**JUNIORSTOCK PLEDGE AGREEMENT**

**                    THISJUNIOR STOCK PLEDGE AGREEMENT** is entered into as of this 10thday of November, 2005, by and between **IBF FUND LIQUIDATING LLC** a Delaware limitedliability company, as holder of the Convertible Debentures (defined below)(together with its successors and assigns, **“SecuredParty”**) and **SUNSET BRANDS, INC.**a Nevadacorporation (“**Pledgor**”).

**                    WHEREAS,**pursuant to that certain Amended and Restated Acquisition Agreement and Plan ofMerger dated as of November 10, 2005 (as amended, restated, supplemented orotherwise modified from time to time, the “**Acquisition Agreement**”), by and amongPledgor, Secured Party, U.S. Mills, Inc. (“**US Mills**”) and USM Acquisition Sub, Inc.,Pledgor will acquire US Mills by merger (the “**Acquisition**”);

                    **WHEREAS,**pursuant to the terms of the Acquisition Agreement, Pledgor shall issue toSecured Party Secured Convertible Debentures dated the date hereof in theaggregate original principal amount of $5,000,000 (as such may be replaced,substituted or reissued from time to time in accordance with their terms,collectively, the **“ConvertibleDebentures”)**which are convertible into the common stock of Pledgor, aspayment of a portion of the consideration for the Acquisition; 

                    **WHEREAS,**Pledgor is party to that certain Junior Security Agreement dated as of the datehereof (as amended, restated, supplemented or otherwise modified from time totime, the “**Security Agreement**”), by and among Pledgor, US Mills and theSecured Party;

**                    WHEREAS,**Secured Party and Pledgor are party to that certain Junior Subordination andIntercreditor Agreement, dated as of the date hereof (as amended, restated,supplemented or otherwise modified from time to time, the “**Subordination Agreement**”), byand among Secured Party, as subordinated creditor, Pledgor, US Mills and IBFFund Liquidating LLC, as senior creditor (“**Senior Creditor**”);

**                    WHEREAS,**as a condition precedent to the agreement of the Secured Party to accept theConvertible Debentures as a portion of the consideration for the Acquisition,Pledgor is required, and has agreed, to enter into and deliver this Agreementand to pledge to Secured Party, and grant a security interest in, the PledgedCollateral (as hereinafter defined) as security for Pledgor’s obligations underthe Security Agreement; and

**                    WHEREAS,**Secured Party is willing to accept the Convertible Debentures as a portion ofthe consideration for the Acquisition only upon the condition that Pledgorexecutes and delivers to Secured Party this Agreement and agrees to perform andto comply with its obligations under this Agreement. 

**                    NOW,THEREFORE,** in consideration of the foregoing and of themutual covenants and agreements hereinafter set forth, the receipt andsufficiency of which are hereby acknowledged, and as an inducement for SecuredParty to accept the Convertible Debentures as a portion of the considerationfor the Acquisition, the parties hereto, intending to be legally bound hereby,do agree as follows:

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**1. DEFINITIONS AND REFERENCES**

**    1.1. Defined Terms**

                    Asused in this Agreement, the following terms shall have the meanings specifiedin this Section 1.1:

                    “**Agreement**”shall be defined to mean thisJunior Stock Pledge Agreement as amended, supplemented or modified from time totime.

                    “**CreditAgreement**” shall mean that certain Revolving Credit, Term Loan and SecurityAgreement, dated as of the date hereof (as amended, restated, supplemented orotherwise modified from time to time), by and among Pledgor, US Mills andCapitalSource Finance LLC (“**CapitalSource**”).

                    “**Default**”shall mean any event, fact,circumstance or condition that, with the giving of applicable notice or passageof time or both, would constitute or be or result in an Event of Defaulthereunder or under any Debenture Document.

                    “**Event of Default**”shall mean theoccurrence of any of the events set forth in Article VI.

                    “**JuniorSubordination Agreement**” shall mean that certain JuniorSubordination and Intercreditor Agreement, dated as of the date hereof (asamended, restated, supplemented or otherwise modified from time to time), byand among Secured Party, as subordinated creditor, Pledgor, US Mills and IBFFund Liquidating LLC, as senior creditor.

                    “**MasterSubordination Agreement**” shall mean that certain Master Subordination and Intercreditor Agreement,dated as of the date hereof (as amended, restated, supplemented or otherwisemodified from time to time), by and among Secured Party, as Debenture Holder,Pledgor, US Mills, CapitalSource Finance LLC (“**CapitalSource**”) and IBF FundLiquidating LLC, as Seller;

                    “**PledgedCollateral**” shall mean,collectively and each individually, (i) the issued and outstanding shares ofcapital stock and other equity securities and ownership interests of theSubsidiaries of Pledgor owned or held of record or beneficially by Pledgor onthe date hereof in the amounts set forth on and as listed on Schedule 1.1(and the certificates, copies of which are attached hereto, representing suchshares and other equity securities and ownership interests); (ii) allother shares of capital stock and other equity securities and ownershipinterests of Subsidiaries of Pledgor and all shares of capital stock and otherequity securities and ownership interests of any entity that hereafter becomesa Subsidiary of Pledgor, in each case owned or held of record or beneficiallyby Pledgor at any time (and the certificates representing such shares and otherequity securities and ownership interests); and (iii) any and allreplacements, products and proceeds of, and dividends, distributions inproperty, returns of capital or other distributions made on or with respect to,any of the foregoing shares and other equity securities and ownershipinterests. 

                    “**SeniorSecurity Agreement**” shall mean that certain Security Agreement,dated as of the date hereof (as amended, restated, supplemented or otherwisemodified from time to time), by and among Pledgor, US Mills and IBF FundLiquidating LLC.

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**    1.2. GeneralTerms**

                    Allcapitalized terms in this Agreement and not defined herein shall have thedefined meanings provided in the Security Agreement. Unless otherwisespecified, as used in this Agreement or in any certificate, report, instrumentor other document made or delivered pursuant to this Agreement, all accountingterms not defined in this Agreement or in the Security Agreement shall have themeanings given to such terms in and shall be interpreted in accordance withGAAP.            

**2. PLEDGE OF COLLATERAL**

                    (a) Assecurity for the due and punctual payment and performance by Pledgor of all theObligations, including, without limitation, all of its obligations to SecuredParty under the Security Agreement, this Agreement, the Convertible Debenturesand the other Debenture Documents (collectively, the “**Secured Obligations**”), Pledgor hereby (i)pledges and assigns to Secured Party all of the Pledged Collateral and all ofits right, title and interest in and to the Pledged Collateral, and (ii) grantsto Secured Party a continuing security interest in and Lien upon the PledgedCollateral senior in priority to all Encumbrances except with respect to thesecurity interest granted to CapitalSource pursuant to the terms of the CreditAgreement and other Loan Documents (as defined in the Credit Agreement) orotherwise permitted thereunder and the security interest granted to IBF FundLiquidating LLC pursuant to the terms of the Senior Security Agreement andother Senior Security Documents (as defined in the Senior Security Agreement)or otherwise permitted thereunder.

