10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________ to ____________________

Commission File Number: 333-53603-03

GRAHAM PACKAGING HOLDINGS COMPANY

(Exact name of registrant as specified in its charter)

Pennsylvania	23-2553000
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
Incorporation or organization)

2401 Pleasant Valley Road

York, Pennsylvania 17402

(717) 849-8500

(Address, including zip code, and telephone number, including

area code, of the registrant’s principal executive offices)

Securities Registered pursuant to Section 12(b) of the Act: None

Securities Registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes o Nox.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o Nox.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days, Yes x Noo.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o Nox.

There is no established public trading market for any of the general or limited partnership interests in the registrant. The aggregate market value of the voting securities held by non-affiliates of the registrant as of March 15, 2007 was $-0-. As of March 15, 2007, the general partnership interests in the registrant were owned by BCP /Graham Holdings L.L.C. and Graham Packaging Corporation, and the limited partnership interests in the registrant were owned by BMP/Graham Holdings Corporation and certain members of the family of Donald C. Graham and entities controlled by them. See Item 12, “Security Ownership of Certain Beneficial Owners and Management.”

______________

DOCUMENTS INCORPORATED BY REFERENCE

None.

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GRAHAM PACKAGING HOLDINGS COMPANY

INDEX

		Page Number
PART I
Item 1.	Business	4
Item 1A.	Risk Factors	12
Item 1B.	Unresolved Staff Comments	17
Item 2.	Properties	18
Item 3.	Legal Proceedings	20
Item 4.	Submission of Matters to a Vote of Security Holders	20
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Registrant Purchases of Equity Securities	21
Item 6.	Selected Financial Data	22
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 8.	Financial Statements and Supplementary Data	37
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	79
Item 9A.	Controls and Procedures	79
Item 9B.	Other Information	80
PART III
Item 10.	Advisory Committee Members and Executive Officers of the Registrant	81
Item 11.	Executive Compensation	83
Item 12.	Security Ownership of Certain Beneficial Owners and Management	96
Item 13.	Certain Relationships and Related Transactions	98
Item 14.	Principal Accounting Fees and Services	102
PART IV
Item 15.	Exhibits and Financial Statement Schedules	104

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

All statements other than statements of historical facts included in this Annual Report on Form 10-K, including statements regarding the future financial position, economic performance and results of operations of the Company (as defined below), as well as the Company’s business strategy, budgets and projected costs and plans and objectives of management for future operations, and the information referred to under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part II, Item 7) and “Quantitative and Qualitative Disclosures About Market Risk” (Part II, Item 7A), are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or similar terminology. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about the Company’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company’s control. Accordingly, readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this report. Important factors that could cause actual results to differ materially from the Company’s expectations include, without limitation:

• the restrictive covenants contained in instruments governing the Company’s indebtedness;

• the Company’s high degree of leverage and substantial debt service;

• the Company’s exposure to fluctuations in resin prices and its dependence on resin supplies;

• risks associated with the Company’s international operations;

• the Company’s dependence on significant customers and the risk that customers will not purchase the Company’s products in the amounts expected by the Company under their requirements contracts;

• the majority of the Company’s sales are made pursuant to requirements contracts;

• a decline in prices of plastic packaging;

• the Company’s ability to develop product innovations and improve the Company’s production technology and expertise;

• infringement on the Company’s proprietary technology;

• sales of the Company’s beverage containers may be affected by cool summer weather;

• risks associated with environmental regulation and liabilities;

• the possibility that the Company’s shareholders’ interests will conflict with the Company’s interests;

• the Company’s dependence on key management and its labor force and the material adverse effect that could result from the loss of their services;

• the Company’s ability to successfully integrate its business with those of other businesses that the Company may acquire;

• risks associated with a significant portion of the Company’s employees being covered by collective bargaining agreements; and

• the Company’s dependence on blow molding equipment providers.

See “Item 1A – Risk Factors.” All forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements set forth in this paragraph.

Unless otherwise indicated, all sources for all industry data and statistics contained herein are estimates contained in or derived from internal or industry sources believed by the Company to be reliable. Market data and certain industry forecasts used herein were obtained from internal surveys, market research, publicly available information and industry publications. Industry publications generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Similarly, internal surveys, industry forecasts and market research, while believed to be reliable, have not been independently verified, and the Company makes no representations as to the accuracy of such information.

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PART I

Item 1. Business

Unless the context otherwise requires, all references herein to the “Company,” “we,” “our” or “us” refer to Graham Packaging Holdings Company (“Holdings”) and its subsidiaries. Graham Packaging Company, L.P. (the “Operating Company”) is a wholly owned subsidiary of Holdings. References to the “Blackstone Investors” herein refer to Blackstone Capital Partners III Merchant Banking Fund L.P., Blackstone Offshore Capital Partners III L.P. and Blackstone Family Investment Partnership III L.P. References to the “Graham Family Investors” herein refer to Graham Capital Company, GPC Investments LLC and Graham Alternative Investment Partners I or affiliates thereof or other entities controlled by Donald C. Graham and his family. All references to “Management” herein shall mean the Management of the Operating Company at the time in question, unless the context indicates otherwise.

The Company focuses on the sale of value-added plastic packaging products principally to large, multinational companies in the food and beverage, household, automotive lubricants and personal care/specialty product categories. The Company has manufacturing facilities in Argentina, Belgium, Brazil, Canada, Ecuador, England, Finland, France, Hungary, Mexico, the Netherlands, Poland, Spain, Turkey, the United States and Venezuela. On October 7, 2004, the Company acquired the blow molded plastic container business of Owens-Illinois, Inc. (“O-I Plastic”). Since October 7, 2004 the Company’s operations have included the operations of O-I Plastic. With this acquisition the Company essentially doubled in size.

General

Holdings was formed under the name “Sonoco Graham Company” on April 3, 1989 as a Pennsylvania limited partnership. It changed its name to “Graham Packaging Company” on March 28, 1991 and to “Graham Packaging Holdings Company” on February 2, 1998. The Operating Company was formed under the name “Graham Packaging Holdings I, L.P.” on September 21, 1994 as a Delaware limited partnership and changed its name to “Graham Packaging Company, L.P.” on February 2, 1998. The predecessor to Holdings, controlled by the predecessors of the Graham Family Investors, was formed in the mid-1970’s as a regional domestic custom plastic container supplier. The primary business activity of Holdings is its direct and indirect ownership of 100% of the partnership interests in the Operating Company.

The principal executive offices of the Company are located at 2401 Pleasant Valley Road, York, Pennsylvania 17402, telephone (717) 849-8500. The Company maintains a website at www.grahampackaging.com. The Company makes available on its website, free of charge, its annual reports on Form 10-K and quarterly reports on Form 10-Q as soon as practical after the Company files these reports with the U.S. Securities and Exchange Commission (“SEC”). The information contained on the Company’s website is not incorporated by reference herein.

The Company is organized and managed on a geographical basis in three operating segments: North America, Europe and South America. Each operating segment includes four major categories: Food and Beverage, Household, Automotive Lubricants and Personal Care/Specialty.

The Company is a worldwide leader in the design, manufacture and sale of technology-based, value-added custom blow molded plastic containers for branded consumer products. As of December 31, 2006, the Company supplies its plastic containers to food and beverage, household, personal care/specialty and automotive lubricants product categories through 86 manufacturing facilities throughout North America, Europe and South America. The Company’s primary strategy is to operate in product categories where it will benefit from the continuing conversion trend toward value-added plastic packaging in place of more commodity glass, metal and paperboard packaging. The Company targets product categories that demand value-added packaging and that will benefit from conversion to plastic packaging; and it pursues opportunities with selected major consumer product companies that it expects will lead the conversion to plastic in these categories. The Company utilizes its innovative design, engineering and technological capabilities to deliver customized, value-added products to its customers in these product categories in order to distinguish their branded products and increase their sales.

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From 1998 through 2006, the Company grew net sales at a compounded annual growth rate of over 19% as a result of its capital investment and focus on the high growth food and beverage conversions from glass, paper and metal containers to plastic packaging, its acquisition on October 7, 2004 of O-I Plastic and an increase in resin prices during the period. With leading positions in each of its core product categories, the Company believes it is poised to continue to benefit from the current conversion trend towards value-added plastic packaging, offering it the opportunity to realize attractive returns on investment.

The Company has an extensive blue-chip customer base that includes many of the world’s largest branded consumer products companies. Approximately one-third of the Company’s manufacturing facilities are located on-site at its customers’ plants, which the Company believes provides a competitive advantage in maintaining and growing customer relationships. The majority of the Company’s sales are made pursuant to long-term customer purchase orders and contracts. The Company’s containers are manufactured primarily from three plastic resins, including polyethylene terephthalate, or PET, high-density polyethylene, or HDPE, and polypropylene, or PP. In 2006, the Company’s top 20 customers comprised over 72% of its net sales and have been its customers for an average of over 20 years.

The combination of leading technology, product innovation, efficient manufacturing operations and strong customer relationships, including on-site facilities, has enabled the Company to generate strong volume growth, margins and returns on invested capital.

Food and Beverage. In the food and beverage product category, the Company produces containers for shelf-stable, refrigerated and frozen juices, non-carbonated juice drinks, teas, sports drinks/isotonics, beer, liquor, yogurt drinks, nutritional drinks, toppings, sauces, jellies and jams. Management believes, based on internal estimates, that the Company has the leading domestic position in plastic containers for hot-fill juice and juice drinks, sports drinks, drinkable yogurt and smoothies, nutritional supplements, wide-mouth food, dressings, condiments and beer, and the leading global position in plastic containers for yogurt drinks. The Company’s food and beverage sales have grown at a compound annual growth rate of 26% from fiscal 1998 through fiscal 2006. Based on the Company’s knowledge of and experience in the industry, its focus on markets which are likely to convert to plastic, its proprietary technologies and its current market position, Management believes the Company is strategically positioned to benefit from the estimated 60% of the domestic hot-fill food and beverage market that has yet to convert to plastic and also to take advantage of evolving domestic and international conversion opportunities like snack foods, beer, baby food and adult nutritional beverages.

The Company’s largest customers in the food and beverage product category include, in alphabetical order: Abbott Laboratories (“Abbott”), Arizona Beverages Company, LLC (“Arizona”), Clement Pappas & Co., Inc. (“Clement Pappas”), Clorox Products Manufacturing Company (“Clorox”), Coca-Cola North America (“CCNA”), Group Danone (“Danone”), H.J. Heinz Company (“Heinz”), Ocean Spray Cranberries, Inc. (“Ocean Spray”), PepsiCo, Inc. (“PepsiCo”), The Quaker Oats Company (“Quaker Oats”), Tropicana Products, Inc. (“Tropicana”), Conopco Inc. (“Unilever”) and Welch Foods, Inc. (“Welch’s”). For the years ended December 31, 2006, 2005 and 2004, the Company generated approximately 58.7%, 57.5% and 56.9%, respectively, of its net sales from food and beverage containers.

Household. In the household product category, the Company is a leading supplier of plastic containers for products such as liquid fabric care, dish care and hard-surface cleaners. The growth in prior years was fueled by conversions from powders to liquids for such products as detergents, household cleaners and automatic dishwashing detergent. Powdered products are packaged in paper based containers such as fiber wound cans and paperboard cartons. The growth of this product category now follows gross domestic product (“GDP”) growth as liquids have gained a predominant share of these products. It should be noted the fabric care industry is now offering some brands in a concentrated formula which will negatively impact sales in this product category.

The Company’s largest customers in the household product category include, in alphabetical order: Church & Dwight Co., Inc. (“Church & Dwight”), Clorox, Colgate-Palmolive Company (“Colgate-Palmolive”), Dial Corporation (“Dial,” a division of Henkel), The Procter & Gamble Company (“Procter & Gamble”) and Unilever. For the years ended December 31, 2006, 2005 and 2004, the Company generated approximately 20.3%, 20.6% and 20.2%, respectively, of its net sales from household containers.

Automotive Lubricants. Management believes, based on internal estimates, that the Company is the leading supplier of one quart/one liter plastic motor oil containers in the United States, Canada and Brazil, supplying most of the motor oil producers in these countries, including approximately 89% of the one quart/one liter plastic motor oil

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containers in the U.S., based upon 2006 unit sales. The Company has been producing automotive lubricants containers since the first plastic automotive lubricants container was introduced over 20 years ago and since then has partnered with its customers to improve product quality and jointly reduce costs through design improvement, reduced container weight and manufacturing efficiencies. The Company’s joint product design and cost efficiency initiatives with its customers have also strengthened its service and customer relationships.

The Company’s largest customers in the automotive lubricants product category include, in alphabetical order: Ashland, Inc. (“Ashland,” producer of Valvoline motor oil), BP Lubricants USA, Inc. (“BP Lubricants,” an affiliated company of BP plc, producer of Castrol motor oil), Chevron Products Company (“Chevron,” a Chevron U.S.A. Inc. Division, producer of Chevron and Havoline motor oils), ExxonMobil Corporation (“ExxonMobil”) and Shell Oil Products US (“Shell,” producer of Shell, Pennzoil and Quaker State motor oils). For the years ended December 31, 2006, 2005 and 2004, the Company generated approximately 11.3%, 11.3% and 17.8%, respectively, of its net sales from automotive lubricants containers.

Personal Care/Specialty. Nearly all of the Company’s sales in the personal care/specialty product category were the result of the acquisition of O-I Plastic on October 7, 2004. In the personal care/specialty product category, the Company is a leading supplier of plastic containers for products such as hair care, skin care and oral care. The Company’s product design, technology development and decorating capabilities help its customers build brand awareness for their products through unique, and frequently changing, packaging design. The Company believes it has the leading domestic position in plastic containers for hair care and skin care products.

The Company’s largest customers in the personal care/specialty product category include, in alphabetical order: Intimate Brands, Inc. (“Intimate”), Procter & Gamble and Unilever. For the years ended December 31, 2006, 2005 and 2004, the Company generated approximately 9.7%, 10.6% and 5.1%, respectively, of its net sales from personal care/specialty containers.

Additional information regarding business segments and product categories is provided in Note 21 of the Notes to Financial Statements.

Products and Raw Materials

PET, HDPE and PP resins constitute the primary raw materials used to make the Company’s products. These materials are available from a number of suppliers and the Company is not dependent upon any single supplier. Management believes that the Company maintains an adequate inventory to meet demands, but there is no assurance this will be true in the future. Changes in the cost of resin are passed through to customers by means of corresponding changes in product pricing in accordance with the Company’s agreements with these customers and industry practice. As resin prices can fluctuate significantly, the Company believes that its gross profit, as well as certain expense items, should not be analyzed solely on a percentage of net sales basis. A sustained increase in resin prices, to the extent that those costs are not passed on to the end-consumer, would make plastic containers less economical for the Company’s customers and could result in a slower pace of conversions to plastic containers. The Company operates one of the largest HDPE bottles-to-bottles recycling plants in the world. The recycling plant is located near the Company’s headquarters in York, Pennsylvania.

Customers

Substantially all of the Company’s sales are made to major branded consumer products companies. The Company’s customers demand a high degree of packaging design and engineering to accommodate complex container shapes and performance and material requirements, in addition to quick and reliable delivery. As a result, many customers opt for long-term contracts, some of which have terms up to ten years. A majority of the Company’s top twenty customers are under long-term contracts. The Company’s contracts typically contain provisions allowing for price adjustments based on changes in raw materials and in some cases the cost of energy and labor, among other factors. In many cases, the Company is the sole supplier of its customers’ custom plastic container requirements nationally, regionally or for a specific brand. For the year ended December 31, 2006, the Company had sales to one customer, PepsiCo, which exceeded 10% of net sales. The Company’s sales to PepsiCo were 17.0% of net sales for the year ended December 31, 2006. For the year ended December 31, 2006, the Company’s twenty largest customers, who accounted for over 72% of net sales, were, in alphabetical order:

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Customer (1)	Category	Company Customer Since (1)
Abbott	Food and Beverage	Mid 2000s
Arizona	Food and Beverage	Late 1990s
Ashland (2)	Automotive Lubricants	Early 1970s
BP Lubricants (3)	Automotive Lubricants	Late 1960s
Church & Dwight	Household	Late 1980s
Clement Pappas	Food and Beverage	Mid 1990s
Clorox	Food and Beverage and Household	Late 1960s
CCNA	Food and Beverage	Late 1990s
Colgate-Palmolive	Household	Mid 1980s
Danone	Food and Beverage	Late 1970s
Dial	Household and Personal Care/Specialty	Early 1990s
ExxonMobil	Automotive Lubricants	Early 2000s
Heinz	Food and Beverage	Early 1990s
Intimate	Person Care/Specialty	Late 1980s
Ocean Spray	Food and Beverage	Early 1990s
PepsiCo (4)	Food and Beverage	Early 2000s
Frito-Lay	Food and Beverage	Early 2000s
Quaker Oats	Food and Beverage	Late 1990s
Tropicana	Food and Beverage	Mid 1980s
Procter & Gamble	Household and Personal Care/Specialty	Late 1950s
Shell (5)	Automotive Lubricants	Early 1970s
Pennzoil-Quaker State	Automotive Lubricants	Early 1970s
Unilever	Household, Personal Care/Specialty and Food and Beverage	Early 1970s
Welch’s	Food and Beverage	Early 1990s

(1) These companies include their predecessors, if applicable, and the dates may reflect customer relationships initiated by predecessors to the Company or entities acquired by the Company.

(2) Ashland is the producer of Valvoline motor oil.

(3) BP Lubricants is the producer of Castrol motor oil.

(4) PepsiCo includes Frito-Lay, Quaker Oats and Tropicana.

(5) Shell includes Pennzoil-Quaker State.

International Operations

The Company has significant operations outside the United States in the form of wholly owned subsidiaries and other arrangements. As of the end of 2006, the Company had 29 manufacturing facilities located in countries outside of the United States, including Argentina (2), Belgium (2), Brazil (4), Canada (1), Ecuador (1), England (1), Finland (1), France (3), Hungary (1), Mexico (5), the Netherlands (2), Poland (2), Spain (1), Turkey (2) and Venezuela (1).

South America. The Company has four on-site plants in Argentina and Brazil and four off-site plants in Argentina, Brazil, Ecuador and Venezuela, for the production of plastic containers for all four of the Company’s core product categories.

Mexico. In Mexico, the Company has three off-site plants and two on-site plants for the production of plastic containers for all four of the Company’s core product categories.

Europe. The Company has on-site plants in each of Belgium (2), France, Hungary, the Netherlands, Poland, Spain and Turkey and seven off-site plants in England, Finland, France, the Netherlands, Poland and Turkey, for the production of plastic containers for all four of the Company’s core product categories.

Canada. The Company has one off-site facility located near Toronto, Canada to service Canadian and northern U.S. customers. This facility produces containers for all four of the Company’s core product categories.

See Note 21 of the Notes to the Consolidated Financial Statements.

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Competition

The Company faces substantial regional and international competition across its product lines from a number of well-established businesses. The Company’s primary competitors include Alpla Werke Alwin Lehner GmbH, Amcor Limited, Ball Corporation, Consolidated Container Company LLC, Constar International Inc., Plastipak, Inc. and Silgan Holdings Inc. Several of these competitors are larger and have greater financial and other resources than the Company. Management believes that the Company competes effectively through its ability to provide superior levels of service, its speed to market and its ability to develop product innovations and improve its production technology and expertise.

Marketing and Distribution

The Company’s sales are made primarily through its own direct sales force, as well as selected brokers. Sales activities are conducted from the Company’s corporate headquarters in York, Pennsylvania and from field sales offices located in Cincinnati, Ohio; Houston, Texas; Levittown, Pennsylvania; Maryland Heights, Missouri; Saddlebrook, New Jersey; Skokie, Illinois; Mississauga, Ontario, Canada; Paris, France; Chalgrove, England; Etten-Leur, Netherlands; Ryttyla, Finland; Buenos Aires, Argentina; Caracas, Venezuela; Sao Paulo, Brazil; Rio de Janeiro, Brazil; Sulejowek, Poland; and Istanbul, Turkey. The Company’s products are typically delivered by truck, on a daily basis, in order to meet customers’ just-in-time delivery requirements, except in the case of on-site operations. In many cases, the Company’s on-site operations are integrated with its customers’ manufacturing operations so that deliveries are made, as needed, by direct conveyance to the customers’ filling lines.

Superior Product Design and Development Capabilities

The Company’s ability to develop new, innovative containers to meet the design and performance requirements of its customers has established the Company as a market leader. The Company has demonstrated significant success in designing innovative plastic containers that require customized features such as complex shapes, reduced weight, handles, grips, view stripes, pouring features and graphic-intensive customized labeling, and often must meet specialized performance and structural requirements such as hot-fill capability, recycled material usage, oxygen barriers, flavor protection and multi-layering. In addition to increasing demand for its customers’ products, the Company believes that its innovative packaging stimulates consumer demand and drives further conversion to plastic packaging. Consequently, the Company’s strong design capabilities have been especially important to its food and beverage customers, who generally use packaging to differentiate and add value to their brands while spending less on promotion and advertising. The Company has been awarded significant contracts based on these unique product design capabilities that it believes set it apart from its competition. Some of the Company’s design and conversion successes over the past few years include:

• aseptic HDPE container for the 8^th Continent soy-based beverages;

• hot-fill PET 16 oz. container with Monosorb™ oxygen scavenger for Tropicana Season’s Best brand, PepsiCo’s Dole brand and Welch’s brand juices;

• hot-fill PET and PP wide-mouth jar for Ragu pasta sauce, Seneca applesauce, Welch’s jellies and jams and Signature fruit slices;

• HDPE frozen juice container for Welch’s and Old Orchard in the largely unconverted metal and paper-composite can markets;

• a true wide-mouth PET juice carafe for Tropicana’s Pure Premium;

• a multi-layer HDPE canister for Frito-Lay’s Stax product;

• a multi-layer SurShot™ PET container for ketchup, beer and juices; and

• Downy Simple Pleasures bottle for Procter & Gamble.

The Company’s innovative designs have also been recognized, through various awards, by a number of customers and industry organizations, including its PET “Apple” container for Martinelli’s (2006 Ameristar Award), PET rectangular juice bottle for Tree Top (2006 Ameristar Award), PET “Fridge Fit” bottle for Heinz (2006 Ameristar Award and 2006 DuPont Award), dual-chamber bottle for Procter & Gamble Cosmetics (2005 Food & Drug Personal Care package of the year), ATP panel-free single serve bottle and 64 oz. rectangular hot-fill bottle (2004 Ameristar Award), Ensure reclosable bottle (2004 Ameristar Award and 2004 Dupont Award), Flexa Tube™ (2003 Dupont Award, 2003 Ameristar Award and 2003 Food & Drug Packaging Award), Coca-Cola Quatro bottle

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(2002 Mexican Packaging Association) and Sabritas (PepsiCo) Be-Light bottle (2002 Mexican Packaging Association).

The Company has an advanced multi-layer injection technology, trade named SurShot™. The Company believes that SurShot™ is among the best multi-layer PET technologies available and billions of plastic containers are produced and sold each year using SurShot™ technology. Currently, the Company is co-developing an advanced 144 cavity SurShot™ machine, under its long-term technical arrangement with Husky Injection Molding Systems Ltd., which will offer significant production cost advantages. The Company will have exclusive rights to use this leading edge machine and expects to commercialize 144 cavity SurShot™ machines.

Management believes the Company’s design and development capabilities, particularly in light of the Company’s acquisition of O-I Plastic, has positioned the Company as the packaging design, development and technology leader in the industry. Over the past several years the Company has received and has filed for numerous patents. See “—Intellectual Property”.

In 2005, the Company enhanced its capability with the opening of the Global Innovation & Design Center in York, Pennsylvania.

Manufacturing

A critical component of the Company’s strategy is to locate manufacturing facilities on-site, reducing expensive shipping and handling charges and increasing production and distribution efficiencies. The Company is a leader in providing on-site manufacturing arrangements. As of the end of 2006, approximately one-third of its 86 manufacturing facilities were on-site at customer and vendor facilities. Within these 86 plants, the Company operates over 900 production lines. The Company sometimes dedicates particular production lines within a plant to better service customers. The plants generally operate 24 hours a day, five to seven days a week, although not every production line is run constantly. When customer demand requires, the plants run seven days a week. The Company’s manufacturing historically has not been subject to large seasonal fluctuations.

In the blow molding process used for HDPE applications, resin pellets are blended with colorants or other necessary additives and fed into the extrusion machine, which uses heat and pressure to form the resin into a round hollow tube of molten plastic called a parison. In a wheel blow molding process, bottle molds mounted radially on a wheel capture the parison as it leaves the extruder. Once inside the mold, air pressure is used to blow the parison into the bottle shape of the mold. While certain of the Company’s competitors also use wheel technology in their production lines, the Company has developed a number of proprietary improvements which Management believes permit the Company’s wheels to operate at higher speeds and with greater efficiency in the manufacture of containers with one or more special features, such as multiple layers and in-mold labeling.

