CENTRAL GARDEN DISTRIBUTION INC, 10-12G, EX-99.1, 2000-06-07

CENTRAL GARDEN DISTRIBUTION INC
10-12G, EX-99.1, 2000-06-07

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EXHIBIT 99.1

SUBJECT TO COMPLETION OR AMENDMENT, DATED JUNE 7, 2000

Information Statement

Central Garden & Pet Company's Spin-Off

Central Garden Distribution Inc.

Through a 100% Common Stock and Class B Stock Distribution

Holders of Central Stock

We are furnishing you with this Information Statement in connection with
Central Garden & Pet Company's spin-off of 100% of the outstanding common stock
and class B stock of Central Garden Distribution Inc. to holders of Central
stock.

Central will effect the spin-off by distributing all issued and outstanding
Central Garden Distribution shares to the holders of record of Central shares.
Central will spin off one share of Central Garden Distribution common stock for
every ten shares of Central common stock and one share of Central Garden
Distribution class B stock for every ten shares of Central class B stock held
as of the close of business on July 10, 2000. The actual total number of
Central Garden Distribution shares to be distributed will depend on the number
of Central shares outstanding on that date.

No vote of stockholders is required in connection with the spin-off. We are
not soliciting proxies, and you are requested not to send us a proxy.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
information statement is truthful or complete. Any representation to the
contrary is a criminal offense.

This information statement does not constitute an offer to sell or the
solicitation of an offer to buy any securities.

----------------

The date of this information statement is , 2000.
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TABLE OF CONTENTS

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Page
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Summary.................................................................. 1
Cautionary Statement..................................................... 7
The Spin-Off............................................................. 8
Certain Special Considerations........................................... 15
Business................................................................. 22
Selected Financial Data.................................................. 29
Management's Discussion and Analysis..................................... 31
Dividend Policy.......................................................... 35
Management............................................................... 36
Security Ownership by Certain Beneficial Owners, Directors and Executive
Officers of Garden Distribution......................................... 41
Arrangements Between Central and Garden Distribution Relating to the
Spin-Off................................................................ 42
Description of Capital Stock............................................. 45
Liability and Indemnification of Officers and Directors of Garden
Distribution............................................................ 48
Where You Can Find More Information...................................... 49
Index to Consolidated Financial Statements............................... F-1
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SUMMARY

This summary highlights selected information from this document, but does
not contain all details concerning the spin-off or Central Garden Distribution
Inc., including information that may be important to you. To better understand
the spin-off and Central Garden Distribution Inc., you should carefully review
this entire document.

References to "we," "us," "our" or "Garden Distribution" mean Central Garden
Distribution Inc. and its subsidiaries and divisions. References to "Central"
mean Central Garden & Pet Company and its subsidiaries and divisions.
References to "fiscal years" are to the fiscal years of Garden Distribution and
Central, which end on the last Saturday of September. Certain market data used
in this document reflect management estimates and independently-published
market-share reports; while we believe such estimates and reports are reliable,
no assurance can be given that they are accurate in all material respects.

Overview of Garden Distribution Business

After the spin-off, Garden Distribution will be an independent national
distributor of lawn and garden products with 21 distribution centers located
throughout the United States. After giving effect to the spin-off, Garden
Distribution had net sales of approximately $752.1 million in fiscal 1999. We
anticipate that Garden Distribution's sales in the current fiscal year will be
substantially lower. See "Certain Special Considerations--Risks Relating to the
Operations of Garden Distribution's Business." Central will retain its
proprietary branded lawn and garden and pet supply products businesses and pet
supplies distribution business.

The Central Board believes that the spin-off is in the best interest of
Central's stockholders.

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Questions and Answers About the Spin-Off and Garden Distribution

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Why is Central spinning off . The spin-off should enhance the
Garden Distribution? competitive position of Garden
Distribution with suppliers who are
competitors of the garden branded
products business.

. The spin-off should permit Central to
pursue an offering of common stock or
acquisitions using stock as
consideration, free of the uncertainties
of the business of Garden Distribution.

. The spin-off should enhance each
company's ability to attract and retain
the best management personnel available
for its portfolio of businesses.

. Garden Distribution and its stockholders
should benefit from the positive effects
of a direct link between the incentive
compensation arrangements for key
employees and the performance of Garden
Distribution common stock.

. The spin-off should allow the management
of each company to focus on the strategic
objectives of each company.

. The spin-off should enable each company
to develop an operating structure and
corporate culture appropriate to it
without being encumbered by approaches
and philosophies attributable to the
different businesses operated by the
other company.

. The spin-off should enable each company
to devote capital to the most effective
use for that company, and the Garden
Distribution business will not have to
compete for resources within the Central
group.

. Following the spin-off, investors should
be better able to assess the individual
strengths of each company and more
accurately evaluate its performance
compared to companies in the same or
similar businesses.

What do I have to do to . Nothing. No stockholder vote or other
participate in the spin-off? action is required. You do not need to
surrender any shares of Central stock to
receive shares of Garden Distribution
common stock or class B stock in the
spin-off.

What will I receive in the spin- . Central will distribute one share of
off? Garden Distribution common stock for
every ten shares of Central common stock
and one share of Garden Distribution
class B stock for every ten shares of
Central class B stock owned as of July
10, 2000. For example, if you own 100
shares of Central common stock and
50 shares of Central class B stock, you
will receive 10 shares of Garden
Distribution common stock and 5 shares of
Garden Distribution class B stock. You
will continue to own your Central stock.
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How will Central distribute . If you are a holder of record of Central
Garden Distribution stock to me? common stock or class B stock on the
record date, the distribution agent will
mail certificates for your shares of
Garden Distribution common stock or class
B stock, as the case may be, on or about
July 31, 2000.

. You will not receive new Central stock
certificates.

What is the record date? . The record date is July 10, 2000.

What if I hold my shares of . If you hold your shares of Central stock
Central stock through my through your stockbroker, bank or other
stockbroker, bank or other nominee, you are probably not a
nominee? stockholder of record and your receipt of
Garden Distribution common stock or class
B stock depends on your arrangements with
the nominee that holds your shares of
Central stock for you. We anticipate that
stockbrokers and banks generally will
credit their customers' accounts with
Garden Distribution common stock or class
B stock on or about July 31, 2000, but
you should check with your stockbroker,
bank or other nominee.

What about fractional shares? . If you own fewer than ten shares of
Central common stock or class B stock,
you will receive cash instead of your
fractional share of Garden Distribution
common stock or class B stock. If you own
ten or more shares of Central common
stock or class B stock, you will receive
physical certificates for all whole
shares of Garden Distribution common
stock or class B stock you should receive
and cash instead of any fractional share
interest. Fractional shares to be cashed
out will be aggregated and sold by the
distribution agent, which will distribute
to you your portion of the cash proceeds
promptly after the spin-off. No interest
will be paid on any cash distributed in
lieu of fractional shares.

What is Garden Distribution's . Garden Distribution currently anticipates
dividend policy? that no cash dividends will be paid on
Garden Distribution common stock in the
foreseeable future to conserve cash for
the repayment of debt, future
acquisitions and capital expenditures.

How will Garden Distribution . We have applied to list Garden
common stock trade? Distribution common stock on the Nasdaq
National Market under the symbol "DISB"
and expect that regular trading will
begin on July 31, 2000. A temporary form
of interim trading called "when-issued
trading" may occur for Garden
Distribution common stock on or before
July 10, 2000 and continue through
July 29, 2000. A when-issued listing can
be identified by the "wi" letters next to
Garden Distribution common stock on the
Nasdaq National Market. If when-issued
trading develops, you may buy Garden
Distribution common stock in advance of
the July 29, 2000 spin-off. You may also
sell Garden Distribution common stock in
advance of such date on a when-issued
basis. When-issued trading occurs to
develop an orderly market and trading
price for Garden Distribution common
stock after the spin-off. See pages 12
and 13.
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. Our ability to continue to list Garden
Distribution common stock on the Nasdaq
National Market will depend on a number
of factors including our net tangible
assets, the number and market value of
the shares held by the public and the
trading price of Garden Distribution
common stock. It is possible that, in the
future, we may not satisfy all of these
continued listing standards and,
accordingly, Garden Distribution common
stock could be delisted on the Nasdaq
National Market. If Garden Distribution
common stock fails to continue to be
listed on the Nasdaq National Market,
then trading of Garden Distribution
common stock would likely not be very
liquid and you may be unable to sell your
Garden Distribution common stock when and
at the price that you desire. In
addition, we cannot assure you that an
active trading market will develop in
Garden Distribution common stock.

. Central common stock will continue to
trade on a regular basis and may also
trade on a when-issued basis, reflecting
an assumed post-spin-off value for
Central common stock. Central common
stock when-issued trading, if available,
could last from on or before July 10,
2000 through July 29, 2000. If this
occurs, an additional listing for Central
common stock, followed by the "wi"
letters, will appear on the Nasdaq
National Market.

Is the spin-off taxable for tax . No. Central expects to receive an opinion
purposes? of Orrick, Herrington & Sutcliffe LLP to
the effect that the spin-off should be
tax-free for U.S. tax purposes, except
for taxes on any cash received instead of
a fractional share. To review tax
consequences in detail, see pages 10 to
12.

What are the risks involved in . The separation of Garden Distribution
owning Garden Distribution common from Central presents certain risks. For
stock? example, Garden Distribution has no prior
history of operating as an independent
company, and there is no assurance that
its operations on a standalone basis will
be profitable. The expiration of the
Solaris Agreement is expected to cause
sharp decreases in Garden Distribution's
sales and operating income. Garden
Distribution depends on a small number of
suppliers and customers for a significant
portion of its sales. The largest of
these customers, Scotts, altered its
distribution systems for certain products
in October 1999. As a result, the
business likely to be taken over in
fiscal year 2000 by Scotts is estimated
to be approximately $200-250 million, and
we cannot assure you that Scotts will
continue to do business with us in the
future. Although Central has agreed to
indemnify Garden Distribution for Garden
Distribution's liabilities to Scotts or
Monsanto which could arise as a result of
disputes arising from the Solaris
Agreement, the existence of such disputes
could jeopardize Garden Distribution's
relationship with Scotts and cause Scotts
to sharply reduce or terminate its
business with Garden Distribution.
Certain other risks are associated with
owning Garden Distribution common stock
due to the nature
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of its business and the markets in which it
competes. You are encouraged to carefully
consider these risks, which are described
in greater detail on pages 15 to 21.

Will Central and Garden . Central will not own any Garden
Distribution be related in any Distribution common stock or class B
way after spin-off? stock after the spin-off. Except for
William E. Brown, the Chairman and Chief
Executive Officer of Central, who will
serve as interim Chief Executive Officer
of Garden Distribution and Robert B.
Jones, a Vice President of Central, who
will serve as interim Chief Financial
Officer of Garden Distribution, no
director or executive officer of Central
will serve on the Garden Distribution
Board of Directors or as an executive
officer of Garden Distribution, and no
director or executive officer of Garden
Distribution will serve on the Central
Board of Directors or as an executive
officer of Central. Central will,
however, enter into agreements with
Garden Distribution to allocate
responsibility for liabilities (including
tax, employee, product and other
contingent liabilities associated with
their respective businesses or otherwise
to be assumed by Garden Distribution or
Central), to separate their businesses,
to license rights to use certain
intellectual property, to provide for the
treatment of employee benefit obligations
and to provide for the sharing of certain
physical facilities, services or products
on a transitional basis. These agreements
are described in greater detail on
pages 42 to 44.

What We Are Doing to Prepare for the Spin-Off

Board Appointments . The Central Board has appointed William
E. Brown as interim Chairman of the Board
of Garden Distribution. The Central Board
has also appointed one additional
director to the Garden Distribution
Board. Prior to the spin-off, Garden
Distribution will appoint three
independent outside directors and an
additional employee director. See page
38.

Senior Management Appointments . The Central Board has appointed William
E. Brown as interim Chief Executive
Officer of Garden Distribution and Robert
B. Jones as interim Chief Financial
Officer while a search is being conducted
for a permanent Chief Executive Officer
and a permanent Chief Financial Officer.
Mr. Brown and Mr. Jones will be supported
by a management group consisting
principally of senior executives
previously responsible for the Garden
Distribution business.

New Credit Facility . Central is currently negotiating with an
asset-based lender for a $60 million
credit facility for Garden Distribution,
which will be secured substantially by
all of Garden Distribution's assets. We
expect to use the available credit to
reduce Central's net investment to $60
million and for working capital and
general corporate purposes.
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Federal Income Tax Matters . Central expects to receive an opinion of
Orrick, Herrington & Sutcliffe LLP to the
effect that the distribution generally
should not be taxable for U.S. federal
income tax purposes to Central and its
stockholders. If you receive cash for a
fractional share, you may have to pay
some federal tax if any gain is
recognized. See pages 10 to 12.
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Who Can Help Answer Your Questions

Stockholders of Central with questions relating to the spin-off should
contact:

Central Investor Relations
Central Garden & Pet Company
3697 Mt. Diablo Blvd.
Lafayette, California 94549
(925) 283-4573

The distribution agent for Garden Distribution common stock and class B
stock in the spin-off and the transfer agent and registrar for Garden
Distribution common stock after the spin-off is:

ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Ridgefield Park, New Jersey 07660
(800) 356-2017

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CAUTIONARY STATEMENT

We caution you that this document contains disclosures which are forward-
looking statements. All statements regarding Garden Distribution's or Central's
expected future financial position, results of operations, cash flows,
dividends, financing plans, business strategy, budgets, projected costs or cost
savings, capital expenditures, competitive positions, growth opportunities or
existing products, plans and objectives of management for future operations and
markets for stock are forward-looking statements. In addition, forward-looking
statements include statements in which we use words such as "expect,"
"believe," "anticipate," "intend," or similar expressions. These statements are
included under the headings "Summary," "The Spin-Off--Reasons for the Spin-
Off," "Management's Discussion and Analysis of Results of Operations and
Financial Condition," "Business" and other headings in this document. Although
we believe the expectations reflected in such forward-looking statements are
based on reasonable assumptions, no assurance can be given that such
expectations will prove to have been correct, and actual results may differ
materially from those reflected in the forward-looking statements.

Factors that could cause the actual results of Garden Distribution to differ
from the expectations reflected in the forward-looking statements in this
document include those set forth in "Certain Special Considerations," including
those relating to our relationship with Scotts, as well as those risks relating
to conducting operations in a competitive environment; acquisition activities
(including uncertainties associated with the availability of financing to
complete acquisitions); leverage and debt service requirements (including
sensitivity to fluctuations in interest rates); general business and economic
conditions; and the timing of restructuring and other cost savings initiatives
following the spin-off. Factors that could cause the actual results of Central
to differ from the expectations reflected in the forward-looking statements in
this document include uncertainties associated with industry performance,
general business and economic conditions, raw material and product pricing
levels, the timing of restructuring and other cost savings initiatives,
acquisition activities (including uncertainties associated with the
availability of financing to complete acquisitions); leverage and debt service
requirements (including sensitivity to fluctuations in interest rates) and the
other factors discussed in Central's filings under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and its 1999 Annual Report.

Neither Garden Distribution nor Central has any intention of or obligation
to update forward-looking statements, even if new information, future events or
other circumstances make them incorrect or misleading.

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THE SPIN-OFF

Reasons for the Spin-Off

The Central Board has determined that the distribution (the "Spin-Off") of
100% of the outstanding common stock, $0.01 par value per share, of Garden
Distribution ("Garden Distribution Common Stock") to owners of the common
stock, $0.01 par value per share, of Central ("Central Common Stock") and 100%
of the outstanding class B stock, $0.01 par value per share, of Garden
Distribution ("Garden Distribution Class B Stock") to owners of the class B
stock, $0.01 par value per share, of Central ("Central Class B Stock") will
achieve a number of benefits for Central and Garden Distribution. The Central
Board believes that the Spin-Off is in the best interest of stockholders.

Central believes that the Spin-Off will result in the following specific
benefits for the retained and distributed businesses:

. Enhance Competitive Position. The Spin-Off should enhance the
competitive position of Central's garden distribution business (the
"Garden Distribution Business") with suppliers to the distribution
business who are competitors of the garden branded products business.
For many years, the largest supplier to the Garden Distribution Business
was Solaris, which until January 1999 was a division of Monsanto. From
1995 until 1999, Central had a strategic alliance agreement with
Solaris, pursuant to which it served as the exclusive distributor of
Solaris products. In January 1999, Monsanto sold its Solaris lawn and
garden business exclusive of its Roundup herbicide products for
residential use to The Scotts Company ("Scotts"). As a result, Scotts
became Central's largest supplier and, in connection with its direct
sales, a substantial customer of Central's services. In February 1998,
Central acquired Pennington Seed, Inc., whose business includes the
manufacture of fertilizers, lawn and garden chemicals and grass seed,
all of which compete directly with products manufactured by Scotts.
Central and Scotts engaged in active discussions to develop a long-term
strategic alliance to replace the existing Solaris Agreement, which
agreement terminated on September 30, 1999. These negotiations failed,
and, beginning in October 1999, Scotts began to distribute Ortho and
Roundup products through a system that involves a combination of
distributors, including Central, as well as through direct sales by
Scotts to certain major retailers. As a result, the Garden Distribution
Business estimates that in the current fiscal year, it will lose at
least $200 million in annual sales. A critical immediate strategic need
of the Garden Distribution Business is to replace as much of the lost
sales volume as possible. Other prospective strategic partners for the
Garden Distribution Business similarly have indicated to Central that
they will not enter into a strategic alliance with a company that is a
major competitor to them. Development of a major strategic alliance with
other major manufacturers of lawn and garden products is a matter of the
highest priority for Central. Central believes that the only way to
achieve this objective without seriously damaging its garden products
business is to separate the Garden Distribution Business into an
independent company.

. Facilitate Stock Offerings or Acquisitions for Stock. Central believes
that growth through acquisitions is an important ingredient of its
future success. Such acquisitions and growth would be financed in part
through the issuance of capital stock. It is expected that the Spin-Off
will increase the availability and decrease the cost of raising capital
for Central. Central's management believes that the spin-off should
permit Central to pursue an offering of common stock or acquisitions
using stock as consideration, free of the uncertainties of the business
of Garden Distribution.

. Key Personnel. The Spin-Off should enhance each company's ability to
attract, incentivize and retain the best management personnel available
for its portfolio of businesses. Following the Spin-Off, Garden
Distribution will be able to more closely tie compensation incentives
for its key employees to the performance of Garden Distribution Common
Stock, and the value of Garden Distribution Common Stock will more
closely correspond to the performance of the employees of Garden
Distribution. Garden Distribution and its stockholders should benefit
from the positive effects of a direct link between the incentive
compensation arrangements for key employees and the performance of
Garden Distribution Common Stock.

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. Appropriate Management Focus. Currently, Central's senior management
spends a disproportionate amount of time addressing issues relating to
the Garden Distribution Business. As a consequence, Central management
is distracted from devoting full attention to its branded products
businesses, which have higher operating profit margins and significant
potential for worldwide growth. The Spin-Off should allow Central's
management to focus their efforts exclusively on these operations. At
the same time, the management of Garden Distribution will be able to
devote its energies to the development of the Garden Distribution
Business and the pursuit of Garden Distribution's strategic objectives,
including acquisitions that previously have not met Central's
acquisition criteria.

. Operating Structure. The Spin-Off will enable each company to develop an
operating structure and corporate culture appropriate to it without
being encumbered by approaches and philosophies attributable to the
different businesses operated by the other company.

. Capital Allocation. The Spin-Off will enable each company to devote
capital to the most effective use for that company, and the Garden
Distribution Business will not have to compete for resources within the
Central group.

. Profile with Investors. Following the Spin-Off, investors will be able
to assess the individual strengths of each company and more accurately
evaluate its performance compared to companies in the same or similar
businesses. Further, investors will be able to more easily determine
whether each company has a management focus and approach to operations
and products suitable for achieving its strategic objectives.

