SEVENTH AMENDMENT TO NOTE PURCHASE AGREEMENT AND CONVERTIBLE SENIOR SUBORDINATED NOTE

EXHIBIT 10.2

SEVENTH AMENDMENT TO
NOTE PURCHASE AGREEMENT AND CONVERTIBLE SENIOR SUBORDINATED
NOTE

THIS SEVENTH AMENDMENT (this “ Amendment ”), dated as of February 18, 2005, to the Note Purchase Agreement, dated as of March 27, 1998, by and among DRESDNER KLEINWORT BENSON PRIVATE EQUITY PARTNERS LP, a Delaware limited partnership (the “ Purchaser ”), and GARDENBURGER, INC., an Oregon corporation (the “ Company ”).

WHEREAS, the parties hereto have entered into the Note Purchase Agreement, dated as of March 27, 1998 (as amended, modified or restated from time to time, the “ Agreement ”), a First Amendment to Note Purchase Agreement dated as of December 23, 1999 (the “ First Amendment ”), a Second Amendment to Note Purchase Agreement dated as of January 10, 2002 (the “ Second Amendment ”), a Third Amendment to Note Purchase Agreement dated as of September 20, 2002 (the “ Third Amendment ”), a Fourth Amendment to Note Purchase Agreement dated as of December 31, 2002 (the “ Fourth Amendment ”), a Fifth Amendment to Note Purchase Agreement dated as of December 29, 2003 (the “ Fifth Amendment ”) and a Sixth Amendment dated as of August 13, 2004 (the “ Sixth Amendment ”); unless otherwise defined herein, all capitalized terms used herein (including the recitals) shall have the meanings assigned to such terms in the Agreement, as amended by the First Amendment, Second Amendment Third Amendment, Fourth Amendment, Fifth Amendment and Sixth Amendment and hereby;

WHEREAS, Annex Holdings I L.P. (“ Annex ”) is the assignee of Purchaser and the term “Purchaser” shall be deemed to refer to Annex, where applicable ;

WHEREAS, the Company executed and delivered to Purchaser a Second Amended and Restated Convertible Senior Subordinated Note dated September 2, 2004 in the original principal amount of $16,905,643 (the “ Second Amended Note ”);

WHEREAS, the Company is party to a Revolving Credit and Term Loan Agreement dated as of January 10, 2002, as amended, with CapitalSource Finance LLC as a lender and as agent (“ CapitalSource ”);

WHEREAS, the Company and CapitalSource are contemporaneously entering into an Eighth Amendment to Revolving Credit and Term Loan Agreement dated as of February 18, 2005, in substantially the form attached hereto as Exhibit A (the “ CapitalSource Eighth Amendment ”); and

WHEREAS, the Company has requested the Purchaser to amend the Agreement on the terms and conditions set forth in this Amendment;

NOW, THEREFORE, in consideration of the premises and the agreements, provisions, and covenants contained herein, the parties hereto agree as follows:

1.             Amendments to Financial Covenants .  Effective as of February 18, 2005, subject to the conditions herein, the financial covenants and related definitions contained in subparagraph 2D of the Agreement shall be amended and restated in their entirety in the manner set forth on Annex I hereto.

2.             Conditions .  This Amendment shall be subject to satisfaction of the following conditions precedent, after giving effect to this Amendment, including the waivers contained in Section 3 below:  (a) the Company shall have delivered to the Purchaser an executed original copy of this Amendment and each other agreement, document or instrument reasonably requested by the Purchaser in connection with this Amendment; and (b) CapitalSource and the Company shall have executed the CapitalSource Eighth Amendment.

3.             Waivers .  The Purchaser hereby acknowledges that the Company is in breach of one or more financial covenants contained in subparagraph 2(D)(b) of the Agreement for the fiscal periods ended September 30, 2004 and December 31, 2004.  The Purchaser hereby waives all Events of Default resulting from breaches and noncompliance by the Company with subparagraph 2(D)(b) for the fiscal periods ending September 30, 2004 and December 31, 2004.  This waiver does not apply to any breach or Event of Default under the Agreement or the Convertible Notes to the extent it relates to any other fiscal period.