                    (b) Pledgorhas delivered to CapitalSource all certificates representing the PledgedCollateral described in clause (i) of the definition of Pledged Collateral and,until the termination of the Master Subordination Agreement, will deliver toCapitalSource (or to Senior Creditor once the Master Subordination Agreementhas terminated and to Secured Party once the Master Subordination Agreement andJunior Subordination Agreement have terminated) all certificates representingthe Pledged Collateral described in clauses (ii) and (iii) of the definition ofPledged Collateral within five (5) Business Days after Pledgor’s acquisition ofsuch shares or other equity securities or ownership interests or other items.Until such time as the Master Subordination Agreement has terminated, allPledged Collateral shall be held by CapitalSource for the benefit of SeniorCreditor and Secured Party for the purpose of perfecting Senior Creditor’s andSecured Party’s security interest therein. Concurrently with the termination ofthe Master Subordination Agreement, CapitalSource shall deliver all PledgedCollateral to Senior Creditor. After Senior Creditor’s receipt of the PledgedCollateral from Capitalsource and until such time as the Junior SubordinationAgreement has terminated, all Pledged Collateral shall be held by SeniorCreditor for the benefit of Secured Party for the purpose of perfecting SecuredParty’s security interest therein. Concurrently with the termination of theJunior Subordination Agreement, Senior Creditor shall deliver all PledgedCollateral to Subordinated Creditor. Subject to the terms of the MasterSubordination Agreement and the Junior Subordination Agreement, each suchcertificate shall be registered in the name of Pledgor, duly endorsed in blankor accompanied by a stock power duly executed by Pledgor in blank, in form andsubstance satisfactory to Secured Party, with any and all documentary taxstamps and other documents necessary to cause Secured Party to have a good,valid and perfected continuing pledge of, Lien on and security interest in thePledged Collateral, free and clear of any mortgage, pledge, Lien, securityinterest, hypothecation, assignment, charge, right, encumbrance or transfer orother restriction (individually, “**Encumbrance**”and collectively, “**Encumbrances**”),senior in priority to all Encumbrances except with respect to the securityinterest granted to CapitalSource pursuant to the terms of the Credit Agreementand other Loan Documents (as defined in the Credit Agreement) or otherwisepermitted thereunder and the security interest granted to IBF Fund LiquidatingLLC pursuant to the terms of the Senior Security Agreement and other SeniorSecurity Documents (as defined in the Senior Security Agreement) or otherwisepermitted thereunder, including, without limitation, any necessary notations in

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the corporate or other records books of Pledgor or theentity in which such shares, equity securities or ownership interests evidencean ownership stake. Subject to the terms of the Master Subordination Agreementand the Junior Subordination Agreement, at any time following the occurrenceand continuation of an Event of Default, any or all of the Pledged Collateral,at the option of Secured Party exercised in accordance with Section 3hereof, may be registered in the name of Secured Party or of its nominee, andPledgor hereby covenants that, upon demand therefor by Secured Party, Pledgorshall or shall cause the entity in which such shares, equity securities orownership interests evidence an ownership stake to effect such registration.

                    (c) IntentionallyOmitted.

                    (d) Inaddition to and notwithstanding any other provision of this Agreement, subjectto the terms of the Master Subordination Agreement and the Junior SubordinationAgreement, Secured Party, in its sole discretion, shall have the right, at anytime that Pledgor fails to do so, without prior notice to Pledgor, to: (i)obtain insurance covering any of the Pledged Collateral to the extent requiredunder the Security Agreement; (ii) pay for the performance of any of thePledgor’s obligations hereunder; (iii) discharge taxes, liens, securityinterests, or other encumbrances at any time levied or placed on any of thePledged Collateral in violation of this Agreement unless Pledgor is in goodfaith with due diligence by appropriate proceedings contesting those items; and(iv) pay for the maintenance and preservation of any of the Pledged Collateral.Such expenses and advances shall be added to the Secured Obligations untilreimbursed to Secured Party and shall be secured by the Pledged Collateral. Anysuch payments and advances by Secured Party shall not be construed as a waiverby Secured Party of an Event of Default or any other rights, remedies or powersof Secured Party hereunder or otherwise.

                    (e) Withinfive (5) Business Days of any request by Secured Party, Pledgor, at its owncost and expense, will duly execute and deliver to Secured Party such financingstatements, continuation statements, assignments, certificates and/or suchother agreements, assignments, instructions or documents as Secured Party mayrequest relating to the Pledged Collateral or otherwise to enable Secured Partyto create, maintain and perfect or from time to time renew the securityinterests granted hereby or to create, maintain and perfect a security interestin any additional Pledged Collateral hereafter acquired by Pledgor or in anyand all additions to and/or replacements, products and proceeds of any of theforegoing, all in form and substance satisfactory to Secured Party. Pledgorwill pay all costs associated therewith, including without limitation, the costof filing any of the foregoing in all public offices or other locationswherever Secured Party deems filing to be necessary or desirable. Pledgorirrevocably grants Secured Party the right, at Secured Party’s option, to fileany or all of the foregoing pursuant to the UCC and otherwise, and Pledgorirrevocably appoints Secured Party as Pledgor’s attorney in fact to execute anyof the foregoing in Pledgor’s name and to perform all other acts that SecuredParty deems appropriate to perfect and continue the security interestsconferred by this Agreement or otherwise to effect fully the purposes, termsand conditions of this Agreement, the Security Agreement and the otherDebenture Documents.

                    (f) Noinjury to, or loss or destruction of, the Pledged Collateral or any Material AdverseEffect or Material Adverse Change shall relieve Pledgor of any of the SecuredObligations.

**3. VOTINGRIGHTS, DIVIDENDS AND DISTRIBUTIONS**

                    Solong as no Event of Default shall have occurred and be continuing or wouldresult from or be caused by any of the following:

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                    (a) Pledgorshall be entitled to exercise any and all voting and/or consensual rights andpowers relating or pertaining to the Pledged Collateral or any part thereof,subject to the terms hereof;

                    (b) Pledgorshall be entitled to receive and retain cash dividends payable on the PledgedCollateral; provided, however, that all other dividends(including, without limitation, stock and liquidating dividends), distributionsin property, returns of capital and other distributions made on or in respectof the Pledged Collateral, whether resulting from a subdivision, combination orreclassification of the outstanding capital stock, equity securities or otherownership interests of Pledgor, any Subsidiary of Pledgor or any other Personor received in exchange for the Pledged Collateral or any part thereof or as aresult of any merger, consolidation, acquisition, transfer, sale or dispositionof the Pledged Collateral or other exchange of assets to which Pledgor, anySubsidiary of Pledgor or any other Person may be a party or otherwise, and anyand all cash and other property received in exchange for or redemption of anyof the Pledged Collateral, shall, subject to the terms of the Master SubordinationAgreement and the Junior Subordination Agreement, be retained by Secured Party,or, if delivered to Pledgor, shall be held in trust for the benefit of SecuredParty and forthwith delivered to Secured Party and shall be considered as partof the Pledged Collateral for all purposes of this Agreement;

                    (c) SecuredParty shall execute and deliver (or cause to be executed and delivered) toPledgor all such proxies, powers of attorney, dividend orders and otherinstruments as Pledgor may request for the purpose of enabling Pledgor toexercise the voting and/or consensual rights and powers that Pledgor isentitled to exercise pursuant to Section 3(a) and/or to receive thedividends that Pledgor is authorized to receive and retain pursuant to Section 3(b);and Pledgor shall execute and deliver to Secured Party all proxies, powers ofattorney, dividend orders and other instruments and documents as may berequired or may be requested by Secured Party to enable Secured Party toreceive and retain the dividends, distributions in property, returns of capitaland other distributions it is authorized to receive and retain pursuant to Section 3(b);and

