collateral in the possession or control (as such term is
  defined in the Uniform Commercial Code) of the Senior Creditor (collectively,
  the Possessory Collateral) as bailee for and on behalf and for the benefit
  of Subordinated Creditor solely for the purposes of perfecting the security
  interests granted in such Possessory Collateral pursuant to the Subordinated
  Debt Documents, subject to the terms and conditions hereof, it being agreed
  that Senior Creditor has no duties to Subordinated Creditor in connection
  with such possession or control or such Possessory Collateral.9

(b)
  Upon the indefeasible payment in full of the Senior Indebtedness and the
  Security Agreement has been terminated, Senior Creditor shall deliver the
  remainder of the Possessory Collateral, if any, in its possession, and to the
  extent practicable, transfer control of the remainder of the Possessory
  Collateral, if any, under its control, to Subordinated Creditor, except as a
  court of competent jurisdiction may otherwise direct.8.
Modification. Any modification, termination or
waiver of any provision of this Agreement, or any consent to any departure by
Subordinated Creditor therefrom, shall not be effective in any event unless the
same is in writing and signed by Senior Creditor and Subordinated Creditor and
then such modification, termination, waiver or consent shall be effective only
in the specific instance and for the specific purpose given. Any notice to or
demand on Subordinated Creditor in any event not specifically required of
Senior Creditor hereunder shall not entitle Subordinated Creditor to any other
or further notice or demand in the same, similar or other circumstances unless
specifically required hereunder.

9.
Additional Documents and Actions.

(a)
  Subordinated Creditor at any time, and from time to time, after the execution
  and delivery of this Agreement, upon the request of Senior Creditor and at
  the expense of Subordinated Creditor, promptly will execute and deliver such
  further documents and do such further acts and things as Senior Creditor
  reasonably may request in order to effect fully the purposes of this
  Agreement.(b)Senior
  Creditor agrees to assign to Subordinated Creditor all rights that Senior Creditor
  has in all Landlord Waiver and Consents and warehouseman waivers that Senior
  Creditor has obtained in connection with its Security Agreement on the date
  that the Senior Indebtedness is indefeasibly paid in full in cash and the
  Security Agreement has been terminated.10.
Notices. Any notice or request under this
Agreement shall be in writing and shall be given to any party hereto at such
partys address set forth beneath its signature on the signature page hereto,
or at such other address as such party may hereafter specify in a notice given
in the manner required under this Section 10. Any such notice or
request shall be given only by, and shall be deemed to have been received upon:
(a) registered or certified mail, return receipt requested, on the date on
which such notice or request is received as indicated in such return receipt,
(b) delivery by a nationally recognized overnight courier, one (1) Business Day
after deposit with such courier, or (c) facsimile or electronic transmission,
in each case upon telephone or further electronic communication from the
recipient acknowledging receipt (whether automatic or manual from recipient),
as applicable.

11.
Severability. In the event that any provision
of this Agreement is deemed to be invalid by reason of the operation of any law
or by reason of the interpretation placed thereon by any court or governmental
authority, the validity, legality and enforceability of the remaining terms and
provisions of this Agreement shall not in any way be affected or impaired
thereby, all of which shall remain in full force and effect, and the affected
term or provision shall be modified to the minimum extent permitted by law so
as to achieve most fully the intention of this Agreement.

12.
Successors and Assigns. Subject to the terms of
Section 2.6 hereof, this Agreement shall be binding upon and inure to the
benefit of the successors and permitted assigns of Senior Creditor, the
Obligors and Subordinated Creditor.

10

13.
Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original, but
all of which taken together shall be one and the same instrument.

14.
Defines Rights of Creditor. The provisions of
this Agreement are solely for the purpose of defining the relative rights of
Subordinated Creditor and Senior Creditor and shall not be deemed to create any
rights or priorities in favor of any other Person, including, without
limitation, the Obligors.