Manner of Effecting the Spin-Off

Central will effect the Spin-Off on July 29, 2000 (the "Distribution Date")
by delivering all of the issued and outstanding shares of Garden Distribution
Common Stock and Garden Distribution Class B Stock to ChaseMellon Shareholder
Services, L.L.C., as the distribution agent (the "Distribution Agent") for
distribution to the holders of record of Central Common Stock and Central Class
B Stock, respectively, as of the close of business on July 10, 2000. The Spin-
Off will be made on the basis of one share of Garden Distribution Common Stock
for every ten shares of Central Common Stock and one share of Garden
Distribution Class B Stock for every ten shares of Central Class B Stock (the
"Distribution Ratio") held as of the close of business on July 10, 2000.
Certificates for Garden Distribution Common Stock and Class B Stock will be
mailed to record stockholders on or about July 31, 2000. Stockholders that hold
their shares through brokerage and "street name" accounts should expect to
receive an account statement from their brokerage firm reflecting the number of
shares of Garden Distribution Common Stock and Class B Stock received by such
stockholder in the Spin-Off.

If a stockholder owns fewer than ten shares of Central Common Stock or
Central Class B Stock and therefore is entitled to receive less than one whole
share of Garden Distribution Common Stock or Central Class B Stock, such
stockholder will receive cash instead of a fractional share of Garden
Distribution Common Stock or Garden Distribution Class B Stock. The
Distribution Agent will, promptly after the Distribution Date, aggregate all
such fractional share interests in Garden Distribution Common Stock and Garden
Distribution Class B Stock with those of other similarly situated stockholders
and sell such fractional share interests in Garden Distribution Common Stock
and Garden Distribution Class B Stock at then-prevailing prices. The
Distribution Agent will distribute the cash proceeds to stockholders entitled
to such proceeds pro rata based upon their fractional interests in Garden
Distribution Common Stock or Garden Distribution Class B Stock. No interest
will be paid on any cash distributed in lieu of fractional shares. See "Tax
Consequences of the Spin-Off."

No owner of Central Common Stock or Central Class B Stock will be required
to pay any cash or other consideration for shares of Garden Distribution Common
Stock or Garden Distribution Class B Stock received in the Spin-Off or to
surrender or exchange any shares of Central Common Stock or Central Class B
Stock to receive shares of Garden Distribution Common Stock or Garden
Distribution Class B Stock. The actual total

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number of shares of Garden Distribution Common Stock and Garden Distribution
Class B Stock to be distributed will depend on the number of shares of Central
Common Stock and Class B Stock outstanding on July 10, 2000. All of such shares
will be fully paid, nonassessable and free of preemptive rights. See
"Description of Capital Stock."

Results of the Spin-Off

After the Spin-Off, Garden Distribution will be a separate public company.
The number and identity of stockholders of Garden Distribution immediately
after the Spin-Off will be the same as the number and identity of stockholders
of Central on July 10, 2000. Immediately after the Spin-Off, Garden
Distribution expects to have approximately 160 holders of record of Garden
Distribution Common Stock and approximately 1,691,447 shares of Garden
Distribution Common Stock outstanding and approximately 6 holders of record of
Garden Distribution Class B Stock and approximately 165,796 shares of Garden
Distribution Class B Stock outstanding, based on the number of record
stockholders and issued and outstanding shares of Central Common Stock and
Central Class B Stock as of the close of business on March 25, 2000 and the
Distribution Ratio. The actual number of shares of Garden Distribution Common
Stock and Garden Distribution Class B Stock to be distributed will be
determined as of July 10, 2000 and could be affected by, among other things,
the exercise of Central stock options, which as of March 25, 2000 could have
been exercised for approximately 795,500 shares of Central Common Stock. The
Spin-Off will not affect the number of outstanding shares of Central Common
Stock or Central Class B Stock or the rights of Central stockholders.

Tax Consequences of the Spin-Off

The following is a summary description of the material U.S. tax consequences
associated with the Spin-Off, and is not intended to address every
stockholder's tax consequences. In particular, this summary description does
not cover state, local, municipal, or non-U.S. tax consequences. Stockholders
are strongly encouraged to consult their own tax advisors concerning the tax
consequences of the Spin-Off applicable to them.

Orrick, Herrington & Sutcliffe LLP ("Tax Counsel") expects to deliver an
opinion (the "Tax Opinion") at the time of the Spin-Off stating that for U.S.
federal income tax purposes the Spin-Off should qualify as a tax-free spin-off
under Section 355 of the Code and will not be taxable under Section 355(e) of
the Code. Central will not complete the Spin-Off unless it receives the Tax
Opinion. The Tax Opinion will be based on the accuracy at the time of the Spin-
Off of factual representations made by Central and Garden Distribution and
certain other information, data, documentation and other materials that Tax
Counsel has deemed necessary.

The Tax Opinion will represent Tax Counsel's best judgment of how a court
would rule. However, the Tax Opinion is not binding upon either the IRS or any
court. A ruling has not been, and will not be, sought from the IRS with respect
to the U.S. federal income tax consequences of the Spin-Off.

Assuming the Spin-Off qualifies as a tax-free spin-off under Section 355 and
is not taxable under Section 355(e), no gain or loss for U.S. federal income
tax purposes will be recognized by Central, and no gain or loss will be
recognized by you as a holder of Central Common Stock or Class B Stock (except
with respect to cash received in lieu of fractional shares), as a result of the
Spin-Off.

As noted above, the Tax Opinion is not binding on the IRS or the courts. You
should be aware that the requirements of Section 355 pertaining to business
purpose, active trade or business, and absence of a device for distribution of
earnings and profits, as well as the requirements of Section 355(e) pertaining
to a plan or series of related transactions to acquire 50% or more by vote or
value of a company, are highly dependent on factual interpretations, are to a
significant extent subjective in nature, and have a relative absence of
authority addressing their application to the particular facts presented by the
Spin-Off. Accordingly, the IRS and/or a court could reach a conclusion that
differs from the conclusions in the Tax Opinion.

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Business Purpose. In order for the Spin-Off to qualify as a tax-free spin-
off under Section 355, it must be motivated, in whole or substantial part, by
one or more corporate business purposes. Central will represent that the Spin-
Off was motivated, in whole or substantial part, to enhance the competitive
position of Garden Distribution with suppliers who are competitors of the
garden branded products business; to permit Central to pursue an offering of
common stock or acquisitions using stock as consideration, free of the
uncertainties of the business of Garden Distribution; to enhance each company's
ability to attract and retain the best management personnel available for its
portfolio of businesses; to provide a direct link between the incentive
compensation arrangements for key employees and the performance of Garden
Distribution common stock; to allow the management of each company to focus on
the strategic objectives of each company; to enable each company to develop an
operating structure and corporate culture appropriate to it without being
encumbered by approaches and philosophies attributable to the different
businesses operated by the other company; and to enable each company to devote
capital to the most effective use for that company, such that the Garden
Distribution business will not have to compete for resources within the Central
group. Based on these representations and certain other information, Tax
Counsel expects to deliver an opinion at the time of the Spin-Off that the
Spin-Off should satisfy the business purpose requirement. Similar rationales
have been accepted by the IRS in other circumstances as sufficient to meet the
business purpose requirement of Section 355. However, because of the inherently
subjective nature of the business purpose requirement and because the IRS may
challenge the representations upon which Tax Counsel relies, there can be no
assurance that the IRS will not assert that the business purpose requirement is
not satisfied.

Active Trade Or Business. In order for the distribution of the stock of
Garden Distribution to qualify as a tax-free spin-off under Section 355, Garden
Distribution, Garden Products and Pet Products each must be engaged in an
active trade or business that has been actively conducted for the five-year
period preceding the Spin-Off, taking into account only businesses that have
been acquired in transactions in which no gain or loss was recognized and
Central must hold no material assets other than stock of Garden Distribution,
Garden Products and Pet Products. Whether current and historical business
activity constitutes an active trade or business turns on the application of
subjective legal standards and on factual determinations, such as intentions of
the parties involved. Based on the representations of Central and Garden
Distribution, Tax Counsel expects to deliver an opinion at the time of the
Spin-Off that the Spin-Off should satisfy the active trade or business
requirement. However, because of the inherently subjective nature of important
elements of the active trade or business requirement and because the IRS may
challenge the representations upon which Tax Counsel relies, there can be no
assurance that the IRS will not assert that the active trade or business
requirement is not satisfied.

Absence of a Device for Distribution of Earnings and Profits. The Spin-Off
will not qualify as a tax-free spin-off under Section 355 if the Spin-Off was
used principally as a device for the distribution of the earnings and profits
of Central or Garden Distribution. Treasury regulations provide that this test
is applied based on all the facts and circumstances, including the presence or
absence of factors described in the Regulations as "device factors" and
"nondevice factors." Application of this test is uncertain in part because of
its subjective nature. Based on the representations of Central and Garden
Distribution, Tax Counsel expects to deliver an opinion at the time of the
Spin-Off that the Spin-Off should not be a transaction used principally as a
device for the distribution of earnings and profits of either Central or Garden
Distribution. However, because of the inherently subjective nature of the
device test (including the subjectivity involved in assigning weight to various
factors) and because the IRS may challenge the representations upon which Tax
Counsel relies, there can be no assurance that the IRS will not assert that
Spin-Off is a transaction used principally as a device for the distribution of
earnings and profits.

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Section 355(e), which was added in 1997, generally provides that a company
that distributes shares of a subsidiary in a spin-off that is otherwise tax-
free will incur U.S. federal income tax liability if 50% or more, by vote or
value, of the capital stock of either the company making the distribution or
the subsidiary is acquired by one or more persons acting pursuant to a plan or
series of related transactions that includes the spin-off. Stock acquired by
certain related persons is aggregated in determining whether the 50% test is
met. There is a presumption that any acquisition of 50% or more, by vote or
value, of the capital stock of the company or the subsidiary occurring two
years before or after the spin-off is pursuant to a plan that includes the
spin-off. However, the presumption may be rebutted by establishing that the
spin-off and the acquisition are not part of a plan or series of related
transactions. Based on the representations of Central and Garden Distribution,
and the assumption that the Spin-Off is not part of a plan that is outside the
knowledge of Central and Garden Distribution pursuant to which one or more
persons will acquire directly or indirectly 50% or more by vote or value of the
capital stock of Central or Garden Distribution, Tax Counsel expects to deliver
an opinion at the time of the Spin-Off that the Spin-Off will not be taxable
under Section 355(e). However, there can be no assurance that the IRS will not
assert that the Spin-Off is taxable under Section 355(e).

If the Spin-Off is taxable under Section 355(e), Central will recognize gain
equal to the difference, if any, between the fair market value of the Garden
Distribution Common Stock and Class B Stock and Central' adjusted tax basis in
the Garden Distribution Common Stock and Class B Stock, respectively. However,
no gain or loss will be recognized by you as a holder of Central Common Stock
or Class B Stock (except with respect to cash received in lieu of fractional
shares). Central believes that if it were to recognize gain on the Spin-Off,
such gain would likely not be substantial.

Central and Garden Distribution will enter into an agreement to allocate
responsibility for the possible tax burden to Central (the "Tax Sharing and
Indemnification Agreement"). However, Central and Garden Distribution have not
agreed to indemnify you for any taxes resulting from the failure of the Spin-
Off to qualify for tax-free treatment under the Code. The Tax Sharing and
Indemnification Agreement will provide that Garden Distribution and its
subsidiaries will jointly and severally indemnify Central for any losses
associated with taxes related to the Spin-Off if they result from certain
actions taken by or failures to act by, or the acquisition of, Garden
Distribution. You should consult your tax adviser about the tax consequences of
the Spin-Off.

In connection with the Spin-Off, a stockholder's tax basis in Central Common
Stock will be apportioned between Central Common Stock and Garden Distribution
Common Stock received in the Spin-Off in accordance with the relative fair
market values of such shares at the time of the Spin-Off. A stockholder's tax
basis in Central Class B Stock will be apportioned between Central Class B
Stock and Garden Distribution Class B Stock received in the Spin-Off in
accordance with the relative fair market values of such shares at the time of
the Spin-Off. In August 2000, Central will send a letter to stockholders that
will explain the way to allocate tax basis between Central Common Stock and
Garden Distribution Common Stock distributed in the Spin-Off and between
Central Class B Stock and Garden Distribution Class B Stock distributed in the
Spin-Off. The holding period of the Garden Distribution Common Stock or Garden
Distribution Class B Stock received in the Spin-Off will include the holding
period of the Central stock with respect to which the Garden Distribution
Common Stock or Garden Distribution Class B Stock will be distributed, provided
the Central stock is held as a capital asset on July 29, 2000.

Listing and Trading of Garden Distribution Common Stock

There is not currently a public market for the Garden Distribution Common
Stock or Garden Distribution Class B Stock. We have applied to list the Garden
Distribution Common Stock on the Nasdaq National Market, and we expect that a
when-issued trading market for Garden Distribution Common Stock may develop on
or before July 10, 2000. The Garden Distribution Class B Stock will not be
listed.

The term "when-issued" means that shares can be traded prior to the time
certificates are actually available or issued. Prices at which the Garden
Distribution Common Stock may trade on a when-issued basis

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cannot be predicted. Until the Garden Distribution Common Stock is fully
distributed and an orderly market develops, the prices at which trading in such
stock occurs may fluctuate significantly and may be lower or higher than the
price that would be expected for a fully- distributed issue.

The prices at which the Garden Distribution Common Stock will trade
following the Spin-Off will be determined by the marketplace and may be
influenced by many factors, including the depth and liquidity of the market for
Garden Distribution Common Stock, investor perceptions of Garden Distribution
and its businesses, Garden Distribution's results, and general economic and
market conditions.

Prior to the Spin-Off, Central Common Stock will continue to trade on a
regular basis and may also trade on a when-issued basis, reflecting an assumed
post- Spin-Off value for Central Stock. Central Common Stock when-issued
trading, if available, could last from on or before July 10, 2000 through July
29, 2000. If Central Common Stock when-issued trading is not available, the
Nasdaq National Market will require that shares of Central Common Stock that
are sold or purchased during the period beginning on July 10, 2000 and ending
on July 29, 2000 be accompanied by due bills representing the Garden
Distribution Common Stock distributable with respect to such shares and that
during such period neither the Central Common Stock nor the due bills may be
purchased or sold separately.

Our ability to continue to list Garden Distribution Common Stock on the
Nasdaq National Market will depend on a number of factors including our net
tangible assets, the number and market value of the shares held by the public
and the trading price of Garden Distribution Common Stock. It is possible that,
in the future, we may not satisfy all of these continued listing standards and,
accordingly, Garden Distribution Common Stock could be delisted on the Nasdaq
National Market. If Garden Distribution Common Stock fails to continue to be
listed on the Nasdaq National Market, then trading of Garden Distribution
Common Stock would likely not be very liquid and you may be unable to sell your
Garden Distribution Common Stock when and at the price that you desire. In
addition, we cannot assure you that an active trading market will develop in
Garden Distribution Common Stock.

The Transfer Agent and Registrar for the Garden Distribution Common Stock
and Garden Distribution Class B Stock will be ChaseMellon Shareholder Services,
L.L.C., 85 Challenger Road, Ridgefield Park, New Jersey 07660. As of March 25,
2000, there were approximately 160 record holders of Central Common Stock,
which number approximates the number of prospective record holders of Garden
Distribution Common Stock immediately after the Spin- Off.

Garden Distribution Common Stock distributed in the Spin-Off generally will
be freely transferable under the Securities Act of 1933 (the "Securities Act"),
except for securities received by persons who may be deemed to be affiliates of
Garden Distribution pursuant to Rule 405 under the Securities Act. Persons who
may be deemed to be affiliates of Garden Distribution after the Spin-Off
generally include individuals or entities that control, are controlled by, or
are under common control with Garden Distribution, including directors of
Garden Distribution. Persons who are affiliates of Garden Distribution will be
permitted to sell their shares of Garden Distribution Common Stock received in
the Spin-Off pursuant to Rule 144 under the Securities Act but without regard
to its holding period requirements.

Conditions; Termination

It is expected that the Spin-Off will occur on July 29, 2000, provided that
certain conditions set forth in the Separation and Distribution Agreement that
Central and Garden Distribution will enter into prior to the Spin-Off (the
"Distribution Agreement") shall have been satisfied or waived by the Central
Board. These include, among other customary conditions, the following:

. The receipt of a legal opinion from Orrick, Herrington & Sutcliffe LLP
that for federal income tax purposes the Spin-Off should qualify as a
tax-free spin-off under Section 355(e) and that no gain or loss should
be recognized by Central or its stockholders upon the spin-off.

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. All material regulatory approvals necessary to consummate the Spin-Off
shall have been received and be in full force and effect.

. The Garden Distribution Common Stock shall have been accepted for
listing on the Nasdaq National Market, subject to official notice of
issuance.

. The Garden Distribution Board of Directors, as named under "Management-
Directors," shall have been elected, and Garden Distribution's
Certificate of Incorporation and Bylaws (the "Garden Distribution
Charter" and the "Garden Distribution Bylaws," respectively) shall be in
effect.

Satisfaction of such conditions will not create any obligation on the part
of Central, Garden Distribution or any other person to effect or seek to effect
the Spin-Off or alter the consequences of any termination of the Distribution
Agreement from those set forth in the Distribution Agreement. See "Arrangements
Between Central and Garden Distribution Relating to the Spin-Off-Distribution
Agreement."

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CERTAIN SPECIAL CONSIDERATIONS

Risks Relating to the Spin-Off

We do not have an operating history as an independent company.

We do not have an operating history as an independent company. Our business
has historically relied on Central for various financial, managerial and
administrative services and has been able to benefit from the earnings, assets
and cash flows of Central's other businesses. Central will not be obligated to
provide assistance or services to Garden Distribution after the Spin-Off,
except as described in the Distribution Agreement, the Transition Services
Agreement and the other agreements entered into by the companies in connection
with the Spin-Off. See "Arrangements Between Central and Garden Distribution
Relating to the Spin-Off."

The Spin-Off may result in dislocation to the business operations, as well
as to the organization and personnel structure, of Garden Distribution.
Following the Spin-Off, we will incur the costs and expenses associated with
the management of a public company and may incur interest expense significantly
in excess of that incurred historically. While we have been profitable as part
of Central, there can be no assurance that, as a stand-alone company, our
future profits will be comparable to historical combined results before the
Spin-Off. This risk is compounded by other very significant risks discussed
elsewhere herein. In light of these risks, we cannot assure you that we will be
profitable in the current fiscal year or in any future year. Moreover, if we
are unprofitable we may find it very difficult to obtain the financing which is
necessary for the operation of our business.

There are potential federal income tax liabilities associated with the Spin-
Off.

Orrick, Herrington & Sutcliffe LLP expects to deliver a tax opinion at the
time of the Spin-Off stating that for U.S. federal income tax purposes the
Spin-Off should qualify as tax-free spin-off under Section 355 of the Internal
Revenue Code of 1986, as amended (the "Code"), and will not be taxable under
Section 355(e) of the Code. Central will not complete the Spin-Off unless it
receives the tax opinion. The tax opinion will be based on the accuracy as of
the time of the Spin-Off of factual representations made by Central and Garden
Distribution, and certain other information, data, documentation and other
materials that Orrick, Herrington & Sutcliffe LLP has deemed necessary. See
"Tax Consequences of the Spin-Off" on page 10.

The tax opinion will represent Orrick, Herrington & Sutcliffe LLP's best
judgment of how a court would rule. However, the tax opinion is not binding on
the Internal Revenue Service ("IRS") or the courts. A ruling has not been, and
will not be, sought from the IRS with respect to the U.S. federal income tax
consequences of the Distributions. Accordingly, the IRS and/or a court could
reach a conclusion that differs from the conclusions in the tax opinion.