4.             Ratification of Agreement .

(a)           To induce the Purchaser to enter into this Amendment, the Company represents and warrants that, after giving effect to this Amendment, no violation of the terms of the Agreement exist and all representations and warranties contained in the Agreement are true, correct, and complete in all material respects on and as of the date hereof except as (i) reflected in any schedule to the Senior Credit Agreement, as updated under the terms of Section 4(a)(ii) of the Eighth Amendment (ii) disclosed in the Company’s reports filed with the Securities and Exchange Commission, or (iii) disclosed to Purchaser’s representative on the Board during a meeting of the Board, and except to the extent such representations and warranties specifically relate to an earlier date in which case they were true, correct, and complete in all material respects on and as of such earlier date.

(b)           To further induce Purchaser to enter into this Amendment, the Company acknowledges and agrees that, as of January 31, 2005, the amount outstanding under this Agreement and Convertible Note (including accrued interest and fees) is:  (i)  $16, 905,643 of principal, (ii) $4,088,770 of accrued interest, (iii) $3,381,129 of exit fee on principal, and (iv) the exit fee to be calculated at an amount equal to twenty percent (20%) of the accrued and unpaid interest.  The Company hereby acknowledges and agrees it has no defense, counterclaim, offset, cross-complaint, claim or demand of any kind or nature whatsoever originating on or before the date this Amendment is executed that can be asserted to reduce or eliminate all or any part of its liability to repay the Indebtedness evidenced by the Agreement and Convertible Note.

Except as expressly set forth in this Amendment, the terms, provisions and conditions of the Agreement and the Investment Documents as previously amended are unchanged, and said agreements, as amended, shall remain in full force and effect and are hereby confirmed and ratified.

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5.             Total Debt Ratio Fee .  In addition to and notwithstanding any other provision of the Agreement, commencing with the Quarterly Test Period ending September 30, 2005 and continuing for each Quarterly Test Period thereafter, Company shall pay to Purchaser the fees specified below (each installment of such fees, individually and collectively, the “ Total Debt Ratio Fee ”) if Company’s Total Debt Ratio for such Quarterly Test Period exceeds the ratio corresponding to such Quarterly Test Period in the table set forth below:

If an installment of the Total Debt Ratio Fee is due in accordance with the foregoing table, such installment shall be added to the principal amount due to Purchaser under this Agreement and Convertible Note subject to the terms of Section 6P of the Agreement as amended hereby.

6.             Amendment Fee .  The Company shall pay to Purchaser $250,000 for the nonrefundable amendment fee (the “ Seventh Amendment Fee ”), which shall be added to the principal amount due to Purchaser under the Agreement and Convertible Note subject to the terms of Section 6P of the Agreement as amended hereby.

7.             Consent to CapitalSource Eighth Amendment .  The Purchaser consents to the execution and delivery by the Company of the CapitalSource Eighth Amendment and affirms that the provisions of the CapitalSource Eighth Amendment do not constitute a breach or Event of Default under the Agreement or the Convertible Notes and that the Amortizing Advance Amount constitutes Senior Indebtedness.

8.             Blockage .  Notwithstanding any provision set forth in Section 6P of the Agreement or any other provision of the Agreement or any other Investment Document:

(a)           until the date upon which the Obligations (as defined in the Senior Credit Agreement) owed to the Agent and Lenders under the Senior Credit Agreement have been irrevocably repaid in full in cash, the Company may not make and the Purchaser or any successor in interest may not receive or retain any payment or distribution (in cash, in kind, in properties or securities, by set-off or otherwise, except that the holders of the Subordinated Debt may accrue payment-in-kind interest and fees) in respect of the Subordinated Debt; provided, however, that if: (i) the Agent and Lenders under the Sen