15.
Conflict. In the event of any conflict between
any term, covenant or condition of this Agreement and any term, covenant or
condition of any of the Subordinated Debt Documents, the Security Agreement or
the other Senior Debt Documents, the provisions of this Agreement shall control
and govern. For purposes of this Section 15, to the extent that any provisions
of any of the Subordinated Debt Documents provide rights, remedies and benefits
to Senior Creditor that exceed the rights, remedies and benefits provided to
Senior Creditor under this Agreement, such provisions of the applicable
Subordinated Debt Documents shall be deemed to supplement (and not to conflict
with) the provisions hereof.

16.
Headings. The paragraph headings used in this
Agreement are for convenience only and shall not affect the interpretation of
any of the provisions hereof.

17.
Termination. This Agreement shall terminate
upon the indefeasible payment in full in cash of the Senior Indebtedness and
the termination of the Security Agreement.

18.
Default Notices. Subordinated Creditor shall
immediately notify Senior Creditor in writing if any event of default occurs
under the Subordinated Debt Documents.

19.
No New Security for Subordinated Indebtedness; No Contest of Liens; Specific
Performance.

(a)
  Subordinated Creditor agrees that it will not at any time require, take or
  accept any additional collateral security for all or any portion of the
  Subordinated Indebtedness, except for those Liens in existence as of the date
  hereof unless such additional collateral security shall be subject to a valid
  Lien in favor of Senior Creditor that is senior in priority to any Lien
  granted to Subordinated Creditor. In the event Subordinated Creditor takes or
  accepts any additional collateral security for the Subordinated Indebtedness
  in violation of the terms of this Agreement, Subordinated Creditor hereby
  appoints Senior Creditor its agent and attorney-in-fact to execute, file,
  record and deliver any such UCC termination statements, releases or other
  documents necessary to release any such collateral security. Such appointment
  of Senior Creditor as Subordinated Creditors agent and attorney in fact is
  coupled with an interest and is irrevocable until the Senior Indebtedness has
  been indefeasibly paid in full in cash and the Security Agreement has been
  terminated.(b)
  Subordinated Creditor agrees that it will not at any time contest the
  validity, perfection, priority or enforceability of the Senior Liens. The
  provisions of this Agreement shall apply regardless of any invalidity,
  unenforceability or lack of perfection of the Senior Liens.(c) Senior
  Creditor agrees that nothing contained in this Agreement shall limit
  Subordinated Creditors ability to seek injunctive relief or specific
  performance against Sunset for Sunsets failure to convert Subordinated
  Creditors Convertible Debentures or exercise Subordinated Creditors
  warrants, in each case to the common stock of Sunset in breach of the terms
  of the Convertible Debentures or the warrants in connection therewith.11

20.
Governing Law; Jurisdiction; Construction. This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York. Any judicial proceeding against Subordinated
Creditor or any Obligor with respect to this Agreement may be brought in any
federal or state court of competent jurisdiction located in New York County of
the state of New York. By execution and delivery of this Agreement,
Subordinated Creditor and each Obligor (a) accepts the non-exclusive
jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any
judgment rendered thereby, (b) agrees that service of process upon it may be
made by certified or registered mail, return receipt requested, pursuant to Section
10 hereof, and (c) 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, convenience or forum non conveniens. Nothing shall affect
the right of Senior Creditor to serve process in any manner permitted by law or
shall limit the right of Senior Creditor to bring proceedings against
Subordinated Creditor or any Obligor in the courts of any other jurisdiction
having jurisdiction. Any judicial proceedings against Senior Creditor,
involving, directly or indirectly, the Senior Debt Documents or this Agreement
shall be brought only in a federal or state court located in New York County of
the state of New York. Subordinated Creditor acknowledge that they participated
in the negotiation and drafting of this Agreement and that, accordingly, none
of them shall move or petition a court construing this Agreement to construe it
more stringently against one party than against any other.

21.
Waiver of Right to Jury Trial.EACH PARTY TO
THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM
OR CAUSE OF ACTION ARISING HEREUNDER OR IN ANY WAY CONNECTED WITH OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES WITH RESPECT HERETO OR THE TRANSACTIONS
CONTEMPLATED HEREBY, 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.

