Note And Warrant Purchase Agreement

Exhibit 10.31


EASY GARDENER PRODUCTS, LTD.


NOTE AND WARRANT
PURCHASE AGREEMENT


This Note and Warrant Purchase Agreement (the "Agreement") is made as of the 29th day of October, 2003 by and between Easy Gardener Products, Ltd., a Texas limited partnership (the "Company"), and Central Garden & Pet Company, a Delaware corporation (the "Purchaser").


RECITALS


The Company desires to issue and sell, and the Purchaser desires to purchase, a promissory note in substantially the form attached to this Agreement as Exhibit A (the "Note") and a warrant to purchase limited partnership interests in the Company in substantially the form attached to this Agreement as Exhibit B (the "Warrant"). The Note, the Warrant and the equity securities issuable upon exercise of the Warrant are collectively referred to herein as the "Securities." The terms of this Agreement are intended to effectuate the transactions described in the agreement between the parties dated as of April 8, 2003 (the "Transaction Agreement").


AGREEMENT


In consideration of the mutual promises contained herein and other good and valuable consideration, receipt of which is hereby acknowledged, the parties to this Agreement agree as follows:


1. Purchase and Sale of Notes and Warrants.


(a) Sale and Issuance of Note and Warrant. Subject to the terms and conditions of this Agreement, the Purchaser agrees to purchase at the Closing (as defined below) and the Company agrees to sell and issue to the Purchaser (i) a Note in the principal amount of $2,675,000, and (ii) a Warrant to purchase limited partnership interests. The purchase price of the Note and Warrant shall be equal to $2,675,000, and the exercise price of the Warrant shall be $2,675,000, plus an amount equal to nine percent (9%) per annum, compounded monthly, of such sum, from the date hereof to the date of the exercise of the option, for the exercise of the entire option, or appropriate percentage thereof for exercises of less than the entire option.


(b) Closing; Delivery.


(i) The purchase and sale of the Note and Warrant shall take place at the offices of Mayer, Brown, Rowe & Maw in New York, New York, simultaneously with the closing of the Acquisition as defined in Section 2(d) of this Agreement, or at such other time and place as the Company and the Purchaser mutually agree upon, orally or in writing (which time and place are designated as the "Closing").


(ii) At the Closing, the Company shall deliver to the Purchaser the Note and Warrant to be purchased by the Purchaser against payment of the purchase price therefor by check payable to the Company or by wire transfer to a bank designated by the Company.


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2. Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchaser that:


(a) Organization, Good Standing and Qualification. The Company is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Texas and has all requisite power and authority to carry on its business as now conducted and as proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on its business or properties.


(b) Authorization. All action on the part of the Company, its general partners and limited partners necessary for the authorization, execution and delivery of this Agreement and the authorization, sale, issuance and delivery of the Note and the Warrant, the limited partnership interest issuable upon exercise of the Warrant, and the performance of all obligations of the Company hereunder and thereunder has been taken or will be taken prior to the Closing. The Agreement, the Note and the Warrant, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application affecting enforcement of creditors' rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.


(c) Capitalization. The authorized capital of the Company consists, and will consist, immediately prior to the Closing, of limited partnership interests, which will be owned by the persons whose names are set forth on Schedule 2(c) attached hereto in the respective amounts set forth on such schedule. There are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally or in writing, for the purchase or acquisition from the Company of any of its limited partnership interests or other equity securities.


(d) No Violation. The Company approached the Purchaser with the request that the Purchaser provide financing to assist the Company in completing a transaction (the "Acquisition") with U.S. Home & Garden, Inc. ("USHG") on substantially the terms contemplated by the asset purchase agreement dated as of December 11, 2002, as amended by amendments dated May 23, 2003, and July 31, 2003 (the "Asset Purchase Agreement") among the Company, USHG and two subsidiaries of USHG. The Company was legally entitled to approach the Purchaser for such purpose, and the transactions contemplated hereby do not violate any duty owed by the Company or any of its general or limited partners or officers or employees to USHG, or its stockholders or affiliates.