                    (d) Uponthe occurrence and continuation of an Event of Default, all rights of Pledgorto exercise the voting and/or consensual rights and powers that Pledgor isentitled to exercise pursuant to Section 3(a) and/or to receive thedividends that Pledgor is authorized to receive and retain pursuant to Section 3(b)shall cease immediately, without any notice to Pledgor or action by or onbehalf of Secured Party or any other Person, and all such rights thereuponshall become vested in Secured Party automatically without any action by anyPerson, and Secured Party shall have the sole and exclusive right and authorityto exercise such voting and/or consensual rights and powers and/or to receiveand retain such dividends. In such case, Pledgor shall execute and deliver suchproxies, powers of attorney, dividend orders and other instruments anddocuments as Secured Party may request or as may be otherwise required ordesirable to enable Secured Party to exercise such rights and receive suchdividends. In addition, Secured Party is hereby appointed the attorney-in-factof Pledgor, with full power of substitution, which appointment asattorney-in-fact is irrevocable and coupled with an interest, to take all suchactions after the occurrence and continuation of an Event of Default, whetherin the name of Secured Party or Pledgor, as Secured Party may considernecessary or desirable for the purpose of exercising such rights and receivingsuch dividends. Any and all money and other property paid over to or receivedby Secured Party pursuant to the provisions of this Section 3(d)shall be retained by Secured Party as part of the Pledged Collateral and shallbe applied in accordance with the provisions hereof.

**4. REMEDIES ON DEFAULT**

                    (a) Notwithstandingand without limiting any other provision of this Agreement or any of the DebentureDocuments, if at any time an Event of Default shall have occurred and becontinuing, then, in addition to having the right to exercise any right orremedy of a secured party upon

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default under the UCC (as defined in the SecurityAgreement) or applicable law or at equity, subject to the terms of the MasterSubordination Agreement and the Junior Subordination Agreement, Secured Partymay, to the extent permitted by law, without being required to give any noticeto Pledgor or to take or do any action (except as provided below):

                         (i) applyany cash held by it hereunder in the manner provided in Section 4(1);and

                         (ii) ifthere shall be no such cash or if the cash so applied shall be insufficient topay in full the items specified in Section 4(1)(i) and 4(1)(ii),collect, receive, appropriate and realize upon the Pledged Collateral or anypart thereof, and/or sell, assign, transfer, contract to sell or otherwisedispose of and deliver the Pledged Collateral or any part thereof, in itsentirety or in portions, at public or private sale or at any broker’s board, onany securities exchange or at any of Secured Party’s places of business orelsewhere, for cash, upon credit or for future delivery, and at such price orprices as Secured Party may deem best, and Secured Party may (except asotherwise provided by law) be the purchaser of any or all of the PledgedCollateral so sold and thereafter may hold the same, absolutely, free from anyright or claim of whatsoever kind.

                    (b) Inthe event of a sale as aforesaid, Secured Party may, at any such sale, restrictthe number of prospective bidders or purchasers and/or further restrict suchprospective bidders or purchasers to Persons who will represent and agree thatthey are purchasing for their own account, for investment and not with a viewto the distribution or resale of the Pledged Collateral, and may otherwiserequire that such sale be conducted subject to restrictions as to such othermatters as Secured Party may deem necessary in order that such sale may beeffected in such manner as to comply with all applicable state and federalsecurities and other laws. Upon any such sale, Secured Party shall have theright to deliver, assign and transfer the Pledged Collateral so sold to thepurchaser thereof.

                    (c) Pledgorhereby acknowledges that, notwithstanding that a higher price might be obtainedfor the Pledged Collateral at a public sale than at a private sale or sales,the making of a public sale of the Pledged Collateral may be subject toregistration requirements under applicable securities laws and other legalrestrictions, compliance with which would make a public sale of the PledgedCollateral impractical. Accordingly, Pledgor hereby agrees that private salesmade by Secured Party in good faith in accordance with the provisions of this Article4 may be at prices and on other terms less favorable to the seller than ifthe Pledged Collateral were sold at a public sale, and that Secured Party shallnot have any obligation to take any steps in order to permit the PledgedCollateral to be sold at a public sale. 

                    (d) Ifany applicable requirements under the Securities Act of 1933, as amended, orsuch other laws cannot be satisfied at the time of a proposed sale of thePledged Collateral by Secured Party, Pledgor hereby agrees to substitute forthe Pledged Collateral other property owned by Pledgor, free and clear of allEncumbrances, of at least equal value as the Pledged Collateral as of the dateof such proposed sale.

                    (e) Eachpurchaser at any such sale shall hold the property sold, absolutely free fromany claim or right whatsoever, including any equity or right of redemption ofPledgor, and Pledgor hereby specifically waives all rights of redemption, stayor appraisal and other rights that Pledgor has or may have under any law,regulation or statute now existing or hereafter adopted or otherwise. SecuredParty shall give Pledgor not less than ten (10) calendar days’ written noticeof its intention to make any such public or private sale. Such notice, in caseof a public sale, shall state the time and place fixed for such sale, and, incase of a sale at broker’s board, on a securities exchange, at one or more ofSecured Party’s places of business or elsewhere, shall state the board,exchange or other location at which such sale is to be made and the day onwhich the Pledged Collateral, or that portion thereof so being sold, will firstbe 

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offered for sale at such location. Such notice, incase of a private sale, shall state only the date on or after which such salemay be made. Any such notice given as aforesaid shall be deemed to bereasonable notification.

                    (f) Anysuch public sale shall be held at such time or times within ordinary businesshours and at such place or places as Secured Party may fix in the notice ofsuch sale. At any sale the Pledged Collateral may be sold in one lot as anentirety or in parts, as Secured Party may determine. Secured Party shall notbe obligated to make any sale pursuant to any such notice. Secured Party may,without notice or publication, adjourn any sale or cause the same to beadjourned from time to time by announcement at the time and place fixed for thesale, and such sale may be made at any time or place to which the same may beso adjourned. In case of any sale of all or any part of the Pledged Collateralon credit or for future delivery, the Pledged Collateral so sold may beretained by Secured Party until the selling price is paid by the purchaserthereof, but Secured Party shall not incur any liability in case of the failureof such purchaser to take up and pay for the Pledged Collateral so sold and, incase of any such failure, such Pledged Collateral may again be sold upon likenotice.

                    (g) SecuredParty, instead of exercising the power of sale herein conferred upon it, mayproceed by a suit or suits at law or in equity to foreclose its Lien orsecurity interest arising from this Agreement and sell the Pledged Collateral,or any portion thereof, under a judgment or decree of a court or courts ofcompetent jurisdiction.

                    (h) Notwithstandingand without limiting any other provision of this Agreement or any of theDebenture Documents, upon the occurrence and continuation of an Event ofDefault, subject to the terms of the Master Subordination Agreement and theJunior Subordination Agreement, Secured Party or its nominee shall have theright, without notice to or the consent of Pledgor, to exercise any and allrights of conversion, exchange or subscription and any other rights, privilegesor options pertaining to any of the Pledged Collateral as if it were theabsolute owner thereof, including, without limitation, the right to transfer,sell, dispose of or exchange, at its discretion, any or all of the PledgedCollateral upon the merger, consolidation, reorganization, recapitalization orother readjustment of Pledgor or Subsidiary of Pledgor or such other Person.

                    (i) Onany sale of any part of the Pledged Collateral, Secured Party is herebyauthorized to comply with any limitation or restriction in connection with suchsale that may be necessary in order to avoid any violation of applicable law orin order to obtain any required approval of the purchaser(s) by anyGovernmental Authority or officer or court.