In the stretch blow molding process used for hot-fill PET applications, resin pellets are fed into an injection molding machine that uses heat and pressure to mold a test tube shaped parison or “preform.” The preform is then fed into a blow molder where it is re-heated to allow it to be formed through a stretch blow molding process into a final container. During this re-heat and blow process, special steps are taken to induce the temperature resistance needed to withstand high temperatures on customer filling lines. Management believes that the injection molders and blow molders used by the Company are widely recognized as the leading technologies for high speed production of hot-fill PET containers and have replaced less competitive technologies used initially in the manufacture of hot-fill PET containers.

Other blow molding processes include: various types of extrusion blow molding for medium- and large-sized HDPE and PP containers; stretch blow molding for medium-sized PET containers; injection blow molding for personal care containers in various materials; two-stage PET blow molding for high-volume, high-performance mono-layer, multi-layer and heat set PET containers; and proprietary blow molding for drain-back systems and other specialized applications.

The Company also operates a variety of bottle decorating platforms. Labeling and decorating is accomplished through in-mold techniques or one of many post-molding methods. Post-molding methods include pressure sensitive labelers, rotary full-wrap labelers, silk-screen decoration, heat transfer and hot stamp. These post-molding methods of decoration or labeling can be in-line or off-line with the molding machine. Typically, these decoration methods are used for bottles in the personal care/specialty product category.

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The Company has employed various types and styles of automation to rationalize labor costs, accomplish assembly tasks, increase throughput and improve quality. Types of automation range from case and tray packers to laser guided vehicles. Other automation equipment includes box and bulk bottle palletizers, pick and place robots, automatic in-line leak detection and vision inspection systems. Assembly automation includes bottle trimming, spout spinwelding or insertion, cap insertion and tube cutting/welding. Management believes that there are additional automation opportunities which could further rationalize labor costs and improve plant efficiency.

The Company maintains a program of quality control with respect to suppliers, line performance and packaging integrity for its containers. The Company’s production lines are equipped with various automatic inspection machines that electronically inspect containers. Additionally, product samples are inspected and tested by Company employees on the production line for proper dimensions and performance and are also inspected and audited after packaging. Containers that do not meet quality standards are crushed and recycled as raw materials. The Company monitors and updates its inspection programs to keep pace with modern technologies and customer demands. Quality control laboratories are maintained at each manufacturing facility to test its products.

The Company has highly modernized equipment in its plants, consisting primarily of rotational wheel systems and shuttle systems, both of which are used for HDPE and PP blow molding, and injection-stretch blow molding systems for value-added PET containers. The Company is also pursuing development initiatives in barrier technologies to strengthen its position in the food and beverage product category. In the past, the Company has achieved substantial cost savings in its manufacturing process through productivity and process enhancements, including increasing line speeds, utilizing recycled products, reducing scrap and optimizing plastic weight requirements for each product’s specifications.

Cash paid for property, plant and equipment, net of proceeds from sale of property, plant and equipment and excluding acquisitions, for 2006, 2005 and 2004 were $170.9 million, $242.6 million and $151.9 million, respectively. Management believes that capital expenditures to maintain and upgrade property, plant and equipment is important to remain competitive. Management estimates that on average the annual capital expenditures required to maintain the Company’s current facilities are approximately $47 million per year. For 2007, the Company expects to make capital expenditures, excluding acquisitions, ranging from $160 million to $175 million.

Ownership

Holdings is currently owned by (i) BMP/Graham Holdings Corporation, a Delaware corporation (92.5%-owned by the Blackstone Investors, 4.8%-owned by DB Investment Partners, Inc. and 2.7%-owned by Management) (“Investor LP”), who owns an 81% limited partnership interest, (ii) BCP/Graham Holdings L.L.C., a Delaware limited liability company (wholly owned by BMP/Graham Holdings Corporation) (“Investor GP” and, together with Investor LP, the “Equity Investors”), who owns a 4% general partnership interest, (iii) GPC Holdings, L.P., a Pennsylvania limited partnership (indirectly owned by the Graham Family Investors), who owns a 14% limited partnership interest and (iv) Graham Packaging Corporation, a Pennsylvania corporation (indirectly owned by the Graham Family Investors), who owns a 1% general partnership interest. Management’s 2.7% ownership interest in Investor LP constitutes a 2.3% interest in Holdings.

Holdings owns a 99% limited partnership interest in the Operating Company, and GPC Opco GP LLC (“Opco GP”), a wholly owned subsidiary of Holdings, owns a 1% general partnership interest in the Operating Company. See “Security Ownership of Certain Beneficial Owners and Management” (Item 12).

GPC Capital Corp. I (“CapCo I”), a wholly owned subsidiary of the Operating Company, and GPC Capital Corp. II (“CapCo II”), a wholly owned subsidiary of Holdings, were incorporated in Delaware in January 1998. The sole purpose of CapCo I is to act as co-obligor of the Senior Notes and Senior Subordinated Notes, as defined herein, and as co-borrower under the Credit Agreement and Second-Lien Credit Agreement (as defined herein) (see “Item 1A – Risk Factors”). CapCo II currently has no obligations under any of the Company’s outstanding indebtedness. CapCo I and CapCo II have only nominal assets, do not conduct any operations and did not receive any proceeds of the refinancing. Accordingly, investors in the Notes must rely on the cash flow and assets of the Operating Company or the cash flow and assets of Holdings, as the case may be, for payment of the Notes.

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Employees

As of December 31, 2006, the Company had approximately 8,400 employees, 6,800 of which were located in North America, 1,100 of which were located in Europe and 500 of which were located in South America. Approximately 81% of the Company’s employees are hourly wage employees, 51% of whom are represented by various labor unions and are covered by various collective bargaining agreements that expire through October 2011. In North America, 82% of the Company’s employees are hourly employees, 44% of whom are represented by various labor unions. In Europe, 77% of the Company’s employees are hourly employees, 92% of whom are represented by various labor unions. In South America, 83% of the Company’s employees are hourly employees, 49% of whom are represented by various labor unions. Management believes that it enjoys good relations with the Company’s employees.

Environmental Matters

The Company’s operations, both in the United States and abroad, are subject to national, state, foreign, provincial and/or local laws and regulations that impose limitations and prohibitions on the discharge and emission of, and establish standards for the use, disposal and management of, regulated materials and waste, and that impose liability for the costs of investigating and cleaning up, and damages resulting from, present and past spills, disposals or other releases of hazardous substances or materials. These domestic and international environmental laws can be complex and may change often, compliance expenses can be significant and violations may result in substantial fines and penalties. In addition, environmental laws such as the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, also known as “Superfund” in the United States, impose strict, and in some cases joint and several, liability on specified responsible parties for the investigation and cleanup of contaminated soil, groundwater and buildings, and liability for damages to natural resources, at a wide range of properties. As a result, the Company may be liable for contamination at properties that it currently owns or operates, as well as at its former properties or off-site properties where it may have sent hazardous substances. The Company is not aware of any material noncompliance with the environmental laws currently applicable to it and is not the subject of any material environmental claim for liability with respect to contamination at any location. Based on existing information, Management believes that it is not reasonably likely that losses related to known environmental liabilities, in aggregate, will be material to the Company’s financial position, results of operations, liquidity or cash flows. For its operations to comply with environmental laws, the Company has incurred and will continue to incur costs, which were not material in fiscal 2006 and are not expected to be material in the future.

A number of governmental authorities, both in the United States and abroad, have considered, are expected to consider or have passed legislation aimed at reducing the amount of disposed plastic wastes. Those programs have included, for example, mandating certain rates of recycling and/or the use of recycled materials, imposing deposits or taxes on plastic packaging material and/or requiring retailers or manufacturers to take back packaging used for their products. That legislation, as well as voluntary initiatives similarly aimed at reducing the level of plastic wastes, could reduce the demand for certain plastic packaging, result in greater costs for plastic packaging manufacturers or otherwise impact the Company’s business. Some consumer products companies, including some of the Company’s customers, have responded to these governmental initiatives and to perceived environmental concerns of consumers by using containers made in whole or in part of recycled plastic. The Company operates one of the largest HDPE bottles-to-bottle recycling plants in the world. Management believes that to date the Company has not been materially adversely affected by these initiatives and developments.

Intellectual Property

The Company holds various patents and trademarks. While in the aggregate the patents are of material importance to its business, the Company believes that its business is not dependent upon any one patent or trademark. The Company also relies on unpatented proprietary know-how and continuing technological innovation and other trade secrets to develop and maintain its competitive position. Others could, however, obtain knowledge of this proprietary know-how through independent development or other access by legal means. In addition to its own patents and proprietary know-how, the Company is a party to licensing arrangements and other agreements authorizing it to use other proprietary processes, know-how and related technology and/or to operate within the scope of certain patents owned by other entities. The duration of the Company’s licenses generally ranges from 5 to 17 years. In some cases the licenses granted to the Company are perpetual and in other cases the term of the license

11

is related to the life of the patent associated with the license. The Company also has licensed some of its intellectual property rights to third parties. See also “Certain Relationships and Related Transactions” (Item 13).

Item 1A. Risk Factors

The Company’s debt agreements contain restrictions that limit its flexibility in operating its business.

On October 7, 2004 the Operating Company, Holdings, CapCo I and a syndicate of lenders entered into a new first-lien credit agreement (the “Credit Agreement”) and a new second-lien credit agreement (the “Second-Lien Credit Agreement” and, together with the Credit Agreement, the “Credit Agreements”). Pursuant to its terms, on April 18, 2006, the Credit Agreement was amended in order to, among other things, increase the Term Loan B facility provided under the Credit Agreement by $150.0 million (the “2006 Amendment”). Proceeds of the 2006 Amendment were used to pay down $100.0 million of the Second-Lien Credit Agreement, with the remaining $50.0 million being used to reduce outstanding borrowings on the existing revolving credit facility provided for under the Credit Agreement. Pursuant to its terms, on March 30, 2007, the Credit Agreement was further amended in order to, among other things, increase the Term Loan B facility provided under the Credit Agreement by approximately $305.0 million (the “2007 Amendment”). Proceeds of the 2007 Amendment were used to pay off the Second-Lien Credit Agreement ($250.0 million), with $50.0 million being used to reduce outstanding borrowings on the existing revolving credit facility provided for under the Credit Agreement and approximately $5.0 million being used to pay fees and expenses. The 2007 Amendment also eliminated one of the Company’s financial ratio covenants, increased the maximum allowable leverage under another financial ratio covenant and waived any potential excess cash flow payment required for the year ended December 31, 2006. After giving effect to the 2007 Amendment, the Credit Agreement consists of a term loan to the Operating Company totaling $1,875.0 million (the “B Loan”) and a $250.0 million revolving credit facility (the “Revolving Credit Facility”). The Credit Agreement and the Indentures for the Senior Notes and the Senior Subordinated Notes (each as defined herein) contain a number of significant covenants that, among other things, restrict the ability of the Company to dispose of assets, repay other indebtedness, incur additional indebtedness, pay dividends, prepay subordinated indebtedness, incur liens, make capital expenditures, investments or acquisitions, engage in mergers or consolidations, engage in transactions with affiliates and otherwise restrict the activities of the Company. In addition, under the Credit Agreement, the Operating Company is required to satisfy specified financial ratios and tests. The ability of the Operating Company to comply with those provisions may be affected by events beyond the Operating Company’s control, and there can be no assurance that the Operating Company will meet those tests. The breach of any of these covenants could result in a default under the Credit Agreement and the lenders could elect to declare all amounts borrowed under the Credit Agreement, together with accrued interest, to be due and payable and could proceed against any collateral securing that indebtedness.

Available cash and access to additional capital may be limited by the Company’s substantial leverage.

The Company is highly leveraged. As of December 31, 2006, the Company had consolidated indebtedness of $2,546.9 million and partners’ deficit of $597.8 million and the Company’s annual net interest expense for 2006 was $207.0 million. As of December 31, 2006, $1,883.4 million of the Company’s total indebtedness was incurred under floating interest rate arrangements, $925.0 million of which was subject to interest rate swaps and $574.2 million of which was subject to forward interest rate agreements which fixed the interest rate. As a result, as of December 31, 2006, $384.2 million of the Company’s indebtedness was subject to floating interest rates. A 1% increase in interest rates would increase the Company’s annual interest payments on this debt by approximately $3.8 million. The $925.0 million of interest rate swaps expire at various points in 2007 and 2008. Availability under the Company’s Revolving Credit Facility as of December 31, 2006 was $184.4 million (as reduced by $9.6 million of outstanding letters of credit). The Company intends to fund their operating activities and capital expenditures in part through borrowings under this Revolving Credit Facility. The Company’s Credit Agreement and Indentures permit the Company to incur additional indebtedness, subject to certain limitations. All loans outstanding under the Revolving Credit Facility are scheduled to be repaid in October 2010 and scheduled annual principal repayments for the B Loan (after giving effect to the 2007 Amendment) under the Credit Agreement are as follows:

• 2007 - $14.1 million

• 2008 - $18.7 million

• 2009 - $18.7 million

• 2010 - $18.7 million

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• 2011 - $1,804.8 million

All amounts outstanding under the Second-Lien Credit Agreement were repaid on March 30, 2007.

The Company’s high degree of leverage could have important consequences, including, but not limited to, the following: (i) the Company’s ability to refinance existing indebtedness or to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes may be impaired in the future; (ii) a substantial portion of the Company’s cash flow from operations must be dedicated to the payment of principal and interest on its indebtedness, thereby reducing the funds available for other purposes, including capital expenditures necessary for maintenance of the Company’s facilities and for the growth of its business; (iii) some of the Company’s borrowings are and will continue to be at variable rates of interest, which expose the Company to the risk of increased interest rates; (iv) the Company may be substantially more leveraged than some of its competitors, which may place the Company at a competitive disadvantage; and (v) the Company’s substantial degree of leverage may hinder its ability to adjust rapidly to changing market conditions and could make it more vulnerable in the event of a downturn in general economic conditions or in its business.

Increases in resin prices and reductions in resin supplies could significantly slow the Company’s growth and disrupt its operations.

The Company depends on large quantities of PET, HDPE and other resins in manufacturing its products. One of its primary strategies is to grow the business by capitalizing on the conversion from glass, metal and paper containers to plastic containers. A sustained increase in resin prices, to the extent that those costs are not passed on to the end-consumer, would make plastic containers less economical for the Company’s customers and could result in a slower pace of conversions to plastic containers. Changes in the cost of resin are passed through to customers by means of corresponding changes in product pricing in accordance with the Company’s agreements with these customers and industry practice. However, if the Company is not able to do so in the future and there are sustained increases in resin prices, the Company’s operating margins could be affected adversely. Furthermore, if the Company cannot obtain sufficient amounts of resin from any of its suppliers, or if there is a substantial increase in oil or natural gas prices, and as a result an increase in resin prices, the Company may have difficulty obtaining alternate sources quickly and economically, and its operations and profitability may be impaired.

The Company’s international operations are subject to a variety of risks related to foreign currencies and local law in several countries.

The Company has significant operations outside the United States in the form of wholly owned subsidiaries and other arrangements. As a result, the Company is subject to risks associated with operating in foreign countries, including fluctuations in currency exchange and interest rates, imposition of limitations on conversion of foreign currencies into dollars or remittance of dividends and other payments by foreign subsidiaries, imposition or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries, labor relations problems, hyperinflation in some foreign countries and imposition or increase of investment and other restrictions by foreign governments or the imposition of environmental or employment laws. For instance, fluctuations in the euro may materially affect the Company’s operating results. Furthermore, the Company typically prices its products in its foreign operations in local currencies. As a result, an increase in the value of the dollar relative to the local currencies of profitable foreign subsidiaries can have a negative effect on the Company’s profitability. In the Company’s consolidated financial statements, the Company translates its local currency financial results into U.S. dollars based on average exchange rates prevailing during a reporting period or the exchange rate at the end of that period. During times of a strengthening U.S. dollar, at a constant level of business, the Company’s reported international sales, earnings, assets and liabilities will be reduced because the local currency will translate into fewer U.S. dollars. Exchange rate fluctuations increased comprehensive income by $23.2 million, decreased comprehensive income by $17.5 million and increased comprehensive income by $23.0 million for the years ended December 31, 2006, 2005 and 2004, respectively. In addition to currency translation risks, the Company incurs a currency transaction risk whenever one of its operating subsidiaries enters into either a purchase or a sales transaction using a currency different from the operating subsidiary’s functional currency. Furthermore, changes in local economic conditions can affect operations. The Company’s international operations also expose it to different local political and business risks and challenges. For example, in certain countries the Company is faced with periodic political issues which could result in currency risks or the risk that the Company is required to include local ownership or management in its businesses. The above mentioned risks in North America, Europe and South America may hurt the Company’s ability to generate revenue in those regions in the future.

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The company would lose a significant source of revenues and profits if it lost its largest customer.

PepsiCo (collectively, with its affiliates, such as Frito-Lay, Gatorade, Quaker Oats and Tropicana) is the Company’s largest customer and all product lines the Company provides to PepsiCo collectively accounted for approximately 17.0% of the Company’s net sales for the year ended December 31, 2006. The Company is not the sole supplier of plastic packaging to PepsiCo. If PepsiCo terminated its relationship with the Company, it could have a material adverse effect upon the Company’s business, financial position or results of operations. Additionally, in 2006, the Company’s top 20 customers comprised over 72% of its net sales. If any of the Company’s largest customers terminated its relationship with the Company, the Company would lose a significant source of revenues and profits. Additionally, the loss of one of the Company’s largest customers could result in the Company having excess capacity if it is unable to replace that customer. This could result in the Company having excess overhead and fixed costs and possible impairment of long-lived assets. This could also result in the Company’s selling, general and administrative expenses and capital expenditures representing increased portions of its revenues.

Contracts with customers generally do not require them to purchase any minimum amounts of products from the Company, so customers may not purchase amounts that meet the Company’s expectations.

The majority of the Company’s sales are made pursuant to long-term customer purchase orders and contracts. Customers’ purchase orders and contracts typically vary in length with terms up to ten years. The contracts, including those with PepsiCo, generally are requirements contracts which do not obligate the customer to purchase any given amount of product from the Company. Prices under these arrangements are tied to market standards and therefore vary with market conditions. Changes in the cost of resin, the largest component of the Company’s cost of goods sold, are passed through to customers by means of corresponding changes in product pricing in accordance with the Company’s agreements with these customers and industry practice. Despite the existence of supply contracts with its customers, although in the past its customers have not purchased amounts under supply contracts that in the aggregate are materially lower than what the Company has expected, the Company faces the risk that in the future customers will not continue to purchase amounts that meet its expectations.

The Company’s industry is very competitive and increased competition could reduce prices and its profit margins.

The Company operates in a competitive environment. In the past, the Company has encountered pricing pressures in its markets and could experience further declines in prices of plastic packaging as a result of competition. Although the Company has been able over time to partially offset pricing pressures by reducing its cost structure and making the manufacturing process more efficient, the Company may not be able to continue to do so in the future. The Company’s business, results of operations and financial condition may be materially adversely affected by further declines in prices of plastic packaging and such further declines could lead to a loss of business and a decline in its margins.

If the Company is unable to develop product innovations and improve its production technology and expertise, the Company could lose customers or market share.

The Company’s success may depend on its ability to adapt to technological changes in the plastic packaging industry. If the Company is unable to timely develop and introduce new products, or enhance existing products, in response to changing market conditions or customer requirements or demands, its business and results of operations could be materially and adversely affected.

The Company may be unable to protect its proprietary technology from infringement.

The Company relies on a combination of patents and trademarks, licensing agreements and unpatented proprietary know-how and trade secrets to establish and protect its intellectual property rights. The Company enters into confidentiality agreements with customers, vendors, employees, consultants and potential acquisition candidates as necessary to protect its know-how, trade secrets and other proprietary information. However, these measures and its patents and trademarks may not afford complete protection of its intellectual property, and it is possible that third parties may copy or otherwise obtain and use its proprietary information and technology without authorization or otherwise infringe on its intellectual property rights. The Company cannot assure that its competitors will not independently develop equivalent or superior know-how, trade secrets or production methods. If the Company is unable to maintain the proprietary nature of its technologies, its profit margins could be reduced as competitors

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imitating its products could compete aggressively against the Company in the pricing of certain products and its business, results of operations and financial condition may be materially adversely affected.

The Company is involved in litigation from time to time in the course of its business to protect and enforce its intellectual property rights, and third parties from time to time initiate litigation against the Company asserting infringement or violation of their intellectual property rights. The Company cannot assure that its intellectual property rights have the value that the Company believes them to have or that its products will not be found to infringe upon the intellectual property rights of others. Further, the Company cannot assure that it will prevail in any such litigation, or that the results or costs of any such litigation will not have a material adverse effect on its business. Any litigation concerning intellectual property could be protracted and costly and is inherently unpredictable and could have a material adverse effect on the Company’s business and results of operations regardless of its outcome.

Sales of the Company’s beverage containers may be affected by cool summer weather which may result in lower sales and profitability.

A significant portion of the Company’s revenue is attributable to the sale of beverage containers. Demand for beverages and the Company’s beverage containers tend to peak during the summer months. In the past, cool summer weather conditions have reduced the demand for beverages, which in turn has reduced the demand for beverage containers manufactured by the Company. Such unseasonably cool summer weather could reduce the Company’s sales and profitability.

The Company’s operations could expose it to substantial environmental costs and liabilities.

The Company is subject to a variety of national, state, foreign, provincial and/or local laws and regulations that impose limitations and prohibitions on the discharge and emission of, and establish standards for the use, disposal and management of, regulated materials and waste, and that impose liability for the costs of investigating and cleaning up, and damages resulting from, present and past spills, disposals or other releases of hazardous substances or materials. These domestic and international environmental laws can be complex and may change often, the compliance expenses can be significant and violations may result in substantial fines and penalties. In addition, environmental laws such as the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, also known as “Superfund” in the United States, impose strict, and in some cases joint and several, liability on specified responsible parties for the investigation and cleanup of contaminated soil, groundwater and buildings, and liability for damages to natural resources, at a wide range of properties. As a result, the Company may be liable for contamination at properties that it currently owns or operates, as well as at its former properties or off-site properties where it may have sent hazardous substances. As a manufacturer, the Company has an inherent risk of liability under environmental laws, both with respect to ongoing operations and with respect to contamination that may have occurred in the past on its properties or as a result of its operations. The Company could, in the future, incur a material liability resulting from the costs of complying with environmental laws or any claims concerning noncompliance, or liability from contamination.

The Company cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted, or what environmental conditions may be found to exist at its facilities or at third party sites for which the Company is liable. Enactment of stricter laws or regulations, stricter interpretations of existing laws and regulations or the requirement to undertake the investigation or remediation of currently unknown environmental contamination at its own or third party sites may require the Company to make additional expenditures, some of which could be material.

In addition, a number of governmental authorities, both in the United States and abroad, have considered, or are expected to consider, legislation aimed at reducing the amount of plastic wastes disposed. Programs have included, for example, mandating certain rates of recycling and/or the use of recycled materials, imposing deposits or taxes on plastic packaging material and requiring retailers or manufacturers to take back packaging used for their products. Legislation, as well as voluntary initiatives similarly aimed at reducing the level of plastic wastes, could reduce the demand for certain plastic packaging, result in greater costs for plastic packaging manufacturers or otherwise impact the Company’s business. Some consumer products companies, including some of the Company’s customers, have responded to these governmental initiatives and to perceived environmental concerns of consumers by using containers made in whole or in part of recycled plastic. Future legislation and initiatives could adversely affect the Company in a manner that would be material.

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Blackstone Investors control the Company and may have conflicts of interest with the Company in the future.

The Blackstone Investors indirectly control approximately 85% of the partnership interests in Holdings. Pursuant to the Fifth Amended and Restated Limited Partnership Agreement (the “Holdings Partnership Agreement”) by and among the Graham Family Investors, Graham Packaging Corporation, BCP/Graham Holdings L.L.C. and BMP/Graham Holdings Corporation, holders of a majority of the partnership interests generally have the sole power, subject to certain exceptions, to take actions on behalf of Holdings, including the appointment of management and the entering into of mergers, sales of substantially all assets and other extraordinary transactions. For example, the Blackstone Investors could cause the Company to make acquisitions that increase the amount of its indebtedness or to sell revenue generating assets, impairing the Company’s ability to make payments under its debt agreements. Additionally, the Blackstone Investors are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with the Company. The Blackstone Investors may also pursue acquisition opportunities that may be complementary to the Company’s business, and as a result, those acquisition opportunities may not be available to the Company. The Graham Family Investors have substantial expertise and knowledge in our industry and may also from time to time seek to compete, directly or indirectly, with the Company.