If the Spin-Off fails to qualify as a tax-free spin-off under Section 355,
Central will recognize gain equal to the difference between the fair market
value of the Garden Distribution Common Stock and Class B Stock and Central's
adjusted tax basis in the Garden Distribution Common Stock and Class B Stock.
In addition, you will be treated as having received a taxable corporate
distribution in an amount equal to the fair market value of the Garden
Distribution Common Stock and Class B Stock that you receive in the Spin-Off.
Central believes that if it were to recognize gain on the Spin-Off, such gain
would likely not be substantial. The corporate level tax, if any, would be
payable by Central. We have agreed to indemnify Central for this and other tax
liabilities if they result from certain actions taken by or failures to act by,
or the acquisition of, Garden Distribution. See "Arrangements Between Central
and Garden Distribution Relating to the Spin-Off--Tax Sharing and
Indemnification Agreement." In addition, under the Code's consolidated return
regulations, each member of Central's consolidated group (including Garden
Distribution) is severally liable for these tax liabilities. If Garden
Distribution is required to indemnify Central for these liabilities or
otherwise is found liable to the IRS for such liabilities, the resulting
obligation could exceed the net worth of Garden Distribution.

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<PAGE>

If the Spin-Off is taxable under Section 355(e), but otherwise qualifies as
a tax-free spin-off, Central will recognize gain equal to the difference
between the fair market value of the Garden Distribution Common Stock and
Class B Stock and Central's adjusted tax basis in the Garden Distribution
Common Stock and Class B Stock. However, no gain or loss will be attributable
to you as a holder of Central Common Stock or Class B Stock as the result of
the Spin-Off being taxable under Section 355(e). Central believes that if it
were to recognize gain on the Spin-Off, such gain would likely not be
substantial.

We may be unable to issue additional stock in some circumstances.

Certain limitations under Section 355 of the Code may restrict Central's
ability to issue capital stock after the Spin-Off. As described above on pages
10 to 12 under "Tax Consequences of the Spin-Off," these limitations will
generally prevent Central from issuing capital stock to the extent the
issuance is part of a plan, which includes the Spin-Off, pursuant to which one
or more people or organizations acquire capital stock of Central that
represents 50% or more of the voting power or 50% or more of the value of
Central's capital stock. These limitation may restrict Central's ability to
undertake transactions involving issuances of capital stock of Central that
management otherwise believes would be beneficial.

We will be unable to rely upon Central for funding, and our leverage may
increase after the Spin-Off.

In the past, our working capital needs have been satisfied under Central's
corporate-wide cash management policies. Following the Spin-Off, however,
Central will no longer provide funds to finance our operations. We believe
that our cash flow from operations, together with availability under the
credit facility referred to below, will be sufficient to satisfy our future
working capital, capital expenditure and debt service requirements. However,
we cannot assure you that this will prove to be the case.

We are currently negotiating with an asset-based lender for a $60 million
credit facility, which will be secured substantially by all our assets. We
expect to use the available credit to reduce Central's net investment to $60
million and for working capital and general corporate purposes. The debt that
Garden Distribution will incur under this credit facility before and shortly
after the Spin-Off and the associated interest expense are not reflected in
Garden Distribution's historical financial statements. Garden Distribution's
debt will have important implications. We will need to generate a minimum
level of cash flow from operations in order to meet required repayments of
interest and principal under the credit facility. In addition, the credit
facility will impose certain restrictions on the conduct of the Garden
Distribution Business following the Spin-Off.

There is no prior market for our stock and our stock price may be volatile
resulting in potential litigation. If our business fails to perform, our
common stock could be delisted from the Nasdaq National Market.

There has been no prior trading market for Garden Distribution Common
Stock, and it is impossible to predict, estimate or give assurances about what
its price will be after the Spin-Off. Until the Garden Distribution Common
Stock is fully distributed and an orderly market develops, the trading prices
for Garden Distribution Common Stock may fluctuate significantly. Prices for
the Garden Distribution Common Stock will be determined in the trading markets
and may be influenced by many factors, including, among others, the depth and
liquidity of the market for Garden Distribution Common Stock, investor
perceptions of Garden Distribution and its businesses, Garden Distribution's
results, and general economic and market conditions.

We cannot assure you that an active trading market will develop in Garden
Distribution Common Stock. It is extremely difficult to predict whether there
will be a market for Garden Distribution Common Stock or to give assurances as
to what its price will be after the Spin-Off.

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Stock could be delisted on the Nasdaq National Market. If Garden Distribution
Common Stock fails to continue to be listed on the Nasdaq National Market,
then trading of Garden Distribution Common Stock would likely not be very
liquid and you may be unable to sell your Garden Distribution Common Stock
when and at the price that you desire.

The shares of Garden Distribution Common Stock distributed to Central
stockholders in the Spin-Off will be freely transferable under the Securities
Act, except for securities received by persons who may be deemed affiliates of
Garden Distribution. See "The Spin-Off--Listing and Trading of Garden
Distribution Common Stock" and "Security Ownership By Certain Beneficial
Owners, Directors and Executive Officers of Garden Distribution." The sale of
a substantial number of shares of Garden Distribution Common Stock after the
Spin-Off could adversely affect the market price of Garden Distribution Common
Stock.

To help assure that the Spin-Off is tax-free, we have agreed to certain
restrictions which could have possible anti-takeover effects.

We have agreed to certain restrictions on our future actions to assure that
the Spin-Off will be tax-free, including restrictions with respect to an
acquisition of shares of Garden Distribution Common Stock. If we fail to abide
by such restrictions and, as a result, the Spin-Off fails to qualify as a tax-
free reorganization, then Garden Distribution will be obligated to indemnify
Central for any resulting tax liability. The tax liability that potentially
could arise from an acquisition of shares of Garden Distribution Common Stock,
together with our related indemnification obligations, could have the effect
of delaying, deferring or preventing a change of control of Garden
Distribution. See "Arrangements Between Central and Garden Distribution
Related to the Spin-Off-Tax Sharing and Indemnification Agreement."

Risks Relating to the Operations of Garden Distribution's Business

Our net sales and operating income are expected to decrease significantly due
to the expiration of the Solaris Agreement.

From October 1, 1995 to September 30, 1999, we distributed Solaris product
nationwide, pursuant to an exclusive distribution agreement. Sales of products
purchased from Solaris, our largest supplier, accounted for approximately 54%
of our net sales during fiscal 1998 and 55% of our net sales during fiscal
1999. In January 1999, Monsanto sold its Solaris lawn and garden business
exclusive of its Roundup(R) herbicide products for consumer use to Scotts.
Beginning October 1, 1999, Scotts began to distribute Ortho(R) and Roundup(R)
products through a system that involves a combination of distributors, as well
as through direct sales by Scotts to certain major retailers. In addition,
Scotts has begun to sell Miracle-Gro directly to certain retailers.

We believe that the business likely to be taken over in this fiscal year
ending September 30, 2000 by Scotts is estimated to be approximately $200-250
million in sales. The gross profit associated with these sales in fiscal 1999
was approximately $15-25 million. We expect this loss of gross profit to be
partially offset this fiscal year with expense reductions and other business
growth. However, there is no assurance that the business taken over by Scotts
in the current fiscal year will not be greater than $200-250 million. In
addition, there can be no assurance, that Scotts will continue to do business
with us in future years or that we will be successful in our attempts to
reduce expenses and generate new business. The amount and profitability of our
business with Scotts in future years, if any, may be influenced by numerous
factors and is impossible to predict. Accordingly, the actual results of our
operations may differ significantly from the foregoing estimates.

The sale of the Solaris business by Monsanto and the end of the Solaris
Agreement subject our distribution business to significant uncertainties as it
relates to our new relationship with Scotts. The final accounting for all
issues under the Solaris Agreement, such as the amounts receivable from
Monsanto for cost reimbursements, payments for cost reductions and payments
for services; the amounts payable to Monsanto for inventory; and
responsibility for obsolete inventory and for non-payment by Solaris' sub-
agents will be retained by Central. Although Central has agreed to indemnify
Garden Distribution for Garden Distribution's liabilities to Scotts and

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Monsanto which could arise as a result of disputes arising from the Solaris
Agreement, the existence of such disputes could jeopardize Garden
Distribution's relationship with Scotts and cause Scotts to sharply reduce or
terminate its business with Garden Distribution.

We depend on a small number of suppliers for a significant portion of our net
sales.

While Garden Distribution purchases products from over 1,000 different
manufacturers and suppliers, we believe that over 73% of our net sales in
fiscal 1999 were derived from products purchased from our three largest
suppliers. We believe that approximately 54% of our net sales during fiscal
1998 and 55% of our net sales during fiscal 1999 were derived from sales of
products purchased from Solaris, our largest supplier.

The Solaris Agreement expired on September 30, 1999. The loss of the
exclusive relationship between us and Solaris is expected to have a material
adverse impact on our business and financial results. Similarly, the loss of,
or a significant adverse change in, the relationship between us and any other
key manufacturer or supplier could have a material adverse impact on our
business and financial results. In addition, during the peak selling season,
there may be unanticipated shortages of certain high demand products. Although
historically we have purchased enough inventory of such products or their
substitutes to satisfy retailer demand, the unanticipated failure of any
manufacturer or supplier to meet our requirements or our inability to obtain
substitutes could have a material adverse effect on us. In most cases we
operate without written agreements with our suppliers. Accordingly, although
we believe we have good relationships with our suppliers, there is a risk that
one or more of our suppliers may at any time terminate its supply relationship
with us.

We depend on a few customers, including Wal*Mart and Home Depot, for a
significant portion of our net sales.

Approximately 64% and 65% of our net sales for fiscal 1998 and fiscal 1999,
respectively, were derived from sales to our top ten customers. Our largest
customer is Wal*Mart, which accounted for approximately 29% of our net sales
for fiscal 1998 and 1999. Our second largest customer is Home Depot, which
accounted for approximately 13% and 15% of our net sales for fiscal 1998 and
fiscal 1999, respectively. During fiscal 2000, Wal*Mart commenced having
certain products delivered to its internal distribution centers rather than
directly to stores. This will adversely affect our revenue from these
products. If Wal*Mart increases deliveries to its internal distribution
centers rather than directly to stores in the future, our revenues could
suffer. The loss of, or significant adverse change in, the relationship
between us and Wal*Mart or Home Depot could have a material adverse effect on
our business and financial results. The loss of or reduction in orders from
any significant customer, losses arising from customer disputes regarding
shipments, fees, merchandise condition or related matters, or our inability to
collect accounts receivable from any major customer could have a material
adverse impact on our business and financial results.

Our quarterly operating results are susceptible to significant fluctuations,
which could cause our stock price to decline.

We expect to continue to experience significant variability in our net
sales and net income on a quarterly basis. Factors that may contribute to this
variability include:

. the extent of lost business from the expiration of the Solaris Agreement
and our ability to offset the loss of gross profit under the Solaris
Agreement through expense reductions and other business growth;

. weather conditions and seasonality during peak gardening seasons;

. shifts in demand for lawn and garden products;

. changes in product mix, service levels and pricing by us and our
competitors;

. fuel and other transportation costs;

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. the effect of acquisitions; and

. economic stability of retail customers.

In addition, because we operate on relatively low margins, our operating
results in any quarterly period could be affected significantly by slight
variations in revenues or operating costs. For the same reason, our quarterly
results also may be vulnerable to problems in areas such as collectibility of
accounts receivable, inventory control and competitive price pressures. The
market price of our common stock could be subject to significant fluctuations
in response to these variations in quarterly operating results and other
factors.

Our business will suffer if manufacturers and suppliers sell directly to
retailers.

Manufacturers and suppliers of lawn and garden products have sold, and may
intensify their efforts to sell, their products directly to retailers,
including our major customers. Since the expiration of the Solaris Agreement,
Scotts has begun to sell Solaris and Miracle-Gro products directly to some
retailers. Most of our major customers, including our top ten customers,
purchase certain products--typically high volume items ordered in large
quantities--directly from manufacturers or suppliers. We believe that most
major manufacturers and suppliers that utilize distributors continually
evaluate the effectiveness of their distribution programs as well as the
performance of individual distributors, and, accordingly, there can be no
assurance that major manufacturers and suppliers of the products distributed by
us will not modify their distribution programs in ways that could adversely
affect us. In addition to direct sales from manufacturers and suppliers to
retailers, certain retailers have, and may intensify their efforts to have,
products shipped by us to their internal distribution centers rather than
directly to stores. Such direct shipments generally yield lower gross margins
to us than shipments to retailers' stores, but we believe that our associated
operating costs are typically lower with such direct shipments. If these
programs become more common or if other methods of distribution of lawn and
garden products and pet supplies become more widely accepted, our business and
financial results could be materially adversely affected.

The recent increase in fuel prices could cause our profit margins to decrease.

Our financial results are directly affected by transportation costs, in
particular fuel costs. Recently, the price of fuel has increase significantly.
Since many of our pricing arrangements with customers are determined in advance
of the spring and summer selling seasons, we may be unable to implement price
adjustments to reflect higher fuel costs. As a result, if we are unable to
increase our prices to reflect increased fuel prices, our profit margins will
suffer.

Adverse weather during the peak gardening season can hurt our net sales.

Because demand for lawn and garden products is significantly influenced by
weather, particularly weekend weather during the peak gardening season, our
results of operations could be adversely affected by certain weather patterns
such as unseasonably cool or warm temperatures, water shortages or floods. In
recent years, our results of operations were negatively affected by severe
weather conditions in many parts of the country. Additionally, our business is
highly seasonal, with approximately 70% of our sales in fiscal 1999 occurring
during the second and third quarters of the fiscal year. Historically,
substantially all of our operating income is generated in this period.

Because of intense competition, our product sales generate low margins.

The distribution industry in which we operate is characterized by relatively
low profit margins. As a result, our success is highly dependent upon
increasing revenues and profits through internal expansion and acquisitions,
effective cost and management controls and differentiating our services from
those of our competitors. The wholesale lawn and garden distribution business
is highly competitive, with many companies competing principally on the basis
of price and service. In addition to competition from other distributors, we
also

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compete with manufacturers and suppliers that elect to distribute certain of
their products directly to retailers, including our major customers, and
private label product suppliers. We cannot assure you that we will not
encounter increased competition in the future or will not lose business from
major manufacturers that elect to sell their products directly to retailers,
either of which could adversely affect our operations and financial results.

Our ability to remain competitive will depend on our ability to obtain
financing.

Our business requires us to supplement internally generated funds with
externally generated funds to accommodate our seasonable needs and potential
growth. As a part of Central, we have been able to depend on Central to obtain
the funding we needed. As a separate company, we will no longer be able to
rely on Central for funding. Our ability to obtain the funding we need on a
standalone basis in the future will depend on numerous factors--including the
profitability, if any, of our operations in the future. In light of the very
serious risks discussed elsewhere in this section, we cannot assure you that
we will be able to obtain as a standalone company the external funding that we
will need to sustain our operations and grow our business.

Potential Disputes Between Central and Scotts and Monsanto could harm Garden
Distribution's relationship with Scotts.

The expiration of the Solaris Agreement may result in litigation involving,
among other things, accounting issues such as the amounts receivable from
Monsanto for cost reimbursements, payments for cost reductions and payments
for services, the amounts payable to Monsanto for inventory, and
responsibility for obsolete inventory and for non-payment by Solaris' sub-
agents. Although Central has agreed to indemnify Garden Distribution for
Garden Distribution's liabilities to Scotts or Monsanto which could arise as a
result of disputes arising from the Solaris Agreement, the existence of such
disputes could jeopardize Garden Distribution's relationship with Scotts and
cause Scotts to sharply reduce or terminate its business with Garden
Distribution.

Our success is dependent upon attracting an experienced Chief Executive
Officer and Chief Financial Officer and retaining key personnel.

We are currently conducting a search for a permanent Chief Executive
Officer and a permanent Chief Financial Officer. William E. Brown, Central's
Chairman and Chief Executive Officer, is serving as our interim Chief
Executive Officer until a permanent Chief Executive Officer is located. Robert
B. Jones, Central's Vice President and former Chief Financial Officer, is
serving as our interim Chief Financial Officer until a permanent Chief
Financial Officer is located. If we are unable to locate a permanent Chief
Executive Officer or a permanent Chief Financial Officer in a timely manner,
our business may suffer. Garden Distribution does not have any employment
contracts with its senior management. The loss of the services of any of such
persons could have a material adverse effect upon us. In addition, our future
performance depends on our ability to attract and retain skilled employees. We
cannot assure you that we will be able to retain our existing personnel or
attract additional qualified employees in the future.

The holders of our Class B stock, through their voting power, can greatly
influence control of the company.

William E. Brown, our interim Chief Executive Officer and Chairman of the
Board and Chief Executive Officer of Central, controls approximately 48% of
the voting power of our capital stock and, therefore, will effectively control
Garden Distribution, including the power to elect all of our directors.
Holders of Class B stock are entitled to the lesser of ten votes per share or
49% of the total votes cast. Holders of common stock are entitled to one vote
for each share owned. The holders of Class B stock have 49% of the combined
voting power. Holders of Class B stock are likely to be able to elect all of
our directors, control our management and policies and determine the outcome
of any matter submitted to a vote of our stockholders except to the extent
that a class vote of the common stock is required by applicable law. The
disproportionate voting rights of the common stock and Class B stock could
have an adverse effect on the market price of the common stock. Such
disproportionate voting rights may make us a less attractive target for a
takeover than we otherwise might be,

20
<PAGE>

or render more difficult or discourage a merger proposal, a tender offer or a
proxy contest, even if such actions were favored by our common stockholders.
Accordingly, such disproportionate voting rights may deprive holders of common
stock of an opportunity to sell their shares at a premium over prevailing
market prices, since takeover bids frequently involve purchases of stock
directly from stockholders at such a premium price.

The products that we distribute may subject us to environmental
considerations.

Many of the products that we distribute are subject to regulation by
federal, state and local authorities. Such regulations are often complex and
are subject to change. Environmental regulations may affect us by restricting
the manufacturing or use of our products or regulating their disposal.
Regulatory or legislative changes may cause future increases in our operating
costs or otherwise affect operations. Although we believe we are and have been
in substantial compliance with such regulations and have strict internal
guidelines on the handling and disposal of our products, there is no assurance
that in the future we may not be adversely affected by such regulations or
incur increased operating costs in complying with such regulations. However,
neither the compliance with regulatory requirements nor our environmental
procedures can ensure that we will not be subject to claims for personal
injury, property damages or governmental enforcement.

Our business depends on general economic conditions over which we have no
control.

The sale of lawn and garden products historically has been subject to
fluctuation, with purchases of these products tending to decline during periods
of recession in the general economy or uncertainty regarding future economic
prospects that affect consumer spending habits, particularly on discretionary
items. These economic cycles and any related fluctuation in consumer demand
could have a material adverse effect on our results of operations and financial
condition. In addition, various retailers, including some of our customers,
have experienced financial difficulties during the past several years, thereby
increasing the risk that such retailers may not pay for our products in a
timely manner, if at all.

21
<PAGE>

BUSINESS

Overview

We are the leading national distributor of lawn and garden products. As of
March 25, 2000, we had 21 distribution centers located throughout the country
and approximately 1,100 employees.

Industry Overview

The lawn and garden industry has retail sales in excess of $30 billion.
After staying at the $22 billion level in 1995 and 1996, lawn and garden retail
sales increased by $4.1 billion or 18% in 1997 and by $3.6 billion in 1998.
According to the 1998-1999 National Gardening Survey conducted for the National
Gardening Association by the Gallup Organization, 65% of all U.S. households or
approximately 67 million households in the United States participated in some
form of gardening in 1998. We believe that gardening is one of the most popular
leisure activities in America and that as the population of America ages,
gardening's popularity will increase.