                    (j) Pledgorhereby acknowledges, understands and agrees that Secured Party (i) may exerciseits rights under the Debenture Documents, whether or not they provide securityfor any of the Secured Obligations, without exercising its rights hereunder oraffecting the security provided hereunder, and (ii) may proceed against all orany portion of the Pledged Collateral and all other collateral securing any ofthe Secured Obligations in such order and at such time as determined by SecuredParty in its sole discretion. Pledgor hereby expressly waives any rights underthe doctrine of marshalling of assets.

                    (k) Pledgorhereby acknowledges, understands and agrees that compliance with the foregoingprocedures shall satisfy any applicable requirements that such sale ordisposition be made in a commercially reasonable manner. 

                    (l) Theproceeds of any collection, recovery, receipt, appropriation, realization,transfer, exchange, disposition or sale as aforesaid shall be applied bySecured Party in the following order:

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                         (i) First,to the payment of all costs and expenses of every kind incurred by SecuredParty in connection therewith or incidental to the care, safekeeping orotherwise of any of the Pledged Collateral, and to the payment of all sumswhich Secured Party may be required or may elect to pay, if any, for taxes,assessments, insurance and other charges upon the Pledged Collateral or anypart thereof, and all other payments that Secured Party may be required orauthorized to make under any provision of this Agreement including, withoutlimitation, in-house documentation and diligence fees, search, audit,recording, and filing fees and expenses and reasonable attorneys’ fees andexpenses;

                         (ii) Second,to the payment of any other amounts due under the Secured Obligations (to beapplied in accordance with the Security Agreement);

                         (iii) Third,to the satisfaction of indebtedness secured by any subordinate securityinterest of record in the Pledged Collateral if written notification of demandtherefor is received before distribution of the proceeds is completed; providedthat the holder of a subordinate security interest shall furnish reasonableproof of its interest to Secured Party, and unless it does so, Secured Partyneed not address its claims; and

                         (iv) Finally,to the payment to Pledgor of any surplus then remaining from such proceeds,unless otherwise required by law or directed by a court of competentjurisdiction; provided that Pledgor shall be liable for any deficiencyif such proceeds are insufficient to satisfy all of the Secured Obligations.

**5. REPRESENTATIONS, WARRANTIESAND COVENANTS OF PLEDGOR**

                    (a) Pledgorrepresents and warrants to Secured Party as of the date hereof (whichrepresentations and warranties shall survive the execution and delivery of thisAgreement as follows:

                         (i) Pledgoris a corporation duly organized, validly existing and in good standing underthe laws of the State of Nevada and has full power, right and authority to (A)own the Pledged Collateral, (B) execute, deliver and perform this Agreement,(C) pledge the Pledged Collateral, and (D) grant the security interests andLiens in the Pledged Collateral pursuant to this Agreement and otherwiseconsummate the transactions contemplated under the other Debenture Documents towhich it is a party;

                         (ii) theexecution, delivery and performance by Pledgor of this Agreement and theconsummation of the transactions contemplated hereby have been duly and validlyauthorized by all necessary actions on the part of Pledgor (none of whichactions have been modified or rescinded, and all of which actions are in fullforce and effect), and this Agreement has been duly executed and delivered byPledgor and constitutes the legal, valid and binding obligation of Pledgor,enforceable against Pledgor in accordance with its terms, subject to the effectof any applicable bankruptcy, moratorium, insolvency, reorganization or othersimilar law affecting the enforceability of creditors’ rights generally and tothe effect of general principles of equity which may limit the availability ofequitable remedies (whether in a proceeding at law or in equity);

                         (iii) Pledgoris, or, with respect to the Pledged Collateral described in clauses (ii) and(iii) of the definition of Pledged Collateral not later than the time ofdelivery of certificates therefor will be, the direct record and beneficialowner of each share, security and other interest that comprises the PledgedCollateral, and Pledgor has and will have good, valid and marketable titlethereto, free and clear of all Encumbrances other than the security interestscreated by this Agreement, the security interest granted to CapitalSourcepursuant to the terms of the Credit Agreement and other Loan 

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Documents (as defined in the Credit Agreement) orotherwise permitted thereunder and the security interest granted to IBF FundLiquidating LLC pursuant to the terms of the Senior Security Agreement andother Senior Security Documents (as defined in the Senior Security Agreement)or otherwise permitted thereunder;

                         (iv) allof the Pledged Collateral has been, or, with respect to the Pledged Collateraldescribed in clauses (ii) and (iii) of the definition of Pledged Collateral notlater than the time of delivery of certificates therefor will be, duly andvalidly issued, fully paid and nonassessable;

                         (v) thePledged Collateral described in clause (i) of the definition of PledgedCollateral constitutes 100% of the issued and outstanding capital stock andother equity securities and ownership interests of each Subsidiary of Pledgorand other Person in which such Pledged Collateral represents an ownershipinterest (calculated on a fully diluted, as converted basis);

                         (vi) thePledged Collateral is and will be duly and validly pledged to Secured Party inaccordance with law, and Secured Party has a good, valid and perfected Lien onand security interest in the Pledged Collateral and the proceeds thereofsubject to no Encumbrances in favor of any other Person except for the securityinterest granted to CapitalSource pursuant to the terms of the Credit Agreementand other Loan Documents (as defined in the Credit Agreement) or otherwisepermitted thereunder and the security interest granted to IBF Fund LiquidatingLLC pursuant to the terms of the Senior Security Agreement and other SeniorSecurity Documents (as defined in the Senior Security Agreement) or otherwisepermitted thereunder;

                         (vii) theexecution, delivery and performance by Pledgor of this Agreement and theconsummation of the transactions and the creation and granting of the securityinterests and Liens contemplated thereby do not and will not (A) conflict withor violate the certificate of incorporation, by-laws, limited liability companyagreement or similar documents of Pledgor or of any entity whose securitiesconstitute part of the Pledged Collateral or any agreement by and betweenPledgor or any such entity and its respective shareholders or equity owners oramong any such shareholders or equity owners; (B) conflict with, result ina breach of, constitute a default of or an event of default under, or 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 defaultunder, require any consent not obtained under, or result in or require theacceleration of any indebtedness pursuant to, any agreement, indenture or otherinstrument to which Pledgor or any entity whose securities constitute part ofthe Pledged Collateral is a party or by which Pledgor or any entity whosesecurities constitute part of the Pledged Collateral or any of its or theirrespective properties or assets are bound or subject, the effect of which couldreasonably be expected to have or result in a Material Adverse Effect;(C) conflict with or violate any provision of any applicable law, statute,rule, regulation, ordinance, license or tariff or any judgment, decree or orderof any court or other Governmental Authority binding on or applicable toPledgor or any entity whose securities constitute part of the PledgedCollateral or any of its or their respective properties or assets or any of thePledged Collateral, or (D) result in the creation or imposition of any Lien ofany nature whatsoever upon any of the properties or assets of Pledgor or anyentity whose securities constitute part of the Pledged Collateral except thosecontemplated hereunder;

                         (viii) noapproval, consent or authorization of, filing, registration or qualificationwith, or other action by, Pledgor or any entity whose securities constitutepart of the Pledged Collateral, any Governmental Authority or any other Personis or will be necessary to permit the valid execution, delivery or performanceof this Agreement by Pledgor or consummation of the transactions or creation orgranting of the Liens and security interests contemplated hereby;