The Company’s ability to operate effectively could be impaired if it lost key personnel.

The success of the Company depends to a large extent on a number of key employees, and the loss of the services provided by them could have a material adverse effect on the Company’s ability to operate its business and implement its strategies effectively. The loss of members of the Company’s senior management team could have a material adverse effect on its operations. The Company does not maintain “key” person insurance on any of its executive officers.

If the Company makes acquisitions in the future, it may experience assimilation problems and dissipation of management resources and it may need to incur additional indebtedness.

The Company’s future growth may be a function, in part, of acquisitions of other consumer goods packaging businesses. To the extent that it grows through acquisitions, the Company will face the operational and financial risks commonly encountered with that type of a strategy. The Company would also face operational risks, such as failing to assimilate the operations and personnel of the acquired businesses, disrupting the Company’s ongoing business, dissipating the Company’s limited management resources and impairing relationships with employees and customers of the acquired business as a result of changes in ownership and management. Additionally, the Company has incurred indebtedness to finance past acquisitions, and would likely incur additional indebtedness to finance future acquisitions, as permitted under the Credit Agreement and the Notes, in which case it would also face certain financial risks associated with the incurring of additional indebtedness to make an acquisition, such as reducing its liquidity, access to capital markets and financial stability.

Additionally, the types of acquisitions the Company will be able to make are limited by the Company’s Credit Agreement, which limits the amount that the Company may pay for an acquisition to $120 million plus additional amounts based on an unused available capital expenditure limit, certain proceeds from new equity issuances and other amounts.

The Company’s operations and profitability could suffer if it experiences labor relation problems.

As of the end of 2006, approximately 3,400 of the Company’s approximately 8,400 employees are covered by collective bargaining agreements with various international and local labor unions. In addition, as of the end of 2006, the Company operated 86 facilities, of which 40 are union facilities operated primarily by union employees. The Company’s union agreements typically have a term of three or four years and thus regularly expire and require negotiation in the course of the Company’s business. In 2007, collective bargaining agreements covering approximately 130 employees will expire. Management believes that the Company enjoys good relations with its employees, and there have been no significant work stoppages in the past three years. Upon the expiration of any of the Company’s collective bargaining agreements, however, the Company may be unable to negotiate new collective bargaining agreements on terms favorable to the Company, and the Company’s business operations at one or more of its facilities may be interrupted as a result of labor disputes or difficulties and delays in the process of renegotiating the Company’s collective bargaining agreements. A work stoppage at one or more of the Company’s facilities could have a material adverse effect on its business, results of operations and financial condition.

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The Company’s ability to expand its operations could be adversely affected if it loses access to additional blow molding equipment.

Access to blow molding technology is important to the Company’s ability to expand its operations. The Company has access to a broad array of blow molding equipment and suppliers, including, without limitation, pursuant to the Equipment Sales Services and License Agreement (the “Equipment Sales Agreement”) with Graham Engineering Corporation (“Graham Engineering”) as described in Item 13 “Certain Relationships and Related Transactions” herein. However, if the Company fails to continue to access this new blow molding equipment or these suppliers, the Company’s ability to expand its operations may be materially and adversely affected in the short-term until alternative sources of technology could be arranged. In addition, the Equipment Sales Agreement is set to expire on December 31, 2007 unless mutually extended by the parties. If the Company does not choose to, or is unable to, renew the Equipment Sales Agreement on terms favorable to the Company, or at all, its operations may be adversely affected.

Item 1B. Unresolved Staff Comments

None.

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Item 2. Properties

At the end of 2006, the Company owned or leased 86 plants located in Argentina, Belgium, Brazil, Canada, Ecuador, England, Finland, France, Hungary, Mexico, the Netherlands, Poland, Spain, Turkey, the United States and Venezuela. 29 of the plants are located on-site at customer and vendor facilities. The Company believes that its plants, which are of varying ages and types of construction, are in good condition, are suitable for its operations and generally are expected to provide sufficient capacity to meet its requirements for the foreseeable future.

The following table sets forth the location of the Company’s principal plants and administrative facilities, their approximate current square footage, whether on-site or off-site and whether leased or owned.

	Location	Size (Square Feet)	On-Site or Off-Site	Leased/ Owned
	U.S. Packaging Facilities(1)
1.	Findlay, Ohio	406,800	Off-Site	Owned
2.	York (Household), Pennsylvania	340,000	Off-Site	Owned
3.	Maryland Heights, Missouri	308,961	Off-Site	Owned
4.	Henderson, Nevada	298,407	Off-Site	Owned
5.	Vandalia, Illinois	277,500	Off-Site	Owned
6.	Rockwall, Texas	241,000	Off-Site	Owned
7.	Modesto, California	238,000	Off-Site	Owned
8.	Hazleton (Household), Pennsylvania	218,384	On-Site	Leased
9.	Holland, Michigan	218,168	Off-Site	Leased
10.	Fremont, Ohio	210,883	Off-Site	Owned
11.	Bedford, New Hampshire	210,510	Off-Site	Owned
12.	York (Food & Beverage), Pennsylvania	210,370	Off-Site	Leased
13.	Tolleson, Arizona	209,468	Off-Site	Owned
14.	Cartersville, Georgia	208,000	Off-Site	Owned
15.	Florence (Food and Beverage), Kentucky	203,000	Off-Site	Owned
16.	Edison, New Jersey	194,000	Off-Site	Owned
17.	Hazleton (Food and Beverage), Pennsylvania	185,080	Off-Site	Owned
18.	Harrisonburg, Virginia	180,000	Off-Site	Owned
19.	Muskogee, Oklahoma	177,000	Off-Site	Leased
20.	Selah, Washington	170,553	Off-Site	Owned
21.	Atlanta, Georgia	165,000	On-Site	Leased
22.	Kansas City, Missouri	162,000	Off-Site	Leased
23.	Belvidere, New Jersey	160,000	Off-Site	Owned
24.	Florence (Personal Care/Specialty), Kentucky	153,600	Off-Site	Owned
25.	Montgomery, Alabama	150,143	Off-Site	Leased
26.	Emigsville, Pennsylvania	148,300	Off-Site	Leased
27.	Levittown, Pennsylvania	148,000	Off-Site	Leased
28.	Evansville, Indiana	146,720	Off-Site	Leased
29.	Iowa City, Iowa	140,896	Off-Site	Owned
30.	Woodridge, Illinois	129,850	Off-Site	Leased
31.	Baltimore, Maryland	128,500	Off-Site	Owned
32.	Santa Ana, California	127,680	Off-Site	Owned
33.	Chicago, Illinois	125,500	Off-Site	Owned
34.	Cincinnati, Ohio	111,669	Off-Site	Leased
35.	Atlanta, Georgia	111,600	Off-Site	Leased
36.	Kansas City, Kansas	111,000	On-Site	Leased
37.	Jefferson, Louisiana	109,407	Off-Site	Leased
38.	Casa Grande, Arizona	100,000	Off-Site	Leased
39.	Oakdale, California	97,934	On-Site	Leased
40.	Bradford, Pennsylvania	90,350	Off-Site	Leased
41.	Berkeley, Missouri	75,000	Off-Site	Owned
42.	Alta Vista, Virginia	62,900	Off-Site	Owned

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43.	Cambridge, Ohio	57,000	On-Site	Leased
44.	Port Allen, Louisiana	56,721	On-Site	Leased
45.	Richmond, California	55,256	Off-Site	Leased
46.	Houston, Texas	52,500	Off-Site	Owned
47.	Newell, West Virginia	50,000	On-Site	Leased
48.	Lakeland, Florida	49,000	Off-Site	Leased
49.	N. Charleston, South Carolina (2)	45,000	On-Site	Leased
50.	Darlington, South Carolina	43,200	On-Site	Leased
51.	Bradenton, Florida	33,605	On-Site	Leased
52.	Vicksburg, Mississippi	31,200	On-Site	Leased
53.	Bordentown, New Jersey	30,000	On-Site	Leased
54.	Joplin, Missouri	29,200	On-Site	Leased
55.	Minster, Ohio	27,674	On-Site	Leased
56.	West Jordan, Utah	25,573	On-Site	Leased
	Canadian Packaging Facilities
57.	Mississauga, Ontario	78,416	Off-Site	Owned
	Mexican Packaging Facilities
58.	Tlalnepantla	292,000	Off-Site	Owned
59.	Pachuca	167,500	Off-Site	Owned
60.	Mexicali	59,700	Off-Site	Leased
61.	Tlaxcala	8,051	On-Site	Leased
62.	Irapuato	5,681	On-Site	Leased
	European Packaging Facilities
63.	Zoetermeer, Netherlands	254,900	On-Site	Leased
64.	Villecomtal, France	245,309	On-Site	Leased
65.	Assevent, France	186,000	Off-Site	Owned
66.	Ryttyla, Finland	182,233	Off-Site	Owned
67.	Rotselaar, Belgium	162,212	On-Site	Leased
68.	Chalgrove, England	132,000	Off-Site	Leased
69.	Etten-Leur, Netherlands	124,450	Off-Site	Leased
70.	Bierun, Poland	114,657	On-Site	Leased
71.	Sulejowek, Poland	83,700	Off-Site	Owned
72.	Meaux, France	80,000	Off-Site	Owned
73.	Aldaia, Spain	75,350	On-Site	Leased
74.	Istanbul, Turkey	50,000	Off-Site	Owned
75.	Lummen, Belgium	42,840	On-Site	Leased
76.	Eskisehir, Turkey	9,461	On-Site	Leased
77.	Nyirbator, Hungary	5,000	On-Site	Leased
	South American Packaging Facilities
78.	Sao Paulo, Brazil	71,300	Off-Site	Leased
79.	Guayaquil, Ecuador	68,500	Off-Site	Leased
80.	Valencia, Venezuela	56,000	Off-Site	Leased
81.	Buenos Aires, Argentina (San Martin)	33,524**	Off-Site	Owned/Leased
82.	Caxias, Brazil	29,493**	On-Site	Owned/Leased
83.	Longchamps, Argentina	21,530**	On-Site	Owned/Leased
84.	Inhauma, Brazil	14,208	On-Site	*
85.	Carambei, Brazil	9,310	On-Site	*
	Graham Recycling
86.	York, Pennsylvania	44,416	Off-Site	Owned

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	Administrative Facilities
•	York, Pennsylvania – Technology Center	246,000	N/A	Leased
•	York, Pennsylvania	116,400	N/A	Leased
•	Warszawa, Poland	9,950	N/A	Leased
•	Blyes, France	9,741	N/A	Leased
•	Rueil, Paris, France	4,300	N/A	Leased
•	Mexico City, Mexico	360	N/A	Leased

(1) Substantially all of the Company’s domestic tangible and intangible assets are pledged as collateral pursuant to the terms of the Credit Agreement.

(2) The Company has announced the closing of this facility.

* The Company operates these on-site facilities without leasing the space it occupies.

** The building is owned and the land is leased.

Item 3. Legal Proceedings

On November 3, 2006, the Company filed a complaint with the Supreme Court of the State of New York against Owens-Illinois, Inc. and OI Plastic Products FTS, Inc. (collectively, “OI”). The complaint alleges certain misrepresentations by OI in connection with the Company’s 2004 purchase of O-I Plastic and seeks damages in excess of $30 million. In December 2006, OI filed an Answer and Counterclaim, seeking to rescind the $39 million payment they had made to the Company in compliance with a settlement agreement in April 2005. The Company filed a Motion to Dismiss the Counterclaim in January 2006. The litigation is proceeding.

In January 2005, Glass, Molders, Pottery, Plastics and Allied Workers Union filed grievances on behalf of three (3) employees claiming that the Company failed to honor certain pension obligations to the grievants, who were former employees of Owens-Brockway Plastic Products, a subsidiary of Owens-Illinois, Inc., and who were permanently laid off in plant closings by the Company following the Company’s acquisition of O-I Plastic. The grievances were referred to an Arbitrator and a hearing was held. The parties expect the Arbitrator’s decision to be issued in early April 2007. The Company and the union have agreed to and expressed their willingness to have the Arbitrator rule on a broader range of pension issues involving other former Owens-Illinois, Inc. employees thereafter employed by the Company. However, it remains unclear whether the Arbitrator intends to rule on that broader issue. Accordingly, the actual amount at stake is an open question depending on the scope of the issues on which the Arbitrator decides to rule, which cannot be predicted at this time. Although the Company believes it will prevail, nevertheless the outcome must be characterized as uncertain. The Company has determined that the outcome of this litigation will in no event exceed $5.0 million, and therefore, will not have a material effect on its financial condition or business.

The Company is party to various other litigation matters arising in the ordinary course of business. The ultimate legal and financial liability of the Company with respect to such litigation cannot be estimated with certainty, but Management believes, based on its examination of these matters, experience to date and discussions with counsel, that ultimate liability from the Company’s various litigation matters will not be material to the business, financial condition, results of operations or cash flows of the Company.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of 2006.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Registrant Purchases of Equity Securities

Because Holdings is a limited partnership, equity interests in Holdings take the form of general and limited partnership interests. There is no established public trading market for any of the general or limited partnership interests in Holdings.

There are two owners of general partnership interests in Holdings: Investor GP and Graham Packaging Corporation. The limited partnership interests in Holdings are owned by Investor LP and the Graham Family Investors. See Item 12, “Security Ownership of Certain Beneficial Owners and Management.”

Opco GP is the sole owner of a general partnership interest in the Operating Company, and Holdings is the sole owner of a limited partnership interest in the Operating Company.

The Operating Company owns all of the outstanding capital stock of CapCo I. Holdings owns all of the outstanding capital stock of CapCo II.

Under the Credit Agreement, the Operating Company is subject to restrictions on the payment of dividends and other distributions to Holdings; provided that, subject to certain limitations, the Operating Company may pay dividends or other distributions to Holdings:

• in respect of overhead, tax liabilities, legal, accounting and other professional fees and expenses; and

• to fund purchases and redemptions of equity interests of Holdings or Investor LP held by then present or former officers or employees of Holdings, the Operating Company or their Subsidiaries (as defined therein) or by any employee stock ownership plan upon that person’s death, disability, retirement or termination of employment or other circumstances with annual dollar limitations.

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Item 6. Selected Financial Data

The following tables set forth the selected historical consolidated financial data and other operating data of the Company for and at the end of each of the years in the five-year period ended December 31, 2006, which are derived from the Company’s audited consolidated financial statements. The following tables should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Item 7) and the Financial Statements included under Item 8.

	Year Ended December 31,
	2006 (1)			2005 (1)			2004 (1)			2003			2002
	(In millions)
STATEMENT OF OPERATIONS DATA:
Net sales (2)	$	2,520.9		$	2,473.4		$	1,353.0		$	978.7		$	906.7
Cost of goods sold (2)(3)		2,233.4			2,177.9			1,159.4			798.4			735.8
Gross profit (2)(3)		287.5			295.5			193.6			180.3			170.9
Selling, general and administrative expenses (3)		131.4			127.5			86.3			66.8			63.7
Impairment charges (4)		25.9			7.3			7.0			2.5			5.1
Net loss (gain) on disposal of fixed assets (3)		13.8			13.6			2.2			(2.6	)		6.9
Operating income		116.4			147.1			98.1			113.6			95.2
Interest expense (5)		207.5			185.0			140.8			97.1			82.1
Interest income		(0.5	)		(0.6	)		(0.3	)		(0.5	)		(0.3	)
Other expense (income), net		2.2			0.2			(1.1	)		(0.3	)		0.1
Income tax provision (benefit) (6)		27.6			14.4			(2.1	)		6.8			4.0
Minority interest		—			0.7			1.4			0.8			1.7
Net (loss) income	$	(120.4	)	$	(52.6	)	$	(40.6	)	$	9.7		$	7.6
OTHER DATA:
Depreciation and amortization (3)(7)	$	205.5		$	201.1		$	112.1		$	74.3		$	69.0
Net cash paid for property, plant and equipment (excluding acquisitions)		170.9			242.6			151.9			91.8			92.4
Investments (including acquisitions)		1.4			18.8			1,230.6			4.1			—
Ratio of earnings to fixed charges (8)		—			—			—			1.2	x		1.1	x
BALANCE SHEET DATA (at period end):
Cash and cash equivalents	$	13.3		$	26.7		$	22.1		$	7.1		$	7.3
Working capital (9)		139.4			248.0			184.9			6.4			9.0
Total assets		2,441.9			2,562.4			2,505.0			876.1			798.3
Total debt		2,546.9			2,638.3			2,465.2			1,097.4			1,070.6
Partners’ capital (deficit) (10)		(597.8	)		(493.7	)		(434.1	)		(421.5	)		(460.3	)

(1) On October 7, 2004, the Company acquired O-I Plastic for $1,191.8 million, including direct costs of the acquisition. Amounts shown under the caption “Investments (including acquisitions)” include cash paid, net of cash acquired, in the acquisition. This transaction was accounted for under the purchase method of accounting. Results of operations are included since the date of the acquisition.

(2) Net sales increase or decrease based on fluctuations in resin prices. Changes in the cost of resin are passed through to customers by means of corresponding changes in product pricing in accordance with the Company’s agreements with these customers and industry practice. As resin prices can fluctuate significantly, the Company believes that its gross profit, as well as certain expense items, should not be analyzed solely on a percentage of net sales basis. A sustained increase in resin prices, to the extent

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that those costs are not passed on to the end-consumer, would make plastic containers less economical for the Company's customers and could result in a slower pace of conversions to plastic containers.

(3) Reclassifications have been made predominantly from cost of goods sold, and from a much lesser extent selling, general and administrative expenses, to reflect as a separate line within operating income for the net loss (gain) on disposal of fixed assets for all periods presented. Amounts for this line were previously included in depreciation and amortization within cost of goods sold, and to a much lesser extent within selling, general and administrative expenses.

(4) The Company evaluated the recoverability of its long-lived and other assets in selected locations, due to indicators of impairment, and recorded impairment charges of $14.1 million, $6.8 million, $7.0 million, $2.5 million and $5.1 million for the years ended December 31, 2006, 2005, 2004, 2003 and 2002, respectively. Goodwill is reviewed for impairment on an annual basis. The resulting impairment charges recognized, based on a comparison of the related net book value of the location to projected discounted future cash flows of the location, were $11.8 million and $0.5 million for the years ended December 31, 2006 and 2005, respectively. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” (Item 7) for a further discussion.

(5) The years ended December 31, 2006, 2004 and 2003 include the effects of the refinancing of the Company’s prior senior credit agreements, which resulted in the write-off of debt issuance fees of $2.1 million, $20.9 million and $6.6 million, respectively, the payment in 2006 of a $1.0 million call premium related to the 2006 Amendment and the write-off of tender and call premia of $15.2 million for the year ended December 31, 2004, associated with the redemption of the Company’s prior senior subordinated notes and senior discount notes.

(6) As limited partnerships, Holdings and the Operating Company are not subject to U.S. federal income taxes or most state income taxes. Instead, taxes are assessed to Holdings' partners based on their distributive share of the income of Holdings. Certain U.S. subsidiaries acquired as part of O-I Plastic are corporations subject to U.S. federal and state income taxes. The Company's foreign operations are subject to tax in their local jurisdictions. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse.

(7) Depreciation and amortization excludes amortization of debt issuance fees, which is included in interest expense, and impairment charges.

(8) For purposes of determining the ratio of earnings to fixed charges, earnings are defined as pre-tax earnings from continuing operations before minority interest and income from equity investees, plus fixed charges and amortization of capitalized interest, less interest capitalized. Fixed charges include interest expense on all indebtedness, interest capitalized, amortization of debt issuance fees and one-third of rental expense on operating leases representing that portion of rental expense deemed to be attributable to interest. Earnings were insufficient to cover fixed charges by $100.0 million, $42.1 million and $41.7 million for the years ended December 31, 2006, 2005 and 2004, respectively.

(9) Working capital is defined as current assets less current liabilities.

(10) As a result of the 1998 recapitalization, the Company has negative net worth for accounting purposes.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Management believes the Company is a worldwide leader in the design, manufacture and sale of customized blow molded plastic containers for the branded food and beverage, household, automotive lubricants and personal care/specialty product categories and, as of the end of 2006, operated 86 manufacturing facilities throughout North America, Europe and South America. The Company’s primary strategy is to operate in select markets that will position it to benefit from the growing conversion to value-added plastic packaging from more commodity packaging.

Management believes that critical success factors to the Company’s business are its ability to:

• develop its own proprietary technologies that provide meaningful competitive advantage in the marketplace;

• maintain relationships with and serve the complex packaging demands of its customers which include some of the world’s largest branded consumer products companies;

• forecast trends in the packaging industry across product lines and geographic territories (including those specific to the rapid conversion of packaging products from glass, metal and paper to plastic); and

• make investments in plant and technology necessary to satisfy the three factors mentioned above.

On October 7, 2004, the Company acquired O-I Plastic for approximately $1.2 billion (the “Acquisition”). Since October 7, 2004 the Company’s operations have included the operations of O-I Plastic. With this acquisition the Company essentially doubled in size.

Management believes that the area with the greatest opportunity for growth continues to be in producing containers for the food and beverage product category because of the continued conversion to plastic packaging, including the demand for containers for juices, juice drinks, nutritional beverages, sports drinks, teas, yogurt drinks, snacks, beer and other food products. Since much of the growth in this area has been in the sale of smaller sized containers, over the past few years, the Company has experienced an overall mix shift toward smaller containers. Based on research prepared by Packaging Strategies and internal estimates, Management believes the Company has become a leader in the value-added segment for hot-fill PET juice containers. Management also believes the Company has recently become a leading participant in the rapidly growing market of yogurt drinks and nutritional beverages where the Company manufactures containers using polyolefin resins. From the beginning of 2003 through December 31, 2006, the Company has invested over $1,115.0 million in capital expenditures, which includes approximately $658.0 million of purchase price allocations related to the Acquisition, in the food and beverage product category. For the year ended December 31, 2006, the Company’s sales of containers for the food and beverage product category grew to $1,478.8 million from $573.0 million in 2003.

The Company’s household container product category is a product category whose growth in prior years was fueled by conversions from powders to liquids for such products as detergents, household cleaners and automatic dishwashing detergent. Powdered products are typically packaged in paper based containers such as fiber wound cans and paperboard cartons. The growth of this product category now tends to follow GDP growth as liquids have gained a predominant share of these products. The Company’s strongest position is in fabric care, where Management believes the Company is a leader in plastic container design and manufacture. It should be noted the fabric care industry is now offering some brands in a concentrated formula which will negatively impact sales in this product category. The Company has continually upgraded its machinery, principally in the United States, to new, larger, more productive blow molders in order to standardize production lines, improve flexibility and reduce manufacturing costs.

The Company’s North American one quart motor oil container product category is in a mature industry. Unit volume in the one quart motor oil industry decreased approximately 8% in 2006 as compared to 2005. Prior to 2003 annual volumes declined an average of approximately 1% to 2%. Management believes that the expected rate of decline in one quart motor oil containers is anticipated to be 8% to 10% per year over the next few years as the product category continues to migrate towards the quick-lube market and larger multi-quart packages.

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The Company’s personal care/specialty product category is a product category that grows, in general, with GDP and is driven by new product launch and relaunch cycles. Based on the volume of its sales to many major suppliers of personal care/specialty products, Management believes the Company is among the leading suppliers in this product category which includes products for the hair care, skin care, oral care and specialty markets. Management believes that the Company’s leading supply position results from its commitment to and reputation in new product development and flexible manufacturing processes and operations.

As of the end of 2006, the Company operated 29 manufacturing facilities outside of the United States in Argentina, Belgium, Brazil, Canada, Ecuador, England, Finland, France, Hungary, Mexico, the Netherlands, Poland, Spain, Turkey and Venezuela. Over the past few years, the Company has expanded its international operations with the addition of new plants in Argentina, Mexico and the Netherlands, as well as the Acquisition which included plants in Ecuador, England, Finland, Mexico, the Netherlands and Venezuela, and the acquisition of certain Tetra-Pak operations on March 24, 2005, which included plants in Brazil, Belgium and Turkey. In March 2005, the Company executed a Purchase and Sale of Equity Interest and Joint Venture Termination Agreement under which the Company terminated the joint venture agreement with Industrias Innopack, S.A. de C.V. and acquired all of the equity interests held by Industrias Innopack, S.A. de C.V. in Graham Innopack de Mexico, S. de R.L. de C.V. (“Graham Innopack”) and the operating companies thereunder. Closing of this transaction occurred on May 9, 2005.