(e) Approvals. The transactions contemplated hereby have been approved by USHG. No other consents or approvals are required for consummation of the transactions contemplated hereby.


(f) 100% Ownership. As of the Closing, the only direct or indirect subsidiaries of the Company will be Weatherly Consumer Products Group, Inc., Weatherly Consumer Products, Inc., and Easy Gardener (UK) Ltd. (the "Subsidiaries"). The Company will own 100% of the stock of Weatherly Consumer Products Group, Inc., and Easy Gardener (UK) Ltd., and Weatherly Consumer Products Group, Inc., owns 100% of the stock of Weatherly Consumer Products, Inc., and there will be no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally


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or in writing, for the purchase or acquisition from the Company of any of the Subsidiaries of any securities of any such Subsidiary.


(g) Litigation. There are no lawsuits, claims, proceedings or investigations pending or, to the best knowledge of the Company, threatened by or against or affecting the Company or its officers or employees or any of the Company's properties, assets, operations or business (including the business to be acquired by it in the Acquisition) which could in any way affect the transactions contemplated by this Agreement or the value to the Company of the business being acquired by it pursuant to the Asset Purchase Agreement, and the Company is not aware of any reasonable basis for any such lawsuit, claim, proceeding or investigation.


(h) Asset Purchase Agreement. All of the representations and warranties of the Company in the Asset Purchase Agreement are true and correct and will be true and correct as of the Closing.


(i) Disclosure. No representation or warranty made by the Company in this Agreement and no statement contained in a certificate, schedule, list or other instrument or document specified in or delivered pursuant to this Agreement, whether heretofore furnished to the Purchaser or hereafter required to be furnished to the Purchaser, contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary to make the statements contained herein or therein not misleading.


3. Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company that:


(a) Authorization. The Purchaser has full power and authority to enter into this Agreement. This Agreement, when executed and delivered by the Purchaser, will constitute a valid and legally binding obligation of the Purchaser, enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors' rights generally, and as limited by laws relating to the availability of a specific performance, injunctive relief, or other equitable remedies


(b) Accredited Investor. The Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.


4. Conditions of the Purchaser's Obligations at Closing. The obligations of the Purchaser to the Company under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:


(a) Representations and Warranties. The representations and warranties of the Company contained in Section 2 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing.


(b) Financial Concessions. The Company shall have obtained the financial concessions described in Section 3 of the Transaction Agreement and such financial concessions shall be satisfactory to the Purchaser in its sole discretion.


(c) Approval of USHG. USHG shall have consented in writing to the transactions contemplated hereby.


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(d) Consents and Approvals. All consents and approvals required for the consummation of the Acquisition, the funding and the transactions contemplated hereby shall have been obtained.


(e) Funding. All other funding sources shall have provided to the Company the funds necessary to fund the Acquisition. The Purchaser, in its sole discretion, shall be fully satisfied with the terms of such funding.


(f) Documentation. The Company shall have provided the Purchasers with true and correct copies of all material contracts and other documents relating to the Acquisition and its funding. The Purchaser, in its sole discretion, shall be fully satisfied with all documents relating to the Acquisition and its funding.


(g) Note. The Company shall have executed and delivered to the Purchaser a Note in the form of Exhibit A hereto.


(h) Warrant. The Company shall have executed and delivered to the Purchaser a Warrant in the form of Exhibit B hereto.


(i) Call Option Agreement. Each of the general partners and each of the limited partners of the Company shall have executed and delivered to the Purchaser a call option agreement in the form of Exhibit C hereto.