The lawn and garden supply industry is complex for a number of reasons. The
industry is highly seasonal with half of all sales occurring during the peak
spring gardening season and two-thirds of all sales occurring in the first six
months of the calendar year. The industry is also complex because of the
breadth and depth of merchandise offered including fertilizers, insecticides,
sprinkler systems, and gardening tools, as well as perishable items such as
live plants and higher priced items such as power tools. Further, merchandise
selection is complicated by varying regional and local climate conditions and
problems such as pest infestations and weed growth. There are at least 10
distinctly different climatic zones in the continental U.S., each of which has
different lawn and garden needs. Finally, lawn and garden sales are driven by
weekly weather conditions and manufacturer promotions, which heavily impact
consumer demand for lawn and garden products.

As a result of the complexity and variability of lawn and garden sales,
retailers, manufacturers and suppliers must constantly adapt to changes in
consumer demand. Industry retailers--ranging from small local garden centers to
regional and national mass merchandisers and discounters--must carefully plan
their lawn and garden needs prior to the peak selling season and adjust those
plans as the season develops. Because of the large number of product SKUs in
the category, merchandise availability from a wide selection is important.
Having rapid access to these goods is also important, particularly for national
retailers, in adapting to regional and local lawn and gardening conditions.
Lastly, retailers need quick deliveries to keep shelves full (especially prior
to weekends) and require high in-stock and order-fulfillment rates.
Manufacturers and suppliers have historically relied on distributors to
inventory large volumes of product close to the retail market in order to
efficiently deliver products in a timely manner to retail stores. Manufacturers
and suppliers also rely on distributors to support and execute promotion and
marketing plans and training of store employees at the store and regional
level. Therefore, distributors represent an effective solution to the retailer
facing a complex industry and an efficient means for a manufacturer or supplier
to distribute and market its products.

Historically, lawn and garden products were distributed through small local
distributors that provided knowledgeable and personalized services to small
local independent nursery centers and retailers. In recent years, as regional
and national chains of retailers such as Wal*Mart, Home Base, Target and Home
Depot have grown, there has been a trend towards consolidation among
distributors in this category with larger regional distributors experiencing
substantial growth as these volume driven accounts demand the administrative
efficiency as well as the value-added services larger distributors can provide.

22
<PAGE>

Business Strategy

Our goal is to maintain our position as the leading distributor of lawn and
garden products in the United States. Garden Distribution's business strategy
is designed to meet the needs of retailers and manufacturers, both of which are
critical to our success. The key elements of our business strategy include:

Comprehensive Product Selection. The breadth and depth of our comprehensive
selection of approximately 24,000 lawn and garden products enable retailers to
fulfill a substantial portion of their product needs from a single source. We
generally focus on those products that are suited to distribution due to their
seasonality, variable sales movements, complexity to consumers and retailers,
handling and transportation difficulties, and which therefore generally require
value-added services. We do not carry live plants, power tools or higher priced
items which are generally sourced directly.

Value-Added Services. We offer a complete menu of value-added services
independently priced so that each customer can choose a program tailored to its
individual needs. Value-added services offered include national, regional and
store level merchandise planning, promotional planning and support, in-store
merchandising and training, reorder support, stock- balancing, as well as the
actual shipping, warehousing and distribution functions. We aggressively seek
opportunities to increase the range and scope of these value-added services to
help retailers sell more product.

National Presence. We have invested significant resources to build and
consolidate our position as the leading national distributor of lawn and garden
products. Management believes that this strategy makes us more attractive and
efficient to both manufacturers and retailers.

Manufacturer Services. To those manufacturers that sell products directly to
retailers, we offer servicing arrangements pursuant to which we perform sales
merchandising, warehousing, delivery, store training, billing and other
services for the direct sale accounts. We intend to pursue longer-term joint
ventures and agency arrangements with key manufacturers that sell directly to
retailers.

Efficient Operations. We believe that our strategically located warehouses,
investments in information systems, employee training and incentive measures
have helped us improve our operating efficiencies. In order to attract new
retail customers and maintain relationships with existing retailers, we also
strive to maintain a high in-stock position and order-fulfillment rate.

Large Retailers. We use our comprehensive product selection, national
presence, value-added services and efficient operations to develop
relationships with large national and regional chains and independent retailers
that have the ability to generate significant sales volume. We believe that we
offer these retailers an efficient and cost effective method of distribution.
These retailers generally purchase more merchandise per order which permits us
to reduce our distribution expense as a percentage of sales. We believe that
these retailers are gaining market share in the lawn and garden industry and
hope to grow with our customers to the extent they continue to grow.

Products

We offer our customers a comprehensive selection of brand name lawn and
garden products. This selection consists of approximately 24,000 products from
approximately 1,000 manufacturers. We generally focus on those lawn and garden
brand name products that are suited to distribution due to their seasonality,
variable sales movements, complexity to consumers and retailers, handling and
transportation difficulties, and which therefore generally require value-added
services. We focus on these types of products because we believe that retailers
cannot source these products directly from suppliers as effectively as they can
through distributors and that manufacturers of these products are likely to
view the services offered by us as highly desirable and cost-effective. We do
not carry live plants, power tools or high priced items which are generally
sourced directly from manufacturers. We believe that our broad and deep
selection of products permits retailers to fulfill substantially all of their
lawn and Garden Distribution requirements from a single source. In fiscal 1999,
substantially all of our products had suggested retail prices of $20 or less.

23
<PAGE>

The following table indicates the approximate number of SKUs, the
approximate number of manufacturers and suppliers and selected brand names in
each of our current major product categories according to our internal records.
We may change from time to time the selection and mix of its products, which
may change the approximate number of manufacturers and suppliers and SKUs
depending on the season.

<TABLE>
<CAPTION>
Approximate
Number of Approximate
Manufacturers Number of
Product Category and Suppliers SKUs Selected Brand Names
---------------- ------------- ----------- --------------------
<C> <C> <C> <S>
Chemicals and Fertilizer(1)........ 100 4,000 Ortho(R), Round-Up(R), Miracle-
Gro(R), Green Light(R), Amdro(R),
Ironite(R), Raid(R), Black
Flag(R), Lilly Miller(R),
Grant's(R)

Other Lawn and Garden Products(2).. 900 20,000 Sunset(R), Gilmour(R), Corona(R),
Rainbird(R), Rubbermaid(R),
Perky-Pet(R), Matthews(R)
</TABLE>
--------
(1) Category includes fertilizers, insecticides, weed killers, herbicides,
animal repellents, other chemicals and electronic pest controls.
(2) Category includes pool chemicals, equipment and toys, barbecues, bird
feeders, lawn and flower seeds, tomato baskets, gloves, instructional
books, plant stakes, safety equipment, plant meters, weather instruments,
wheelbarrows, spreaders, rakes, long handle tools, hand tools, brooms,
axes, shears, saws, hedge tools, hoses, sprayers, dusters, sprinklers, drip
watering systems, nozzles, Christmas products and other seasonal items.

Sales and Service

Our strategy is to offer a broad range of services to help retailers and
manufacturers maximize their sales and profitability. We have implemented this
strategy by developing a knowledgeable and profit-incented sales force and by
offering a broad menu of services.

Sales. At March 25, 2000, we employed approximately 350 sales and marketing
personnel located throughout our distribution center network. Sales and
marketing personnel typically service retail customers within a 250 mile radius
of the distribution centers. They are trained with knowledge of local market
conditions, our products and merchandising skills. A significant number of
sales personnel are certified nurserymen, horticultural graduates and/or master
gardeners. We have divided our sales force into key account managers, who act
as consultants to the buyers of large retailers, and field sales personnel, who
are responsible for servicing specific retail customers in their assigned
territory.

Menu of Value-Added Services. We offer retailers and manufacturers a
comprehensive menu of value-added services with separate or combination prices
from which each customer may select according to its individual needs. Each
value-added service is generally designed either to increase a retailer's sales
or decrease a retailer's costs. We generally offer retailers deliveries within
one business day from the time we receive an order. In addition to the standard
delivery services, many of our customers choose a high percentage of the value-
added services listed below.

. Program Development. Our key account managers recommend and assist
retail buyers in developing national and local product listings,
advertising, promotions and shelf space planning at the beginning of and
during the peak selling season to optimize store sales and profits.

. Training of Store Employees. Our sales personnel conduct formal and
informal product training sessions with store personnel to help them
provide informed consumer service. We believe that the demand for this
service is greater at larger regional and national retail chains due to
their higher employee turnover and employee inexperience with gardening
products.

. Weekend Consumer Clinics. Sales personnel also conduct and assist in
preparing and giving in-store weekend consumer education clinics to help
increase retail sales and improve consumer relations.

24
<PAGE>

. Designing and Setting Store Displays. Our sales personnel assist in
designing and planning store shelves at the beginning of each season.
Their expertise in product knowledge, sales trends, in-season promotions
and consumer demand for specific products allows them to help each store
adjust shelf stock and displays to increase sales in a timely fashion.

. Point-of-Purchase. We assist the manufacturer and retailer in the design
and installation of point-of-purchase ("POP") material to increase
sales. The POP material is generally matched to manufacturers'
advertising and promotions as well as local lawn, gardening and insect
problems.

. Merchandising of Shelf Stock. Our store service personnel physically
restock store shelves with all our merchandise on a weekly basis. This
service can also include price stickering for stores not on electronic
point-of-sale systems.

. Electronic Data Interchange ("EDI"). Our systems offer EDI capabilities
to retailers which can include paperless invoices, payments and product
history movements to help retailers monitor, plan and order products at
a lower administrative cost.

. "Hot Shot" Deliveries. We offer rush deliveries to help retailers
satisfy high consumer demand. This service is often critical to keep
retailers from being out-of-stock on a weekend during the peak selling
season.

We believe that retailers choose these services because we can in many cases
provide them more efficiently and effectively than manufacturers or retailers
themselves. Our sales force often advises and assists store management to
increase or decrease shelf space of certain products to match the expected and
unexpected seasonal demands. We believe that a typical store needs to change
the shelf space dedicated to lawn and garden products several times during the
peak selling season. The sales force also often highlights specific products
appropriate for the local market.

Retailers

We focus on selling lawn and garden products to retailers with high volume
retail stores. Our customer base is comprised of a wide range of retailers,
including "do-it-yourself" superstores, mass merchants, warehouse clubs, high
volume local and regional nurseries and regional and national chains of drug
and grocery stores. The following table sets forth selected customers of Garden
Distribution for each major category of retailer.

<TABLE>
<CAPTION>
Do-It-Yourself Mass High-Volume Drug and
Superstores Merchants Nurseries Grocery Stores
----------------------- --------- ------------------ ------------------
<S> <C> <C> <C>
Costco Bi-Mart Armstrong Garden Albertson's
Eagle Hardware & Garden Kmart Bachman Nurseries Bruno's
Home Depot Target Calloway's Nursery Fred Meyer
Home Base Wal*Mart Frank's Long's Drug Stores
Lowe's Pike Nurseries Raley's
Orchard Supply Hardware
Payless Cashways
</TABLE>

As a result of our national presence, we have an opportunity to enter into
relationships with national chains, whereby we, directly or through our
affiliates, provide services to all or substantially all of the individual
stores in the chain. From the point of view of the national retailer, such an
arrangement offers the benefit of a high level of service, lower cost of doing
business and administrative efficiencies. We believe our customers also benefit
from the in-depth local market knowledge of our sales personnel, in-store
stocking, training of store employees and other value-added merchandising
services. Because these arrangements are not formalized in writing, these
retailers may at any time purchase products from competing distributors.

25
<PAGE>

Most major retailers, including customers of ours, currently purchase a
portion of their lawn and garden products directly from certain large
manufacturers rather than through distributors such as us. If a number of our
major customers were to substantially shift or increase their purchases to
direct shipments from manufacturers, the our sales and earnings could be
adversely affected.

Our current practice on product returns generally is to accept and credit
the return of unopened cases of products from customers where the quantity is
small, where the product has been misshipped or the product is defective. We
have arrangements with our manufacturers and suppliers to stock balance and/or
credit us for a certain percentage of returned or defective products. While in
the past our return practice has not caused any material adverse impact on
operations, there can be no assurance in the future that our operations will
not be adversely impacted due to the return of products.

Manufacturers and Suppliers

Our national presence enables manufacturers and suppliers to access retail
outlets and end users through one primary distributor. In addition, our menu of
value-added services to retailers includes product promotion and merchandising
support that we believe many manufacturers and suppliers could not efficiently
perform. While we purchase products from approximately 1,000 different
manufacturers and suppliers, we believe that approximately 54% and 55% of our
net sales for fiscal 1998 and fiscal 1999, respectively, were derived from
products purchased from Solaris. We expect this percentage to decrease
significantly due to the expiration of the Solaris Agreement.

Expiration of the Solaris Agreement

As discussed in detail above under "Certain Special Considerations--Risks
Relating to the Operations of Garden Distribution's Business," the expiration
of the Solaris Agreement may result in litigation involving, among other
things, accounting issues such as the amounts receivable from Monsanto for cost
reimbursements, payments for cost reductions and payments for services, the
amounts payable to Monsanto for inventory, and responsibility for obsolete
inventory and for non-payment by Solaris sub-agents. Although Central has
agreed to indemnify Garden Distribution for most of Garden Distribution's
liabilities to Scotts or Monsanto which could arise as a result of disputes
arising from the Solaris Agreement, the existence of such disputes could
jeopardize Garden Distribution's relationship with Scotts and cause Scotts to
sharply reduce or terminate its business with Garden Distribution.

The business likely to be taken over in fiscal year 2000 by Scotts is
estimated to be approximately $200-250 million in sales. The gross profit
associated with these sales in fiscal 1999 was approximately $15-25 million. We
expect this loss of gross profit to be partially offset in fiscal year 2000
with expense reductions and other business growth. However, we cannot assure
you that the business taken over by Scotts will not be greater than $200-250
million, that Scotts will continue to do business with us at all in future
years or that we will be successful in our attempts to reduce expenses and
generate new business.

Inventory and certain liabilities associated with Solaris activity are
reflected in Garden Distribution's financial statements through September 25,
1999.

We have taken actions to realign our lawn and garden distribution operations
to reflect business levels for the fiscal year 2000. As a result, we have
recorded charges of $1.8 million in the fiscal year ending September 25, 1999.
These charges related principally to the closing of three distribution centers
and work force reductions.

The amount and profitability of our business with Scotts in future years, if
any, may be influenced by numerous factors and are impossible to predict.
Accordingly, the actual results of our operations may differ significantly from
the foregoing estimates.

26
<PAGE>

Management Information Systems

During their weekly visits to the retail stores, sales personnel transmit
orders to the appropriate distribution centers in any one of three methods:
remote order entry units (hand held, electronic devices), telephone or
facsimile. Generally, sales personnel transmit orders several times each day.
Certain retailers can also order products directly through our EDI system or by
purchasing items directly at each distribution center. After customer orders
are received and processed, shipping tickets are printed and credit approved
prior to the orders being sent to the warehouse manager. Our warehouse
employees then fill orders by manual selection and packaging. We believe that
due to the unusual shapes and sizes of its products (e.g., hand held tools,
wheelbarrows and bags of fertilizer) current automatic order selection systems
are not as efficient and cost effective as our current manual systems.

Our management information systems collect data needed for receivables and
inventory management, customer, product and facility profitability analysis, as
well as permit electronic data interface with customers and suppliers. We are
presently electronically connected with several major customers with a variety
of applications that range from purchase order receipt to paperless invoicing.
We also use a shelf space planning system that optimizes retail shelf space
utilization and profitability. We receive more than a majority of our daily
order volume from field sales representatives utilizing hand-held order entry
computers. Our systems enable us to provide delivery within one business day.

Distribution

In order to develop the most effective possible national distribution
network, we rely on our 21 company-operated, distribution centers and on our
affiliation arrangement with certain regional distributors of lawn and garden
products. We generally will make deliveries from our distribution centers
within one to two days after receipt of the order and, if the customer
requests, will generally make "hot shot" deliveries within four hours after
receipt of the order. We organize our truck and delivery routes to optimize
each truck's merchandise load and number of deliveries. We use common carriers
for a substantial portion of product shipments and the balance are delivered by
our own trucks. Common carriers are typically used for deliveries beyond a
200 mile radius from the distribution center.

Properties

As of March 25, 2000, we operated 21 distribution centers totaling
approximately 1,848,000 square feet. Most distribution centers consist of
office and warehouse space, and several large bays for loading and unloading.
Each distribution center provides warehouse, distribution, sales and support
functions for its geographic area under the supervision of a regional manager.
Our executive offices are located in Lafayette, California. The table below
lists our distribution facilities.

Northwest Region Midwest Region Southwest Region
---------------- -------------- ----------------
Algona, WA Bloomington, IL Dallas, TX
Boise, ID Kansas City, MO Hammond, LA
Denver, CO Minneapolis, MN Houston, TX
Medford, OR Little Rock, AR
Portland, OR Lubbock, TX*
Salt Lake City, UT Southeast Region San Antonio, TX
----------------
Atlanta, GA
Western Region Greensboro,
-------------- Orlando, FL NC
Phoenix, AZ
Sacramento, CA
Santa Fe Springs, CA
--------
* Company owned

27
<PAGE>

Our leases generally expire between 2000 and 2007. Substantially all of the
leases contain renewal provisions with automatic rent escalation clauses. In
addition to the facilities that are owned, our fixed assets are comprised
primarily of trucks and warehousing, transportation and computer equipment. As
of March 25, 2000, we operated a fleet of approximately 125 trucks of which
most are leased. During our peak season we rent additional trucks.

Competition

The lawn and garden products distribution industry is highly competitive.
Traditionally, this industry has been characterized by intense competition from
large numbers of smaller local and regional distributors--with competition
based on price, service and personal relationships. In recent years, we have
moved aggressively to insulate ourselves from this type of competition through
the development of a nationwide presence, forging relationships with
manufacturers, suppliers and major retailers and adding new value-added
services.

In addition to competition from other distributors, we also face increasing
competition from manufacturers and suppliers which distribute some percentage
of their products directly to retailers, bypassing distributors, or through a
dual distribution system in which the manufacturer or supplier competes with
distributors for sales to certain accounts. Such competition is typically based
on service and price. Although we compete against direct sales by manufacturers
and suppliers, we are often able to participate in such direct sales by
entering into agreements with the manufacturers and suppliers pursuant to which
we provide the manufacturers and suppliers with order processing, warehousing,
shipping and certain in-store services in connection with such direct sales in
return for a fee from the manufacturers and suppliers.

Employees

As of March 25, 2000, we had approximately 1,100 employees of which
approximately 900 were full-time employees and 200 were temporary or part-time
employees. We hire substantial numbers of temporary employees for the peak
shipping season of February through June to meet the increased demand
experienced during the spring and summer months, including merchandising in
stores. All of our temporary employees are paid on an hourly basis. None of our
employees is represented by a labor union. We consider our relationship with
our employees to be good.

Environmental Considerations

Litigation

We are not currently a party to any material litigation. We may, however, be
subject to litigation arising from the Solaris Agreement as discussed in detail
under "Certain Special Considerations--Risks Relating to the Operations of
Garden Distribution's Business." Central has agreed to indemnify Garden
Distribution for Garden Distribution's liabilities to Scotts or Monsanto which
could arise as a result of disputes arising from the Solaris Agreement.

28
<PAGE>

SELECTED FINANCIAL DATA

The following table summarizes certain selected financial data of Garden
Distribution. The Summary of Operations historical data set forth below for
each of the three years in the period ended September 25, 1999 and the Balance
Sheet Data at September 26, 1998 and September 25, 1999 are derived from
audited consolidated financial statements of Garden Distribution. The Summary
of Operations historical data set forth below for each of the six month periods
ended March 27, 1999 and March 25, 2000 and the nine-month period ended
September 30, 1995 and the year ended September 28, 1996 and the Balance Sheet
Data at March 27, 1999 and March 25, 2000 and at September 30, 1995, September
28, 1996 and September 27, 1997 are derived from unaudited consolidated
financial statements of Garden Distribution. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. The results of operations of any
interim period are not necessarily indicative of the results of operations for
the full year. The historical selected financial data may not necessarily be
indicative of Garden Distribution's past or future performance as an
independent company. Such historical data should be read in conjunction with
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and Garden Distribution's Consolidated Financial Statements and
notes thereto included elsewhere in this document. Pro forma per share data is
based on the number of shares estimated to be outstanding as of the Spin-Off
date.