For the year ended December 31, 2006, 72.6% of the Company’s net sales were generated by the top twenty customers. The majority of the top twenty customers were under long-term contracts with terms up to ten years, while the balance of the top twenty customers represent customers with whom the Company has been doing business for over 20 years on average. Prices under these arrangements are typically tied to market standards and, therefore, vary with market conditions. In general, the contracts are requirements contracts that do not obligate the customer to purchase any given amount of product from the Company. The Company had sales to one customer, PepsiCo, which exceeded 10% of total sales in each of the years ended December 31, 2006, 2005 and 2004. The Company’s sales to PepsiCo were 17.0%, 17.9% and 14.9% of total sales for the years ended December 31, 2006, 2005 and 2004, respectively. For the years ended December 31, 2006, 2005 and 2004, approximately 100%, 98% and 99%, respectively, of the sales to PepsiCo were made in North America. The Company also had sales to one other customer which exceeded 10% of total sales in the year ended December 31, 2004. The Company’s sales to this customer were 10.2% of total sales for the year ended December 31, 2004.

The largest component of the Company’s cost of goods sold is resin costs. Based on industry data, the following table summarizes average market prices per pound of PET and HDPE resins in the United States during 2006, 2005 and 2004:

			Year
	2006		2005		2004
PET	$	0.75	$	0.77	$	0.73
HDPE		0.69		0.65		0.60

Changes in the cost of resin are passed through to customers by means of corresponding changes in product pricing in accordance with the Company’s agreements with these customers and industry practice. As resin prices can fluctuate significantly, the Company believes that its gross profit, as well as certain expense items, should not be analyzed solely on a percentage of net sales basis. A sustained increase in resin prices, to the extent that those costs are not passed on to the end-consumer, would make plastic containers less economical for the Company’s customers and could result in a slower pace of conversions to plastic containers.

Holdings and the Operating Company, as limited partnerships, do not pay U.S. federal income taxes under the provisions of the Internal Revenue Code, as the applicable income or loss is included in the tax returns of the partners. However, certain U.S. subsidiaries acquired as part of O-I Plastic are corporations and are subject to U.S. federal and state income taxes. The Company’s foreign operations are subject to tax in their local jurisdictions. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse.

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Results of Operations

The following tables set forth the major components of the Company’s net sales and such net sales expressed as a percentage of total net sales:

	Year Ended December 31,
	2006				2005				2004
	(Dollars in millions)
North America	$	2,220.5	88.1	%	$	2,168.2	87.7	%	$	1,136.1	84.0	%
Europe		235.9	9.3			240.1	9.7			173.4	12.8
South America		64.5	2.6			65.1	2.6			43.5	3.2
Total Net Sales	$	2,520.9	100.0	%	$	2,473.4	100.0	%	$	1,353.0	100.0	%

	Year Ended December 31,
	2006				2005				2004
	(Dollars in millions)
Food and Beverage	$	1,478.8	58.7	%	$	1,422.5	57.5	%	$	769.9	56.9	%
Household		512.3	20.3			508.7	20.6			274.0	20.2
Automotive Lubricants		284.7	11.3			278.7	11.3			240.6	17.8
Personal Care/Specialty (1)		245.1	9.7			263.5	10.6			68.5	5.1
Total Net Sales	$	2,520.9	100.0	%	$	2,473.4	100.0	%	$	1,353.0	100.0	%

(1) Prior to the Acquisition, sales of Personal Care/Specialty containers were not significant and are included in the Household product category.

Note: Based upon a broader product offering and consolidation of production facilities resulting from the acquisition of O-I Plastic, the Company has reviewed and changed its traditional methodology for compiling product category data. Reclassifications have been made to the 2005 product category data to conform to the 2006 presentation.

2006 Compared to 2005

Net Sales. Net sales for the year ended December 31, 2006 increased $47.5 million, or 1.9%, to $2,520.9 million from $2,473.4 million for the year ended December 31, 2005. The increase in sales was primarily due to an increase in resin pricing and volume, net of changes in mix and price erosion. Container units sold increased 3.7%, principally due to additional food and beverage container business where container units sold increased 7.6%. On a geographic basis, sales for the year ended December 31, 2006 in North America increased $52.3 million, or 2.4%, from the year ended December 31, 2005, primarily due to an increase in resin pricing and higher container units sold of 2.7%, net of changes in mix and price erosion. North American sales in the food and beverage, household and automotive lubricants product categories contributed $56.2 million, $18.1 million and $7.3 million, respectively, to the increase, while North American sales in the personal care/specialty product category decreased $29.3 million. Container units sold in North America increased in the food and beverage and household product categories by 7.1% and 5.0%, respectively, and decreased in the automotive lubricants and personal care/specialty product categories by 7.1% and 12.6%, respectively. Sales for the year ended December 31, 2006 in Europe decreased $4.2 million, or 1.7%, from the year ended December 31, 2005. The decrease in sales was primarily due to container weight reduction programs and an overall mix shift to smaller containers, partially offset by an increase in volume and favorable exchange rate changes of approximately $3.0 million. Sales for the year ended December 31, 2006 in South America decreased $0.6 million, or 0.9%, from the year ended December 31, 2005. The decrease in sales was primarily due to an overall mix shift to smaller containers and price erosion, partially offset by favorable exchange rate changes of $3.6 million and volume.

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Gross Profit. Gross profit for the year ended December 31, 2006 decreased $8.0 million to $287.5 million from $295.5 million for the year ended December 31, 2005. Gross profit for the year ended December 31, 2006 increased $1.9 million in North America and decreased $4.4 million and $5.5 million in Europe and South America, respectively, when compared to the year ended December 31, 2005. The positive impact on gross profit of added volume was offset by a negative impact of approximately $8.4 million due to the inability to recover all raw material costs related to extraordinary efforts during the Rita/Katrina hurricane events during the latter half of 2005 to procure PET raw materials and build unusually high inventory levels to make certain the Company met its customers’ requirements in the short term and build for the peak isotonic beverage demand in the long term. Gross profit was also negatively impacted by a decrease in gross profit related to ongoing business of $7.3 million, partially offset by a net decrease in non-recurring charges of $5.3 million, a net decrease in project costs of $1.7 million and a favorable impact from changes in foreign currency exchange rates of $0.7 million. The decrease in gross profit related to ongoing business was primarily due to price erosion and increased inflationary pressures which are expected to increase operating costs in the foreseeable future, partially offset by operational improvements and volume. The non-recurring charges included expenses related to the integration of O-I Plastic; expenses, primarily associated with ensuring an adequate supply of resin, related to the hurricanes in the United States in the second half of 2005; and restructuring and other non-recurring expenses.

Selling, General & Administrative Expenses. Selling, general and administrative expenses for the year ended December 31, 2006 increased $3.9 million to $131.4 million from $127.5 million for the year ended December 31, 2005. The increase was primarily due to increases in non-recurring charges, professional fees, recruitment expenses and depreciation expenses, partially offset by a decrease in bad debt expense. Non-recurring charges were $19.4 million and $17.9 million for the years ended December 31, 2006 and 2005, respectively, comprised of expenses relating to aborted acquisitions, the integration of O-I Plastic, global reorganization costs and other costs. Selling, general and administrative expenses as a percent of sales remained at 5.2% of sales for each of the years ended December 31, 2006 and 2005.

Impairment Charges. Impairment charges were $25.9 million for the year ended December 31, 2006 as compared to $7.3 million for the year ended December 31, 2005. Due to changes in the ability to utilize certain assets in Brazil, Ecuador, England, Finland, France, the Netherlands, Poland, Spain and the United States in 2006 and in Brazil, Ecuador, France and the United States in 2005, the Company evaluated the recoverability of these assets. For these assets to be held and used, the Company determined that the undiscounted cash flows were below the carrying value of these long-lived assets. Accordingly, the Company adjusted the carrying value of these long-lived assets to their estimated fair value in accordance with Statement of Financial Accounting Standards (“SFAS”) 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” resulting in impairment charges of $14.1 million and $6.8 million for the years ended December 31, 2006 and 2005, respectively. Similarly, the Company evaluated the recoverability of its goodwill, and consequently recorded impairment charges of $11.8 million and $0.5 million for the years ended December 31, 2006 and 2005, respectively, related to Ecuador, England, Finland and Venezuela in 2006 and Turkey in 2005. Goodwill was evaluated for impairment and the resulting impairment charges recognized were based on a comparison of the related net book value of the goodwill of the reporting unit to its implied fair value.

Interest Expense, Net. Interest expense, net increased $22.6 million to $207.0 million for the year ended December 31, 2006 from $184.4 million for the year ended December 31, 2005. The increase was primarily related to higher LIBOR rates in 2006 compared to 2005.

Other Expense (Income), Net. Other expense, net increased $2.0 million to $2.2 million for the year ended December 31, 2006 from $0.2 million for the year ended December 31, 2005, primarily due to higher foreign exchange losses.

Income Tax Provision (Benefit). Income tax provision increased $13.2 million to $27.6 million for the year ended December 31, 2006 from $14.4 million for the year ended December 31, 2005. The increase was attributable to several factors. A reduced tax benefit was attributable to lower taxable income in the Company’s U.S. subsidiaries acquired as part of the acquisition of O-I Plastic and for operations in Europe and Mexico for the year ended December 31, 2006. In

27

addition, valuation allowances were placed on certain deferred tax assets originally treated as purchased in the acquisition of O-I Plastic.

Net (Loss) Income. Primarily as a result of factors discussed above, net loss was $120.4 million for the year ended December 31, 2006 compared to net loss of $52.6 million for the year ended December 31, 2005.

2005 Compared to 2004

Net Sales. Net sales for the year ended December 31, 2005 increased $1,120.4 million, or 82.8%, to $2,473.4 million from $1,353.0 million for the year ended December 31, 2004. The increase in sales was primarily due to the acquisition of O-I Plastic, as well as an increase in resin pricing. Container units sold increased 56.1%, principally due to additional food and beverage container business where container units sold increased 53.4%. On a geographic basis, sales for the year ended December 31, 2005 in North America increased $1,032.1 million, or 90.8%, from the year ended December 31, 2004, and included higher container units sold of 78.8%, primarily due to the acquisition of O-I Plastic. North American sales in the food and beverage product category, the household product category, the automotive lubricants product category and the personal care/specialty product category contributed $602.4 million, $214.6 million, $24.4 million and $190.7 million, respectively, to the increase. Container units sold in North America increased 81.6% in the food and beverage product category, increased 85.1% in the household product category, decreased 6.0% in the automotive lubricants product category and increased 273.9% in the personal care/specialty product category. Sales for the year ended December 31, 2005 in Europe increased $66.7 million, or 38.5%, compared to sales for the year ended December 31, 2004. The increase was primarily due to the acquisition of O-I Plastic and favorable exchange rate changes of approximately $4.4 million. Container units sold in Europe increased 14.8% compared to the same period last year. Sales in South America for the year ended December 31, 2005 increased $21.6 million, or 49.7%, from the year ended December 31, 2004, primarily due to the acquisition of O-I Plastic, a 67.8% increase in container units sold and favorable exchange rate changes of approximately $7.4 million.

Gross Profit. Gross profit for the year ended December 31, 2005 increased $101.9 million to $295.5 million from $193.6 million for the year ended December 31, 2004. Gross profit for the year ended December 31, 2005 increased $91.0 million, $5.4 million and $5.5 million in North America, Europe and South America, respectively, when compared to the year ended December 31, 2004. The net increase in gross profit resulted primarily from an increase in unit volume, principally as a result of the acquisition of O-I Plastic (partially offset by the effects of the hurricanes in the United States in the fourth quarter of 2005), of $114.1 million and a favorable impact from changes in foreign currency exchange rates of $3.0 million, offset by a net increase of expenses related to the acquisition of O-I Plastic and restructuring and other non-recurring expenses of $4.5 million ($2.6 million for North America, $2.1 million for Europe and $(0.2) million for South America) and a net increase in project costs of $10.7 million ($9.9 million for North America and $0.8 million for Europe) due to the activity and complexity level of the projects in 2005.

Selling, General & Administrative Expenses. Selling, general and administrative expenses for the year ended December 31, 2005 increased $41.2 million to $127.5 million from $86.3 million for the year ended December 31, 2004. The increase was primarily due to the acquisition of O-I Plastic. Non-recurring charges were $17.9 million and $10.1 million for the years ended December 31, 2005 and 2004, respectively, comprised of expenses relating to the acquisition of O-I Plastic, global reorganization costs and other costs. Selling, general and administrative expenses as a percent of sales decreased to 5.2% of sales for the year ended December 31, 2005 from 6.4% of sales for the year ended December 31, 2004.

Impairment Charges. Impairment charges were $7.3 million for the year ended December 31, 2005 as compared to $7.0 million for the year ended December 31, 2004. Due to a change in the ability to utilize certain assets in Brazil, Ecuador, France and the United States in 2005 and in France, Spain and the United States in 2004, the Company evaluated the recoverability of these assets. For these assets to be held and used, the Company determined that the undiscounted cash flows were below the carrying value of these long-lived assets. Accordingly, the Company adjusted the carrying value of these long-lived assets to their estimated fair values, resulting in impairment charges of $6.8 million and $7.0 million for the years ended December 31, 2005 and 2004, respectively. Similarly, the Company evaluated the recoverability of its goodwill, and consequently recorded impairment charges of $0.5 million for the year ended December 31, 2005 related to one reporting unit. Goodwill was evaluated for

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impairment and the resulting impairment charges recognized were based on a comparison of the related net book value of the goodwill of the reporting unit to its implied fair value.

Interest Expense, Net. Interest expense, net increased $43.9 million to $184.4 million for the year ended December 31, 2005 from $140.5 million for the year ended December 31, 2004. The increase was primarily related to significantly higher debt levels in 2005 following the Transactions (as defined herein), partially offset by 2004 having included the write-off of debt issuance fees of $20.9 million from the Company’s prior senior credit agreement and tender and call premia of $15.2 million associated with the redemption in 2004 of the Company’s prior senior subordinated notes and senior discount notes.

Other Expense (Income), Net. Other expense, net was $0.2 million for the year ended December 31, 2005 as compared to other income, net of $1.1 million for the year ended December 31, 2004, primarily due to higher foreign exchange losses.

Income Tax Provision (Benefit). Income tax provision was $14.4 million for the year ended December 31, 2005 as compared to income tax benefit of $2.1 million for the year ended December 31, 2004. The change of $16.5 million was primarily related to deferred income tax provided on intercompany dividends and on the unremitted earnings of certain foreign subsidiaries where Management determined that the earnings would not be permanently reinvested, combined with higher taxable income in the Company’s U.S. subsidiaries acquired as part of the acquisition of O-I Plastic and for operations in Europe and Mexico for the year ended December 31, 2005.

Minority Interest. Minority interest decreased $0.7 million to $0.7 million for the year ended December 31, 2005 from $1.4 million for the year ended December 31, 2004, due to the buyout on May 9, 2005 of the minority interest in the Company’s joint venture in Mexico.

Net (Loss) Income. Primarily as a result of factors discussed above, net loss was $52.6 million for the year ended December 31, 2005 compared to net loss of $40.6 million for the year ended December 31, 2004.

Effect of Changes in Exchange Rates

In general, the Company’s results of operations are affected by changes in foreign exchange rates. Subject to market conditions, the Company prices its products in its foreign operations in local currencies. As a result, a decline in the value of the U.S. dollar relative to the local currencies of profitable foreign subsidiaries can have a favorable effect on the profitability of the Company, and an increase in the value of the U.S. dollar relative to the local currencies of profitable foreign subsidiaries can have a negative effect on the profitability of the Company. Exchange rate fluctuations increased comprehensive income by $23.2 million, decreased comprehensive income by $17.5 million and increased comprehensive income by $23.0 million for the years ended December 31, 2006, 2005 and 2004, respectively. Included in other expense (income) were foreign exchange losses of $1.9 million and $0.3 million for the years ended December 31, 2006 and 2005, respectively, and foreign exchange gains of $1.3 million for the year ended December 31, 2004.

Liquidity and Capital Resources

In 2006, 2005 and 2004, the Company generated $490.4 million of cash from operations and $1,413.2 million from increased indebtedness. This $1,903.6 million was primarily used to fund $565.5 million of net cash paid for property, plant and equipment, $1,250.8 million of investments and $81.5 million of debt issuance fee payments.

Working capital, defined as current assets less current liabilities, decreased $108.6 million in 2006, primarily due to a decrease in inventories of $48.9 million, primarily due to a decrease in raw material inventories that were established at the end of 2005 to mitigate the effects on the supply of raw materials caused by the hurricanes in the United States in the latter part of 2005, reduced inventory levels due to added capacity during 2006 and a decrease in resin prices; and an increase in accounts payable and accrued expenses of $47.5 million, primarily due to a change in vendor payment terms in the fourth quarter of 2006 and higher accrued interest at the end of 2006.

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The Company’s Credit Agreement (after giving effect to the 2007 Amendment) currently consists of a senior secured B Loan to the Operating Company totaling $1,875.0 million and a Revolving Credit Facility to the Operating Company totaling $250.0 million. Pursuant to its terms, on April 18, 2006, the Credit Agreement was amended in order to, among other things, increase the Term Loan B facility provided under the Credit Agreement by $150.0 million. Proceeds of the 2006 Amendment were used to pay down $100.0 million of the Second-Lien Credit Agreement, with the remaining $50.0 million being used to reduce outstanding borrowings on the existing revolving credit facility provided for under the Credit Agreement. Pursuant to its terms, on March 30, 2007, the Credit Agreement was further amended in order to, among other things, increase the Term Loan B facility provided under the Credit Agreement by approximately $305.0 million. Proceeds of the 2007 Amendment were used to pay off the Second-Lien Credit Agreement ($250.0 million), with $50.0 million being used to reduce outstanding borrowings on the existing revolving credit facility provided for under the Credit Agreement and approximately $5.0 million being used to pay fees and expenses. The 2007 Amendment also eliminated one of the Company’s financial ratio covenants, increased the maximum allowable leverage under another financial ratio covenant and waived any potential excess cash flow payment required for the year ended December 31, 2006. The obligations of the Operating Company under the Credit Agreement are guaranteed by Holdings and certain other subsidiaries of Holdings. After giving effect to the 2007 Amendment, the B Loan is payable in quarterly installments and requires payments of $14.1 million in 2007, $18.7 million in each of 2008, 2009 and 2010 and $1,804.8 million in 2011. The Company expects to fund scheduled debt repayments from cash from operations and unused lines of credit. The Revolving Credit Facility expires on October 7, 2010.

The Acquisition and refinancing of substantially all of the Company’s prior debt (the “Transactions”) included the issuance of $250.0 million of Senior Notes due 2012 and the issuance of $375.0 million of Senior Subordinated Notes due 2014. The Senior Notes, together with the Senior Subordinated Notes, are herein collectively referred to as the “Notes.” The Senior Notes mature on October 7, 2012, with interest payable semi-annually at 8.50%. The Senior Subordinated Notes mature on October 7, 2014, with interest payable semi-annually at 9.875%. On August 23, 2005 the Operating Company and CapCo I completed an Exchange Offer whereby the Senior Notes and Senior Subordinated Notes were exchanged for Notes registered under the Securities Act of 1933, as amended. The Notes are fully and unconditionally guaranteed by Holdings.

At December 31, 2006, the Company’s total indebtedness was $2,546.9 million.

Unused lines of credit at December 31, 2006 and 2005 were $196.2 million and $61.8 million, respectively. Substantially all unused lines of credit have no major restrictions and are provided under notes between the Company and the lending institution.

The Credit Agreement and the Notes contain a number of significant covenants. The Company believes that these covenants are material terms of these agreements and that information about the covenants is material to an investor’s understanding of the Company’s financial condition and liquidity. Covenant compliance EBITDA (as defined below) is used to determine the Company’s compliance with many of these covenants. Any breach of covenants in the Credit Agreement that are tied to financial ratios based on covenant compliance EBITDA could result in a default under the Credit Agreement and the lenders could elect to declare all amounts borrowed to be immediately due and payable. Any such acceleration would also result in a default under the Notes. Additionally, these covenants restrict the Company’s ability to dispose of assets, repay other indebtedness, incur additional indebtedness, pay dividends, prepay subordinated indebtedness, incur liens, make capital expenditures, investments or acquisitions, engage in mergers or consolidations, engage in transactions with affiliates and otherwise restrict the Company’s activities. Under the Credit Agreement, the Company is required to satisfy specified financial ratios and tests beginning with the first quarter of 2005. As of December 31, 2006, the Company was in compliance with the financial ratios and tests specified in the Credit Agreements and the Company currently anticipates being able to comply with such financial ratios and tests for the next fiscal year, however, the Company can not give any assurance this will occur.

Covenant compliance EBITDA is defined as EBITDA (i.e., earnings before interest, taxes, depreciation and amortization) further adjusted to exclude non-recurring items, non-cash items and other adjustments required in calculating covenant compliance under the Credit Agreement and the Notes, as shown in the table below. Covenant compliance EBITDA is not intended to represent cash flow from operations as defined by generally accepted accounting principles and should not be used as an alternative to net income as an indicator of operating performance or to cash flow as a measure of liquidity. The Company believes that the inclusion of covenant compliance EBITDA in this annual report on Form 10-K is appropriate to provide additional information to

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investors about the calculation of certain financial covenants in the Credit Agreement and the Notes. Because not all companies use identical calculations, these presentations of covenant compliance EBITDA may not be comparable to other similarly titled measures of other companies. A reconciliation of net loss to covenant compliance EBITDA is as follows:

Reconciliation of net loss to EBITDA

	Year Ended December 31, 2006
	(In millions)
Net loss	$	(120.4	)
Interest income		(0.5	)
Interest expense		207.5
Income tax provision		27.6
Depreciation and amortization		205.5
EBITDA	$	319.7

Reconciliation of EBITDA to covenant compliance EBITDA

	Year Ended December 31, 2006
	(In millions)
EBITDA	$	319.7
Impairment charges		25.9
Other non-cash charges (a)		13.8
Fees related to monitoring agreements (b)		5.0
Non-recurring items (c)		53.8
Covenant compliance EBITDA	$	418.2

(a) Represents the net loss on disposal of fixed assets.

(b) Represents annual fees paid to Blackstone Management Partners III L.L.C. and a limited partner of Holdings under monitoring agreements.

(c) The Company is required to adjust EBITDA, as defined above, for the non-recurring items in the table below:

	Year Ended December 31, 2006
	(In millions)
Reorganization and other costs (i)	$	34.6
Project startup costs (ii)		19.2
	$	53.8

(i) Represents non-recurring costs related to the integration of O-I Plastic, aborted acquisitions, expenses related to the hurricanes in the United States in the second half of 2005, global reorganization costs and other costs.

(ii) Represents non-recurring costs associated with project startups.

Under the debt agreements, the Company’s ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is also tied to ratios based on covenant compliance EBITDA. After giving effect to the 2007 Amendment, the Credit Agreement requires that the Company maintain a senior secured debt to covenant compliance EBITDA ratio of a maximum of 5.50x, for the most recent four quarter period. For the four quarters ended December 31, 2006, the Operating Company’s covenant compliance EBITDA was $418.2 million. The covenant compliance EBITDA to cash interest ratio and net debt to covenant compliance EBITDA ratio were 2.05x and 6.06x, respectively, for the four quarters ended December 31, 2006, which were in compliance with the covenants as they existed prior to the 2007 Amendment. The ability of the Operating Company to incur additional debt and make certain restricted payments under its Notes is tied to a covenant compliance

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EBITDA to interest expense ratio of 2.0 to 1, except that the Operating Company may incur certain debt and make certain restricted payments without regard to the ratio, such as up to $2.2 billion under the Credit Agreement and investments equal to 7.5% of the Operating Company’s total assets.

Substantially all of the Company’s domestic tangible and intangible assets are pledged as collateral pursuant to the terms of the Credit Agreement.

Under the Credit Agreement, the Operating Company is subject to restrictions on the payment of dividends or other distributions to Holdings; provided that, subject to certain limitations, the Operating Company may pay dividends or other distributions to Holdings:

• in respect of overhead, tax liabilities, legal, accounting and other professional fees and expenses; and

• to fund purchases and redemptions of equity interests of Holdings or Investor LP held by then present or former officers or employees of Holdings, the Operating Company or their Subsidiaries (as defined therein) or by any employee stock ownership plan upon that person’s death, disability, retirement or termination of employment or other circumstances with annual dollar limitations.

As market conditions warrant, the Company and its major equityholders, including the Blackstone Investors and their affiliates, may from time to time repurchase debt securities issued by the Company, in privately negotiated or open market transactions, by tender offer or otherwise.

Cash paid for property, plant and equipment, net of proceeds from sales of property, plant and equipment and excluding acquisitions, for 2006, 2005 and 2004 were $170.9 million, $242.6 million and $151.9 million, respectively. Management believes that capital investment to maintain and upgrade property, plant and equipment is important to remain competitive. Management estimates that on average the annual capital expenditures required to maintain the Company’s current facilities are approximately $47 million per year. Additional capital expenditures beyond this amount will be required to expand capacity or improve the cost structure.