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                         (ix) thereis no action, claim, suit, proceeding or investigation pending or, to theknowledge of Pledgor, currently threatened against or affecting the PledgedCollateral, or Pledgor or any entity whose securities constitute part of thePledged Collateral, or this Agreement or the transactions contemplated hereby,before or by any court, arbitrator or Governmental Authority (a) that questionsor could prevent the validity of this Agreement or the right or ability ofPledgor to enter into this Agreement or to consummate the transactions orcreate or grant the Liens and security interests contemplated hereby, (b) thatcould reasonably be expected to have or result in, either individually or inthe aggregate, any Material Adverse Change or Material Adverse Effect, or (c)that could reasonably be expected to result in any change in the current equityownership of Pledgor or any entity whose securities constitute part of thePledged Collateral or otherwise in a Change of Control, nor is Pledgor awarethat there is any basis for any of the foregoing;

                         (x) neitherPledgor nor any entity whose securities constitute part of the PledgedCollateral is (A) a party or subject to any judgment, order or decree or anyagreement, document or instrument or subject to any restriction, any of whichdo or would materially adversely affect or prevent Pledgor’s ability to executeor deliver, or perform under, consummate the transactions contemplated by or toobserve the covenants and agreements contained in, this Agreement; (B) indefault or breach of the performance, observance or fulfillment of anyobligation, covenant or condition contained in any agreement, document orinstrument to which Pledgor or such entity is a party or by which any of its ortheir properties or assets are bound or subject, which default or breach, ifnot remedied within any applicable grace or cure period could reasonably beexpected to have or result in a Material Adverse Effect, nor is there anyevent, fact, condition or circumstance which, with notice or passage of time,or both, would constitute or result in a conflict, breach, default or event ofdefault under, any of the foregoing which, if not remedied within anyapplicable grace or cure period could reasonably be expected to have or resultin a Material Adverse Effect; or (C) a party or subject to any agreement (oralor written), document or instrument with respect to, or obligation to pay any,service or management fee with respect to the ownership, operation, leasing orperformance of any of its business or any facility, nor is there any managerwith respect to any such facility.

                         (xi) Pledgoris in compliance with all laws, statutes, rules, regulations, ordinances andtariffs of any Governmental Authority with respect to or applicable to Pledgorand/or Pledgor’s assets and properties and is not in violation of any order,judgment or decree of any court or other Governmental Authority or arbitrationboard or tribunal, in each case except where noncompliance or violation couldnot reasonably be expected to have or result in a Material Adverse Effect, andthere is no event, fact, condition or circumstance which, with notice orpassage of time, or both, would constitute or result in any noncompliance with,or any violation of, any of the foregoing, in each case except wherenoncompliance or violation could not reasonably be expected to have or resultin a Material Adverse Effect, and there is no Liability Event as of the datehereof; 

                         (xii) theobligations of Pledgor under this Agreement are not subordinated in any way toany other obligation of Pledgor or to the rights of any other Person, except tothe extent set forth in the Master Subordination Agreement and the JuniorSubordination Agreement.

                    (b) Untilall Secured Obligations have been performed and satisfied in full andindefeasibly paid in full in cash and the Security Agreement has beenterminated, Pledgor hereby covenants that:

                         (i) Exceptas set forth in the Credit Agreement and the other Loan Documents (as definedin the Credit Agreement) and in the Senior Security Agreement and the otherSenior Security Documents (as defined in the Senior Security Agreement) (A)Pledgor shall not sell, lease, transfer, pledge, assign or otherwise dispose ofany of the Pledged Collateral or any interest therein, 

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and (B) Pledgor shall not create, incur, assume orsuffer to exist any Encumbrance upon, in, against or with respect to any of thePledged Collateral or any interest therein (except pursuant hereto);

                         (ii) Pledgorshall, and shall cause each entity whose securities constitute part of thePledged Collateral to: (A) preserve and maintain its existence in goodstanding (except as permitted or required under the Security Agreement);(B) comply with all laws, rules, statutes, regulations, ordinances andtariffs and orders of all applicable Governmental Authorities with respect toor applicable to its business, assets or operations or to any of the PledgedCollateral, except where the failure to comply could not reasonably be expectedto have or result in a Material Adverse Effect; and (C) promptly upon theoccurrence thereof and in any event within three (3) calendar days afterPledgor or any authorized officer of Pledgor obtains knowledge thereof, givewritten notice to Secured Party of (1) any action, suit, litigation,investigation, arbitration, dispute resolution proceeding or proceeding of anykind pending, instituted or threatened against or affecting, involving orrelating to Pledgor, any such entity or the Pledged Collateral or any of theirrespective properties or assets, whether or not the claim is covered by insurance,to the extent the amount in controversy exceeds $30,000 or to the extent suchlitigation, suit, investigation, arbitration, dispute resolution proceeding oradministrative proceeding seeks injunctive relief, (2) the filing, recording orassessment of any federal, state, local or foreign tax lien against the PledgedCollateral, Pledgor or any such entity, (3) the occurrence of any Defaultor 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 withrespect thereto, (4) the occurrence or existence of any event, fact,circumstance or condition which constitutes or results in, or would constituteor result in with the giving of notice or passage of time or both, an Event ofDefault, which notice shall specify the nature and status thereof, the periodof existence thereof and what action is proposed to be taken with respectthereto, and (5) any other development, event, fact, circumstance,condition or action of any nature against or affecting Pledgor or any suchentity or otherwise, which could reasonably be expected to have, lead to orresult in a Material Adverse Effect, a Default or an Event of Default, in eachcase describing the nature and status thereof and the action Pledgor proposesto take with respect thereto, and (6) any matter(s) affecting the value,enforceability or collectability of any of the Pledged Collateral, including,without limitation, claims or disputes asserted by any obligor or obligors inthe amount of $30,000 or more, singly or in the aggregate, in existence at anyone time.

                         (iii) Pledgorshall, and shall cause each entity whose securities constitute part of thePledged Collateral to, (a) perform in accordance with its terms every contract,agreement or other arrangement (oral or written) to which it is a party or bywhich it or any of the Pledged Collateral is bound, except where the failure toperform could not reasonably be expected to have or result in a MaterialAdverse Effect, (b) comply with all laws, statutes, rules, regulations,ordinances and tariffs of any applicable Governmental Authority with respect orapplicable to its business, assets or operations or to the Pledged Collateral,except where the failure to comply could not reasonably be expected to have orresult in a Material Adverse Effect, (c) pay, discharge or otherwise satisfy ator before maturity (subject where applicable to specified grace periods and, inthe case of the trade payable, to ordinary course payment practices) all of itsand/or their material obligations and liabilities of whatsoever nature, exceptwhen the amount or validity thereof is currently being contested in good faithby appropriate proceedings and it shall have provided for such reserves asSecured Party may deem proper and necessary in its sole discretion,(d) pay all taxes, assessments, fees, governmental charges, claims forlabor, supplies, rent and all other obligations or liabilities of any kind ofor imposed upon such Person or upon the Pledged Collateral, except liabilitiesbeing contested in good faith and against which adequate reserves have beenestablished, except where the failure to pay could not reasonably be expectedto have or result in a Material Adverse Effect, (e) obtain and deliver allrequired consents, approvals and agreements from such third parties as SecuredParty shall determine are necessary or desirable in its sole discretion thatare satisfactory to Secured Party with respect to (I) this Agreement and theother Debenture Documents and the transactions contemplated hereby and thereby,(II) claims against Pledgor, any such entity or any of 

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the Pledged Collateral, and/or (III) any agreement(oral or written), consent, document or instrument to which any of them is aparty or by which any of their properties or assets are bound or subject, (f)perform in accordance with its terms every contract, agreement or otherarrangement (oral or written) to which it is a party or by which it or any ofthe Pledged Collateral is bound, and (g) furnish to Secured Party suchadditional information as Secured Party may reasonably request from a credit orsecurity perspective or otherwise from time to time;

                         (iv) Pledgorshall, and shall cause each entity whose securities constitute part of thePledged Collateral to, keep true, complete and accurate books of record withrespect to the Pledged Collateral in accordance with commercially reasonablebusiness practices; and

                         (v) Pledgorshall not take or permit to be taken, or permit or cause any entity whosesecurities constitute part of the Pledged Collateral to take or permit to betaken, any action in connection with the Pledged Collateral or otherwise whichwould impair the value of the Pledged Collateral or any portion thereof or thevalue of the interests or rights of Pledgor or Secured Party therein or withrespect thereto, including, without limitation, any amendment to ormodification of the certificate of incorporation (or similar charter documents)or bylaws (or similar documents) of Pledgor or such Person which would resultin or cause any of the foregoing.