Garden Distribution has conducted its business as a division of Central,
with some levels of management, personnel, facilities and accounting records.
Garden Distribution has historically depended on Central for corporate senior
management and administrative functions, as well as for strategic marketing,
financing, cash management, tax and payroll administration, property/casualty
insurance, employee benefits administration, and certain other services. The
fees for these services have been allocated to Garden Distribution, and
reflected in the accompanying consolidated financial statements. Such charges
have been allocated on a specific identification basis if known, square
footage, or based on a percentage of revenues for general administrative
functions. In the opinion of management, the fees included in the accompanying
consolidated financial statements reflect a reasonable amount for the services
received; however, such amounts were not established on an arm's-length basis
and may not be the same as would have been incurred had Garden Distribution
operated independent of Central. Nevertheless, management does not believe
Garden Distribution would have incurred materially different operating expenses
as an independent company.

<TABLE>
<CAPTION>
Nine-Month
Period Fiscal Year Ended Six Months Ended
Ended --------------------------------------- -------------------
Sept. 30, Sept. 28, Sept. 27, Sept. 26, Sept. 25, March 27, March 25,
1995(1) 1996 1997 1998 1999 1999 2000
---------- --------- --------- --------- --------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales(2)............ $294,176 $491,570 $586,892 $681,167 $752,094 $298,531 $195,828
Cost of goods sold and
occupancy.............. 255,453 435,060 514,322 591,370 656,396 266,543 168,069
-------- -------- -------- -------- -------- -------- --------
Gross profit.......... 38,723 56,510 72,570 89,797 95,698 31,988 27,759
Selling, general and
administrative
expenses............... 31,160 40,983 50,664 63,997 80,135 28,986 34,625
Other charges........... -- -- -- 1,926 1,839 -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes........... 7,563 15,527 21,906 23,874 13,724 3,002 (6,866)
Income taxes............ 3,248 6,463 8,779 9,669 5,621 1,227 (2,807)
-------- -------- -------- -------- -------- -------- --------
Net income (loss)....... $ 4,315 $ 9,064 $ 13,127 $ 14,205 $ 8,103 $ 1,775 $ (4,059)
======== ======== ======== ======== ======== ======== ========
Pro forma net income
(loss) per common share
Basic and diluted..... $ 2.32 $ 4.88 $ 7.07 $ 7.65 $ 4.36 $ 0.96 $ (2.19)
Pro forma weighted
average shares
outstanding
Basic and diluted..... 1,857 1,857 1,857 1,857 1,857 1,857 1,857
</TABLE>

29
<PAGE>

<TABLE>
<CAPTION>
Sept. 30, Sept. 28, Sept. 27, Sept. 26, Sept. 25, March 27, March 25,
1995 1996 1997 1998 1999 1999 2000
--------- --------- --------- --------- --------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital......... $31,950 $ 78,902 $ 81,629 $110,355 $ 63,215 $ 96,784 $ 87,885
Total assets............ 96,681 202,366 255,566 268,619 245,331 439,566 250,808
</TABLE>
--------
(1) In 1995, Central changed its fiscal year end to the last Saturday in
September. Accordingly, the fiscal period ended September 30, 1995 was a
nine-month period.
(2) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" herein for a discussion of sales fluctuations
related to internal growth and business acquisitions for fiscal years 1997,
1998 and 1999.

30
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion is based upon and should be read in conjunction
with the Selected Financial Data and the Consolidated Financial Statements,
including the notes thereto, included elsewhere in this document.

General

From October 1, 1995 to September 30, 1999, we distributed Solaris product
nationwide, pursuant to an exclusive distribution agreement (the "Solaris
Agreement"). Management believes that the relationship with Solaris embodied in
the Solaris Agreement had a substantial impact on our results of operations.
Approximately 54% of our net sales during fiscal 1998 and 55% of our net sales
during fiscal 1999 were derived from sales of products purchased from Solaris,
our largest supplier. Under the Solaris Agreement, we, in addition to serving
as the master agent and master distributor of Solaris products, provided a wide
range of value-added services including logistics, order processing and
fulfillment, inventory distribution and merchandising. As a result of the
Solaris Agreement, a majority of our sales of Solaris products were derived
from servicing direct sales accounts, whereas in 1995 and prior, a majority of
our sales of Solaris products were made by us as a traditional distributor.
Under the Solaris Agreement, our inventories of Solaris product increased
significantly, since we not only carried inventories to support our own sales
of Solaris products but also certain inventory previously carried by Solaris as
well as additional inventories to support sales of Solaris products by our
former network of independent distributors.

In January 1999, Monsanto sold its Solaris lawn and garden business
exclusive of its Roundup herbicide products for consumer use to Scotts and
entered into a separate, long-term, exclusive agreement pursuant to which
Monsanto continues to make Roundup herbicide products for consumer use and
Scotts markets the products. Scotts has been for many years a substantial
supplier to us and, in connection with its direct sales, a substantial
purchaser of our services.

The business likely to be taken over in fiscal year 2000 by Scotts is
estimated to be approximately $200-250 million in sales. The gross profit
associated with these sales in fiscal 1999 was approximately $15-25 million. We
expect this loss of gross profit to be partially offset in fiscal year 2000
with expense reductions and other business growth. However, there is no
assurance that the business taken over by Scotts will not be greater than $200-
250 million, that Scotts will continue to do business with us at all in future
years or that we will be successful in our attempts to reduce expenses and
generate new business.

31
<PAGE>

inventory and for non-payment by Solaris' sub-agents. Although Central has
agreed to indemnify Garden Distribution for Garden Distribution's liabilities
to Scotts or Monsanto which could arise as a result of disputes under the
Solaris Agreement, the existence of such disputes could jeopardize Garden
Distribution's relationship with Scotts and cause Scotts to sharply reduce or
terminate its business with Garden Distribution.

Results of Operations

The Consolidated Financial Statements may not necessarily be indicative of
the results of operations, financial position and cash flows of Garden
Distribution in the future or had it operated as a separate, independent
company during the periods presented. The Consolidated Financial Statements do
not reflect any changes that may occur in the financing and operations of
Garden Distribution as a result of the Spin-Off.

The following table sets forth, for the periods indicated, the relative
percentages that certain income and expense items bear to net sales:

<TABLE>
<CAPTION>
Fiscal Year Ended Six Months Ended
----------------------------- -------------------
Sept. 27, Sept. 26, Sept. 25, March 27, March 25,
1997 1998 1999 1999 2000
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales................... 100.0% 100.0% 100.0% 100.0% 100.0 %
Cost of goods sold and
occupancy.................. 87.7 86.8 87.3 89.3 85.8
----- ----- ----- ----- -----
Gross profit................ 12.3 13.2 12.7 10.7 14.2
Selling, general and
administrative expenses.... 8.6 9.4 10.7 9.7 17.7
Other charges............... 0.0 0.3 0.2 0.0 0.0
----- ----- ----- ----- -----
Income (loss) before income
taxes...................... 3.7 3.5 1.8 1.0 (3.5)
Income taxes................ 1.5 1.4 0.7 0.4 (1.4)
----- ----- ----- ----- -----
Net income (loss)........... 2.2% 2.1% 1.1% 0.6% (2.1)%
===== ===== ===== ===== =====
</TABLE>

Six Months Ended March 25, 2000 Compared to Six Months Ended March 27, 1999

Net sales for the six months ended March 25, 2000, decreased by 34.4% or
$102.7 million to $195.8 million from $298.5 million for the six months ended
March 27, 1999. The decrease in net sales is attributable to the reduction in
sales of Solaris product resulting from the expiration of the exclusive Solaris
Agreement, effective September 30, 1999. As a result of the expiration of this
agreement, we estimate that sales of Solaris product for our fiscal year 2000
will decrease by $200-250 million.

Gross profit decreased by approximately 13.1% or $4.2 million from $32.0
million during the six months ended March 27, 1999, to $27.8 million for the
six months ended March 25, 2000. Gross profit as a percentage of net sales
increased from 10.7% for the six months ended March 27, 1999, to 14.2% for the
comparable 2000 period. The increase in gross profit as a percentage of net
sales is primarily the result of the reduction in low margin Solaris sales to
retailers' distribution centers.

Selling, general and administrative expenses increased by 19.3% or $5.6
million from $29.0 million during the six months ended March 27, 1999, to $34.6
million for the comparable 2000 period. The increase in selling, general and
administrative expenses are the result of management's decision to defer
certain cost reductions to maintain an operational infrastructure for the
upcoming garden season coupled with the effect of the expiration of the Solaris
Agreement. As a result of the expiration, there has been a significant decrease
in both sales and inventory levels. This significant reduction in inventory
levels resulted in an increase in the amount of purchasing, merchandise
handling and storage costs charged to expense and not included in inventory
costs compared to the prior year. The increase was offset in part by lower cost
of sales during the six months ended March 25, 2000. Accordingly, as the garden
business is highly seasonal, selling, general and administrative costs are
expected to increase in the first two fiscal quarters of 2000 and decrease in
the last two quarters, and not have a significant impact on the operating
expenses for the fiscal year 2000 as a whole as compared with the prior year.

32
<PAGE>

Our tax rate was 40.9% for both periods. The tax rate was computed based on
estimates of what our taxable income would have been, after allocating certain
corporate expenses, had we operated as a stand alone company.

Fiscal 1999 Compared to Fiscal 1998

Net sales for the year ended September 25, 1999, increased by 10.4% or $70.9
million to $752.1 million from $681.2 million for the year ended September 26,
1998. The increase is attributable principally to increased sales of Scott's
and Solaris products, which combined account for approximately 67% of our total
sales. Of the $70.9 million sales increase, approximately 78% was attributable
to our three largest customers.

Gross profit increased by 6.6% or $5.9 million from $89.8 million during the
year ended September 26, 1998, to $95.7 million for the comparable 1999 period.
Gross profit as a percentage of net sales decreased slightly from 13.2% for
fiscal 1998 to 12.7% for fiscal 1999. The decrease in gross profit as a
percentage of net sales is due principally to the mix of products sold in
fiscal 1999 compared with fiscal 1998.

For the year ended September 25, 1999, selling, general and administrative
expenses increase by $16.1 million to $80.1 million from $64.0 million for the
year ended September 26, 1998, an increase of 25.2%. As a percentage of net
sales, selling, general and administrative expenses increased from 9.4% in
fiscal 1998 to 10.7% in fiscal 1999. Of the $16.1 million increase, $4.8
million is the result of increased sales volume in fiscal 1999. The balance of
the increase is primarily attributable to the expanded use of common freight
carriers, additional sales and service personnel and increased facilities
costs, computer conversion costs for certain older systems used principally in
our Northwest operations and expanded use of data communication lines to link
all of our computer systems and an increase in overall corporate administrative
expenses.

For the year ended September 25, 1999, we recorded other charges totaling
$1.8 million. The charges relate to the resizing of our distribution
operations, including the closure of three distribution centers in our Western
region. The resizing was made in anticipation of a reduction in sales volume of
Solaris products in fiscal year 2000 estimated at $200-$250 million. The
remaining charges relate principally to severance costs, lease costs on
warehouses and trucks, property taxes and other facility costs required to be
paid subsequent to the terminations of operations.

Our tax rate was 40.9% in fiscal year 1999 compared to 40.5% in Fiscal 1998.
The rates were calculated based on estimates of what our taxable income would
have been, after allocating certain corporate expenses, had we operated as a
stand alone company.

Fiscal 1998 Compared to Fiscal 1997

Net sales for the year ended September 26, 1998, increase by 16.1% or $94.3
million to $681.2 million from $586.9 million for the year ended September 27,
1997. Of the $94.3 million increase in sales, approximately $25.7 million was
attributable to Ezell Nursery supply, a business acquired in April 1997.
Approximately 64% of the increase came from sales to our three largest
customers, with sales of Solaris product accounting for the majority of the
sales increase.

Gross profit increased by 23.7% or $17.2 million from $72.6 million during
the year ended September 27, 1997, to $89.8 million for the like 1998 period.
Gross profit as a percentage of net sales increased from 12.3% for fiscal 1997
to 13.2% for fiscal year 1998. The improvement in gross margin percentage is
attributable in part to increased selling prices on certain product lines and
the impact of Ezell's operations. Ezell sells a significantly higher proportion
to independent retailers which, due to economics of scale, generally produce a
higher gross profit percent than mass merchants or large chain retailers.

33
<PAGE>

For the year ended September 26, 1998, selling, general and administrative
expenses increased by $13.3 million to $64.0 million from $50.7 million for the
year ended September 27, 1997. The $13.3 million increase in operating expenses
primarily related to Ezell Nursery Supply, incremental costs related to
increased sales, expanded use of common freight carriers, and additional
service personnel and increased facility costs.

For the year ended September 26, 1998, we recorded other charges totaling
$1.9 million. These charges related principally to the closure and relocation
of our Southern California branch to a larger facility to accommodate the
transfer of certain business previously shipped from our Central California
facility and the closure of our vegetable seed distribution operation in
Celaya, Mexico.

Our tax rate was 40.5% for fiscal 1998 compared to 40.1% in fiscal 1997. The
rates were computed based on estimates of what our taxable income would have
been, after allocating certain corporate expenses, had we operated as a stand-
alone company.

Inflation

The results of operations and financial condition are presented based upon
historical cost adjusted for certain balance sheet and expense allocations from
the corporate division of Central Garden & Pet Company, which we believe have
been fairly determined. While it is difficult to accurately measure the impact
of inflation, we believe that the effects of inflation on our operations have
been immaterial.

Liquidity and Capital Resources

Historically we have financed our operations and growth through cash
advances from Central Garden & Pet Company, our parent. Prior to the Spin-Off,
the Garden Distribution Business will continue to be financed through Central.
As of March 25, 2000, Central's net investment in Garden Distribution was
approximately $118 million. At the time of the Spin-Off, we anticipate that the
net investment will be substantially reduced principally through the reduction
of payables to our parent attributable to cash collections from our accounts
receivable. In connection with the Spin-Off, Central will capitalize Garden
Distribution with $60 million of equity. The difference between the amount of
equity remaining in Garden Distribution and Central's net investment at the
effective date of the Spin-Off will be paid to Central from borrowings to be
made by Garden Distribution under a new $60 million credit facility currently
being negotiated with an asset-based lender. The new revolving credit facility
will be secured by substantially all of our assets. We expect to use the
remaining available credit for working capital and general corporate purposes.

Our business is highly seasonal and our working capital requirements and
capital resources track closely to this seasonal pattern. During the first
fiscal quarter accounts receivable reach their lowest level while inventory,
accounts payable and short-term borrowings increase. Since our short-term
credit line fluctuates based upon a specified asset borrowing base, this
quarter is typically the period when the asset borrowing base is at its lowest
and consequently our ability to borrow is at its lowest. During the second
fiscal quarter, receivables, accounts payable and short-term borrowings begin
to increase, reflecting the build-up of inventory and related payables in
anticipation of the peak selling season. During the third fiscal quarter,
inventory levels commence to decline while accounts receivable peak and short-
term borrowings start to decline as cash collections are received during the
peak-selling season. During the fourth fiscal quarter, inventory levels are at
their lowest, and accounts receivable and payables are substantially reduced
through conversion of receivables to cash.

We believe that cash flow from operations, funds to become available under a
credit line and arrangements with suppliers will be adequate to fund our
presently anticipated capital requirements. We anticipate that our capital
expenditures will not exceed $3.0 million for the next 12 months.

Weather and Seasonality

Historically, our sales have been influenced by weather and climate
conditions in the markets we serve. In recent years, our results of operations
were negatively affected by severe weather conditions in many parts of the
country. Additionally, our business is highly seasonal. In fiscal 1999,
approximately 70% of our sales

34
<PAGE>

occurred in the first six months of the calendar year. Substantially all of our
operating income is typically generated in this period, which has historically
offset the operating losses incurred during the first fiscal quarter of the
year.

Market Risk Sensitivity; Derivative Financial Instruments

We are exposed to market risks, which include changes in U.S. interest rates
and, to a lesser extent, foreign exchange rates. We do not engage in financial
transactions for trading or speculative purposes.

Commodity Prices. We are not exposed to fluctuation in commodity market
prices.

Foreign Currency Risks. We have minimal sales outside of the United States
and, therefore, have only minimal exposure to foreign currency exchange risks.
Purchases made from foreign vendors are primarily made in U.S. dollars and,
therefore, we have only minimal exposure to foreign currency exchange risk. We
do not hedge against foreign currency risks and believe that foreign currency
exchange risk is immaterial.

Year 2000

Garden Distribution's systems were tested for Year 2000 compliance by
Central. Central used primarily internal resources to reprogram or replace and
test its systems for Year 2000 compliance. These systems changes were completed
during fiscal 1999. Central incurred no significant incremental costs to
address Year 2000 issues. Subsequent to the Spin-Off, Garden Distribution will
retain the systems that were tested by Central and used for Garden
Distribution's operations.

DIVIDEND POLICY

Garden Distribution currently anticipates that no cash dividends will be
paid on the Garden Distribution Common Stock or Garden Distribution Class B
Stock in the foreseeable future in order to conserve cash for the repayment of
debt, future acquisitions and capital expenditures.

35
<PAGE>

MANAGEMENT

Directors

It is contemplated that the Garden Distribution Board of Directors will
consist of six directors. The two initial directors named below were elected by
Central, as sole stockholder of Garden Distribution. The remaining four
directors will be elected by Central, prior to the Distribution Date.

William E. Brown, Chairman
Robert B. Jones

For biographical information concerning William E. Brown and Robert B.
Jones, see "--Executive Officers and Senior Operating Management."

The role of the Board is to provide independent corporate governance and
company oversight. Areas of emphasis include

. Selection, motivation and evaluation of the Chief Executive Officer;

. Corporate and board organization, staffing and succession planning;

. Compensation programs and personnel evaluation;

. Long-range goals, strategies and plans;

. Business reviews, financial performance and reporting;

. Significant investment or disinvestment; and

. Optimization of stockholder wealth.

Audit and Compensation Committee of the Garden Distribution Board

Garden Distribution will have an Audit and Compensation Committee (the
"Committee") of the Board of Directors. The Committee will consist entirely of
independent outside directors who will be determined following the Spin-Off.

In its capacity as an audit committee, the Committee will

. Recommend the appointment of Garden Distribution's independent
accountants;

. Review the scope and results of the audit plans of the internal auditors
and the independent accountants;

. Oversee the scope and adequacy of Garden Distribution's internal
accounting control and record-keeping systems;

. Review conflict of interest issues;

. Review the objectivity, effectiveness and resources of the internal
audit function, which will report directly to the Committee;

. Confer independently with the independent accountants;

. Review non-audit services to be performed by the independent
accountants; and

. Determine the appropriateness of fees for audit and non-audit services
performed by the independent accountants.

36
<PAGE>

In its capacity as a compensation committee, the Committee will

. Be responsible for the Chief Executive Officer evaluation process;

. Review and recommend to the Board salary and incentive compensation,
including bonus and stock options, for the Chief Executive Officer;

. Review and approve the salaries and incentive compensation for all
corporate officers and senior executives;

. Review and approve the short-term and long-term incentive compensation
programs, including the performance goals thereunder;

. Review the salary structure and apportionment of compensation among
salary and short-term and long-term incentive compensation;

. Review and approve the incentive compensation to be allocated to
employees; and

. Review, prior to becoming effective, any major organization change that
the Chief Executive Officer intends to implement.