For the fiscal year 2007, the Company expects to incur capital investments ranging from $160 million to $175 million. However, total capital investments for 2007 will depend on the size and timing of growth related opportunities. The Company’s principal sources of cash to fund ongoing operations and capital requirements have been and are expected to continue to be net cash provided by operating activities and borrowings under the Credit Agreement. Management believes that these sources will be sufficient to fund the Company’s ongoing operations and its foreseeable capital requirements. In connection with plant expansion and improvement programs, the Company had commitments for capital expenditures of $46.3 million at December 31, 2006, including the $12.0 million per year obligation to Graham Engineering, an entity owned by Donald C. Graham, for products and services through December 31, 2007. See “-Transactions with Affiliates.”

Contractual Obligations and Commitments

The following table sets forth the Company's significant contractual obligations and commitments as of December 31, 2006:

			Payments Due by Period
Contractual Obligations	Total		2007		2008 and 2009		2010 and 2011		2012 and beyond
	(In millions)
Long-term debt	$	2,509.3	$	23.7	$	32.5	$	1,578.0	$	875.1
Capital lease obligations		37.6		10.6		13.4		13.6		—
Interest payments		1,107.7		197.0		410.7		372.8		127.2
Operating leases		147.0		29.5		48.7		30.3		38.5
Capital expenditures		46.3		46.3		—		—		—
Total contractual cash obligations	$	3,847.9	$	307.1	$	505.3	$	1,994.7	$	1,040.8

Amounts shown above have not been adjusted to reflect the 2007 Amendment to the Credit Agreement.

Interest payments are calculated based upon the Company’s 2006 year-end actual interest rates, including the effects of interest rate swaps. The assumptions used to determine the effects of the interest rate swaps include certain contractual fixed rates and variable rates based on LIBOR as of December 31, 2006.

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In addition to the amounts included above, in 2007 the Company expects to make cash contributions to its pension plans of approximately $7.4 million. Cash contributions in subsequent years will depend on a number of factors including the performance of plan assets.

Off-Balance Sheet Arrangements

Other than operating leases, as of December 31, 2006, the Company did not have any off-balance sheet arrangements as defined in Item 303 (a)(4)(ii) of SEC Regulation S-K.

Transactions with Affiliates

The Company’s transactions with Graham Engineering are related to equipment supplied to the Company. The Company is a party to an Equipment Sales, Services and License Agreement dated February 2, 1998 (“Equipment Sales Agreement”) with Graham Engineering, under which Graham Engineering will provide the Company with certain sizes of wheels, used in extrusion blow molding, on an exclusive basis within the countries and regions in which the Company has material sales of plastic containers. The Company received equipment and related services of approximately $10.3 million, $13.1 million and $13.6 million for the years ended December 31, 2006, 2005 and 2004, respectively.

On July 9, 2002, the Company and Graham Engineering executed a First Amendment to the Equipment Sales Agreement to, among other things, (i) permit the Company to purchase certain extrusion blow molding wheel systems from a third party under certain circumstances if Graham Engineering is provided the opportunity to bid on supplying the same equipment; (ii) clarify that the Company’s exclusivity rights under the Equipment Sales Agreement do not apply to certain new generations of Graham Engineering equipment; (iii) in the event of the sale of Graham Engineering to a competitor, provide the Company the option to require the transfer of the existing agreement or obtain a perpetual, royalty-free license to make and use wheel equipment and components; (iv) provide Graham Engineering with the ability to terminate the Equipment Sales Agreement if an arbitrator determines that the Company has purchased certain high output extrusion blow molding equipment from another supplier in breach of the Equipment Sales Agreement; and (v) obligate the Company, retroactive to January 1, 2002, and subject to certain credits and carry-forwards, to make payments for products and services to Graham Engineering in the amount of at least $12.0 million per calendar year, or else pay to Graham Engineering a shortfall payment. The minimum purchase commitment for 2006 has been met.

Subsequently, on January 13, 2004, the parties executed a Second Amendment to the Equipment Sales Agreement. Such amendment removed restrictions originally placed upon the Company with respect to the Company’s use of Graham Engineering technology to manufacture containers at blow molding plants co-located with dairies or dairy-focused facilities.

The Equipment Sales Agreement terminates on December 31, 2007, unless mutually extended by the parties.

Innopack, S.A., former minority shareholder of Graham Innopack de Mexico S. de R.L. de C.V., has supplied goods and related services to the Company of approximately $1.7 million for the year ended December 31, 2004. The Company purchased the remaining interest in Graham Innopack de Mexico S. de R.L. de C.V. on May 9, 2005.

The Graham Family Investors have supplied management services to the Company since 1998. The Company received services of approximately $2.0 million, $2.1 million and $1.3 million for the years ended December 31, 2006, 2005 and 2004, respectively, including the annual fee paid pursuant to the Holdings Partnership Agreement and the Monitoring Agreement.

Blackstone Management Partners III L.L.C. has supplied management services to the Company since 1998. The Company received services of approximately $3.1 million, $3.1 million and $1.6 million for the years ended December 31, 2006, 2005 and 2004, respectively, including the annual fee paid pursuant to the Monitoring Agreement. Additionally, in connection with the Acquisition, the Blackstone Investors received a fee of approximately $24.3 million for the year ended December 31, 2004.

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Critical Accounting Policies and Estimates

Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with SFAS 144. The Company uses a probability-weighted estimate of the future undiscounted net cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. Any impairment loss, if indicated, is measured on the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset. When fair values are not available, the Company estimates fair value using the probability-weighted expected future cash flows discounted at a risk-free rate. Management believes that this policy is critical to the financial statements, particularly when evaluating long-lived assets for impairment. Varying results of this analysis are possible due to the significant estimates involved in the Company’s evaluations.

Impairment of Goodwill

Goodwill is not amortized, but instead is subject to impairment testing. The Company performs an evaluation of whether goodwill is impaired annually, or when events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Events or circumstances that might indicate an interim evaluation is warranted include unexpected adverse business conditions, economic factors, unanticipated technological changes or competitive activities, loss of key personnel and acts by governments and courts. The identification and measurement of goodwill impairment involves the estimation of the fair value of reporting units. The Company considers a number of factors, including the input of an independent appraisal firm, in conducting the impairment testing of its reporting units. The Company performs its impairment testing by comparing the estimated fair value of the reporting unit to the carrying value of the reported net assets, with such testing occurring as of the end of each year. Fair value is generally based on the income approach using a calculation of discounted cash flows, based on the most recent financial projections for the reporting units. The financial projections are Management’s best estimates based on current and forecasted market conditions. The calculation of fair value for the Company’s reporting units incorporates many assumptions including future growth rates, profit margins and discount factors. Changes in economic and operating conditions impacting these assumptions could result in additional impairment charges in future periods.

Derivatives

The Company accounts for derivatives under SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS 138. These standards establish accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value. The fair value of the derivatives is determined from sources independent of the Company, including the financial institutions which are party to the derivative instruments. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and the hedged item will be recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portion of the change in the fair value of the derivative will be recorded in other comprehensive income (“OCI”) and will be recognized in the income statement when the hedged item affects earnings.

During 2004, the Company entered into four interest rate swap agreements, under which the Company receives variable interest based on the Eurodollar rate (the applicable interest rate offered to banks in the London interbank eurocurrency market) and pays fixed interest at a weighted average rate of 3.89%, on $700.0 million of term loans. Also in 2004, the Company entered into an interest rate cap agreement, under which the Company would receive interest on $200.0 million notional amount of variable rate debt based on the Eurodollar rate to the extent the rate exceeded 4.50% prior to January of 2006. During 2005, the Company entered into three additional interest rate swap agreements, under which the Company receives variable interest based on the Eurodollar rate and pays fixed interest at a weighted average rate of 4.43%, on $225.0 million of term loans. During 2006, the Company entered into four forward rate agreements, under which the Company receives variable interest based on the Eurodollar rate and pays fixed interest at a weighted average rate of 5.35%, on $1,145.2 million of term loans. The interest rate swaps and forward rate agreements are accounted for as cash flow hedges. The hedges are highly effective as defined in SFAS 133. The effective portion of the cash flow hedges is recorded in OCI and was an unrealized gain of $10.9 million as of December 31, 2006. Failure to properly document the Company’s interest

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rate swaps as effective hedges would result in income statement recognition of all or part of the cumulative $10.9 million unrealized gain recorded in accumulated OCI as of December 31, 2006. Approximately 99% of the amount recorded within OCI is expected to be recognized as interest expense in the next twelve months.

SFAS 133 defines requirements for designation and documentation of hedging relationships as well as ongoing effectiveness assessments in order to use hedge accounting. For a derivative that does not qualify as a hedge, changes in fair value will be recognized in earnings. Continued use of hedge accounting is dependent on management’s adherence to this accounting policy. Failure to properly document the Company’s interest rate swaps as cash flow hedges would result in income statement recognition of all or part of any future unrealized gain or loss recorded in OCI. The potential income statement impact resulting from a failure to adhere to this policy makes this policy critical to the financial statements.

The Company also enters into forward exchange contracts, when considered appropriate, to hedge the exchange rate exposure on transactions that are denominated in a foreign currency. These forward contracts are accounted for as fair value hedges. At December 31, 2006 and 2005 the Company had no foreign currency forward exchange contracts open.

Benefit Plan Accruals

The Company has several defined benefit plans, under which participants earn a retirement benefit based upon a formula set forth in the plan. Key assumptions used in the actuarial valuations include the discount rate and the anticipated rate of return on plan assets, as determined by Management. These rates are based on market interest rates, and therefore, fluctuations in market interest rates could impact the amount of pension expense recorded for these plans. The Company’s primary U.S. defined benefit plan for hourly and salaried employees was frozen to future salary and service accruals in the fourth quarter of 2006.

Income Taxes

The Company accounts for income taxes in accordance with SFAS 109, "Accounting for Income Taxes," which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the financial reporting and tax bases of recorded assets and liabilities. SFAS 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company has recorded a valuation allowance to reduce its deferred tax assets to the amount that it believes is more likely than not to be realized. The Company’s assumptions regarding future realization may change due to future operating performance and other factors.

Fair Value of Acquisition-Related Assets and Liabilities

The Company allocates the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. In determining fair value, management is required to make estimates and assumptions that affect the recorded amounts. To assist in this process, third party valuation specialists are engaged to value certain of these assets and liabilities.

Estimates used in valuing acquired assets and liabilities include but are not limited to: expected future cash flows, market rate assumptions for contractual obligations, actuarial assumptions for benefit plans, settlement plans for litigation and contingencies and appropriate discount rates. The Company’s estimates of fair value are based upon assumptions believed to be reasonable, but that are inherently uncertain. In addition, estimated liabilities to exit activities of the acquired operations, including the exiting of contractual obligations and the termination of employees, are subject to change as the Company completes the implementation of the plan.

The purchase agreement related to O-I Plastic contains a stated purchase price of $1,200.0 million, which was paid on October 7, 2004, subject to adjustments based on the level of working capital acquired, indebtedness assumed and certain other measures. The Company and the sellers resolved these adjustments to the purchase price in April 2005, resulting in a return to the Company of $38.9 million. In addition, the purchase agreement provides information on certain net operating loss carryforwards for U.S. federal income tax purposes (“NOL’s”) that are allocated from the sellers to O-I Plastic. The amount of such NOL’s was $157.5 million. A deferred income tax benefit of $61.8 million related to the NOL’s was included in the purchase price allocation.

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For disclosure of all of the Company's significant accounting policies see Note 1 of the Notes to Consolidated Financial Statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Company had significant long- and short-term debt commitments outstanding as of December 31, 2006. These on-balance sheet financial instruments, to the extent they provide for variable rates of interest, expose the Company to interest rate risk. The Company manages its interest rate risk by entering into interest rate swap agreements. All of the Company’s derivative financial instrument transactions are entered into for non-trading purposes.

To the extent that the Company’s financial instruments, including derivative instruments, expose the Company to interest rate risk and market risk, they are presented in the table below. For variable rate debt obligations, the tables present principal cash flows and related actual weighted average interest rates as of December 31, 2006 and 2005. For fixed rate debt obligations, the following tables present principal cash flows and related weighted average interest rates by maturity dates. For interest rate swap agreements, the table presents notional amounts and the interest rates by expected (contractual) maturity dates for the pay rate and actual interest rates at December 31, 2006 and 2005 for the receive rate. Note 11 of the Notes to Consolidated Financial Statements should be read in conjunction with the tables below. Also refer to the interest rate sensitivity analysis in “Risk Factors” (Item 1A).

		Expected Maturity Date of Long-Term Debt (Including Current Portion) and Interest																					Fair Value
		Rate Swap Agreements at December 31, 2006																					December
		2007			2008			2009			2010			2011			Thereafter			Total				31, 2006
		(Dollars in thousands)
Interest rate sensitive liabilities:
Variable rate borrowings, including short-term amounts	$	23,328		$	16,154		$	16,119		$	72,019		$	1,505,785		$	250,000		$	1,883,405		$		1,883,405
Average interest rate		8.91	%		7.72	%		7.72	%		8.06	%		7.72	%		9.62	%		8.00	%
Fixed rate borrowings	$	10,937		$	9,733		$	3,859		$	8,532		$	5,307		$	625,114		$	663,482		$		671,320
Average interest rate		7.69	%		7.72	%		7.69	%		7.74	%		7.71	%		9.32	%		9.23	%
Total interest rate sensitive liabilities	$	34,265		$	25,887		$	19,978		$	80,551		$	1,511,092		$	875,114		$	2,546,887		$		2,554,725
Derivatives matched against liabilities:
Pay fixed swaps	$	650,000		$	275,000														$	925,000		$		10,725
Pay rate		3.98	%		4.11	%														4.02	%
Receive rate		4.18	%		4.35	%														4.23	%

Debt amounts above have not been adjusted to reflect the 2007 Amendment to the Credit Agreement.

		Expected Maturity Date of Long-Term Debt (Including Current Portion) and Interest																					Fair Value
		Rate Swap Agreements at December 31, 2005																					December
		2006			2007			2008			2009			2010			Thereafter			Total			31, 2005
		(Dollars in thousands)
Interest rate sensitive liabilities:
Variable rate borrowings, including short-term amounts	$	22,107		$	14,635		$	14,635		$	14,600		$	202,000		$	1,713,000		$	1,980,977		$	1,980,977
Average interest rate		8.09	%		6.48	%		6.48	%		6.48	%		7.07	%		6.96	%		6.97	%
Fixed rate borrowings	$	5,752		$	9,638		$	8,112		$	2,104		$	6,634		$	625,123		$	657,363		$	647,138
Average interest rate		7.66	%		7.71	%		7.75	%		7.78	%		7.78	%		9.32	%		9.25	%
Total interest rate sensitive liabilities	$	27,859		$	24,273		$	22,747		$	16,704		$	208,634		$	2,338,123		$	2,638,340		$	2,628,115
Derivatives matched against liabilities:
Pay fixed swaps	$	400,000		$	650,000		$	275,000												(1	)	$	14,514
Pay rate		2.60	%		3.98	%		4.11	%
Receive rate		4.47	%		4.74	%		4.77	%

(1) Swaps maturing in 2007 and 2008 are forward starting at expiration of existing swaps; therefore totals are not applicable.

There were no forward exchange contracts outstanding as of December 31, 2006 and 2005.

36

Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

	Page Number
Report of Independent Registered Public Accounting Firm	38
Audited Financial Statements	39
Consolidated Balance Sheets at December 31, 2006 and 2005	39
Consolidated Statements of Operations for the years ended December 31, 2006, 2005 and 2004	40
Consolidated Statements of Partners’ Capital (Deficit) for the years ended December 31, 2006, 2005 and 2004	41
Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004	42
Notes to Consolidated Financial Statements	43

37

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners

Graham Packaging Holdings Company

We have audited the accompanying consolidated balance sheets of Graham Packaging Holdings Company and subsidiaries (the “Company”) as of December 31, 2006 and 2005, and the related consolidated statements of operations, partners’ capital (deficit), and cash flows for each of the three years in the period ended December 31, 2006. Our audits also included financial statement schedules I and II listed in the index at Item 15(a). These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.

DELOITTE & TOUCHE LLP

Philadelphia, Pennsylvania

March 30, 2007

38

GRAHAM PACKAGING HOLDINGS COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands)

	December 31,
	2006			2005
ASSETS
Current assets:
Cash and cash equivalents	$	13,327		$	26,684
Accounts receivable, net		240,692			251,357
Inventories		238,941			287,810
Deferred income taxes		15,409			13,069
Prepaid expenses and other current assets		64,870			50,997
Total current assets		573,239			629,917
Property, plant and equipment:
Machinery and equipment		1,962,386			1,788,812
Land, buildings and leasehold improvements		281,119			268,846
Construction in progress		143,259			173,465
		2,386,764			2,231,123
Less accumulated depreciation and amortization		960,752			787,663
Property, plant and equipment, net		1,426,012			1,443,460
Intangible assets, net		78,511			81,633
Goodwill		303,394			317,171
Other non-current assets		60,781			90,197
Total assets	$	2,441,937		$	2,562,378
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)
Current liabilities:
Accounts payable	$	206,672		$	177,600
Accrued expenses		194,837			176,432
Current portion of long-term debt		32,308			27,859
Total current liabilities		433,817			381,891
Long-term debt		2,514,579			2,610,481
Deferred income taxes		28,538			22,593
Other non-current liabilities		62,759			41,123
Commitments and contingent liabilities (see Notes 19 and 20)		—			—
Partners’ capital (deficit):
General partners		(30,965	)		(24,946	)
Limited partners		(595,148	)		(478,513	)
Notes and interest receivable for ownership interests		(3,295	)		(3,102	)
Accumulated other comprehensive income		31,652			12,851
Total partners’ capital (deficit)		(597,756	)		(493,710	)
Total liabilities and partners’ capital (deficit)	$	2,441,937		$	2,562,378

See accompanying notes to consolidated financial statements.

39

GRAHAM PACKAGING HOLDINGS COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

	Year Ended December 31,
	2006			2005			2004
Net sales	$	2,520,936		$	2,473,449		$	1,352,955
Cost of goods sold		2,233,439			2,177,918			1,159,335
Gross profit		287,497			295,531			193,620
Selling, general and administrative expenses		131,414			127,534			86,295
Impairment charges		25,875			7,263			6,996
Net loss on disposal of fixed assets		13,851			13,591			2,250
Operating income		116,357			147,143			98,079
Interest expense		207,503			184,995			140,832
Interest income		(552	)		(633	)		(332	)
Other expense (income), net		2,192			244			(1,086	)
Loss before income taxes and minority interest		(92,786	)		(37,463	)		(41,335	)
Income tax provision (benefit)		27,590			14,450			(2,148	)
Minority interest		—			728			1,445
Net loss	$	(120,376	)	$	(52,641	)	$	(40,632	)
Net loss allocated to general partners	$	(6,019	)	$	(2,632	)	$	(2,032	)
Net loss allocated to limited partners	$	(114,357	)	$	(50,009	)	$	(38,600	)

See accompanying notes to consolidated financial statements.

40

GRAHAM PACKAGING HOLDINGS COMPANY

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL (DEFICIT)

(In thousands)

	General Partners			Limited Partners			Notes and Interest Receivable for Ownership Interests			Accumulated Other Comprehensive Income (Loss)			Total
Consolidated balance at January 1, 2004	$	(20,282	)	$	(390,182	)	$	(2,749	)	$	(8,327	)	$	(421,540	)
Net loss for the year		(2,032	)		(38,600	)		—			—			(40,632	)
Changes in fair value of derivatives (net of tax of $0)		—			—			—			5,813			5,813
Additional minimum pension liability (net of tax of $381)		—			—			—			(611	)		(611	)
Cumulative translation adjustment (net of tax of $0)		—			—			—			23,033			23,033
Comprehensive loss														(12,397	)
Stock compensation expense		—			8			—			—			8
Interest on notes receivable for ownership interests		—			—			(171	)		—			(171	)
Consolidated balance at December 31, 2004		(22,314	)		(428,774	)		(2,920	)		19,908			(434,100	)
Net loss for the year		(2,632	)		(50,009	)		—			—			(52,641	)
Changes in fair value of derivatives (net of tax of $0)		—			—			—			11,129			11,129
Additional minimum pension liability (net of tax of $387)		—			—			—			(673	)		(673	)
Cumulative translation adjustment (net of tax of $0)		—			—			—			(17,513	)		(17,513	)
Comprehensive loss														(59,698	)
Stock compensation expense		—			270			—			—			270
Interest on notes receivable for ownership interests		—			—			(182	)		—			(182	)
Consolidated balance at December 31, 2005		(24,946	)		(478,513	)		(3,102	)		12,851			(493,710	)
Net loss for the year		(6,019	)		(114,357	)		—			—			(120,376	)
Changes in fair value of derivatives (net of tax of $0)		—			—			—			(3,648	)		(3,648	)
Adjustment to minimum pension liability prior to adoption of SFAS 158 (as defined in Note 1) (net of tax of $(273)), pension and postretirement plans		—			—			—			1,837			1,837
Cumulative translation adjustment (net of tax of $0)		—			—			—			23,197			23,197
Comprehensive loss														(98,990	)
Adjustment to initially apply SFAS 158 (net of tax of $239), pension and postretirement plans		—			—			—			(2,585	)		(2,585	)
Stock compensation expense		—			187			—			—			187
Interest on notes receivable for ownership interests		—			—			(193	)		—			(193	)
Repurchase of options		—			(2,762	)		—			—			(2,762	)
Exercise of options		—			297			—			—			297
Consolidated balance at December 31, 2006	$	(30,965	)	$	(595,148	)	$	(3,295	)	$	31,652		$	(597,756	)

See accompanying notes to consolidated financial statements.

41

GRAHAM PACKAGING HOLDINGS COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31,
	2006			2005			2004
Operating activities:
Net loss	$	(120,376	)	$	(52,641	)	$	(40,632	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		205,518			201,056			112,114
Amortization of debt issuance fees		12,490			10,302			27,654
Net loss on disposal of fixed assets		13,851			13,591			2,250
Impairment charges		25,875			7,263			6,996
Stock compensation expense		187			270			8
Minority interest		—			728			1,445
Foreign currency transaction loss (gain)		411			535			(1,067	)
Interest receivable for ownership interests		(193	)		(182	)		(171	)
Changes in operating assets and liabilities, net of acquisitions of businesses:
Accounts receivable		14,819			(3,521	)		(18,612	)
Inventories		50,931			(52,287	)		(24,311	)
Prepaid expenses and other current assets		(12,535	)		(4,900	)		(5,749	)
Other non-current assets		8,666			(2,929	)		(4,570	)
Other non-current liabilities		24,823			2,315			(1,716	)
Accounts payable and accrued expenses		38,484			397			53,822
Net cash provided by operating activities		262,951			119,997			107,461
Investing activities:
Cash paid for property, plant and equipment		(190,539	)		(257,605	)		(154,282	)
Proceeds from sale of property, plant and equipment		19,605			14,994			2,359
Acquisitions of/investments in businesses, net of cash acquired		(1,426	)		(18,773	)		(1,230,563	)
Net cash used in investing activities		(172,360	)		(261,384	)		(1,382,486	)
Financing activities:
Proceeds from issuance of long-term debt		809,828			1,115,762			2,872,524
Payment of long-term debt		(913,722	)		(965,672	)		(1,505,534	)
Contributions to minority shareholders		—			—			(182	)
Proceeds from issuance of partnership units		297			—			—
Debt issuance fees		(1,000	)		(2,145	)		(78,389	)
Net cash (used in) provided by financing activities		(104,597	)		147,945			1,288,419
Effect of exchange rate changes on cash and cash equivalents		649			(2,005	)		1,670
(Decrease) increase in cash and cash equivalents		(13,357	)		4,553			15,064
Cash and cash equivalents at beginning of year		26,684			22,131			7,067
Cash and cash equivalents at end of year	$	13,327		$	26,684		$	22,131
Supplemental disclosures
Cash paid for interest, net of amounts capitalized	$	179,673		$	172,003		$	115,419
Cash paid for taxes	$	18,646		$	10,128		$	6,769
Non-cash investing and financing activities:
Capital leases	$	11,939		$	22,784		$	—
Accruals related to investing and financing activities	$	37,794		$	35,176		$	7,337

See accompanying notes to consolidated financial statements.