**6. EVENTS OF DEFAULT**

                    (a) Theoccurrence of any one or more of the following shall constitute an “Event ofDefault” under this Agreement:

                         (i) Pledgorshall fail to perform, observe or comply with any covenant, obligation oragreement set forth in this Agreement and such failure shall not be curedwithin the applicable period set forth herein, provided that, withrespect to the covenants set forth in Sections 5(b) (other than Sections5(b)(i), 5(b)(ii)(A), and 5(b)(v), for which there shall beno cure period) Pledgor shall have a twenty (20) calendar day cure period commencingfrom the earlier of (i) Receipt by Pledgor of written notice of suchfailure, and (ii) the time at which Pledgor or any authorized officer thereofknew or became aware, or should have known or been aware, of such failure,breach or default;

                         (ii) anyrepresentation or warranty made or deemed made by Pledgor in this Agreementshall not be true and correct in all material respects or shall have been falseor misleading in any material respect on the date when made or deemed to havebeen made (except to the extent the representation or warranty is alreadyqualified by materiality or the phrase “Material Adverse Effect” or “MaterialAdverse Change,” in which case it shall be true and correct in all respects andshall not be false or misleading in any respect); 

                         (iii) anyEvent of Default under any Debenture Document shall occur and be continuingpast any cure period and shall not have been waived in writing; or

                         (iv) thisAgreement shall cease to be in full force and effect or any Lien or securityinterest created hereunder shall cease to constitute a valid perfected Lien andsecurity interest on the Pledged Collateral that is senior in priority to allEncumbrances except with respect to the security interest granted toCapitalSource pursuant to the terms of the Credit Agreement and other LoanDocuments (as defined in the Credit Agreement) or otherwise permittedthereunder and the security interest granted to IBF Fund Liquidating LLC pursuantto the terms of the Senior Security Agreement and other Senior SecurityDocuments (as defined in the Senior Security Agreement) or otherwise permittedthereunder.

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                    (b) Notwithstandingand without limiting or being limited by any other provision of this Agreementor the Debenture Documents, upon the occurrence and continuation of any Eventof Default, Secured Party may, by notice to Pledgor take any actions permittedhereunder or under the Debenture Documents. 

                    (c) Notwithstanding the foregoing, in the case of an Event of Defaultunder Section 6(a)(iv), the Convertible Debentures, all interestthereon and all other Secured Obligations automatically, without demand orfurther act by Secured Party, shall be immediately due and payable (providedthat, with respect to minor, non-material breaches or violations thatconstitute Events of Default under Section 6(a)(iv), Pledgor shall have a five(5) Business Day cure period commencing from the earlier of (i) Receipt byPledgor of written notice of such breach or violation and resulting Event ofDefault or of any event, fact or circumstance constituting or resulting in anyof the foregoing, and (ii) the time at which Pledgor or any authorized officerthereof knew or became aware, or should have known or been aware, of suchbreach or violation and resulting Event of Default or of any event, fact orcircumstance constituting or resulting in any of the foregoing).

**7. MISCELLANEOUS PROVISIONS**

**    7.1. Expenses**

                    Withoutlimiting or being limited by any other provision of this Agreement or theDebenture Documents, Pledgor shall pay all costs and expenses incurred bySecured Party or any of its Affiliates, including, without limitation,documentation and diligence fees and expenses, all search, audit, appraisal,recording, professional and filing fees and expenses and all otherout-of-pocket charges and expenses (including, without limitation, UCC andjudgment and tax lien searches and UCC filings and fees for post-Closing UCCand judgment and tax lien searches), and reasonable attorneys’ fees andexpenses, (a) in any effort to enforce this Agreement, any other DebentureDocument and/or any related agreement, document or instrument, or to effect collectionhereunder or thereunder, (b) in connection with entering into, negotiating,preparing, reviewing and executing this Agreement and the other DebentureDocuments and all related agreements, documents and instruments, (c) arising inany way out of administration of the Secured Obligations or the securityinterests or Liens created hereunder, (d) in connection with instituting,maintaining, preserving and enforcing Secured Party’s rights hereunder andenforcing and/or foreclosing on the security interests and/or Liens in any ofthe Pledged Collateral, through judicial process or otherwise, (e) in defendingor prosecuting any actions, claims or proceedings arising out of or relating tothis Agreement and/or any related agreement, document or instrument, (f) inseeking or receiving any advice with respect to its rights and obligationsunder this Agreement, any of the other Debenture Documents and/or all relatedagreements, documents and instruments, and/or (g) in connection with anymodification, supplement, amendment, waiver or extension of this Agreement, anyother Debenture Document or any related agreement, document or instrument, andall of the same may be added to, and shall be part of, the Secured Obligations.If Secured Party or any of its Affiliates uses in-house counsel for any of thepurposes set forth above or any other purposes under this Agreement for whichPledgor is responsible to pay or indemnify, Pledgor expressly agrees that itsSecured Obligations include reasonable charges for such work commensurate withthe fees that would otherwise be charged by outside legal counsel selected bySecured Party or such Affiliate in its sole discretion for the work performed.In addition and without limiting the foregoing, Pledgor shall pay all taxes(other than taxes based upon or measured by Secured Party’s income or revenuesor any personal property tax), if any, in connection with the issuance of theConvertible Debentures and the recording of the security documents andfinancing statements therefor and pursuant to the Security Documents. 

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    **7.2. ****Notices**

                    Anynotice or request under this Agreement shall be given to any party to thisAgreement at such party’s address set forth beneath its signature on thesignature page to this Agreement, or at such other address as such party mayhereafter specify in a notice given in the manner required under this Section7.2. Any notice or request hereunder shall be given only by, and shall bedeemed to have been received upon (each, a **“Receipt”**): (i) registered or certified mail, return receiptrequested, on the date on which such received as indicated in such returnreceipt, (ii) delivery by a nationally recognized overnight courier, one(1) Business Day after deposit with such courier, or (iii) facsimile orelectronic transmission, in each case upon telephone or further electroniccommunication from the recipient acknowledging receipt (whether automatic ormanual from recipient), as applicable. 

**    7.3. Delay**

                    Nocourse of action or dealing, renewal, release or extension of any provision ofthis Agreement, or single or partial exercise of any such provision, or delay,failure or omission on Secured Party’s part in enforcing any such provisionshall affect the liability of Pledgor or operate as a waiver of such provisionor affect the liability of Pledgor or preclude any other or further exercise ofsuch provision. No waiver by any party to any Debenture Document of any one ormore defaults by any other party in the performance of any of the provisions ofany Debenture Document shall operate or be construed as a waiver of any futuredefault, whether of a like or different nature, and each such waiver shall belimited solely to the express terms and provisions of such waiver.Notwithstanding any other provision of any Debenture Document, by completingthe Closing under this Agreement, Secured Party does not waive any breach ofany representation or warranty of under any Debenture Document, and all ofSecured Party’s claims andrights resulting from any such breach or misrepresentation are specificallyreserved.