Directors' Compensation

Directors who are not employees of Garden Distribution will be paid
directors fees consisting of $12,000 per year and $1,000 for each Board meeting
attended. Directors who attend meetings of the Audit and Compensation Committee
will receive an additional $1,000 for each meeting not held on the same day as
a Board meeting. The Garden Distribution long-term incentive plan provides
that, at the time of a directors initial election or appointment to the board
or upon completion of the Spin-Off, each director who is not an employee of
Garden Distribution will automatically be granted an option to purchase $25,000
of shares of Garden Distribution Common Stock based on the fair market value on
the date of grant. In addition, each outside director will automatically be
granted an option to purchase $25,000 of shares of Garden Distribution Common
Stock on the date of each annual meeting based on the fair market value on the
date of grant. Employee directors of Garden Distribution will not receive
additional compensation for serving on the Board of Directors. Directors will
be reimbursed for actual travel costs.

Executive Officers and Senior Operating Management

The following persons are expected to serve as the executive officers of
Garden Distribution as of the Distribution Date:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
William E. Brown................. 58 Interim Chief Executive Officer
Robert B. Jones.................. 67 Interim Chief Financial Officer and
Secretary
Richard A. Wiepking.............. 53 Treasurer
</TABLE>

Biographies of the executive officers and the other members of senior
operating management of Garden Distribution as of the Distribution Date follow.

William E. Brown is the interim Chief Executive Officer. Mr. Brown is also
the Chairman of the Board and Chief Executive Officer of Central and has held
those positions since 1980.

Robert B. Jones is the interim Chief Financial Officer and Secretary. Mr.
Jones is also a Vice President of Central and has held this position since
1993. From 1993 until January 2000, Mr. Jones also served as Central's Chief
Financial Officer and from May 1994 until January 2000 as Central's Secretary.

Richard A. Wiepking is the Treasurer. Mr. Wiepking joined Central in June
1996 as Vice President, Finance. From 1990 to June 1996, he was Chief Financial
Officer of CyberVision Systems, Inc., a direct marketing company.

37
<PAGE>

Summary of Executive Compensation

The following table sets forth the compensation received by Garden
Distribution's Interim Chief Executive Officer and the two other executive
officers of Garden Distribution who, based on employment with Central, were the
most highly compensated for fiscal 1999. The amounts included in the table
below relate to the compensation of each individual allocated to Garden
Distribution based upon level of time invested in Garden Distribution.
Therefore, these amounts will change subsequent to the spin-off and based on
the hiring of individuals to fill on a permanent basis the interim positions of
the Chief Executive Officer and Chief Financial Officer and the adoption of the
incentive plans by Garden Distribution as discussed below.

Summary Compensation

<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
------------------------------- ------------------------
Other Annual Restricted Securities All Other
Compensation Stock Underlying Compen-
Name and Principal Position Year Salary($) Bonus($) ($)(1) Awards($) Options(#)(2) sation($)(3)
--------------------------- ---- --------- -------- ------------ ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William E. Brown................ 1999 293,000 -- -- -- -- --
Interim Chief Executive Officer 1998 290,000 -- -- -- -- --
1997 247,000 -- -- -- 247,000 --

Robert B. Jones................. 1999 147,000 -- -- -- 33,000 1,972(3)
Interim Chief Financial Officer 1998 157,000 -- -- -- 22,000 1,901(3)
1997 133,204 15,000 -- -- 15,000 2,102(3)

Richard A. Wiepking............. 1999 134,610 -- -- -- 10,000(4) --
Treasurer 1998 131,324 -- -- -- 2,000 --
1997 127,500 -- -- -- 5,000 --
</TABLE>
--------
(1) While certain of the named executive officers enjoy certain perquisites,
for fiscal years 1999, 1998 and 1997 these did not exceed the lesser of
$50,000 or 10% of each officer's salary and bonus.
(2) The options listed in this column are options to purchase Central Common
Stock and do not reflect the adjustments discussed in "--Treatment of
Outstanding Central Stock Options." See also "Arrangements Between Central
and Garden Distribution Relating to the Spin-Off--Benefits Sharing
Agreement."
(3) Represents the matching contribution which Central made on behalf of each
executive officer to the Central 401(k) Plan.
(4) Includes options to purchase 8,000 shares of Central Common Stock that were
repriced in fiscal year 1999, which were originally granted in fiscal years
1996 and 1997.

Treatment of Outstanding Central Stock Options

Effective on the Distribution Date, holders of outstanding options to
purchase Central Common Stock under Central's existing long-term incentive plan
will have their interests adjusted. The only purpose of these adjustments is to
maintain the aggregate "spread" between the exercise price and the fair market
value of the outstanding Central Options taking into account the Spin-Off. The
Audit and Compensation Committee of Central's Board of Directors has approved
formulae to adjust the exercise price and award size of Central Options
pursuant to the terms and provisions of each such grant and the Central long-
term incentive plan.

Employees of Garden Distribution who hold Central Options as of the
Distribution Date will retain the Central Options, subject to the following
adjustments to the exercise price and number of shares subject to each such
option (each, an "Adjusted Central Option"). The exercise price of each
Adjusted Central Option shall be determined by multiplying the Central Option
exercise price prior to the Spin-Off by a fraction, which shall be no greater
than 1.0 (the "Central Conversion Ratio"), where the numerator is the composite
volume weighted average price of Central Common Stock trading without Garden
Distribution for the trading days during the pricing period to be determined at
a future date (the "Per Share Post-Spin-Off Central Common Stock Price") and
the denominator is the Per Share Pre-Spin-Off Central Common Stock Price. The
number of shares of

38
<PAGE>

Central Common Stock subject to each Adjusted Central Option will equal the
number of shares subject to such Central Option prior to the Spin-Off divided
by the Central Conversion Ratio. All other terms of the Adjusted Central
Options shall be the same as the terms of the pre-adjustment Central Options,
except that Central will waive all post-termination exercise periods that are
shorter than the remaining term of the option.

Employees of Central who will continue to be employed by Central after the
Distribution Date and hold any Central Options, and holders of any Central
Options who retire or who have retired from Central on or prior to the
Distribution Date, will retain such options, subject to the adjustments to the
exercise price and number of shares described in the previous paragraph. All
other terms of such Adjusted Central Options will remain the same.

Garden Distribution Incentive Plans

On or prior to the Distribution Date, the Garden Distribution Board will
adopt, and Central, as sole stockholder of Garden Distribution will approve,
the following incentive compensation plans.

Stock Incentive Plan

The Garden Distribution stock incentive plan is expected to provide for the
grant of various types of long-term incentive awards to selected employees,
consultants and directors of Garden Distribution, consistent with the
objectives and restrictions of the plan. Although these awards may include non-
qualified stock options, incentive stock options eligible for preferential tax
treatment under the Code, stock appreciation rights, and restricted stock
awards, it is expected that only stock options will be granted under the plan
initially. The term of the plan is expected to be ten years from the effective
date.

The plan will vest broad powers in the Audit and Compensation Committee of
Garden Distribution's Board of Directors to administer and interpret the plan.
This power will include the authority to select the persons to be granted
awards, to determine the terms, goals and conditions of awards, and to
determine whether such goals and conditions have been met.

While the precise number of available shares is yet to be determined, it is
anticipated that Garden Distribution will grant options for Garden Distribution
Common Stock to senior management of Garden Distribution following the Spin-
Off. A total of 275,000 shares of Garden Distribution Common Stock will be
available for issuance under Garden Distribution's long-term incentive plan.

Defined Contribution Plans

It is anticipated that Garden Distribution will establish a defined
contribution 401(k) plan for its employees on terms substantially similar to
the Central Garden and Pet Investment Growth Plan and that account balances of
affected employees under each Central plan will be transferred subsequently to
the Garden Distribution plan. After the Spin-Off, the Central plan and Garden
Distribution plan will each offer, along with mutual funds, two common stock
funds as investment alternatives: (i) a Garden Distribution common stock fund
and (ii) a Central common stock fund. Garden Distribution plan participants
will be able to maintain or increase their holdings in Central stock in the
Garden Distribution plan and will be allowed to transfer their account balances
out of the Central stock fund in the transferred Central accounts.

Employee Stock Purchase Plan

As of the Spin-Off, Garden Distribution employees will become ineligible to
participate in the Central Employee Stock Purchase Plan. Accordingly, the
accumulated contributions of Garden Distribution employees will be refunded as
soon as reasonably possible.

39
<PAGE>

Other Benefit Plans

It is expected that Garden Distribution will adopt a number of plans to
provide certain employee welfare benefits to active employees of Garden
Distribution after the Distribution Date. These plans may include medical,
dental, vision, prescription drug, short and long-term disability, group life
insurance, severance and other benefits, and the Garden Distribution Board will
reserve the right to amend, suspend or terminate any of these welfare plans.

40
<PAGE>

SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND EXECUTIVE OFFICERS OF GARDEN DISTRIBUTION

None of the present executive officers or directors of Garden Distribution
currently owns any shares of Garden Distribution Common Stock. All such shares
are currently owned by Central. However, the executive officers and directors
of Garden Distribution will, by virtue of their ownership of Central stock,
receive shares of Garden Distribution Common Stock or Class B Stock in the
Spin-Off. It is anticipated that grants of options to purchase Garden
Distribution Common Stock will be granted to senior management of Garden
Distribution.

The following table sets forth the number of shares of Central stock
beneficially owned on March 25, 2000 by each of the persons expected to serve
as directors of Garden Distribution after the Spin-Off, the executive officers
of Garden Distribution listed in the Summary Compensation Table in
"Management--Summary of Executive Compensation," each holder known to Central
to be the beneficial owner of more than five percent of any class of Central's
voting stock, and all directors and executive officers of Garden Distribution
as a group. The table does not reflect the adjustments to Central Options
referred to in the preceding paragraph.

<TABLE>
<CAPTION>
Shares Beneficially Owned as of
March 25, 2000
-----------------------------------------
Number of Number of
Beneficial Owner Class B Shares Common Shares Percent(1)
---------------- -------------- ------------- ----------
<S> <C> <C> <C>
William E. Brown(2)................. 1,606,159 320,000(3) 10.3%
Brooks M. Pennington III(4)......... -- 1,669,552 9.0
Dimensional Fund Advisors Inc.(5)... -- 1,443,400(6) 8.6
Strong Capital Management, Inc.(7).. -- 848,750(8) 5.0
Richard A Wiepking.................. -- 8,000(9) *
Robert B. Jones..................... -- 47,403(10) *
All directors and officers as a
group (3 persons).................. 1,606,159 375,403(11) 10.5
</TABLE>
--------
(*) Less than 1%.
(1) Represents the number of shares of Class B Stock and Common Stock
beneficially owned by each stockholder as a percentage of the total number
of shares of Class B Stock and Common Stock outstanding.
(2) The address of Mr. Brown is 3697 Mt. Diablo Boulevard, Lafayette,
California 94549.
(3) Includes 180,000 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 25, 2000.
(4) The address of Mr. Pennington is 1280 Atlanta Highway, Madison, Georgia
30650.
(5) The address of Dimensional Fund Advisors, Inc. is 1299 Ocean Avenue, 11th
Floor, Santa Monica, California 90401.
(6) Based on a Schedule 13G/A filed reflecting beneficial ownership as of
December 31, 1999.
(7) The address of Strong Capital Management, Inc. is 100 Heritage Reserve,
Menomonee Falls, Wisconsin 53051.
(8) Based on a Schedule 13G/A filed reflecting beneficial ownership as of
April 30, 2000.
(9) Includes 8,000 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 25, 2000.
(10) Includes 45,000 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 25, 2000.
(11) Includes 233,000 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 25, 2000.

The foregoing information relating to owners of Central Stock is based upon
Central's existing stock records and data supplied to Central by such owners as
of March 25, 2000.

41
<PAGE>

ARRANGEMENTS BETWEEN CENTRAL AND
GARDEN DISTRIBUTION RELATING TO THE SPIN-OFF

To govern certain of the ongoing relationships between Central and Garden
Distribution after the Spin-Off and to provide mechanisms for an orderly
transition, Central and Garden Distribution, or their respective subsidiaries,
as applicable, will enter into the various agreements described below. Certain
of the agreements summarized below will be included as exhibits to the
Registration Statement, and the following summaries are qualified in their
entirety by reference to the agreements as filed.

Distribution Agreement

The Distribution Agreement will provide for, among other things, the
principal corporate transactions required to effect the Spin-Off and certain
other matters governing the relationship between Garden Distribution and
Central with respect to or in consequence of the Spin-Off.

The Distribution Agreement contains provisions designed principally to place
with Garden Distribution, on an "as is, where is" basis, the assets currently
related to the Garden Distribution Business and financial responsibility for
known and contingent or unknown liabilities of the Garden Distribution
Business. As discussed in detail under "Certain Special Considerations--Risks
Relating to the Operations of Garden Distribution's Business," Central has
agreed to indemnify Garden Distribution for Garden Distribution's liabilities
to Scotts and Monsanto which could arise as a result of disputes arising from
the Solaris Agreement. In addition, certain other assets and liabilities of
Central described in the Distribution Agreement will be contributed to, or
assumed by, Garden Distribution. These additional liabilities include, among
others, liabilities associated with the new credit facility to be assumed by
Garden Distribution on or prior to the Distribution Date.

The Distribution Agreement further provides that all intercompany
receivables, payables and loans between Central and Garden Distribution will be
released and discharged as of the Distribution Date. Each of Garden
Distribution and Central will release the other from all other obligations and
liabilities owed to such party existing on the Distribution Date, other than
liabilities and obligations arising under the Distribution Agreement and the
other agreements entered into in connection with the Spin-Off. Likewise, each
of Central and Garden Distribution will indemnify the other for liabilities
arising from a breach of such agreements or the failure to pay or discharge the
liabilities assumed by such party under the Distribution Agreement.

The Distribution Agreement will contain a non-competition covenant that will
prohibit Garden Distribution from engaging in certain of Central's core
businesses in the U.S. for a period of three years following the Distribution
Date. This covenant has been negotiated to protect the interests of Central
stockholders in view of the close familiarity of Garden Distribution's senior
management with the proprietary business and marketing plans and strategies
(and other confidential information) associated with Central's branded products
businesses, as well as the transfer to Garden Distribution pursuant to the
Distribution Agreement of assets and resources which could be used in such
businesses. Under the terms of the covenant, for a period of three years after
the Distribution Date Garden Distribution will, in general, be prohibited from
manufacturing or importing products to the extent such products are
substantially similar to those products manufactured or imported by Central as
of the Distribution Date.

Under the Distribution Agreement and other related agreements, Central and
Garden Distribution will agree that Garden Distribution will have the right to
use a portion of Central's headquarters in Lafayette, California for a
transition period. Garden Distribution will be obligated to pay its share of
the costs and expenses associated with the operation and maintenance of the
facility.

Garden Distribution is currently an additional named insured under all
applicable Central insurance policies and claim service agreements. Under the
Distribution Agreement, Garden Distribution will be entitled to the benefit of
coverage from Central's property and liability insurance policies to the extent
coverage is applicable or potentially available and where limits of liability
have not been exhausted, either on a per

42
<PAGE>

occurrence or aggregate basis. To the extent that these policies feature a
deductible or self-insured retention, Garden Distribution will assume legal and
financial responsibility for such deductibles or retentions.

Applicable insurance policies include, but are not limited to, Workers'
Compensation, Commercial General Liability (including product liability),
Commercial Automobile Liability, Commercial Excess/Umbrella Liability,
Directors' and Officers' Liability, Fiduciary Liability, Commercial
Comprehensive Crime, Property, and Ocean Marine Insurance. The terms and
conditions of these policies, including limits of liability, will not be
amended as a consequence of the Spin-Off.

The Distribution Agreement will provide that the Spin-Off is subject to a
number of conditions which are described under "The Spin-Off--Conditions;
Termination." The Distribution Agreement may be amended or terminated, and the
Spin-Off may be canceled, or certain conditions to the Spin-Off may be waived,
at any time prior to the Distribution Date, in the sole discretion of the
Central Board.

Benefits Sharing Agreement

Prior to the date of the Spin-Off, Central and Garden Distribution will
enter into a Benefits Sharing Agreement (the "Benefits Agreement") to set forth
the manner in which assets and liabilities under employee benefit plans and
other employment-related liabilities will be divided between them, and to help
ensure a smooth transition for employees' benefits in the Spin-Off. In general,
Garden Distribution will be responsible for compensation and employee benefits
relating to its employees. It is intended that Garden Distribution will receive
corresponding plan assets under the plans that are qualified under the Code,
but will receive no assets with respect to liabilities under non-qualified
plans.

The Benefits Agreement will also provide for the treatment of outstanding
Central Options. At the time of the Spin-Off, Central Options held by employees
who will be employed by Garden Distribution after the Spin-Off will be retained
by such employees, except that the terms of such options will be adjusted in
the manner described in "Management--Treatment of Outstanding Central Stock
Awards." Central Options held by employees who will be employed by Central
after the Spin-Off will be unaffected by the Spin-Off and will be retained by
such employees, except that the terms of such options will be adjusted in the
same manner as the Central Options held by Garden Distribution employees. For
additional information with respect to the treatment of Central Options in the
Spin-Off, see "Management-- Treatment of Outstanding Central Stock Awards."
Following the Spin-Off, Garden Distribution will be responsible for delivering
shares of Garden Distribution Common Stock upon exercise of Garden Distribution
Options, and Central will be responsible for the delivery of shares of Central
Stock upon exercise of Central Options.

See "Management--Treatment of Outstanding Central Stock Options" for a more
detailed description of the effect of the Spin-Off on unexercised Central
Options.

Tax Sharing And Indemnification Agreement

On or prior to the Distribution Date, Garden Distribution and Central will
enter into a Tax Sharing and Indemnification Agreement that will set forth each
party's rights and obligations with respect to payment and refunds, if any,
with respect to taxes for periods before and after the Distribution Date and
related matters such as the filing of tax returns and the conduct of audits or
other proceedings involving claims made by taxing authorities.

In general, Central will be responsible for filing consolidated U.S. federal
and consolidated, combined or unitary state income tax returns for periods
through the Distribution Date, and for paying the taxes relating to such
returns including any subsequent adjustments resulting from the redetermination
of such tax liability by the applicable taxing authorities. Garden Distribution
will generally be responsible for all taxes imposed on Garden Distribution or
its subsidiaries for periods (or portions thereof) commencing on or after the
Distribution, and for all taxes imposed on Garden Distribution or its
subsidiaries on a separate return basis. The

43
<PAGE>

Tax Sharing and Indemnification Agreement will also allocate liability between
Central and Garden Distribution for any taxes which may arise in connection
with separating the Garden Distribution Business from Central businesses.

Pursuant to the Tax Sharing and Indemnification Agreement, Garden
Distribution will agree that for a two-year period following the Distribution
Date (i) Garden Distribution will continue to engage in the Garden Distribution
Business, (ii) Garden Distribution will continue to own and manage at least 50%
of the assets which it owns directly or indirectly immediately after the
Distribution Date and (iii) Garden Distribution will not, unless it obtains an
IRS tax ruling or a legal opinion reasonably satisfactory to Central that such
transaction will not cause the Spin-Off to be taxable for U.S. federal income
tax purposes, engage in a number of specified transactions. Transactions
subject to these restrictions will include, among other things, issuances of
Garden Distribution Common Stock or Garden Distribution Class B Stock (or
certain derivatives thereof) in amounts which would equal or exceed 40% of the
outstanding Garden Distribution Common Stock or Garden Distribution Class B
Stock immediately after the Distribution Date, issuances of instruments other
than Garden Distribution Common Stock or Garden Distribution Class B Stock (or
derivatives thereof) constituting equity for U.S. federal tax purposes, certain
redemptions and other acquisitions of capital stock or equity securities of
Garden Distribution, or the merger, dissolution or liquidation of Garden
Distribution.