42

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

1. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the operations of Graham Packaging Holdings Company (“Holdings”), a Pennsylvania limited partnership formerly known as Graham Packaging Company; Graham Packaging Company, L.P., a Delaware limited partnership formerly known as Graham Packaging Holdings I, L.P. (the “Operating Company”); and subsidiaries thereof. In addition, the consolidated financial statements of the Company include GPC Capital Corp. I (“CapCo I”), a wholly owned subsidiary of the Operating Company, and GPC Capital Corp. II (“CapCo II”), a wholly owned subsidiary of Holdings. The purpose of CapCo I is solely to act as co-obligor with the Operating Company under the Senior Notes and Senior Subordinated Notes (as defined herein) and as co-borrower with the Operating Company under the Credit Agreements (as defined herein). CapCo II currently has no obligations under any of the Company’s outstanding indebtedness. CapCo I and CapCo II have only nominal assets and do not conduct any independent operations. Since October 7, 2004 the consolidated financial statements of the Company include the operations of Graham Packaging Acquisition Corp. and subsidiaries thereof, as a result of the acquisition of the blow molded plastic container business of Owens-Illinois, Inc. (“O-I Plastic”). (Refer to Note 3 for a discussion of this acquisition). These entities and assets are referred to collectively as Graham Packaging Holdings Company (the “Company”). All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.

Holdings has no assets, liabilities or operations other than its direct and indirect investments in the Operating Company and its ownership of CapCo II. Holdings has fully and unconditionally guaranteed the Senior Notes and Senior Subordinated Notes of the Operating Company and CapCo I.

Description of Business

The Company focuses on the manufacture and sale of value-added plastic packaging products principally to large, multinational companies in the food and beverage, household, automotive lubricants and personal care/specialty product categories. The Company has manufacturing facilities in Argentina, Belgium, Brazil, Canada, Ecuador, England, Finland, France, Hungary, Mexico, the Netherlands, Poland, Spain, Turkey, the United States and Venezuela.

Revenue Recognition

The Company recognizes revenue when the title and risk of loss have passed to the customer, there is persuasive evidence of an arrangement, delivery has occurred, the sales price is determinable and collectability is reasonably assured. Revenue is recognized at time of shipment. Sales are recorded net of discounts, allowances and returns. Sales allowances are recorded as a reduction to sales in accordance with Emerging Issues Task Force (“EITF”) 01-9, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).”

Shipping and Handling Costs

Shipping and handling costs are included as a component of cost of goods sold in the consolidated statements of operations.

Research and Development Costs

The Company expenses costs to research, design and develop new packaging products and technologies as incurred. Such costs were $16.5 million, $15.8 million and $6.6 million for the years ended December 31, 2006, 2005 and 2004, respectively.

Cash and Cash Equivalents

The Company considers cash and investments with an initial maturity of three months or less when purchased to be cash and cash equivalents.

43

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Inventories

Inventories include material, labor and overhead and are stated at the lower of cost or market with cost determined by the first-in, first-out ("FIFO") method. See Note 5.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation and amortization are computed by the straight-line method over the estimated useful lives of the various assets ranging from 3 to 31.5 years. Interest costs are capitalized during the period of construction of capital assets as a component of the cost of acquiring these assets.

The Company accounts for its molds in accordance with EITF 99-5, “Accounting for Pre-Production Costs Related to Long-Term Supply Arrangements.” All molds, whether owned by the Company or its customers, are included in machinery and equipment in the consolidated balance sheet.

The Company accounts for obligations associated with the retirement of its tangible long-lived assets in accordance with Statement of Financial Accounting Standards (“SFAS”) 143, “Accounting for Asset Retirement Obligations,” and Financial Accounting Standards Board (“FASB”) Interpretation No. (“FIN”) 47, “Accounting for Conditional Asset Retirement Obligations.”

Intangible Assets

Intangible assets consist of patented technology, customer relationships, licensing agreements and non-compete agreements. The Company amortizes these intangibles using the straight-line method over the estimated useful lives of the assets ranging from 3 to 20 years. See Note 7.

Goodwill

Goodwill is not amortized but is tested annually for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired, and written down to fair value if considered impaired. See Notes 6, 8 and 21.

Other Non-Current Assets

Other non-current assets primarily include debt issuance fees and deferred income tax assets. Debt issuance fees totaled $54.7 million and $66.2 million as of December 31, 2006 and 2005, respectively. These amounts are net of accumulated amortization of $23.3 million and $12.9 million as of December 31, 2006 and 2005, respectively. Amortization is computed by the effective interest method over the term of the related debt.

Impairment of Long-Lived Assets and Intangible Assets

Long-lived assets and amortizable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Company uses a probability-weighted estimate of the future undiscounted net cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. Any impairment loss, if indicated, is measured on the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset. When fair values are not available, the Company estimates fair value using the probability-weighted expected future cash flows discounted at a risk-free rate.

Derivatives

The Company accounts for derivatives under SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS 138. These standards establish accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value. The fair value of the derivatives is determined from sources independent of the Company, including the

44

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

financial institutions which are party to the derivative instruments. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and the hedged item will be recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portion of the change in the fair value of the derivative will be recorded in other comprehensive income (“OCI”) and will be recognized in the income statement when the hedged item affects earnings.

During 2004, the Company entered into four interest rate swap agreements, under which the Company receives variable interest based on the Eurodollar rate (the applicable interest rate offered to banks in the London interbank eurocurrency market) and pays fixed interest at a weighted average rate of 3.89%, on $700.0 million of term loans. Also in 2004, the Company entered into an interest rate cap agreement, under which the Company would receive interest on $200.0 million notional amount of variable rate debt based on the Eurodollar rate to the extent the rate exceeded 4.50% prior to January of 2006. During 2005, the Company entered into three additional interest rate swap agreements, under which the Company receives variable interest based on the Eurodollar rate and pays fixed interest at a weighted average rate of 4.43%, on $225.0 million of term loans. During 2006, the Company entered into four forward rate agreements, under which the Company receives variable interest based on the Eurodollar rate and pays fixed interest at a weighted average rate of 5.35%, on $1,145.2 million of term loans. The interest rate swaps and forward rate agreements are accounted for as cash flow hedges. The hedges are highly effective as defined in SFAS 133. The effective portion of the cash flow hedges is recorded in OCI and was an unrealized gain of $10.9 million as of December 31, 2006. Failure to properly document the Company’s interest rate swaps as effective hedges would result in income statement recognition of all or part of the cumulative $10.9 million unrealized gain recorded in accumulated OCI as of December 31, 2006. Approximately 99% of the amount recorded within OCI is expected to be recognized as interest expense in the next twelve months.

SFAS 133 defines requirements for designation and documentation of hedging relationships as well as ongoing effectiveness assessments in order to use hedge accounting. For a derivative that does not qualify as a hedge, changes in fair value will be recognized in earnings. Continued use of hedge accounting is dependent on management’s adherence to this accounting policy. Failure to properly document the Company’s interest rate swaps as cash flow hedges would result in income statement recognition of all or part of any future unrealized gain or loss recorded in OCI. The potential income statement impact resulting from a failure to adhere to this policy makes this policy critical to the financial statements.

The Company also enters into forward exchange contracts, when considered appropriate, to hedge the exchange rate exposure on transactions that are denominated in a foreign currency. These forward contracts are accounted for as fair value hedges. At December 31, 2006 and 2005 the Company had no foreign currency forward exchange contracts open.

Benefit Plan Accruals

The Company has several defined benefit plans, under which participants earn a retirement benefit based upon a formula set forth in the plan. Accounting for defined benefit pension plans, and any curtailments thereof, requires various assumptions, including, but not limited to, discount rates, expected rates of return on plan assets and future compensation growth rates. The Company evaluates these assumptions at least once each year or as facts and circumstances dictate and make changes as conditions warrant. Changes to these assumptions will increase or decrease the Company’s reported income, which will result in changes to the recorded benefit plan assets and liabilities.

Foreign Currency Translation

The Company uses the local currency as the functional currency for all foreign operations, except as noted below. All assets and liabilities of such foreign operations are translated into U.S. dollars at year-end exchange rates. Income statement items are translated at average exchange rates prevailing during the year. The resulting translation adjustments are included in accumulated other comprehensive income as a component of partners’ capital (deficit). Exchange gains and losses arising from transactions denominated in foreign currencies other than the functional currency of the entity entering into the transactions are included in current operations. For operations in highly inflationary economies, the Company remeasures such entities’ financial statements as if the functional currency was the U.S. dollar.

45

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Comprehensive Income

Changes in fair value of derivatives designated and accounted for as cash flow hedges, pension liability adjustments and foreign currency translation adjustments are included in OCI and added with net loss to determine total comprehensive income (loss), which is displayed in the Consolidated Statements of Partners’ Capital (Deficit).

The components of accumulated other comprehensive income (loss), net of income taxes, consisted of:

	Cash Flow Hedges			Pension Liability			Cumulative Translation Adjustments			Total
	(In thousands)
Balance at January 1, 2004	$	(2,428	)	$	(3,257	)	$	(2,642	)	$	(8,327	)
Change		5,813			(611	)		23,033			28,235
Balance at December 31, 2004		3,385			(3,868	)		20,391			19,908
Change		11,129			(673	)		(17,513	)		(7,057	)
Balance at December 31, 2005		14,514			(4,541	)		2,878			12,851
Change		(3,648	)		—			23,197			19,549
Adjustment to minimum pension liability prior to adoption of SFAS 158		—			1,837			—			1,837
Adjustment to initially apply SFAS 158		—			(2,585	)		—			(2,585	)
Balance at December 31, 2006	$	10,866		$	(5,289	)	$	26,075		$	31,652

Income Taxes

Holdings and the Operating Company, as limited partnerships, do not pay U.S. federal income taxes under the provisions of the Internal Revenue Code, as the applicable income or loss is included in the tax returns of its partners. However, certain U.S. subsidiaries acquired as part of O-I Plastic are corporations and are subject to U.S. federal and state income taxes. The Company’s foreign operations are subject to tax in their local jurisdictions. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse.

Option Plans

In 2004, the FASB issued SFAS 123(R), “Share-Based Payment.” SFAS 123(R) revises SFAS 123, “Accounting for Stock-Based Compensation,” and requires companies to expense the fair value of employee stock options and other forms of stock-based compensation. Under SFAS 123(R), companies are to (1) use fair value to measure stock-based compensation awards and (2) cease using the “intrinsic value” method of accounting, which Accounting Principles Board Opinion (“APB”) 25, “Accounting for Stock Issued to Employees,” allowed and resulted in no expense for many awards of stock options for which the exercise price of the option equaled the price of the underlying stock at the grant date. In addition, SFAS 123(R) retains the modified grant date model from SFAS 123. Under that model, compensation cost is measured at the fair value of an award on the grant date and adjusted to reflect estimated forfeitures and the outcome of certain conditions over the requisite service period of the award. The fair value of an award is not re-measured after its initial estimation on the grant date (except in the case of a liability award or if the award is modified). The Company adopted SFAS 123(R) on January 1, 2006 using the prospective method. In accordance with SFAS 123(R), the Company applied this statement prospectively to awards issued, modified, repurchased or cancelled after January 1, 2006. Under SFAS 123 (R), actual tax benefits, if any, recognized in excess of tax benefits previously established upon grant are reported as a financing cash inflow. Prior to adoption, such excess tax benefits, if any, were reported as an operating cash inflow. The adoption of SFAS 123(R) has not had a significant impact on the Company’s financial statements.

The Company continued to account for equity based compensation to employees for awards outstanding as of January 1, 2006 using the intrinsic value method prescribed in APB 25. SFAS 123 established accounting and

46

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

disclosure requirements using a fair value based method of accounting for equity based employee compensation plans. The exercise prices of all unit options were equal to or greater than the fair market value of the units on the dates of the grants and, accordingly, no compensation cost has been recognized under the provisions of APB 25. However, as part of the North American reductions in force that occurred in 2005, certain individuals were terminated and were allowed to keep their unit options, resulting in compensation cost for the years ended December 31, 2006 and 2005 under SFAS 123 of $0.2 million and $0.3 million, respectively. Under SFAS 123, compensation cost is measured at the grant date based on the value of the award and is recognized over the service (or vesting) period. Had compensation cost for all option plans been determined under SFAS 123, based on the fair market value at the grant dates, the Company’s pro forma net loss for 2006, 2005 and 2004 would have been reflected as follows:

	Year Ended December 31,
	2006			2005			2004
	(In thousands)
Net loss, as reported	$	(120,376	)	$	(52,641	)	$	(40,632	)
Add: stock-based compensation expense included in reported net loss, net of income taxes		187			270			8
Deduct: total stock-based compensation expense under the fair value method for all awards, net of income taxes		(1,122	)		(1,441	)		(328	)
Pro forma net loss	$	(121,311	)	$	(53,812	)	$	(40,952	)

Postemployment Benefits

The Company maintains a supplemental income plan, which provides postemployment benefits to a former employee of the Company. Accrued postemployment benefits of approximately $1.8 million and $2.2 million as of December 31, 2006 and 2005, respectively, were included in other non-current liabilities.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

New Accounting Pronouncements

In November 2004, the FASB issued SFAS 151, “Inventory Costs — an amendment of APB No. 43, Chapter 4,” which is the result of its efforts to converge U.S. accounting standards for inventories with International Accounting Standards. SFAS 151 requires abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) to be recognized as current-period charges. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The Company adopted SFAS 151 on January 1, 2006 and the adoption of SFAS 151 did not have a significant impact on its financial statements.

In June 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on accounting for derecognition, interest, penalties, accounting in interim periods, disclosure and classification of matters related to uncertainty in income taxes and transitional requirements upon adoption of FIN 48. The Company is required to adopt FIN 48 on January 1, 2007 and is still evaluating the possible effect of FIN 48 on its financial statements.

In February 2006, the FASB issued SFAS 155, “Accounting for Certain Hybrid Financial Instruments – an Amendment of FASB Statements No. 133 and 140.” SFAS 155 allows financial instruments that contain an embedded derivative and that otherwise would require bifurcation to be accounted for as a whole on a fair value basis, at the holder’s election. SFAS 155 also clarifies and amends certain other provisions of SFAS 133 and SFAS

47

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

140. This statement is effective for all financial instruments acquired or issued in fiscal years beginning after September 15, 2006. The Company does not expect SFAS 155 to have a material impact on its financial statements.

In June 2006, the EITF reached a consensus on EITF 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation).” EITF 06-3 provides that the presentation of taxes assessed by a governmental authority that is directly imposed on a revenue producing transaction between a seller and a customer on either a gross basis (included in revenues and costs) or on a net basis (excluded from revenues) is an accounting policy decision that should be disclosed. The provisions of EITF 06-3 will be effective for the Company as of January 1, 2007. The Company does not expect EITF 06-3 to have a material impact on its financial statements.

In September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” This statement establishes a single authoritative definition of fair value, sets out a framework to classify the source of information used in fair value measurements, identifies additional factors that must be disclosed about assets and liabilities measured at fair value based on their placement in the new framework and modifies the long-standing accounting presumption that the transaction price of an asset or liability equals its initial fair value. SFAS 157 is effective for fiscal years beginning after November 15, 2007. Therefore, the Company will be required to adopt SFAS 157 on January 1, 2008. The Company is currently in the process of assessing the impact of the adoption of SFAS 157 on its financial statements.

In September 2006, the FASB issued SFAS 158. Under SFAS 158, companies are required to (1) recognize in its statement of financial position an asset for a plan’s over funded status or a liability for a plan’s under funded status, (2) measure a plan’s assets and its obligations that determine its funded status as of the end of the company’s fiscal year and (3) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. Those changes will be reported in accumulated other comprehensive income. The Company has adopted SFAS 158 as of December 31, 2006. The adoption of SFAS 158 resulted in a decrease in total partners’ capital (deficit) of $2.6 million as of December 31, 2006. For further information regarding the impact of the adoption of SFAS 158, refer to Note 14.

In September 2006, the Securities and Exchange Commission issued Staff Account Bulletin (“SAB”) 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB 108 requires companies to quantify misstatements using both the balance sheet and income statement approaches and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. The Company adopted SAB 108 for the year ended December 31, 2006 and the adoption of SAB 108 did not have a significant impact on its financial statements.

In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115.” Under SFAS 159, companies may elect to measure specified financial instruments and warranty and insurance contracts at fair value on a contract–by–contract basis, with changes in fair value recognized in earnings each reporting period. SFAS 159 is effective as of the beginning of a company’s first fiscal year that begins after November 15, 2007. Therefore, the Company may adopt SFAS 159 on January 1, 2008. The Company is currently in the process of assessing the impact of the adoption of SFAS 159 on its financial statements.

Reclassifications

Certain reclassifications have been made to the 2005 and 2004 financial statements to conform to the 2006 presentation, including the following:

• a reclassification to reflect as a separate line item within operating income on the Consolidated Statements of Operations the net loss on disposal of fixed assets; amounts for this line item were previously included predominantly in cost of goods sold; the amounts (in thousands) were $13,591 and $2,250 for the years ended December 31, 2005 and 2004, respectively;

• a reclassification of the tax effect between the changes in additional minimum pension liability and cumulative translation adjustment on the Consolidated Statements of Partners’ Capital (Deficit); the amounts (in thousands) were $387 and $381 for the years ended December 31, 2005 and 2004, respectively;

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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

• a reclassification to reflect as a separate line item within operating activities on the Consolidated Statements of Cash Flows the net loss on disposal of fixed assets; amounts for this line item were previously included in depreciation and amortization; the amounts (in thousands) were $13,591 and $2,250 for the years ended December 31, 2005 and 2004, respectively; and

• a reclassification to reflect as separate components of cash provided by operating activities on the Consolidated Statements of Cash Flows, other non-current assets and other non-current liabilities, which were previously aggregated; accordingly, there was no impact on amounts presented for net cash provided by (used in) operating, investing and financing activities; the amounts (in thousands) were cash outflows from changes in other non-current assets of $2,929 and $4,570 for the years ended December 31, 2005 and 2004, respectively, a cash inflow from a change in other non-current liabilities of $2,315 for the year ended December 31, 2005 and a cash outflow from a change in other non-current liabilities of $1,716 for the year ended December 31, 2004.

2. 1998 Recapitalization

Pursuant to an Agreement and Plan of Recapitalization, Redemption and Purchase, dated as of December 18, 1997 (the “Recapitalization Agreement”), (i) Holdings, (ii) the then owners of the Company (the “Graham Entities”) and (iii) BMP/Graham Holdings Corporation, a Delaware corporation ("Investor LP") formed by Blackstone Capital Partners III Merchant Banking Fund L.P., and BCP/Graham Holdings L.L.C., a Delaware limited liability company and a wholly owned subsidiary of Investor LP (“Investor GP” and together with Investor LP, the “Equity Investors”) agreed to a recapitalization of Holdings (the “Recapitalization”). Closing under the Recapitalization Agreement occurred on February 2, 1998.

As a result of the consummation of the Recapitalization, Investor LP owns an 81% limited partnership interest in Holdings and Investor GP owns a 4% general partnership interest in Holdings. Certain Graham Entities or affiliates thereof or other entities controlled by Donald C. Graham and his family (the “Graham Family Investors”) have retained a 1% general partnership interest and a 14% limited partnership interest in Holdings. Additionally, Holdings owns a 99% limited partnership interest in the Operating Company, and GPC Opco GP L.L.C., a wholly owned subsidiary of Holdings, owns a 1% general partnership interest in the Operating Company.

3. Acquisitions

Purchase of O-I Plastic

On October 7, 2004, the Company acquired O-I Plastic. With this acquisition the Company essentially doubled in size.

The Company acquired O-I Plastic for a total purchase price (including acquisition-related costs of $30.7 million) of $1,191.8 million. The acquisition was recorded under the purchase method of accounting and, accordingly, the results of the acquired operation are included in the financial statements of the Company beginning on October 7, 2004. The purchase price has been allocated to assets acquired and liabilities assumed based on fair values. The allocated fair value of assets acquired and liabilities assumed is summarized as follows (in thousands):

49

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Cash	$	10,860
Accounts receivable		130,023
Inventories		140,771
Deferred income taxes		14,039
Prepaid expenses and other current assets		11,312
Total current assets		307,005
Property, plant and equipment		679,303
Intangible assets		81,000
Goodwill		291,336
Other non-current assets		6,990
Total		1,365,634
Less liabilities assumed		173,859
Net cost of acquisition	$	1,191,775

The purchase agreement related to O-I Plastic contains a stated purchase price of $1,200.0 million, which was paid on October 7, 2004, subject to adjustments based on the level of working capital acquired, indebtedness assumed and certain other measures. The Company and the sellers resolved these adjustments to the purchase price in April 2005, resulting in a return to the Company of $38.9 million. In addition, the purchase agreement provides information on certain net operating loss carryforwards for U.S. federal income tax purposes (“NOL’s”) that are allocated from the sellers to O-I Plastic. The amount of such NOL’s was $157.5 million. A deferred income tax benefit of $61.8 million related to the NOL’s has been included in the purchase price allocation above.

Purchase of Certain Tetra-Pak Operations

On March 24, 2005, the Company acquired certain operations from Tetra-Pak Inc., Tetra Pak Moulded Packaging Systems Limited, Tetra Pak S.R.L., Tetra Pak MPS N.V., Tetra Pak LTDA and Tetra Pak Paketleme Sanayi Ve Ticaret A.S. for a total purchase price (including acquisition-related costs) of $36.8 million. The acquisition was recorded under the purchase method of accounting and, accordingly, the results of the acquired operation are included in the financial statements of the Company beginning on March 24, 2005. The purchase price has been allocated to assets acquired and liabilities assumed based on fair values. The allocated fair value of assets acquired and liabilities assumed is summarized as follows (in thousands):

Accounts receivable	$	2,916
Inventories		915
Prepaid expenses and other current assets		64
Total current assets		3,895
Property, plant and equipment		26,023
Intangible assets		3,980
Goodwill		4,676
Total		38,574
Less liabilities assumed		1,764
Net cost of acquisition	$	36,810

Pro Forma Information

The following table sets forth unaudited pro forma results of operations, assuming that all of the above acquisitions had taken place at the beginning of each period presented:

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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

	Year Ended December 31,
		2005			2004
		(In millions)
As reported – net sales		$	2,473		$	1,353
Pro forma – net sales		$	2,479		$	2,256
As reported – net loss		$	(53	)	$	(41	)
Pro forma – net loss		$	(51	)	$	(29	)

These unaudited pro forma results have been prepared for comparative purposes only and include certain adjustments, such as additional depreciation and amortization expense as a result of a step-up in the basis of fixed assets and intangible assets, increased interest expense on acquisition debt and related tax effects. They do not purport to be indicative of the results of operations which actually would have resulted had the combinations been in effect at the beginning of each period presented, or of future results of operations of the entities.

In March 2005, the Company executed a Purchase and Sale of Equity Interest and Joint Venture Termination Agreement under which the Company terminated the joint venture agreement with Industrias Innopack, S.A. de C.V. and acquired all of the equity interests held by Industrias Innopack, S.A. de C.V. in Graham Innopack de Mexico, S. de R.L. de C.V. (“Graham Innopack”) and the operating companies thereunder. Closing of this transaction occurred on May 9, 2005, resulting in a payment by the Company of $13.9 million for the 49% interest in Graham Innopack that it did not previously own.

4. Accounts Receivable

Accounts receivable are presented net of an allowance for doubtful accounts of $6.3 million and $11.3 million at December 31, 2006 and 2005, respectively. Management performs ongoing credit evaluations of its customers and generally does not require collateral.

The Company had sales to one customer, PepsiCo, which exceeded 10% of total sales in each of the years ended December 31, 2006, 2005 and 2004. The Company’s sales to this customer were 17.0%, 17.9% and 14.9% of total sales for the years ended December 31, 2006, 2005 and 2004, respectively. For the years ended December 31, 2006, 2005 and 2004, approximately 100%, 98% and 99%, respectively, of the sales to PepsiCo were made in North America. The Company also had sales to Dial which exceeded 10% of total sales in the year ended December 31, 2004. The Company’s sales to Dial were 10.2% of total sales for the year ended December 31, 2004.

5. Inventories

Inventories, at lower of cost or market, consisted of the following:

	December 31,
		2006		2005
		(In thousands)
Finished goods		$	175,362	$	195,533
Raw materials and parts			63,579		92,277
		$	238,941	$	287,810

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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

6. Impairment Charges

During 2006, the Company evaluated the recoverability of its long-lived assets in the following locations (with the operating segment under which it reports in parentheses) due to a significant change in the ability to utilize certain assets:

• Brazil (South America);

• Ecuador (South America);

• England (Europe);

• Finland (Europe);

• France (Europe);

• the Netherlands (Europe);

• Poland (Europe);

• Spain (Europe); and

• the United States (North America).

During 2005, the Company evaluated the recoverability of its long-lived assets in the following locations (with the operating segment under which it reports in parentheses) due to a significant change in the ability to utilize certain assets:

• Brazil (South America);

• Ecuador (South America);

• France (Europe); and

• the United States (North America).