(j) USHG Certificate. USHG shall have delivered to the Purchaser copies of its annual report on Form 10-K for the fiscal year ended June 30, 2002 filed with the SEC under the Securities Exchange Act of 1934 (the "Exchange Act") and the other reports or documents required to be filed by USHG under Sections 13(a), 14(a), 14(c) and 15(d) of the Exchange Act subsequent to June 30, 2002 (collectively, the "Reports"), as well as the Form S-4 Registration Statement filed with the SEC in connection with the Acquisition, together with all amendments thereto and documents incorporated by reference therein (the "Form S-4"). USHG shall have also delivered to the Purchaser a certificate signed by its chief executive officer and chief financial officer stating that, as of their respective date, the Reports and the Form S-4 did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading, and subsequent to their respective dates, no event has occurred that would make the Reports or the Form S-4 untrue or misleading as of the dates of such Reports and the Form S-4.


(k) Legal Opinion. USHG shall have delivered to the Purchaser a legal opinion of Blank Rome LLP in form and substance reasonably satisfactory to the Purchaser providing customary negative assurances as to the disclosure in the Form S-4.


(l) Disclosure. Purchaser shall be satisfied in its sole discretion with the adequacy of the public disclosures of the Company and USHG concerning the transactions contemplated hereby and the transactions contemplated by the Asset Purchase Agreement.


5. Conditions of the Company's Obligations at Closing. The obligations of the Company to the Purchaser under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:


(a) Representations and Warranties. The representations and warranties of


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the Purchaser contained in Section 3 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing.


6. Miscellaneous.


(a) Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.


(b) Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.


(c) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.


(d) Interpretation. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. For purposes of contract interpretation, the parties agree that they are joint authors of this Agreement.


(e) Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):


(1) if to the Purchaser, to
CENTRAL GARDEN & PET COMPANY
3697 Mt. Diablo Boulevard
Lafayette, CA 94549


Attention: William E. Brown


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with a copy to: John F. Seegal, Esq.


ORRICK, HERRINGTON & SUTCLIFFE LLP
The Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111


(2) if to the Company, to


EASY GARDENER PRODUCTS, LTD.
3022 Franklin Avenue
Waco, Texas 76702-1025


Attention: Richard Grandy


with a copy to: Wesley Filer, Esq.


NAMAN, HOWELL, SMITH & LEE L.L.P.
900 Washington Avenue
P. O. Box 1470
Waco, Texas 76701 (Street); 76703 (P. O. Box)


All notices given thereunder shall be deemed given at the time of personal delivery or, if mailed, on the earlier of actual receipt as shown on the registry receipt or three business days after the date of such mailing.


(f) Finder's Fee. Each party represents that it neither is nor will be obligated for any finder's fee or commission in connection with this transaction.


(g) Amendments and Waivers. Any term of this Agreement may be amended or waived only with the written consent of the Company and the Purchaser.


(h) Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith, in order to maintain the economic position enjoyed by each party as close as possible to that under the provision rendered unenforceable. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.


(i) Entire Agreement. This Agreement, and the documents referred to herein constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements existing between the parties hereto are expressly canceled.


[Signature Pages Follow]


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The parties have executed this Note and Warrant Purchase Agreement as of the date first written above.


COMPANY:


EASY GARDENER PRODUCTS, LTD.


BY: E G PRODUCT MANAGEMENT, L.L.C.,
GENERAL PARTNER


By: /s/ Richard Grandy
---------------------------------
Name: Richard Grandy
--------------------------
Title: Manager
-------------------------


CENTRAL GARDEN & PET COMPANY.


By: /s/ William Brown
---------------------------------
Name: William Brown
--------------------------
Title: Chairman
-------------------------


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SCHEDULE 2(c)
OWNERS OF LIMITED PARTNERSHIP INTERESTS


Owner Type of Interest Percentage - ----- ---------------- ---------- EG Product Management, L.L.C. General 1% EG, L.L.C. Limited 99%


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Exhibit A - Form of Promissory Note


Exhibit B - Form of Warrant


Exhibit C - Call Option Agreement


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EXHIBIT A


FORM OF PROMISSORY NOTE


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THE OBLIGATIONS HEREUNDER (AND THE PAYMENTS WITH RESPECT THERETO) ARE SUBJECT TO (A) THAT CERTAIN SUB ...