In addition, under the Tax Sharing and Indemnification Agreement, Garden
Distribution will agree to indemnify Central for tax liabilities arising from a
breach of the foregoing provisions, as well as tax liabilities (including the
tax liabilities of Central's stockholders to the extent such liability is
imposed upon or assumed by Central) arising from acquisitions of Garden
Distribution Common Stock (or any other class of Garden Distribution Stock), or
commencement of any tender or exchange offers for Garden Distribution Common
Stock (or any other class of Garden Distribution Stock), during the two-year
period following the Spin-Off, the consummation of which result in the Spin-Off
being taxable for U.S. federal income tax purposes.

If the obligations of Garden Distribution under the Tax Sharing and
Indemnification Agreement were breached and the Spin-Off were to fail to
qualify as tax-free for U.S. federal income tax purposes as a result of such
breach, Garden Distribution would be required to indemnify Central for the tax
liabilities described above. This indemnification obligation could exceed the
net worth of Garden Distribution at such time.

Though valid as between the parties thereto, the Tax Sharing and
Indemnification Agreement is not binding on the IRS and does not affect the
several liability of Central, Garden Distribution and their respective
subsidiaries to the IRS for all U.S. federal taxes of the consolidated group
relating to periods prior to the Distribution Date.

Transition Services Agreement

On or prior to the Distribution Date, Central and Garden Distribution will
enter into a Transition Services Agreement pursuant to which Central and Garden
Distribution will provide each other with transitional administrative and
support services for a period of time not expected to exceed 12 months. The
Transition Services Agreement will provide that Garden Distribution will pay a
fee to Central intended to approximate Central's cost for such services.

The Transition Services Agreement will provide that Garden Distribution will
indemnify Central for all claims, losses, damages, liabilities and costs
incurred by Central to a third party arising in connection with the provision
of a service under the agreement, other than those costs resulting from
Central's willful misconduct or gross negligence. In general, Garden
Distribution can terminate a transition service after an agreed notice period.

44
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Authorized Capital Stock

Garden Distribution's authorized capital stock consists of 7,500,000 shares
of Garden Distribution Common Stock, $0.01 par value, 200,000 shares of Garden
Distribution Class B Stock, $0.01 par value, and 500,000 shares of preferred
stock, $0.01 par value, ("Garden Distribution Preferred Stock"). No shares of
Garden Distribution Preferred Stock will be issued in connection with the Spin-
Off. Based on the number of shares of Central Common Stock and Central Class B
Stock outstanding at March 25, 2000, approximately 1,691,469 shares of Garden
Distribution Common Stock and approximately 165,796 shares of Garden
Distribution Class B Stock will be issued to stockholders of Central in the
Spin-Off. All of the shares of Garden Distribution Common Stock issued in the
Spin-Off will be validly issued, fully paid and nonassessable. No holder of any
capital stock of Garden Distribution authorized as of the Distribution Date
will have any preemptive right to subscribe to any securities of Garden
Distribution of any kind or class.

The following description of Garden Distribution's capital stock does not
purport to be complete and is subject to and is qualified in its entirety by
the description of the capital stock contained in Garden Distribution's
Certificate of Incorporation, a copy of which is filed as an exhibit to the
Registration Statement of which this Information Statement is a part.

Garden Distribution Common Stock and Garden Distribution Class B Stock

Voting, Dividend and Other Rights. The voting powers, preferences and
relative rights of the Garden Distribution Common Stock and the Garden
Distribution Class B Stock are identical in all respects, except that (i) the
holders of Garden Distribution Common Stock are entitled to one vote per share
and the holders of Garden Distribution Class B Stock are entitled to the lesser
of ten votes per shares or 49% of the total votes cast, (ii) stock dividends on
Garden Distribution Common Stock may be paid only in shares of Garden
Distribution Common Stock and stock dividends on Garden Distribution Class B
Stock may be paid only in shares of Garden Distribution Class B Stock and (iii)
shares of Garden Distribution Class B Stock have certain conversion rights and
are subject to certain restrictions on ownership and transfer described below
under "Conversion Rights and Restrictions on Transfer of Class B Stock." Except
as described above, issuances of additional shares of Garden Distribution Class
B Stock and modifications of the terms of the Garden Distribution Class B Stock
require the approval of a majority of the holders of the Garden Distribution
Common Stock and Garden Distribution Class B Stock, voting as separate classes.
The Certificate of Incorporation cannot be modified, revised or amended without
the affirmative vote of the majority of outstanding shares of Garden
Distribution Common Stock and Garden Distribution Class B Stock, voting
separately as a class. Except as described above or as required by law, holders
of Garden Distribution Common Stock and Garden Distribution Class B Stock vote
together on all matters presented to the stockholders for their vote or
approval, including the election of directors. The stockholders are not
entitled to vote cumulatively for the election of directors.

Each share of Garden Distribution Common Stock and Garden Distribution Class
B Stock is entitled to receive dividends if, as and when declared by the Board
of Directors of Garden Distribution out of funds legally available therefor.
The Garden Distribution Common Stock and Garden Distribution Class B Stock
share equally, on a share-for-share basis, in any cash dividends declared by
the Board of Directors.

Stockholders of Garden Distribution have no preemptive or other rights to
subscribe for additional shares. Subject to any rights of holders of any Garden
Distribution Preferred Stock, all holders of Garden Distribution Common Stock
and Garden Distribution Class B Stock, regardless of class, are entitled to
share equally on a share-for-share basis in any assets available for
distribution to stockholders on liquidation, dissolution or winding up of
Garden Distribution. No Garden Distribution Common Stock or Garden Distribution
Class B Stock is subject to redemption or a sinking fund.

45
<PAGE>

Conversion Rights and Restrictions on Transfer of Garden Distribution Class
B Stock. The Garden Distribution Common Stock has no conversion rights.
However, at the option of the holder, each share of Garden Distribution Class B
Stock is convertible at any time and from time to time into one share of Garden
Distribution Common Stock. If at any time the holders of a majority of
outstanding shares of Garden Distribution Class B Stock vote to convert the
outstanding shares of Garden Distribution Class B Stock to Garden Distribution
Common Stock, then all outstanding shares of Garden Distribution Class B Stock
shall be deemed automatically converted into shares of Garden Distribution
Common Stock.

Garden Distribution's Certificate of Incorporation provides that any holder
of shares of Garden Distribution Common B Stock desiring to transfer such
shares to a person other than a Permitted Transferee (as defined below) must
present such shares to Garden Distribution for conversion into an equal number
of shares of Garden Distribution Common Stock upon such transfer. Thereafter,
such shares of Garden Distribution Common Stock may be freely transferred to
persons other than Permitted Transferees, subject to applicable securities law.

Shares of Garden Distribution Class B Common Stock may not be transferred
except generally to family members, certain trusts, heirs and devisees
(collectively, "Permitted Transferees"). Upon any sale or transfer of ownership
or voting rights to a transferee other than a Permitted Transferee or to the
extent an entity no longer remains a Permitted Transferee, such shares of
Garden Distribution Class B Stock will automatically convert into equal number
of shares of Garden Distribution Common Stock. Accordingly, no trading market
is expected to develop in the Garden Distribution Class B Stock and the Garden
Distribution Class B Stock will not be listed or traded on any exchange or in
any market.

Effects of Disproportionate Voting Rights. The Disproportionate voting
rights of the Garden Distribution Common Stock and Garden Distribution Class B
Stock could have an adverse effect on the market price of the Garden
Distribution Common Stock. Such disproportionate voting rights may make Garden
Distribution a less attractive target for a takeover than it otherwise might
be, or render more difficult or discourage a merger proposal, a tender offer or
a proxy contest, even if such actions were favored by stockholders of Garden
Distribution other than the holders of the Garden Distribution Class B Stock.
Accordingly, such disproportionate voting rights may deprive holders of Garden
Distribution Common Stock of an opportunity to sell their shares at a premium
over prevailing market prices, since takeover bids frequently involve purchases
of stock directly from shareholders at such a premium price.

Garden Distribution Preferred Stock

The Board of Directors has the authority to cause Garden Distribution to
issue up to 500,000 shares of Garden Distribution Preferred Sock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares constituting any
series or the designation of such series, without any further vote or action by
the stockholders. The issuance of Garden Distribution Preferred Stock may have
the effect of delaying, deferring or preventing a change in control of the
Company without further action by the stockholders. The issuance of Garden
Distribution Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of the Garden Distribution Common Stock.

Section 203 of the Delaware General Corporation Law

Garden Distribution is subject to the provisions of Section 203 of the
Delaware General Corporation Law. In general, this statute prohibits under
certain circumstances, a Delaware corporation whose stock is publicly traded or
held in record by more than 2,000 stockholders, from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction which the person became an interested stockholder,
unless

. the corporation has elected in its certificate of incorporation or
bylaws not to be governed by this Delaware law (Garden Distribution has
not made such an election);

46
<PAGE>

. prior to the time the stockholder became an interested stockholder, the
board of directors approved either the business combination or the
transaction which resulted in the person becoming an interested
stockholder;

. the stockholder owned at least 85% of the outstanding voting stock of
the corporation (excluding shares held by directors who were also
officers or held in certain employee stock plans) upon consummation of
the transaction which resulted in a stockholder becoming an interested
stockholder; or

. the business combination was approved by the board of directors and by
two-thirds of the outstanding voting stock of the corporation (excluding
shares held by the interested stockholder).

"Interested stockholder" is a person who, together with affiliates and
associates, owns (or, if such person is an affiliate or associate of the
corporation, any time within the prior three years did own) 15% or more of the
corporation's outstanding voting stock. The term "business combination" is
defined generally to include mergers, consolidations, stock sales, asset based
transactions, and other transactions resulting in a financial benefit to the
interested stockholder.

Transfer Agent and Registrar

ChaseMellon Shareholder Services, L.L.C. is the transfer agent and registrar
for Garden Distribution's Common Stock and Garden Distribution's Class B Stock.

47
<PAGE>

LIABILITY AND INDEMNIFICATION
OF OFFICERS AND DIRECTORS OF GARDEN DISTRIBUTION

Limitation Of Liability

The Garden Distribution Charter provides that a director of Garden
Distribution will not be personally liable to Garden Distribution or its
stockholders for monetary damages for breach of any duty owed to Garden
Distribution or its stockholders, except that such provision shall not relieve
a director from liability for any breach of duty based upon an act or omission

. in breach of such person's duty of loyalty to Garden Distribution or its
stockholders,

. not in good faith or involving a violation of law or

. resulting in receipt by such director of an improper personal benefit.

As used in the Garden Distribution Charter, an act or omission in breach of
a person's duty of loyalty means an act or omission which that director knows
or believes to be contrary to the best interests of Garden Distribution or its
stockholders in connection with a matter in which such director has a material
conflict of interest.

While the Garden Distribution Charter provides directors with protection
from awards for monetary damages for certain breaches of their duty of care, it
does not eliminate such duty. Accordingly, the Garden Distribution Charter has
no effect on the availability of equitable remedies such as an injunction or
rescission based on a director's breach of his or her duty of care. The
provisions of the Garden Distribution Charter described above apply to an
officer of Garden Distribution only if he or she is a director of Garden
Distribution and is acting in his or her capacity as director, and do not apply
to officers of Garden Distribution who are not directors.

Indemnification Of Officers And Directors

The Garden Distribution Bylaws provide that each person who is or was or has
agreed to become a director or officer of Garden Distribution, or each such
person who is or was serving or has agreed to serve at the request of Garden
Distribution as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, will be indemnified by
Garden Distribution in accordance with the procedures set forth in the Garden
Distribution Bylaws, to the fullest extent permitted from time to time by
Delaware law, as the same exists or may hereafter be amended or any other
applicable laws as currently or hereafter in effect. Garden Distribution will
be required to indemnify any person seeking indemnification in connection with
a proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Garden Distribution Board or is an
appropriate proceeding to enforce such person's claim to indemnification
pursuant to the rights granted by the Garden Distribution Bylaws or otherwise
by Garden Distribution's Board. In addition, Garden Distribution may enter into
one or more agreements with any person providing for indemnification greater
than or different from that provided in the Garden Distribution Bylaws.

48
<PAGE>

WHERE YOU CAN FIND MORE INFORMATION

Garden Distribution has filed the Registration Statement with the Commission
concerning the shares of Garden Distribution Common Stock being received by
Central stockholders in the Spin-Off. This document does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements made in this document concerning the contents of
any contract, agreement or other document referred to herein are summaries of
certain provisions thereof. With respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to such exhibit for a more complete description of the matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference.

The Registration Statement and the exhibits and schedules thereto filed by
Garden Distribution may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the Regional Offices of the Commission at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
information can be obtained by mail from the Public Reference Branch of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Such material can also be inspected at the offices of the Nasdaq
National Market, 20 Broad Street, New York, New York 10005 or accessed
electronically by means of the Commission's home page on the Internet
(http://www.sec.gov). You can get further information from the Commission's
Public Reference Room by calling 1-800-SEC-0330.

Following the Spin-Off, Garden Distribution will be required to comply with
the reporting requirements of the Exchange Act and will file annual, quarterly
and other reports with the Commission. Garden Distribution will also be subject
to the proxy solicitation requirements of the Exchange Act and, accordingly,
will furnish audited financial statements to its stockholders in connection
with its annual meetings of stockholders.

No person is authorized by Central or Garden Distribution to give any
information or to make any representations other than those contained in this
document, and if given or made, such information or representations must not be
relied upon as having been authorized.

49
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----

<S> <C>
Independent Auditors' Report............................................. F-2

Consolidated Balance Sheets, September 26, 1998 and September 25, 1999
and March 25, 2000 (unaudited).......................................... F-3

Consolidated Statements of Income and Changes in Parent's Net Investment
for Fiscal Years Ended September 27, 1997, September 26, 1998 and
September 25, 1999 and the Six Months Ended March 27, 1999 (unaudited)
and March 25, 2000 (unaudited).......................................... F-4

Consolidated Statements of Cash Flows for Fiscal Years Ended September
27, 1997, September 26, 1998 and September 25, 1999 and the Six Months
Ended March 27, 1999 (unaudited) and March 25, 2000 (unaudited)......... F-5

Notes to Consolidated Financial Statements for Fiscal Years Ended
September 27, 1997, September 26, 1998 and September 25, 1999 and the
Six Month Periods Ended March 27, 1999 and March 25,
2000 ................................................................... F-6
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors
Central Garden Distribution Inc.
Lafayette, California

We have audited the accompanying consolidated balance sheets of Central
Garden Distribution Inc. and subsidiary (the "Company"), currently a division
of Central Garden & Pet Company, as of September 26, 1998 and September 25,
1999, and the related consolidated statements of income and changes in parent's
net investment and of cash flows for each of the fiscal years in the three-year
period ended September 25, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of September
26, 1998 and September 25, 1999, and the results of their operations and their
cash flows for each of the fiscal years in the three-year period ended
September 25, 1999 in conformity with generally accepted accounting principles.

/s/ DELOITTE & TOUCHE LLP
San Francisco, California
December 20, 1999

F-2
<PAGE>

CENTRAL GARDEN DISTRIBUTION INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
September 26, September 25, March 25,
1998 1999 2000
------------- ------------- -----------
(unaudited)
(dollars in thousands)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.................................. $ -- $ -- $ --
Accounts receivable, less allowance
for doubtful accounts of $1,860,
$1,858, and $2,099 (unaudited)....... 63,121 46,976 88,616
Inventories held for return to
manufacturer......................... -- 75,887 --
Inventories........................... 162,692 80,751 124,188
Prepaid expenses and other assets..... 3,557 5,021 4,092
-------- -------- --------
Total current assets................. 229,370 208,635 216,896

Land, buildings, improvements and
equipment:
Land.................................. 73 73 73
Buildings and improvements............ 3,446 3,357 3,313
Transportation equipment.............. 1,825 1,829 1,696
Machinery and warehouse equipment..... 5,687 6,886 6,745
Office furniture and equipment........ 8,327 10,343 9,611
-------- -------- --------
Total................................ 19,358 22,488 21,438
Less accumulated depreciation and
amortization......................... 11,758 13,340 13,035
-------- -------- --------
Land, buildings, improvements and
equipment--net...................... 7,600 9,148 8,403
Goodwill............................... 20,533 19,841 18,941
Other assets........................... 11,116 7,707 6,568
-------- -------- --------
Total................................ $268,619 $245,331 $250,808
======== ======== ========

LIABILITIES AND PARENT'S NET INVESTMENT

Current liabilities:
Accounts payable...................... $100,894 $127,377 $121,665
Accrued expenses...................... 18,121 18,043 7,346
-------- -------- --------
Total current liabilities............ 119,015 145,420 129,011
Deferred income taxes and other long-
term obligations...................... 3,117 3,466 3,466

Commitments and contingencies -- -- --
Parent's net investment................ 146,487 96,445 118,331
-------- -------- --------
Total................................ $268,619 $245,331 $250,808
======== ======== ========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>

CENTRAL GARDEN DISTRIBUTION INC.

CONSOLIDATED STATEMENTS OF INCOME
AND CHANGES IN PARENT'S NET INVESTMENT

<TABLE>
<CAPTION>
Fiscal Year Ended Six Months Ended
----------------------------------------- ------------------
September 27, September 26, September 25, March March
1997 1998 1999 27, 1999 25, 2000
------------- ------------- ------------- -------- --------
(unaudited)
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net sales............... $586,892 $681,167 $752,094 $298,531 $195,828
Cost of goods sold and
occupancy.............. 514,322 591,370 656,396 266,543 168,069
-------- -------- -------- -------- --------
Gross profit.......... 72,570 89,797 95,698 31,988 27,759
Selling, general and
administrative
expenses............... 50,664 63,997 80,135 28,986 34,625
Other charges........... -- 1,926 1,839 -- --
-------- -------- -------- -------- --------
Income (loss) before
income taxes......... 21,906 23,874 13,724 3,002 (6,866)
Income taxes............ 8,779 9,669 5,621 1,227 (2,807)
-------- -------- -------- -------- --------
Net income (loss)....... 13,127 14,205 8,103 1,775 (4,059)
Parent's net investment,
beginning balance...... 99,969 114,498 146,487 146,487 96,445
Net contribution from
(distribution to)
Parent................. 1,402 17,784 (58,145) (16,112) 25,945
-------- -------- -------- -------- --------
Parent's net investment,
ending balance......... $114,498 $146,487 $ 96,445 $132,150 $118,331
======== ======== ======== ======== ========
Pro forma net income
(loss) per common share
(unaudited):
Basic and diluted..... $ 7.07 $ 7.65 $ 4.36 $ 0.96 $ (2.19)
======== ======== ======== ======== ========
Pro forma weighted
average shares
outstanding
(unaudited):
Basic and diluted..... 1,857 1,857 1,857 1,857 1,857
======== ======== ======== ======== ========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>

CENTRAL GARDEN DISTRIBUTION INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Fiscal Year Ended Six Months Ended
----------------------------------------- --------------------
September 27, September 26, September 25, March 27, March 25,
1997 1998 1999 1999 2000
------------- ------------- ------------- --------- ---------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income (loss)...... $ 13,127 $ 14,205 $ 8,103 $ 1,775 $ (4,059)
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities:
Depreciation and
amortization......... 2,211 2,386 2,674 1,409 1,657
Deferred income
taxes................ 235 291 (1,644) -- --
Loss (gain) on sale of
land, building and
improvements......... 72 (67) (15) -- --
Changes in assets and
liabilities:
Receivables.......... 5,891 (13,838) 16,145 (74,495) (41,640)
Inventories.......... (25,346) 4,134 6,054 (101,304) 32,451
Prepaid expenses and
other assets........ 923 (4,150) 1,945 5,065 2,067
Accounts payable..... 13,007 (24,562) 26,483 193,168 (5,708)
Accrued expenses..... 3,948 4,483 (78) (8,268) (10,225)
Other long-term
obligations......... 117 810 1,993 -- --
-------- -------- -------- --------- --------
Net cash provided
(used) by operating
activities......... 14,185 (16,308) 61,660 17,350 (25,457)
-------- -------- -------- --------- --------
Cash flows from
investing activities:
Additions to land,
buildings,
improvements and
equipment............. (999) (1,476) (3,515) (1,238) (488)
Payments to acquire
companies, net of cash
acquired.............. (13,284) -- -- -- --
-------- -------- -------- --------- --------
Net cash used by
investing
activities......... (14,283) (1,476) (3,515) (1,238) (488)
-------- -------- -------- --------- --------
Cash flows from
financing activities:
Payments on long-term
debt.................. (1,304) -- -- -- --
Contribution
from/(distribution to)
parent--net........... 1,402 17,784 (58,145) (16,112) 25,945
-------- -------- -------- --------- --------
Net cash provided
(used) by financing
activities......... 98 17,784 (58,145) (16,112) 25,945
-------- -------- -------- --------- --------
Net increase (decrease)
in cash................ -- -- -- -- --
Cash at beginning of
year................... -- -- -- -- --
-------- -------- -------- --------- --------
Cash at end of year..... $ -- $ -- $ -- $ -- $ --
======== ======== ======== ========= ========
Supplemental
information:
Assets (excluding cash)
acquired through
purchase of
subsidiaries.......... 20,434
Liabilities assumed
through purchase of
subsidiaries.......... 15,486
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>

CENTRAL GARDEN DISTRIBUTION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Years Ended September 27, 1997, September 26, 1998 and September 25,
1999
and the Six Month Periods Ended March 27, 1999 and March 25, 2000

1. Organization and Significant Accounting Policies

Organization--Central Garden Distribution Inc., a Delaware corporation, and
subsidiary (the "Company"), is a national supplier and merchandiser of lawn and
garden products. The Company was included in the operations of Central Garden &
Pet Company ("Central") prior to its spin-off into a separate public entity
which will occur on or about July 29, 2000.