During 2004, the Company evaluated the recoverability of its long-lived assets in the following locations (with the operating segment under which it reports in parentheses) due to a significant change in the ability to utilize certain assets:

• France (Europe);

• Spain (Europe); and

• the United States (North America).

For assets to be held and used, the Company determined that the undiscounted cash flows were below the carrying value of certain long-lived assets in these locations. Accordingly, the Company adjusted the carrying value of these long-lived assets in these locations to their estimated fair values, resulting in impairment charges of $14.1 million, $6.8 million and $7.0 million for the years ended December 31, 2006, 2005 and 2004, respectively.

The Company evaluated the recoverability of its goodwill, and consequently recorded impairment charges of $11.8 million and $0.5 million for the years ended December 31, 2006 and 2005, respectively, related to the following locations (with the operating segment under which it reports in parentheses):

• Ecuador in 2006 (South America);

• England in 2006 (Europe);

• Finland in 2006 (Europe);

• Turkey in 2005 (Europe); and

• Venezuela in 2006 (South America).

Goodwill was evaluated for impairment and the resulting impairment charges recognized were based on a comparison of the related net book value of the goodwill of the reporting unit to its implied fair value.

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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

7. Intangible Assets

The gross carrying amount and accumulated amortization of the Company’s intangible assets subject to amortization as of December 31, 2006 were as follows:

	Gross Carrying Amount		Accumulated Amortization			Net		Weighted Average Amortization Period
	(In thousands)
Patented technology	$	23,982	$	(5,011	)	$	18,971	11 years
Customer relationships		41,982		(5,559	)		36,423	18 years
Licensing agreements		28,000		(5,727	)		22,273	11 years
Non-compete agreements		1,544		(700	)		844	5 years
Total	$	95,508	$	(16,997	)	$	78,511

The gross carrying amount and accumulated amortization of the Company’s intangible assets subject to amortization as of December 31, 2005 were as follows:

	Gross Carrying Amount		Accumulated Amortization			Net		Weighted Average Amortization Period
	(In thousands)
Patented technology	$	23,169	$	(2,822	)	$	20,347	11 years
Customer relationships		38,130		(2,787	)		35,343	19 years
Licensing agreements		28,000		(3,182	)		24,818	11 years
Non-compete agreement		1,500		(375	)		1,125	5 years
Total	$	90,799	$	(9,166	)	$	81,633

Amortization expense for the years ended December 31, 2006, 2005 and 2004 was $7.7 million, $7.1 million and $2.2 million, respectively. Estimated aggregate amortization expense for each of the next five years ending December 31 is as follows (in millions):

2007	$	7.4
2008		7.4
2009		7.3
2010		7.1
2011		7.0

8. Goodwill

The changes in the carrying amount of goodwill were as follows:

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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

	North America Segment			Europe Segment			South America Segment			Total
	(In thousands)
Balance at January 1, 2005	$	333,174		$	16,916		$	694		$	350,784
Goodwill acquired during the year		5,420			295			769			6,484
Return of purchase price related to the acquisition of O-I Plastic (see Note 3)		(38,900	)		—			—			(38,900	)
Adjustments to O-I Plastic purchase price allocation*		(13,714	)		2,060			11,173			(481	)
Foreign currency translation adjustments		2,178			(1,556	)		(901	)		(279	)
Impairment		—			(437	)		—			(437	)
Balance at December 31, 2005		288,158			17,278			11,735			317,171
Foreign currency translation adjustments		(642	)		2,124			79			1,561
Impairment		—			(2,661	)		(9,068	)		(11,729	)
Other adjustments		(2,676	)		(914	)		(19	)		(3,609	)
Balance at December 31, 2006	$	284,840		$	15,827		$	2,727		$	303,394

*Adjustments relate primarily to the fixed asset valuation and deferred tax adjustments, as well as the finalization of the allocation of the purchase price among the segments.

9. Accrued Expenses

Accrued expenses consisted of the following:

	December 31,
	2006		2005
	(In thousands)
Accrued employee compensation and benefits	$	58,491	$	60,748
Accrued interest		34,885		20,281
Accrued sales allowance		20,254		18,774
Other		81,207		76,629
	$	194,837	$	176,432

For the year ended December 31, 2006, the Company incurred costs of termination benefits in the United States of $1.6 million, which included the legal liability of severing 46 employees, all of which were terminated by December 31, 2006. Substantially all of the cash payments for these termination benefits are expected to be made by September 30, 2007. For the year ended December 31, 2006, the Company incurred costs of termination benefits in the United States of $5.3 million related to the separation of its Chief Executive Officer and Chief Financial Officer on December 3, 2006. Substantially all of the cash payments for these termination benefits are expected to be made by December 31, 2009. For the year ended December 31, 2005, the Company incurred costs of employee termination benefits in the United States of $2.3 million, which included the legal liability of severing 16 employees, all of which were terminated as of December 31, 2006. Substantially all of the cash payments for these termination benefits are expected to be made by December 31, 2007. For the year ended December 31, 2005, the Company incurred costs of employee termination benefits in France of $3.8 million, which included the legal liability of severing 37 employees, all of which were terminated as of December 31, 2006. Substantially all of the cash payments for these termination benefits are expected to be made by December 31, 2007. For the year ended December 31, 2004, the Company accrued costs of employee termination benefits in the United States related to plant closures of $3.3 million, and in 2005 reduced the accrual for these plants by $1.4 million. In accordance with EITF 95-3, this liability was treated as having been assumed in the purchase business combination of O-I Plastic and included in the allocation of the acquisition cost. (Refer to Note 3 for a discussion of this acquisition). 248 employees of these plants have been terminated as of December 31, 2006. All of the cash payments for these termination benefits have been made as of December 31, 2006. Additional termination benefits were incurred in

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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

2002, 2003 and 2004 in France and North America; the remaining cash payments for these benefits are expected to be made by December 31, 2007.

The following table reflects a rollforward of these costs, $3.4 million of which is included in other non-current liabilities and the remainder of which is included in accrued employee compensation and benefits (in thousands):

	2002/ 2003 France Reduction in Force			2003 North America Reduction in Force			2004 United States Reduction in Force			2005/ 2006 United States Plant Closures			2005 United States Reduction in Force			2005 France Reduction in Force			2006 United States Reduction in Force			2006 CEO/CFO Separations			Total
Reserves at January 1, 2005	$	631		$	777		$	77		$	3,294		$	—		$	—		$	—		$	—		$	4,779
(Decrease) increase in reserves		—			(3	)		1			(1,449	)		2,291			3,845			—			—			4,685
Cash payments		(232	)		(302	)		(78	)		(1,845	)		(720	)		—			—			—			(3,177	)
Reserves at December 31, 2005		399			472			—			—			1,571			3,845			—			—			6,287
(Decrease) increase in reserves		(101	)		—			—			—			101			—			1,608			5,256			6,864
Cash payments		(5	)		(232	)		—			—			(1,214	)		(3,066	)		(672	)		(128	)		(5,317	)
Reserves at December 31, 2006	$	293		$	240		$	—		$	—		$	458		$	779		$	936		$	5,128		$	7,834

10. Debt Arrangements

Long-term debt consisted of the following:

	December 31,
	2006		2005
	(In thousands)
Term loans	$	1,819,861	$	1,785,500
Revolving Credit Facility		56,000		187,500
Foreign and other revolving credit facilities		7,174		7,472
Senior Notes		250,000		250,000
Senior Subordinated Notes		375,000		375,000
Capital leases		37,607		31,605
Other		1,245		1,263
		2,546,887		2,638,340
Less amounts classified as current		32,308		27,859
	$	2,514,579	$	2,610,481

The majority of the Company’s prior credit facilities were refinanced on October 7, 2004 in connection with the acquisition of O-I Plastic (the “Transactions”). The Operating Company, Holdings, CapCo I and a syndicate of lenders entered into a new credit agreement (the “Credit Agreement”) and second-lien credit agreement (the “Second-Lien Credit Agreement” and, together with the Credit Agreement, the “Credit Agreements”). Pursuant to its terms, on April 18, 2006, the Credit Agreement was amended in order to, among other things, increase the Term Loan B facility provided under the Credit Agreement by $150.0 million (the “2006 Amendment”). Proceeds of the 2006 Amendment were used to pay down $100.0 million of the Second-Lien Credit Agreement, with the remaining $50.0 million being used to reduce outstanding borrowings on the existing revolving credit facility provided for under the Credit Agreement. Pursuant to its terms, on March 30, 2007, the Credit Agreement was further amended in order to, among other things, increase the Term Loan B facility provided under the Credit Agreement by approximately $305.0 million (the “2007 Amendment”). Proceeds of the 2007 Amendment were used to pay off the Second-Lien Credit Agreement ($250.0 million), with $50.0 million being used to reduce outstanding borrowings on the existing revolving credit facility provided for under the Credit Agreement and approximately $5.0 million being used to pay fees and expenses. The 2007 Amendment also eliminated one of the Company’s financial ratio covenants, increased the maximum allowable leverage under another financial ratio covenant and waived any potential excess cash flow payment required for the year ended December 31, 2006. After giving effect to the 2007 Amendment, the Credit Agreement consists of a term loan B to the Operating Company totaling $1,875.0 million (the “Term Loan” or “Term Loan Facility”) and a $250.0 million revolving credit facility (the “Revolving Credit Facility”). The obligations of the Operating Company under the Credit Agreement are

55

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

guaranteed by Holdings and certain other subsidiaries of Holdings. After giving effect to the 2007 Amendment to the Credit Agreement, the term loan B is payable in quarterly installments and requires payments of $14.1 million in 2007 and $18.7 million in each of 2008, 2009 and 2010 and $1,804.8 million in 2011. The second-lien term loan was repaid in March 2007. The Revolving Credit Facility expires on October 7, 2010. Availability under the Company’s Revolving Credit Facility as of December 31, 2006 was $184.4 million (as reduced by $9.6 million of outstanding letters of credit). Interest under the Credit Agreement is payable at (a) the “Alternate Base Rate” (“ABR”) (the higher of the Prime Rate or the Federal Funds Rate plus 0.50%) plus a margin ranging from 1.25% to 1.75%; or (b) the “Eurodollar Rate” (the applicable interest rate offered to banks in the London interbank eurocurrency market) plus a margin ranging from 1.75% to 2.75%. A commitment fee of 0.50% is due on the unused portion of the revolving loan commitment. In addition, the Credit Agreement contains certain affirmative and negative covenants as to the operations and financial condition of the Company, as well as certain restrictions on the payment of dividends and other distributions to Holdings. As of December 31, 2006, the Company was in compliance with all covenants as they existed prior to the 2007 Amendment.

Substantially all domestic tangible and intangible assets of the Company are pledged as collateral pursuant to the terms of the Credit Agreement.

The Transactions also included the issuance of $250.0 million in Senior Notes of the Operating Company and $375.0 million in Senior Subordinated Notes of the Operating Company (collectively “the Notes”). The Notes are unconditionally guaranteed, jointly and severally, by Holdings and mature on October 7, 2012 (Senior Notes) and October 7, 2014 (Senior Subordinated Notes). Interest on the Senior Notes is payable semi-annually at 8.50% and interest on the Senior Subordinated Notes is payable semi-annually at 9.875%.

During 2004 and 2005, the Operating Company entered into forward starting interest rate swap agreements that effectively fix the interest rate on $925.0 million of the Term Loans at a weighted average rate of 4.02%. These swaps went into effect at various points in 2006 and expire in December 2007 ($650.0 million) and January 2008 ($275.0 million). In addition, in 2004 the Operating Company entered into a $200.0 million interest rate cap that expired in January 2006.

During 2006, the Operating Company entered into four forward rate agreements that effectively fix the interest rate on $1,145.2 million of the Term Loans at a weighted average rate of 5.35%. These forward rate agreements went into effect at various points in 2006 and expire in 2007.

The Credit Agreement and Notes contain a number of significant covenants that, among other things, restrict the Company’s ability to dispose of assets, repay other indebtedness, incur additional indebtedness, pay dividends, prepay subordinated indebtedness, incur liens, make capital expenditures, investments or acquisitions, engage in mergers or consolidations, engage in transactions with affiliates and otherwise restrict the Company’s activities. In addition, under the Credit Agreement, the Company is required to satisfy specified financial ratios and tests beginning with the first quarter of 2005.

Under the Credit Agreement, the Operating Company is subject to restrictions on the payment of dividends or other distributions to Holdings; provided that, subject to certain limitations, the Operating Company may pay dividends or other distributions to Holdings:

• in respect of overhead, tax liabilities, legal, accounting and other professional fees and expenses; and

• to fund purchases and redemptions of equity interests of Holdings or Investor LP held by then present or former officers or employees of Holdings, the Operating Company or their Subsidiaries (as defined therein) or by any employee stock ownership plan upon that person’s death, disability, retirement or termination of employment or other circumstances with annual dollar limitations.

The Company’s weighted average effective interest rate on the outstanding borrowings under the Term Loans and Revolving Credit Facility was 7.99% and 6.96% at December 31, 2006 and 2005, respectively, excluding the effect of interest rate swaps.

The Company had several variable-rate revolving credit facilities denominated in U.S. Dollars, Brazilian Real, Argentine Pesos, Polish Zloty and Venezuela Bolivar, with aggregate available borrowings at December 31, 2006 equivalent to $19.0 million. The Company’s average effective interest rate on borrowings of $7.2 million on these credit facilities at December 31, 2006 was 11.6%. The Company’s average effective interest rate on borrowings of $7.5 million on these credit facilities at December 31, 2005 was 11.2%.

56

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Cash paid for interest during 2006, 2005 and 2004, net of amounts capitalized of $9.5 million, $6.1 million and $1.8 million, respectively, and inclusive of tender and call premia for 2004 on debt retired during 2004 of $15.2 million, totaled $179.7 million, $172.0 million and $115.4 million, respectively.

After giving effect to the 2007 Amendment, the annual debt service requirements of the Company for the succeeding five years are as follows: 2007--$32.3 million; 2008--$28.6 million; 2009--$22.7.0 million; 2010--$28.1 million; and 2011--$1,810.0 million.

11. Fair Value of Financial Instruments and Derivatives

The following methods and assumptions were used to estimate the fair values of each class of financial instruments:

Cash and Cash Equivalents, Accounts Receivable and Accounts Payable

The fair values of these financial instruments approximate their carrying amounts.

Long-Term Debt

The fair values of the variable-rate, long-term debt instruments approximate their carrying amounts. The fair value of other long-term debt was based on market price information. Other long-term debt includes $250.0 million of Senior Notes and $375.0 million of Senior Subordinated Notes and totaled approximately $663.5 million and $657.4 million at December 31, 2006 and 2005, respectively. The fair value of this long-term debt, including the current portion, was approximately $671.3 million and $647.1 million at December 31, 2006 and 2005, respectively.

Derivatives

The Company is exposed to market risk from changes in interest rates and currency exchange rates. The Company manages these exposures on a consolidated basis and enters into various derivative transactions for selected exposure areas. The financial impacts of these hedging instruments are offset by corresponding changes in the underlying exposures being hedged. The Company does not hold or issue derivative financial instruments for trading purposes.

Interest rate swap and forward rate agreements are used to hedge exposure to interest rates associated with the Company’s Credit Agreement. Under these agreements, the Company agrees to exchange with a third party at specified intervals the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount. In 2006 and 2005, the assets associated with interest rate swaps were recorded on the balance sheet in prepaid expenses and other current assets and other non-current assets at fair value. The hedges are highly effective as defined in SFAS 133, with the effective portion of the cash flow hedges recorded in OCI.

The following table presents information for all interest rate swaps, forward rate agreements and caps. The notional amount does not necessarily represent amounts exchanged by the parties, and therefore is not a direct measure of the Company’s exposure to credit risk. The fair value approximates the cost to settle the outstanding contracts.

57

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

	December 31,
	2006		2005
	(In thousands)
Swaps:
Notional amount	$	925,000	$	1,325,000
Fair value – asset		10,725		14,514
Forward rate agreements:
Notional amount		1,145,241		0
Fair value – asset		206		0
Caps:
Notional amount		0		200,000
Fair value – asset		0		0

Derivatives are an important component of the Company’s interest rate management program, leading to acceptable levels of variable interest rate risk. In 2006 and 2005, the effect of derivatives was to decrease interest expense by $11.5 million and $2.8 million, respectively, compared to an entirely unhedged variable rate debt portfolio. Due to declining interest rates in 2004, the effect of derivatives was to increase interest expense by $4.6 million compared to an entirely unhedged variable rate debt portfolio.

The Company manufactures and sells its products in a number of countries throughout the world and, as a result, is exposed to movements in foreign currency exchange rates. The Company utilizes foreign currency hedging activities to protect against volatility associated with purchase commitments that are denominated in foreign currencies for machinery, equipment and other items created in the normal course of business. The terms of these contracts are generally less than one year.

Gains and losses related to qualifying hedges of foreign currency firm commitments or anticipated transactions are accounted for in accordance with SFAS 133. There were no currency forward contracts outstanding at December 31, 2006 and 2005.

Credit risk arising from the inability of a counterparty to meet the terms of the Company’s financial instrument contracts is generally limited to the amounts, if any, by which the counterparty’s obligations exceed the obligations of the Company. It is the Company’s policy to enter into financial instruments with a diversity of creditworthy counterparties. Therefore, the Company does not expect to incur material credit losses on its risk management or other financial instruments.

12. Lease Commitments

The Company is a party to various leases involving real property and equipment. Total rent expense for operating leases was $54.3 million, $49.1 million and $32.4 million for 2006, 2005 and 2004, respectively. Minimum future lease obligations on long-term noncancelable operating leases in effect at December 31, 2006 are as follows: 2007--$29.5 million; 2008--$26.9 million; 2009--$21.8 million; 2010--$17.1 million; 2011--$13.2 million; and thereafter--$38.5 million. Minimum future lease obligations on capital leases in effect at December 31, 2006 are as follows: 2007--$10.6 million; 2008--$9.6 million; 2009--$3.8 million; 2010--$8.4 million; 2011--$5.2 million; and thereafter--$0.0 million. The gross amount of assets under capital leases was $55.6 million and $43.2 million as of December 31, 2006 and 2005, respectively.

13. Transactions with Related Parties

The Company had transactions with entities affiliated through common ownership. The Company’s transactions with Graham Engineering Corporation (“Graham Engineering”) are related to equipment supplied to the Company. The Company is a party to an Equipment Sales, Services and License Agreement dated February 2, 1998 (“Equipment Sales Agreement”) with Graham Engineering, under which Graham Engineering will provide the Company with certain sizes of the Graham Wheel, which is an extrusion blow molding machine, on an exclusive basis within the countries and regions in which the Company has material sales of plastic containers. Innopack,

58

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

S.A., former minority shareholder of Graham Innopack de Mexico S. de R.L. de C.V., has supplied goods and related services to the Company. The Company purchased the remaining interest in Graham Innopack de Mexico S. de R.L. de C.V. on May 9, 2005. The Graham Family Investors have supplied management services to the Company since 1998. Blackstone Management Partners III L.L.C. has supplied management services to the Company since 1998.

Transactions with entities affiliated through common ownership included the following:

		Year Ended December 31,
		2006		2005		2004
		(In thousands)
Equipment and related services purchased from affiliates	$	10,311	$	13,147	$	13,610
Goods and related services purchased from affiliates	$	35	$	41	$	1,655
Management services provided by affiliates, including management, legal, tax, accounting, insurance, treasury and employee benefits administration services	$	5,140	$	5,156	$	2,912
Advisory services related to the Transactions	$	—	$	—	$	24,250
Services provided and sales to affiliates, including administrative services, engineering services and raw materials	$	—	$	20	$	2
Interest income on notes receivable from owners	$	193	$	182	$	171

Account balances with affiliates included the following:

	As of December 31,
	2006		2005
	(In thousands)
Accounts receivable	$	—	$	1
Accounts payable	$	907	$	1,132
Notes and interest receivable for ownership interests	$	3,295	$	3,102

Gary G. Michael, a member of the committee that advises the partnership and the general partners (the “Advisory Committee”), also serves on the Board of Director’s of The Clorox Company, which is a related party of the Company. Included in current assets at December 31, 2006 and 2005 were receivables to The Clorox Company of $1.7 million and $2.9 million, respectively. Included in net sales for the year ended December 31, 2006, 2005 and 2004 were net sales to The Clorox Company of $30.6 million, $32.0 million and $6.3 million, respectively.

14. Pension Plans

Substantially all employees of the Company participate in noncontributory defined benefit or defined contribution pension plans.

The U.S. defined benefit plan covering salaried employees provides retirement benefits based on the final five years average compensation, while plans covering hourly employees provide benefits based on years of service. The Company’s hourly and salaried pension plan covering non-union employees was frozen to future salary and service accruals in the fourth quarter of 2006. The Company recorded a $3.1 million curtailment gain in the fourth quarter of 2006 as a result of the plan freeze.

On September 29, 2006, the FASB issued SFAS 158. The Company adopted SFAS 158 effective December 31, 2006. The impact of the adoption of SFAS 158 has been reflected within the consolidated financial statements as of December 31, 2006. The incremental effect of applying SFAS 158 is disclosed as part of this footnote.

The Company uses a December 31 measurement date for its plans. All of its plans have a benefit obligation in excess of plan assets.

Using the most recent actuarial valuations, the following table sets forth the change in the Company’s benefit obligation and pension plan assets at market value for the years ended December 31, 2006 and 2005:

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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

	2006			2005
	(In thousands)
Change in benefit obligations:
Benefit obligation at beginning of year	$	(89,206	)	$	(73,640	)
Service cost		(11,105	)		(10,762	)
Interest cost		(5,018	)		(4,390	)
Benefits paid		1,731			2,006
Employee contribution		(88	)		(109	)
Effect of exchange rate changes		(1,163	)		811
Special termination benefits		(14	)		—
Actuarial gain (loss)		4,798			(4,051	)
Settlements/curtailments		15,627			1,403
Decrease in benefit obligation due to plan experience		—			730
Increase in benefit obligation due to plan change		(119	)		(1,204	)
Benefit obligation at end of year	$	(84,557	)	$	(89,206	)
Change in plan assets:
Plan assets at fair value at beginning of year	$	53,440		$	45,774
Actual return on plan assets		5,296			3,407
Foreign currency exchange rate changes		875			(504	)
Employer contribution		10,684			7,319
Employee contribution		88			109
Settlements		—			(670	)
Benefits paid		(1,714	)		(1,995	)
Plan assets at fair value at end of year	$	68,669		$	53,440
Funded status at end of year	$	(15,888	)	$	(35,766	)
Amounts recognized in the statement of financial position consist of:
Accrued benefit liability	$	(24	)		(9,798	)
Non-current liability		(15,864	)	$	(11,377	)
Intangible asset		—			4,223
Accumulated other comprehensive income		—			5,335
Net amount recognized	$	(15,888	)	$	(11,617	)
Amounts recognized in accumulated other comprehensive income:
Transition liability	$	—
Prior service cost		2,389
Net actuarial loss		2,921
Total	$	5,310
Other changes in plan assets and benefit obligations
recognized in other comprehensive income:
Prior service cost for period	$	—
Change in minimum liability included in OCI		(2,094	)
Total	$	(2,094	)

The following table provides a breakdown of the incremental effect of applying SFAS 158 on individual line items on the balance sheet at December 31, 2006:

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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

	Before Application of SFAS 158			Adjustments			After Application of SFAS 158
	(In thousands)
Liability for pension benefits	$	(16,210	)	$	322		$	(15,888	)
Intangible asset		2,390			(2,390	)		—
Accumulated other comprehensive income		3,245			2,065			5,310
Effect of exchange rate changes		(3	)		—			(3	)

The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $0.2 million and $0.3 million, respectively.