**    7.4. Release of PledgedCollateral**

                    Promptlyfollowing full performance and satisfaction and indefeasible payment in full incash of the Secured Obligations and the termination of the Security Agreement,the security interests and Liens created hereby shall terminate and SecuredParty shall execute and deliver such documents, at Pledgor’s expense, as arenecessary to release Secured Party’s security interests and Liens in thePledged Collateral and shall return the Pledged Collateral to Pledgor at theaddress of Pledgor set forth herein or at such other address as Pledgor maydirect in writing. Secured Party shall not be deemed to have made anyrepresentation or warranty with respect to any Pledged Collateral so delivered,except that such Pledged Collateral is free and clear, on the date of suchdelivery, of any and all liens, charges and encumbrances arising from SecuredParty’s own acts.

**    7.5. Successorsand Assigns; Participations; New Secured Parties**

                    ThisAgreement shall inure to the benefit of Secured Party, Transferees and allfuture holders of the Convertible Debentures, the Secured Obligations and/orany of the Pledged Collateral, and each of their respective successors andassigns. This Agreement shall be binding upon Pledgor other than Secured Partythat are parties to this Agreement and their respective successors and assigns,and no such Person may assign, delegate or transfer this Agreement or any ofits rights or obligations under this Agreement without the prior writtenconsent of Secured Party. No rights are intended to be created under thisAgreement for the benefit of any third party donee, creditor or incidentalbeneficiary of Pledgor. Nothing contained in any Debenture Document shall beconstrued as a delegation to Secured Party of any other Person’s duty ofperformance. PLEDGOR ACKNOWLEDGES AND AGREES THAT SECURED PARTY AT ANY TIME ANDFROM TIME TO TIME MAY (I) DIVIDE AND RESTATE THE 

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CONVERTIBLE DEBENTURES, AND/OR (II) SELL, ASSIGN ORGRANT PARTICIPATING INTERESTS IN OR TRANSFER ALL OR ANY PART OF ITS RIGHTS OROBLIGATIONS UNDER ANY DEBENTURE DOCUMENT, THE CONVERTIBLE DEBENTURES, THEOBLIGATIONS AND/OR THE PLEDGED COLLATERAL TO OTHER PERSONS (EACH SUCHTRANSFEREE, ASSIGNEE OR PURCHASER, A “**TRANSFEREE**”).Each Transferee shall have all of the rights and benefits with respect to theSecured Obligations and Pledged Collateral held by it as fully as if theoriginal holder thereof, and either Secured Party or any Transferee may bedesignated as the sole agent to manage the transactions and obligationscontemplated therein; provided that, notwithstanding anything to thecontrary in any Debenture Document, Pledgor shall not be obligated to pay underthis Agreement to any Transferee any sum in excess of the sum which Pledgorwould have been obligated to pay to Secured Party had such participation notbeen effected. Notwithstanding any other provision of any Debenture Document,Secured Party may disclose to any Transferee all information, reports,financial statements, certificates and documents obtained under any provisionof any Debenture Document.

**    7.6. Severability;Captions; Counterparts; Facsimile Signatures**

                    Ifany provision of this Agreement is adjudicated to be invalid under applicablelaws or regulations, such provision shall be inapplicable to the extent of suchinvalidity without affecting the validity or enforceability of the remainder ofthis Agreement which shall be given effect so far as possible. The captions inthis Agreement are intended for convenience and reference only and shall notaffect the meaning or interpretation of this Agreement. The Agreement may beexecuted 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 facsimilesignature and that it accepts the facsimile signature of each other party.

**    7.7. Survival**

                    Itis the express intention and agreement of the parties hereto that allobligations, covenants, agreements, representations, warranties, waivers andindemnities made by Pledgor herein shall survive the execution, delivery andtermination of this Agreement until all Secured Obligations are performed infull and indefeasibly paid in full in cash and the Security Agreement isterminated. 

**    7.8. ****Governing Law;Jurisdiction;Service of Process; Venue**

                    ThisAgreement shall be governed by and construed in accordance with the internallaws of the State of New York without giving effect to its choice of lawprovisions. Any judicial proceeding against Pledgor with respect to the SecuredObligations, this Agreement or any related agreement may be brought in anyfederal or state court of competent jurisdiction located in the State of NewYork. By execution and delivery of each Debenture Document to which it is aparty, Pledgor (i) accepts the non-exclusive jurisdiction of the aforesaidcourts and irrevocably agrees to be bound by any judgment rendered thereby,(ii) waives personal service of process, (iii) agrees that service of processupon it may be made by certified or registered mail, return receipt requested,pursuant to Section 7.2 hereof, and (iv) waives any objection tojurisdiction and venue of any action instituted hereunder and agrees not toassert any defense based on lack of jurisdiction, venue or convenience. Nothing shall affect theright of Secured Party to serve process in any manner permitted by law or shalllimit the right of Secured Party to bring proceedings against Pledgor in thecourts of any other jurisdiction having jurisdiction. Any judicial proceedingsagainst Secured Party involving, directly or indirectly, the SecuredObligations, this Agreement or any related agreement shall be brought only in afederal or state court located in the State of New York. All partiesacknowledge that they participated in the negotiation and drafting of this 

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Agreement and that,accordingly, no party shall move or petition a court construing this Agreementto construe it more stringently against one party than against any other.

**    7.9. Indemnity**

                    Pledgorjointly and severally shall indemnify Secured Party, its affiliates and its andtheir 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, withoutlimitation, reasonable fees and disbursements of counsel and in-housedocumentation and diligence fees and legal expenses) which may be imposed on,incurred by or asserted against any Indemnified Person with respect to orarising out of, or in any litigation, proceeding or investigation instituted orconducted by any Person with respect to any aspect of, or any transactioncontemplated by or referred to in, or any matter related to, any DebentureDocument or any agreement, document or transaction contemplated thereby,whether or not such Indemnified Person is a party thereto, except to the extentthat any of the foregoing arises out of the gross negligence or willfulmisconduct of such Indemnified Person. If any Indemnified Person uses in-housecounsel for any purpose for which Pledgor is responsible to pay or indemnify,Pledgor expressly agrees that its indemnification obligations includereasonable charges for such work commensurate with the fees that wouldotherwise be charged by outside legal counsel selected by such IndemnifiedPerson in its sole discretion for the work performed. Secured Party agrees togive Pledgor reasonable notice of any event of which Secured Party becomesaware for which indemnification may be required under this Section 7.9,and Secured Party may elect (but is not obligated) to direct the defensethereof, provided that the selection of counsel shall be subject to Pledgor’sconsent, which consent shall not be unreasonably withheld or delayed. AnyIndemnified Person may, in its reasonable discretion, take such actions as itdeems necessary and appropriate to investigate, defend or settle any event ortake other remedial or corrective actions with respect thereto as may benecessary for the protection of such Indemnified Person or the PledgedCollateral. Notwithstanding the foregoing, if any insurer agrees to undertakethe defense of an event (an **“Insured Event”)**, Secured Party agrees not to exerciseits right to select counsel to defend the event if that would cause Pledgor’sinsurer to deny coverage; provided, however, that Secured Partyreserves the right to retain counsel to represent any Indemnified Person withrespect to an Insured Event at its sole cost and expense. To the extent thatSecured Party obtains recovery from a third party other than an IndemnifiedPerson of any of the amounts that Pledgor has paid to Secured Party pursuant tothe indemnity set forth in this Section 7.9, then Secured Party shallpromptly pay to Pledgor the amount of such recovery. 