22.
Senior Debt Documents; Reliance.Subordinated
Creditor has been advised by counsel in connection with the negotiation and
execution of this Agreement and is not relying upon any oral representations or
statements inconsistent with the terms and provisions hereof. Subordinated
Creditor acknowledges that (i) it has benefited and will benefit from the
execution, delivery and performance by Senior Creditor of the Merger Agreement
and the other Senior Debt Documents, (ii) this Agreement is intended to be an
inducement to Senior Creditor to execute, deliver and perform its obligations
under the Merger Agreement and the other Senior Debt Documents and to provide
the financing contemplated thereunder and (iii) Senior Creditor is relying on
the subordination and other provisions of this Agreement in entering into and
performing the Merger Agreement and the other Senior Debt Documents.

23.
Division of Proceeds After Liquidation.Notwithstanding
anything contained herein to the contrary, if all of the assets of the Obligors
are liquidated pursuant to a Proceeding, then after the indefeasible payment in
full of all Senior Indebtedness except with respect to Senior Note 1, the net
proceeds from such liquidation (after the payment of all associated fees, costs
and expenses) shall be applied on a Pro Rata basis to the payment of (a) Seller
Note 1 and (b) the Convertible Debentures. For the purposes of the previous sentence,
Pro Rata shall mean with respect to Senior Creditor or Subordinated Creditor,
as applicable, the fraction (expressed as a percentage), the numerator of which
is (x) with respect to Senior Creditor, the outstanding principal balance of
Seller Note 1 at such time, or (y) with respect to Subordinated Creditor, the
outstanding principal balance of the Convertible Debentures at such time, and
the denominator of which is the total at such time of (A) the outstanding
principal balance of Seller Note 1 and (B) the outstanding principal balance of
the Convertible Debentures.

12

24.
Senior Subordination Agreement.This Agreement
and the exercise of any right or remedy hereunder by Senior Creditor and
Subordinated Creditor are subject to the terms of the Senior Subordination
Agreement.

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13

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

SENIOR CREDITOR:IBF FUND LIQUIDATING LLCBy:
    /s/ Arthur J. SteinbergName:
    Arthur J. SteinbergTitle:
    ManagerNotice Address:
    IBF Fund Liquidating LLCc/o Kaye Scholer LLP425 Park AvenueNew York, New York 10002Attention:
    Arthur J. Steinberg, Esq., ManagerTelephone:
    (212) 836-8564Telecopy:
    (212) 836-6157SUBORDINATED CREDITOR:IBF FUND LIQUIDATING LLCBy:
    /s/ Arthur J. SteinbergName:
    Arthur J. SteinbergTitle:
    ManagerNotice Address:
    IBF Fund Liquidating LLCc/o Kaye Scholer LLP425 Park AvenueNew York, New York 10002Attention:
    Arthur J. Steinberg, Esq., ManagerTelephone:
    (212) 836-8564Telecopy:
    (212) 836-6157ACKNOWLEDGEMENT BY OBLIGORS

The
undersigned, the Obligors referred to in the foregoing Junior Subordination and
Intercreditor Agreement, hereby agree to comply with all of the terms and
provisions of said Junior Subordination and Intercreditor Agreement in all
respects. The Recitals set forth in the foregoing Junior Subordination and
Intercreditor Agreement, are acknowledged by the Obligors to be true and
correct. Each Obligor hereby covenants that, except those payments on the
Subordinated Indebtedness specifically permitted by the terms of the foregoing
Junior Subordination and Intercreditor Agreement, it will not make any payment
on account of the Subordinated Indebtedness.

SUNSET BRANDS, INC.By:
    /s/ Todd SandersName:
Todd SandersTitle:
President &
  CEONotice
  Address:
Sunset
  Brands, Inc.10990 Wilshire
  Blvd., Suite 1220Los Angeles,
  California 90024Attention:
PresidentTelephone:
(310)
  478-4600Telecopy:
(310)
  478-4601U.S. MILLS, INC.By:
    /s/ Todd SandersName:
Todd SandersTitle:
CEONotice
  Address:
U.S. Mills,
  Inc.200
  Reservoir StreetNeedham,
  Massachusetts 02494Attention:
PresidentTelephone:
(781)
  444-0440Telecopy:
(781)
  444-3411