The Solaris Agreement--Central entered into an agreement effective October
1, 1995 with The Solaris Group ("Solaris"), a strategic business unit of
Monsanto Company, which manufactured Ortho, Round-up and Green Sweep lawn and
garden products (the "Solaris Agreement"). Under the Solaris Agreement, which
had a four year term, Central, primarily through the operations of the Company,
in addition to serving as the master agent and master distributor for sales of
Solaris products, provided a wide range of value-added services including
logistics, order processing and fulfillment, inventory distribution and
merchandising. However, Solaris continued to negotiate its sales prices
directly with its direct sales accounts. The Solaris Agreement provided for
Central to be reimbursed for costs incurred in connection with services
provided to Solaris' direct sales accounts and to receive payments based on the
growth of sales of Solaris products. Central was also entitled to share with
Solaris in the economic benefits of certain cost reductions, to the extent
achieved. The results of the activities encompassed by the Solaris Agreement
have been included in the operations of the Company for the three fiscal year
periods included herein and in its financial position as of September 26, 1998.

In February 1999, Monsanto sold its Solaris lawn and garden business
exclusive of its Roundup(R) herbicide products for consumer use to The Scotts
Company ("Scotts") and entered into a separate, long-term, exclusive agreement
pursuant to which Monsanto continues to make Roundup herbicide products for
consumer use and Scotts markets the products. Scotts has been for many years a
substantial supplier to Central and, in connection with its direct sales, a
substantial purchaser of Company services. On September 30, 1999, the Solaris
Agreement expired according to its terms.

Scotts has altered its distribution systems for certain products, including
Ortho(R) and Miracle-Gro(R) products and Monsanto's consumer Roundup products
for which Scotts acts as Monsanto's exclusive sales agent. Beginning October 1,
1999, Scotts began to distribute Ortho and Roundup products through a system
that involves a combination of distributors, of which the Company is the
largest, as well as through direct sales by Scotts to certain major retailers.
In addition, Scotts has begun to sell Miracle-Gro directly to certain
retailers. The Company will continue to serve as a distributor of Scotts
products during fiscal 2000. However, management believes that the Company's
sales volume of Solaris products in fiscal 2000 will be reduced from the volume
of fiscal 1999 by an estimated $200-$250 million.

At September 25, 1999, the Company held approximately $76 million of
inventory, which was returned to Scotts in accordance with the terms of the
Solaris Agreement subsequent to fiscal year end. Such inventory has been
recorded at its estimated net realizable value, and reported on the
consolidated balance sheet as "Inventory held for return to manufacturer" as of
September 25, 1999. The Company and Central have entered into an agreement
whereby Central has agreed to indemnify the Company for all net accounts
payable and receivable amounts due to or from Solaris which have not been
accounted for in the financial statements as of September 25, 1999, as well as
for any claims made against it related to the Agreement.

Basis of Consolidation and Presentation--The Company has conducted its
business as a division of Central, with some levels of management, personnel,
facilities and accounting records. The Company has

F-6
<PAGE>

CENTRAL GARDEN DISTRIBUTION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

historically depended on Central for corporate senior management and
administrative functions, as well as for strategic marketing, financing, cash
management, tax and payroll administration, property/casualty insurance,
employee benefits administration, and certain other services. The fees for
these services have been allocated to the Company, and reflected in the
accompanying consolidated financial statements. Such charges have been
allocated on a specific identification basis if known, square footage, or based
on a percentage of revenues for general administrative functions. In the
opinion of management, the fees included in the accompanying consolidated
financial statements reflect a reasonable amount for the services received;
however, such amounts were not established on an arm's-length basis and may not
be the same as would have been incurred had the Company operated independent of
Central. Nevertheless, management does not believe the Company would have
incurred materially different operating expenses as an independent company.

Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires that management make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.

Revenue Recognition--Sales are recorded, net of estimated returns and
discounts, when merchandise is shipped from Company warehouses, because title
and risk of loss passes to its customer and the Company has no further
obligations to provide services related to such merchandise, or when services
are provided to customers. The Company's current practice on product returns
generally is to accept and credit the return of unopened cases of products from
customers where the quantity is small, where the product has been misshipped or
the product is defective.

Other Charges--In September 1999, the Company recorded other charges
totaling $1.8 million associated with workforce reductions and facility
closures.

Of the $1.8 million charge, $0.1 million was recorded for exit related
costs, primarily lease costs required to be paid subsequent to the expiration
of the Solaris Agreement.

The Company initiated a plan for closure of three distribution centers as
well as a workforce reduction which is expected to be completed by the end of
the first quarter of fiscal 2000. Also included in the $1.8 million charge is
$1.7 million related to such closures and workforce reductions. Of this charge,
$0.4 million was required to reduce the carrying value of certain facility
assets which will no longer be used and are expected to be disposed of during
the first half of fiscal 2000. Also related to such closures, a charge of $0.4
million was recorded for other exit-related costs. These primarily consist of
lease costs and property taxes and other facility costs required to be paid
subsequent to the termination of operations. As part of this plan, the Company
recorded a severance charge of $0.6 million for workforce reductions. The
severance charge relates to the termination of 70 employees, primarily in the
sales force and distribution centers and associated administrative functions.
Severance of $0.2 million was paid during fiscal 1999 which related to the
termination of 51 employees. The remaining severance will be paid in fiscal
2000. The Company also recorded a charge of $0.3 million to reduce the carrying
value of inventory and receivables to their estimated recoverable value.
$0.9 million of the $1.8 million other charges recorded in September 1999 is
included in accrued expenses as of September 25, 1999.

In fiscal 1998, the Company recorded other charges totaling $1.9 million.
These charges related to the closure of two of the Company's branches and
included costs incurred during the close down process and other exit-related
costs.

F-7
<PAGE>

CENTRAL GARDEN DISTRIBUTION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Income Taxes are accounted for under the liability method in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes. The Company's taxable income has been included in Central's
consolidated tax returns. The provision for income taxes in the Company's
consolidated financial statements has been determined on a separate-return
basis, accordingly the amounts represented as taxes payable or receivable
represent payables to or receivables from the parent. Deferred income taxes
result primarily from bad debt allowances, inventory reserves, depreciation and
nondeductible reserves.

Inventories, which primarily consist of garden products finished goods are
stated at the lower of FIFO cost or market. Cost includes certain indirect
purchasing, merchandise handling and storage costs.

Inventories held for return to manufacturer consist of Solaris inventory
returned subsequent to September 25, 1999 in accordance with the terms of the
Solaris Agreement.

Long-lived assets--The Company periodically reviews its long-lived assets,
including goodwill, for potential impairment based on a review of projected
undiscounted cash flows associated with these assets.

Land, buildings, improvements and equipment are stated at cost. Depreciation
is computed by the straight-line method over thirty years for buildings.
Improvements are amortized on a straight-line basis over the shorter of the
useful life of the asset or the terms of the related leases. Depreciation on
equipment is computed by the straight-line and accelerated methods over the
estimated useful lives of 3 to 10 years.

Goodwill is amortized using the straight-line method over periods ranging
from 20 to 40 years. Accumulated amortization totaled $3,140,000 and $3,942,000
at September 26, 1998 and September 25, 1999, respectively.

Fair Value of Financial Instruments--At September 26, 1998 and September 25,
1999, the carrying amount of cash, accounts receivable and accounts payable
approximates its fair value.

New Accounting Pronouncements--In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in either assets or liabilities. As amended in June 1999 by SFAS No.
137 this statement is effective for all fiscal years beginning after June 15,
2000 and is not to be applied retroactively to financial statements for prior
periods. The impact of adoption of the standard has not yet been determined.

SFAS No. 130 requires an enterprise report, by major components and as a
single total, the change in its net assets, during the period from non-owner
sources. The Company does not have any items of Other Comprehensive Income, as
defined by SFAS No. 130, and thus Net Income is equal to Comprehensive Income.

SFAS No. 131 establishes annual and interim reporting standards for a
enterprise's operating segments and related disclosures about its products,
services, geographic areas, and major customers. The Company's operations
include only activities related to the sale of lawn and garden products to
retailers through similar distribution centers throughout the United States and
comprise one segment.

Pro forma earnings per share (unaudited) for all periods have been computed
based on the Company shares estimated to be outstanding as of the spin-off
date. The earnings per share computation excludes the potential dilutive impact
of stock options as there are currently no options outstanding of the Company
and any estimate of prior grants would not be practicable.

F-8
<PAGE>

CENTRAL GARDEN DISTRIBUTION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Stock Plan Information--The Company intends to implement various incentive
plans, to include a stock option plan and defined contribution 401(k) plan. The
Company will account for its stock-based awards using the intrinsic value
method in accordance with Accounting Principles Board No. 25, Accounting for
Stock Issued to Employees, and its related interpretations. Employees of the
Company who held options in Central prior to the spin-off date will retain
those options, which are exercisable into shares of Central stock and will have
no effect on the financial position of results of operations of the Company.

Unaudited Interim Financial Statements

Unaudited interim financial statements as of March 25, 2000 and for the six-
month periods ended March 27, 1999 and March 25, 2000 are unaudited but have
been prepared in accordance with generally accepted accounting principles for
interim financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. The results of operations of any interim
period are not necessarily indicative of the results of the operations for the
full year.

2. Acquisitions

Fiscal 1997

In March 1997, the Company acquired a 33.3% equity interest in Commerce LLC,
a distributor of lawn and garden products, which is being accounted for under
the equity method. In May 1997, the Company acquired Ezell Nursery Supply,
Inc., a distributor of lawn and garden, barbecue and patio products. The
purchase price for these two acquisitions totaled $17 million, including the
issuance of 193,104 shares of common stock at a value of $4 million. The
purchase price exceeded the fair market value of net assets acquired by $14
million which was recorded as goodwill and is being amortized on a straight-
line basis over 40 years.

These acquisitions have been accounted for under the purchase method and
have been included in the Company's consolidated statements of income from the
dates of acquisition.

Unaudited Pro Forma Results of Operations--The following table summarizes on
a pro forma basis the combined results of operations of the Company and its
subsidiaries for fiscal 1997 as if the fiscal year 1997 acquisitions were made
on September 29, 1996. The pro forma results of operations reflects the
amortization of goodwill which would have been incurred. Although this pro
forma combined information includes the results of operations of the
acquisition, it does not necessarily reflect the results of operations that
would have occurred had the acquisition been managed by the Company prior to
its acquisition.

<TABLE>
<CAPTION>
Fiscal Year Ended
September 27, 1997
--------------------
(unaudited,
in thousands, except
per share amounts)
<S> <C>
Net sales............................................... $615,941
Gross profit............................................ 78,237
Income before income taxes.............................. 19,842
Net income.............................................. 11,907

Net income per share:
Basic and diluted..................................... $ 6.41
Weighted average common shares outstanding:
Basic and diluted..................................... 1,857
</TABLE>

F-9
<PAGE>

CENTRAL GARDEN DISTRIBUTION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

3. Concentration of Credit Risk and Significant Customers and Suppliers

Customer Concentration--Approximately 61%, 64% and 65% of the Company's net
sales for fiscal years 1997, 1998 and 1999, respectively, were derived from
sales to the Company's top ten customers. The Company's largest customer
accounted for approximately 28%, 29% and 29% of the Company's net sales for
fiscal years 1997, 1998 and 1999, respectively. The Company's second largest
customer accounted for approximately 12%, 13% and 15% of the Company's net
sales for fiscal years 1997, 1998 and 1999, respectively. The Company's third
largest customer accounted for approximately 13% and 15% of the Company's net
sales for fiscal years 1998 and 1999, respectively. The loss of, or significant
adverse change in, the relationship between the Company and any of these three
customers could have a material adverse effect on the Company's business and
financial results. The loss of or reduction in orders from any significant
customer, losses arising from customer disputes regarding shipments, fees,
merchandise condition or related matters, or the Company's inability to collect
accounts receivable from any major customer could have a material adverse
impact on the Company's business and financial results. As of September 26,
1998 and September 25, 1999, accounts receivable from the Company's top eight
customers comprised 38% and 50%, respectively, of the Company's total accounts
receivable.

Supplier Concentration--While the Company purchases products from over 1,000
different manufacturers and suppliers, approximately 61%, 71% and 73% of the
Company's net sales in fiscal years 1997, 1998 and 1999, respectively, were
derived from products purchased from the Company's three largest suppliers. The
Company believes that approximately 46%, 54% and 55% of the Company's net sales
during fiscal years 1997, 1998 and 1999, respectively, were derived from sales
of products purchased from Solaris, the Company's largest supplier. As
discussed in Note 1, the Solaris Agreement expired on September 30, 1999.

4. Commitments and Contingencies

The Company has operating lease agreements principally for office and
warehouse facilities and equipment. Such leases have remaining terms, inclusive
of renewal options, of 1 to 8 years. Rental expense was $6,812,000, $8,502,000
and $10,177,000 for fiscal years 1997, 1998 and 1999, respectively.

Certain facility leases have renewal options and provide for additional rent
based upon increases in the Consumer Price Index.

Aggregate minimum annual payments on noncancelable operating leases at
September 25, 1999 are as follows:

<TABLE>
<CAPTION>
Fiscal year: (in thousands)
<S> <C>
2000....................................................... $ 9,985
2001....................................................... 8,978
2002....................................................... 6,736
2003....................................................... 5,086
2004....................................................... 4,439
Thereafter................................................. 4,194
-------
Total................................................... $39,418
=======
</TABLE>

F-10
<PAGE>

CENTRAL GARDEN DISTRIBUTION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

5. Income Taxes

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------
September 27, September 26, September 25,
1997 1998 1999
------------- ------------- -------------
(in thousands)
<S> <C> <C> <C>
Current:
Federal........................ $7,177 $7,872 $ 6,071
State.......................... 1,367 1,506 1,194
------ ------ -------
Total............................ 8,544 9,378 7,265

Deferred......................... 235 291 (1,644)
------ ------ -------
Total........................ $8,779 $9,669 $ 5,621
====== ====== =======
</TABLE>

A reconciliation of the statutory federal income tax rate with the Company's
effective income tax rate is as follows:

<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------
September 27, September 26, September 25,
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Statutory rate................. 35% 35% 35%
State income taxes, net of
federal benefit............... 4 4 4
Nondeductible expenses......... 1 1 2
--- --- ---
Effective tax rate............. 40% 40% 41%
=== === ===
</TABLE>

Deferred income taxes reflect the impact of "temporary differences" between
amounts of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws. The tax effect of temporary differences and
carryforwards which give rise to deferred tax assets and liabilities are as
follows:

<TABLE>
<CAPTION>
September 26, 1998 September 25, 1999
-------------------- --------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
-------- ----------- -------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Current:
Allowance for doubtful accounts
receivable.................... $ 594 $ 734
Inventory reserves............. 751 1,369
Prepaid expenses............... $ (312) $ (298)
Nondeductible reserves......... 455 1,070
State taxes....................
Other.......................... 2
------ ------- ------ -------
Current.......................... 1,800 (312) 3,175 (298)
Noncurrent:
Depreciation and amortization.. (828) (781)
Joint venture income........... (821) (620)
Nondeductible reserves......... 177 177
Other.......................... (17)
------ ------- ------ -------
Noncurrent....................... 177 (1,666) 177 (1,401)
------ ------- ------ -------
Total........................ $1,977 $(1,978) $3,352 $(1,699)
====== ======= ====== =======
</TABLE>

F-11
<PAGE>

CENTRAL GARDEN DISTRIBUTION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

6. Stock-Based Compensation

SFAS No. 123, Accounting for Stock-Based Compensation, requires the
disclosure of pro forma net earnings and earnings per share had the Company
adopted the fair value method as of the beginning of fiscal 1997. These
calculations require subjective assumptions, including future stock price
volatility and expected time to exercise, which greatly affect the calculated
values. To estimate the impact of the stock options granted to the Company's
employees on the operating result of the Company, the expected life, volatility
and interest rate of Central has been used to value the options held by
employees of the Company. Had compensation costs for the Central stock options
been determined based on the Black-Scholes value at the grant dates as
prescribed by SFAS No. 123, the pro forma net earnings for fiscal 1997, 1998
and 1999 would have been $11,162,000, $12,326,000, and $15,674,000,
respectively. The Company's calculations were made using the following weighted
average assumptions: expected life of four years from date of grant; stock
volatility, 64% in fiscal 1997, 59% in fiscal 1998 and 64% in fiscal 1999; risk
free interest rates, 6.1% in fiscal 1997, 5.8% in fiscal 1998 and 4.6% in
fiscal 1999; and no dividends during the expected term. The Company's
calculations are based on a single option valuation approach and forfeitures
are recognized as they occur.

However, the impact of outstanding non-vested stock options granted prior to
fiscal 1996 has been excluded from the pro forma calculation; accordingly, the
fiscal 1997, fiscal 1998 and fiscal 1999 pro forma adjustments are not
indicative of future period pro forma adjustments, when the calculation will
apply to all stock options.

7. Valuation and Qualifying Accounts

The following table summarises the activity in the Company's allowance for
doubtful accounts receivable account.

<TABLE>
<CAPTION>
Additions
------------------- Balances
Balance at Charged to Charged at End
Beginning Costs and to Other of
of Period Expenses Accounts Deductions Period
---------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Year ended September 27,
1997
Allowance for doubtful
accounts receivable...... $3,098 $ 643 $300(1) $1,256 $2,785
Year ended September 26,
1998
Allowance for doubtful
accounts receivable...... 2,785 1,152 -- 2,077 1,860
Year ended September 25,
1999
Allowance for doubtful
accounts receivable...... 1,860 3,787 -- 3,789 1,858
Six months ended March 25,
2000 (unaudited)
Allowance for doubtful
accounts receivable...... 1,858 496 -- 255 2,099
</TABLE>

Note: (1) Recorded on the books of company acquired

8. Transactions with Related Parties

The Company leased certain warehouse facilities and equipment from related
entities which had been controlled by a principal shareholder of the Company.
Rental expense under these leases totaled $156,000 annually in fiscal years
1998, and 1997, respectively. During fiscal year 1999, the Company's principal
shareholder disposed of these assets.

F-12