**    7.10.          Waiverof Notice; Waiver of Statute of Limitations; Defenses**

                    Pledgor hereby waives demand,presentment, protest, notice of dishonor or non-payment, as well as alldefenses with respect to any and all instruments, notice of acceptance hereof,credit extended, collateral received or delivered, or any other action taken bySecured Party in reliance hereon, and all other demands and notices of anydescription, except such as are expressly provided for herein. The pleading ofany statute of limitations as a defense to any demand against Pledgor hereunderand under the Debenture Documents is expressly waived by Pledgor. Pledgorhereby waives any and all defenses and counterclaims it may have or couldinterpose in any action or procedure brought by Secured Party to obtain anorder of court recognizing the assignment of or security interests and Liens ofSecured Party in and to the Pledged Collateral. 

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**    7.11. JuryWaiver**

                    EACHPARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OFANY CLAIM OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR IN ANY WAYCONNECTED WITH OR INCIDENTAL TO THE DEALINGS OF THE PARTIES WITH RESPECT TO ANYOF THE DEBENTURE DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY, WHETHERNOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OROTHERWISE. EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM OR CAUSEOF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TOTHIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITHANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES TO THE WAIVER OFTHEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.

**    7.12. Entire Agreement**

                    ThisAgreement and the other Debenture Documents to which Pledgor is a partyconstitute the entire agreement between Pledgor and Secured Party with respectto the subject matter hereof and thereof, and supersede all prior agreementsand understandings, if any, relating to the subject matter hereof or thereof.Any promises, representations, warranties or guarantees not herein containedand hereinafter made shall have no force and effect unless in writing signed byPledgor and Secured Party. No provision of this Agreement may be changed,modified, amended, restated, waived, supplemented, discharged, canceled orterminated orally or by any course of dealing or in any other manner other thanby an agreement in writing signed by Secured Party and Pledgor. Each partyhereto acknowledges that it has been advised by counsel in connection with thenegotiation and execution of this Agreement and is not relying upon oralrepresentations or statements inconsistent with the terms and provisionshereof.

**    7.13. NoDuty of Secured Party**

                    SecuredParty shall have no responsibility for or obligation or duty with respect toall or any part of the Pledged Collateral or any matter or proceeding arisingout of or relating thereto, including without limitation, any obligation orduty to collect any sums due in respect thereof or to protect or preserve anyrights pertaining thereto. 

**    7.14. Confidentialityand Publicity**

                    Pledgoragrees, and agrees to cause each of its affiliates, (i) not to transmit ordisclose provision of any Debenture Document to any Person (other than toPledgor’s advisors and officers on a need-to-know basis) without SecuredParty’s prior written consent, (ii) to inform all Persons of the confidentialnature of the Debenture Documents and to direct them not to disclose the sameto any other Person and to require each of them to be bound by theseprovisions. Secured Party reserves the right to review and approve allmaterials that Pledgor or any of its affiliates prepares that contain SecuredParty’s name or describe or refer to any Debenture Document, any of the termsthereof or any of the transactions contemplated thereby. Pledgor shall not, andshall not permit any of its affiliates to, use Secured Party’s name (or thename of any of Secured Party’s affiliates) in connection with any of itsbusiness operations. Nothing contained in any Debenture Document is intended topermit or authorize Pledgor or any of its affiliates to contract on behalf ofSecured Party. 

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**    7.15 Releaseof Secured Party**

                    Notwithstandingany other provision of this Agreement or any other Debenture Document, Pledgorvoluntarily, knowingly, unconditionally and irrevocably, with specific andexpress intent, for and on behalf of itself and its Affiliates and its andtheir respective heirs, managers, members, directors, officers, employees,shareholders, Affiliates, agents, representatives, accountants, attorneys,successors and assigns and their respective Affiliates (collectively, the **“Releasing Parties”**) hereby does fully andcompletely release and forever dischargethe Indemnified Parties and any other Person, business or insurer which may be responsibleor liable for the acts or omissions of any of the Indemnified Parties, or whomay be liable for the injury or damage resulting therefrom (collectively, withthe Indemnified Parties, the **“ReleasedParties”**), of andfrom any and all actions, causes of action, damages, claims, obligations,liabilities, costs, expenses and demands of any kind whatsoever, at law or inequity or otherwise, whether matured or unmatured, vested or contingent,whether or not resulting from acts or conduct of any or all of them, that theReleasing Parties or any of them have against the Released Parties or any oftem (whether directly or indirectly) at any time or any other financialaccommodation is made or extended to Pledgor or under any Debenture Document.Pledgor acknowledges that the foregoing release is a material inducement toSecured Party’s decision to accept the Convertible Debentures as a portion ofthe consideration for the Acquisition and has been relied upon by Secured Partyin agreeing to accept the Convertible Debentures as a portion of theconsideration for the Acquisition. 

**    7.16 Cooperationin Discovery and Litigation**

                    Inany litigation, arbitration or other dispute resolution proceeding relating toany Debenture Document, Pledgor waives any and all defenses, objections andcounterclaims it may have or could interpose with respect to (i) any of itsdirectors, officers, employees or agents being deemed to be employees ormanaging agents of Pledgor for purposes of all applicable law or court rulesregarding the production of witnesses by notice for testimony (whether in adeposition, at trial or otherwise), (ii) Secured Party’s counsel examining anysuch individuals as if under cross-examination and using any discoverydeposition of any of them as if it were an evidence deposition, and/or (iii)using all commercially reasonable efforts to produce in any such disputeresolution proceeding, at the time and in the manner requested by SecuredParty, all Persons, documents (whether in tangible, electronic or other form)and/or other things under its control and relating to the dispute.

**    7.17 Subordination**

                    ThisAgreement and the exercise of any right or remedy hereunder by Secured Partyare subject to the terms of the Master Subordination Agreement. The Liens inthe Pledged Collateral granted herein are subordinated to the Liens in thePledged Collateral granted to CapitalSource Finance LLC in the manner and tothe extent set forth in the Master Subordination Agreement. 

                    ThisAgreement and the exercise of any right or remedy hereunder by Secured Partyare subject to the terms of the Junior Subordination Agreement. The Liens inthe Pledged Collateral granted herein are subordinated to the Liens in thePledged Collateral granted to IBF Fund Liquidating LLC in the manner and to theextent set forth in the Junior Subordination Agreement. 

[SIGNATURES APPEARON THE FOLLOWING PAGE]

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                    INWITNESS WHEREOF, each of the parties hereto has duly executed this Agreement asof the date first written above.

 

 

 

 

**SUNSET BRANDS, INC.**

 

 

 

/s/ Todd Sanders

 

 

By: Todd Sanders

 

Title:

President & CEO

 

 

 

Address for Notices:

 

 

 

Sunset Brands, Inc.

 

10990 Wilshire Blvd., Suite 1220

 

Los Angeles, CA 90024

 

Attention: President

 

Telephone: (310) 478-4600

 

FAX: (310) 478-4601

 

 

 

**IBF FUND LIQUIDATING LLC**

 

 

 

/s/ Arthur J. Steinberg

 

 

By: Arthur J. Steinberg

 

Title: 

Manager

 

 

 

Address for Notices:

 

 

 

IBF Fund Liquidating LLC

 

c/o Kaye Scholer LLP

 

425 Park Avenue

 

New York, NY 10022

 

Attention: Arthur J. Steinberg,        Esq., Manager

 

Telephone: (212) 836-8564

 

FAX: (212) 836-6157

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