The Company’s net pension cost for its defined benefit pension plans includes the following components:

	Year Ended December 31,
	2006			2005			2004
	(In thousands)
Service cost	$	11,105		$	10,762		$	4,127
Interest cost		5,019			4,390			3,338
Net investment return on plan assets		(4,748	)		(4,096	)		(3,245	)
Curtailment (gain) loss		(3,217	)		—			106
Net amortization and deferral		1,235			1,051			838
Special benefits		14			—			—
Settlement gain		—			(726	)		—
Net periodic pension costs	$	9,408		$	11,381		$	5,164

	Actuarial Assumptions
	U.S.		Canada		England		Mexico
Discount rate:
2006	5.75	%	5.00	%	5.00	%	5.59	%
2005	5.75	%	5.00	%	4.90	%	7.46	%
2004	6.00	%	6.00	%	5.40	%	8.68	%
Long-term rate of return on plan assets:
2006	8.75	%	8.00	%	6.92	%	N/A
2005	8.75	%	8.00	%	6.20	%	N/A
2004	8.75	%	8.00	%	6.60	%	N/A
Weighted average rate of increase for future compensation levels:
2006	4.50	%	4.00	%	3.60	%	4.91	%
2005	4.50	%	4.00	%	3.50	%	4.88	%
2004	4.50	%	4.00	%	3.50	%	5.55	%

Pension expense is calculated based upon a number of actuarial assumptions established on January 1 of the applicable year, detailed in the table above, including a weighted-average discount rate, rate of increase in future compensation levels and an expected long-term rate of return on plan assets. The discount rate used by the Company for valuing pension liabilities is based on a review of high quality corporate bond yields with maturities approximating the remaining life of the projected benefit obligations. The expected long-term rate of return assumption on plan assets (which consist mainly of U.S. equity and debt securities) was developed by evaluating input from the Company’s actuaries and investment consultants as well as long-term inflation assumptions. Projected returns by such consultants are based on broad equity and bond indices. The expected long-term rate of return on plan assets is based on an asset allocation assumption of 65% with equity managers and 35% with fixed income managers. At December 31, 2006, the Company’s asset allocation was 65% with equity managers, 34% with fixed income managers and 1% other. At December 31, 2005, the Company’s asset allocation was 66% with equity managers, 33% with fixed income managers and 1% other. The Company believes that its long-term asset

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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

allocation on average will approximate 65% with equity managers and 35% with fixed income managers. The Company regularly reviews its actual asset allocation and periodically rebalances its investments to targeted allocations when considered appropriate. Based on this methodology, the Company’s expected long-term rate of return assumption is 8.75% in 2006 and 2005. Asset allocation for the Company’s Canadian plan is substantially similar to the U.S. plan. Asset allocation for the Company’s U.K. plan is 48% with equity managers, 23% with fixed income managers and 29% in real estate.

The Company made cash contributions to its pension plans in 2006 of $10.7 million and paid benefit payments of $1.7 million. The Company estimates that based on current actuarial calculations it will make cash contributions to its pension plans in 2007 of $7.4 million. Cash contributions in subsequent years will depend on a number of factors including performance of plan assets.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

	Pension Benefits
	(In thousands)
2007		$	1,626
2008			1,952
2009			2,355
2010			2,564
2011			2,925
Years 2012 — 2016			25,184

The Company also participated in a defined contribution plan under Internal Revenue Code Section 401(k), which covered all U.S. employees of the Company except those represented by a collective bargaining unit. The Company’s contributions were determined as a specified percentage of employee contributions, subject to certain maximum limitations. The Company’s costs for the defined contribution plan for 2006, 2005 and 2004 were $3.2 million, $3.2 million and $2.1 million, respectively.

15. Partners’ Capital

Holdings was formed under the name “Sonoco Graham Company” on April 3, 1989 as a limited partnership in accordance with the provisions of the Pennsylvania Uniform Limited Partnership Act, and on March 28, 1991, Holdings changed its name to “Graham Packaging Company.” Upon the closing of the Recapitalization, the name of Holdings was changed to “Graham Packaging Holdings Company.” Holdings will continue until its dissolution and winding up in accordance with the terms of the Holdings Partnership Agreement (as defined below).

As contemplated by the Recapitalization Agreement, Graham Family Investors (as successors and assigns of Graham Capital Corporation and Graham Family Growth Partnership), Graham Packaging Corporation (“Graham GP Corp”), Investor LP and Investor GP entered into a Fifth Amended and Restated Agreement of Limited Partnership (the “Holdings Partnership Agreement”). The general partners of the partnership are Investor GP and Graham GP Corp. The limited partners of the partnership are GPC Holdings, L.P. and Investor LP.

Capital Accounts. A capital account is maintained for each partner on the books of the Company. The Holdings Partnership Agreement provides that at no time during the term of the partnership or upon dissolution and liquidation thereof shall a limited partner with a negative balance in its capital account have any obligation to Holdings or the other partners to restore such negative balance. Items of partnership income or loss are allocated to the partners’ capital accounts in accordance with their percentage interests except as provided in Section 704(c) of the Internal Revenue Code with respect to contributed property where the allocations are made in accordance with the U.S. Treasury regulations thereunder.

Distributions. The Holdings Partnership Agreement requires certain tax distributions to be made if and when Holdings has taxable income. Other distributions shall be made in proportion to the partners’ respective percentage interests.

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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Transfers of Partnership Interests. The Holdings Partnership Agreement provides that, subject to certain exceptions including, without limitation, in connection with an IPO Reorganization (as defined below) and the transfer rights described below, general partners shall not withdraw from Holdings, resign as a general partner nor transfer their general partnership interests without the consent of all general partners, and limited partners shall not transfer their limited partnership interests.

If either Graham GP Corp. and/or GPC Holdings, L.P. (individually “Continuing Graham Partner” and collectively the “Continuing Graham Partners”) wishes to sell or otherwise transfer its partnership interests pursuant to a bona fide offer from a third party, Holdings and the Equity Investors must be given a prior opportunity to purchase such interests at the same purchase price set forth in such offer. If Holdings and the Equity Investors do not elect to make such purchase, then such Continuing Graham Partner may sell or transfer such partnership interests to such third party upon the terms set forth in such offer. If the Equity Investors wish to sell or otherwise transfer their partnership interests pursuant to a bona fide offer from a third party, the Continuing Graham Partners shall have a right to include in such sale or transfer a proportionate percentage of their partnership interests. If the Equity Investors (so long as they hold 51% or more of the partnership interests) wish to sell or otherwise transfer their partnership interests pursuant to a bona fide offer from a third party, the Equity Investors shall have the right to compel the Continuing Graham Partners to include in such sale or transfer a proportionate percentage of their partnership interests.

Dissolution. The Holdings Partnership Agreement provides that Holdings shall be dissolved upon the earliest of (i) the sale, exchange or other disposition of all or substantially all of Holdings’ assets (including pursuant to an IPO Reorganization), (ii) the withdrawal, resignation, filing of a certificate of dissolution or revocation of the charter or bankruptcy of a general partner, or the occurrence of any other event which causes a general partner to cease to be a general partner unless (a) the remaining general partner elects to continue the business or (b) if there is no remaining general partner, a majority-in-interest of the limited partners elect to continue the partnership, or (iii) such date as the partners shall unanimously elect.

IPO Reorganization. “IPO Reorganization” means the transfer of all or substantially all of Holdings’ assets and liabilities to CapCo II in contemplation of an initial public offering of the shares of common stock of CapCo II. The Holdings Partnership Agreement provides that, without the approval of each general partner, the IPO Reorganization may not be effected through any entity other than CapCo II.

16. Option Plans

Pursuant to the Recapitalization Agreement, the Company adopted the Graham Packaging Holdings Company Management Option Plan (the “1998 Option Plan”). On November 17, 2004, the Company adopted a second option plan entitled 2004 Graham Packaging Holdings Company Management Option Plan (the “2004 Option Plan” and, together with the 1998 Option Plan, the “Option Plans”).

The Option Plans provide for the grant to management employees of Holdings and its subsidiaries and non-employee members of the Advisory Committee, advisors, consultants and other individuals providing services to Holdings of options (“Options”) to purchase limited partnership interests in Holdings equal to 0.0075% of Holdings (prior to any dilution resulting from any interests granted pursuant to the Option Plans) (each 0.0075% interest being referred to as a “Unit”). The aggregate number of Units with respect to which Options may be granted under the 1998 Option Plan shall not exceed 631.0 Units and the aggregate number of Units with respect to which Options may be granted under the 2004 Option Plan shall not exceed 1,278.4 Units, representing a total of up to 12.5% of the equity of Holdings.

The exercise price per Unit shall be at or above the fair market value of a Unit on the date of grant. The Company utilizes an independent appraisal firm to determine the fair market value of a Unit. The number and type of Units covered by outstanding Options and exercise prices may be adjusted to reflect certain events such as recapitalizations, mergers or reorganizations of or by Holdings. The Option Plans are intended to advance the best interests of the Company by allowing such employees to acquire an ownership interest in the Company, thereby motivating them to contribute to the success of the Company and to remain in the employ of the Company.

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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

A committee has been appointed to administer the Option Plans, including, without limitation, the determination of the individuals to whom grants will be made, the number of Units subject to each grant and the various terms of such grants. Relative to the 1998 Option Plan, during 2006, 12.1 Option Units were forfeited, 11.5 Option Units were exercised and no Option Units were granted. During 2005, no Option Units were forfeited and no Option Units were granted. During 2004, 2.7 Option Units were forfeited and no Option Units were granted. Relative to the 2004 Option Plan, during 2006, 54.4 Option Units were forfeited and 628.4 Option Units were granted. During 2005, 15.6 Option Units were forfeited and Options to purchase 4.0 Units were granted. During 2004, no Option Units were forfeited and Options to purchase 616.5 Units were granted. As of December 31, 2006, 1,778.4 Option Units were outstanding.

Under the 1998 Option Plan, in general, 50% of the Options vest and become exercisable in 20% increments annually over five years, so long as the holder of the Option is still an employee on the vesting date, and 50% of the Options vest and become exercisable in 20% increments annually over five years, so long as the Company achieves specified earnings targets for each year, although these Options do become exercisable in full without regard to the Company’s achievement of these targets on the ninth anniversary of the date of grant, so long as the holder of the Option is still an employee on that date.

Under the 2004 Option Plan, except for Options granted in 2006, 100% of the Options vest and become exercisable in 25% increments annually over four years, so long as the holder of the Option is still an employee on the vesting date. On December 4, 2006, 295.7 Options were granted to Warren D. Knowlton, the Company’s Chief Executive Officer, which vest and become exercisable with respect to 20% of the Units on the first anniversary of the grant date, an additional 40% of the Units on the second anniversary of the grant date, an additional 20% of the Units on the third anniversary of the grant date and an additional 20% of the Units on the fourth anniversary of the grant date, so long as the holder of the Option is still an employee on the vesting date. On December 4, 2006, 110.9 Options were granted to Mark S. Burgess, the Company’s Chief Financial Officer, 50% of which vest and become exercisable in 25% increments annually, on the anniversaries of the grant date, over four years so long as the holder of the Option is still an employee on the vesting date, and 50% of which vest and become exercisable in 25% increments annually, on the anniversaries of the grant date, over four years so long as the Company achieves specified earnings targets each year and so long as the holder of the Option is still an employee on the vesting date. On December 4, 2006, 221.8 Options were granted to Mr. Knowlton and Mr. Burgess which vest and become exercisable upon (A) the Blackstone Investors’ sale of their interest in the Company and (B) the attainment of certain financial performance goals.

There were 628.4 Options granted in 2006. The weighted average fair value at date of grant for Options granted in 2006, 2005 and 2004 were $6,001, $7,748 and $7,064 per Option, respectively. The fair value of each Option was estimated on the date of the grant using the minimum value option pricing model, for 2005 and 2004, and using the fair value option pricing model, for 2006, with the following weighted-average assumptions:

	2006		2005		2004
Dividend yield	0	%	0	%	0	%
Expected volatility	30	%	0	%	0	%
Risk free interest rate	4.53	%	3.65	%	3.3	%
Expected option life (in years)	4.5		4.5		4.5
Forfeiture rate	35	%	N/A		N/A

A summary of the changes in the Option Units outstanding under the Option Plans as of December 31, 2006, 2005 and 2004 is as follows:

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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

	2006				2005				2004
	Units Under Option		Weighted Average Exercise Price		Units Under Option		Weighted Average Exercise Price		Units Under Option		Weighted Average Exercise Price
Outstanding at beginning of year	1,228.0		$	38,861	1,239.6		$	38,980	625.8		$	26,527
Granted	628.4			31,857	4.0			51,579	616.5			51,579
Exercised	(11.5	)		25,789	—			—	—			—
Forfeited	(66.5	)		47,428	(15.6	)		51,579	(2.7	)		29,606
Outstanding at end of year	1,778.4			36,150	1,228.0			38,861	1,239.6			38,980
Vested or expected to vest at end of year	1,556.6			37,626
Exercisable at end of year	788.7			35,386	637.5			32,189	467.1			26,092

The following table summarizes information relating to Option Units outstanding at December 31, 2006:

	Options Outstanding				Options Exercisable
Exercise Prices	Options Outstanding at 12/31/06	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Aggregate Intrinsic Value	Options Exercisable at 12/31/06	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Aggregate Intrinsic Value
		(in years)		(in millions)		(in years)		(in millions)
$25,789 to $29,606	932.2	5.2	$26,235	—	504.8	2.2	$26,280		—
$38,684	295.7	9.9	$38,684	—	—	—	—		—
$51,579	550.5	7.9	$51,579	—	283.9	7.9	$51,579		—

The proceeds from options exercised in 2006 were $0.3 million. The total intrinsic value of these options was $0.0 million.

17. Other Expense (Income), Net

Other expense (income), net consisted of the following:

	Year Ended December 31,
	2006		2005			2004
	(In thousands)
Foreign exchange loss (gain)	$	1,922	$	329		$	(1,260	)
Other		270		(85	)		174
	$	2,192	$	244		$	(1,086	)

18. Income Taxes

The provision for income taxes consisted of:

65

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

	Year Ended December 31,
	2006		2005			2004
	(In thousands)
Current provision:
Federal	$	—	$	—		$	—
State and local		113		—			—
Foreign		16,701		13,298			6,889
Total current provision	$	16,814	$	13,298		$	6,889
Deferred provision:
Federal	$	1,661	$	(1,736	)	$	(7,176	)
State and local		4,794		(1,027	)		(1,421	)
Foreign		4,321		3,915			(440	)
Total deferred provision (benefit)	$	10,776	$	1,152		$	(9,037	)
Total provision (benefit)	$	27,590	$	14,450		$	(2,148	)

The following table sets forth the deferred income tax assets and liabilities that result from temporary differences between the reported amounts and the tax bases of the assets and liabilities:

	December 31,
	2006			2005
	(In thousands)
Deferred income tax assets:
Net operating loss carryforwards	$	141,041		$	115,200
Fixed assets, principally due to differences in depreciation and assigned values		7,663			1,315
Accrued retirement indemnities		3,102			1,870
Inventories		1,115			851
Accruals and reserves		18,043			14,965
Capital leases		225			585
Tax credits		17,342			15,871
Other items		5,229			3,101
Gross deferred income tax assets		193,760			153,758
Valuation allowance		(106,607	)		(48,705	)
Net deferred income tax assets		87,153			105,053
Deferred income tax liabilities:
Fixed assets, principally due to differences in depreciation and assigned values		72,487			81,932
Inventories		1,399			597
Amortizable intangibles		23,024			23,675
Unremitted earnings of foreign subsidiaries		8,646			8,827
Other items		329			980
Gross deferred income tax liabilities		105,885			116,011
Net deferred income tax liabilities	$	18,732		$	10,958

Current deferred income tax liabilities of $7.2 million in 2006 and $6.8 million in 2005 are included in accrued expenses. Non-current deferred income tax assets of $1.6 million in 2006 and $5.4 million in 2005 are included in other non-current assets.

The valuation allowance for deferred tax assets of $106.6 million and $48.7 million at December 31, 2006 and 2005, respectively, relates principally to the uncertainty of the utilization of certain deferred tax assets, primarily tax loss and credit carryforwards in various jurisdictions. The Company believes that it will generate sufficient future taxable income to realize the tax benefits related to the remaining deferred tax asset. The valuation allowance was calculated in accordance with SFAS 109, “Accounting for Income Taxes,” which requires that a valuation allowance be established and maintained when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. The valuation allowance increase in 2006 was primarily attributable to the recording of a valuation allowance on deferred tax assets associated with current operating losses and federal and state tax loss carryforwards.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

The increase in net deferred income tax liabilities of $7.8 million in 2006 consisted of $10.8 million of deferred income tax expense, $0.1 million charged to other comprehensive income and $0.2 million charged to employee benefits in Mexico, less $4.1 million of deferred tax benefits related to purchase accounting. The remaining difference of $0.8 million is due to changes in the foreign exchange rates at December 31, 2006 compared to December 31, 2005 used to translate the deferred tax balances of foreign affiliates.

Certain legal entities in the Company do not pay income taxes because their income is taxed to the owners. For those entities, the reported amount of their assets net of the reported amount of their liabilities are exceeded by the related tax bases of their assets net of liabilities by $112.8 million at December 31, 2006 and $150.0 million at December 31, 2005.

The difference between the actual income tax provision and an amount computed by applying the U.S. federal statutory rate for corporations to earnings before income taxes is attributable to the following:

	Year Ended December 31,
	2006			2005			2004
	(In thousands)
Taxes at U.S. federal statutory rate	$	(32,475	)	$	(13,112	)	$	(14,467	)
Partnership loss not subject to federal income taxes		8,757			15,980			13,413
State income tax net of federal benefit		3,189			(670	)		(897	)
Foreign loss without current tax benefit		4,080			2,273			1,853
Unremitted earnings of foreign subsidiaries		3,417			7,446			—
Residual U.S. tax on dividends from foreign subsidiaries		237			2,262			141
Foreign income tax rates other than U.S. federal rate		283			(1,268	)		(992	)
Permanent differences between tax and book accounting		3,841			(161	)		238
Prior year adjustments		30			150			265
Change in valuation allowance		36,246			(293	)		(1,772	)
Other		(15	)		1,843			70
	$	27,590		$	14,450		$	(2,148	)

As of December 31, 2006, the Company’s domestic subsidiaries have U.S. federal net operating loss carryforwards of approximately $187.3 million. These net operating loss carryforwards are available to offset future taxable income and expire principally in the years 2020 through 2025. The Company also has various state net operating loss carryforwards that expire through 2026. The determination of the state net operating loss carryforwards is dependent upon the subsidiaries’ taxable income or loss, apportionment percentages and other respective state laws that can change from year to year and impact the amount of such carryforward. The Company’s international operating subsidiaries have, in the aggregate, approximately $197.4 million of tax loss carryforwards available as of December 31, 2006. These losses are available to reduce the originating subsidiaries’ future taxable foreign income and have varying expiration dates. The loss carryforwards relating to the Company’s French subsidiaries ($166.6 million) and UK subsidiaries ($5.5 million) have no expiration date. The remainder of the foreign loss carryforwards have expiration dates ranging from 2007 through 2015. The Company’s international subsidiaries also have approximately $8.9 million of capital loss carryforwards which are available only to offset capital gains. If unused, all but $0.5 million of these losses (which have no expiration date) will expire in 2011.

As of December 31, 2006, the Company’s domestic subsidiaries had federal and state income tax credit carryforwards of approximately $11.5 million consisting of $1.5 million of Alternative Minimum Tax credits which never expire, $5.3 million of federal research and development credits which expire principally in the years 2011 through 2024 and $4.7 million of state tax credits with expiration dates from 2007 through 2013. The Company’s subsidiaries in Mexico and Argentina have tax credit carryforwards of $5.5 million and $0.3 million, respectively, which expire in the years 2014 through 2016.

As of December 31, 2006, the Company’s equity in the undistributed earnings of foreign subsidiaries which are deemed to be permanently reinvested, and for which income taxes had not been provided, were zero. Therefore, no U.S. or foreign tax will be payable on undistributed earnings of such foreign subsidiaries.

The American Jobs Creation Act of 2004 (the “Act”) was signed into law on October 22, 2004. The Act creates a temporary incentive for U.S. corporations to repatriate accumulated income abroad by providing an 85 percent dividends received deduction for certain dividends from controlled foreign corporations. During 2005, Management decided the Company would not repatriate foreign earnings under the Act and therefore did not

67

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

recognize any income tax effect in 2005. Because the Act only provided a one-time incentive for repatriations occurring during 2005, there will be no future income tax effect.

Cash income tax payments of $18.6 million, $10.1 million and $6.8 million were made for income tax liabilities in 2006, 2005 and 2004, respectively.

19. Commitments

In connection with plant expansion and improvement programs, the Company had commitments for capital expenditures of approximately $46.3 million at December 31, 2006, including the $12.0 million per year obligation to Graham Engineering for products and services through December 31, 2007. See Note 20.

20. Contingencies and Legal Proceedings

On November 3, 2006, the Company filed a complaint with the Supreme Court of the State of New York against Owens-Illinois, Inc. and OI Plastic Products FTS, Inc. (collectively, “OI”). The complaint alleges certain misrepresentations by OI in connection with the Company’s 2004 purchase of O-I Plastic and seeks damages in excess of $30 million. In December 2006, OI filed an Answer and Counterclaim, seeking to rescind the $39 million payment they had made to the Company in compliance with a settlement agreement in April 2005. The Company filed a Motion to Dismiss the Counterclaim in January 2006. The litigation is proceeding.

In January 2005, Glass, Molders, Pottery, Plastics and Allied Workers Union filed grievances on behalf of three (3) employees claiming that the Company failed to honor certain pension obligations to the grievants, who were former employees of Owens-Brockway Plastic Products, a subsidiary of Owens-Illinois, Inc., and who were permanently laid off in plant closings by the Company following the Company’s acquisition of O-I Plastic. The grievances were referred to an Arbitrator and a hearing was held. The parties expect the Arbitrator’s decision to be issued in early April 2007. The Company and the union have agreed to and expressed their willingness to have the Arbitrator rule on a broader range of pension issues involving other former Owens-Illinois, Inc. employees thereafter employed by the Company. However, it remains unclear whether the Arbitrator intends to rule on that broader issue. Accordingly, the actual amount at stake is an open question depending on the scope of the issues on which the Arbitrator decides to rule, which cannot be predicted at this time. Although the Company believes it will prevail, nevertheless the outcome must be characterized as uncertain. The Company has determined that the outcome of this litigation will in no event exceed $5.0 million, and therefore, will not have a material effect on its financial condition or business.

The Company is party to various other litigation matters arising in the ordinary course of business. The ultimate legal and financial liability of the Company with respect to such litigation cannot be estimated with certainty, but Management believes, based on its examination of these matters, experience to date and discussions with counsel, that ultimate liability from the Company’s various litigation matters will not be material to the business, financial condition, results of operations or cash flows of the Company.

On July 9, 2002, the Company and Graham Engineering executed a First Amendment to the Equipment Sales Agreement to, among other things, (i) permit the Company to purchase certain extrusion blow molding wheel systems from a third party under certain circumstances if Graham Engineering is provided the opportunity to bid on supplying the same equipment; (ii) clarify that the Company’s exclusivity rights under the Equipment Sales Agreement do not apply to certain new generations of Graham Engineering equipment; (iii) in the event of the sale of Graham Engineering to a competitor, provide the Company the option to require the transfer of the existing agreement or obtain a perpetual, royalty-free license to make and use wheel equipment and components; (iv) provide Graham Engineering with the ability to terminate the Equipment Sales Agreement if an arbitrator determines that the Company has purchased certain high output extrusion blow molding equipment from another supplier in breach of the Equipment Sales Agreement; and (v) obligate the Company, retroactive to January 1, 2002, and subject to certain credits and carry-forwards, to make payments for products and services to Graham Engineering in the amount of at least $12.0 million per calendar year, or else pay to Graham Engineering a shortfall payment. The minimum purchase commitment for 2006 has been met.

Subsequently, on January 13, 2004 the parties executed a Second Amendment to the Equipment Sales Agreement. Such amendment removed restrictions originally placed upon the Company with respect to the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

Company’s use of Graham Engineering technology to manufacture containers at blow molding plants co-located with dairies or dairy-focused facilities.

The Equipment Sales Agreement terminates on December 31, 2007, unless mutually extended by the parties.

21. Segment Information

The Company is organized and managed on a geographical basis in three operating segments: North America, Europe and South America. The accounting policies of the segments are consistent with those described in Note 1. The Company’s measure of profit or loss is operating income. Segment information for the three years ended December 31, 2006, representing the reportable segments currently utilized by the chief operating decision maker, was as follows:

	Year	North America			Europe		South America			Eliminations			Total
		(a)			(a)		(a)			(b)			(a)
	(In thousands)
Net sales (c)(d)	2006	$	2,220,713		$	236,141	$	64,578		$	(496	)	$	2,520,936
	2005		2,168,193			240,147		65,119			(10	)		2,473,449
	2004		1,136,508			173,428		43,529			(510	)		1,352,955
Operating income (loss)	2006	$	123,946		$	2,206	$	(9,795	)	$	—		$	116,357
	2005		125,260			15,719		6,164			—		$	147,143
	2004		83,441			11,179		3,459			—		$	98,079
Depreciation and amortization	2006	$	178,961		$	21,387	$	5,170		$	—		$	205,518
	2005		178,506			18,590		3,960			—			201,056
	2004		96,908			13,027		2,179			—			112,114
Impairment charges	2006	$	2,942		$	11,949	$	10,984		$	—		$	25,875
	2005		5,177			687		1,399			—			7,263
	2004		5,340			1,656		—			—			6,996
Interest expense, net	2006	$	203,338		$	2,676	$	937		$	—		$	206,951
	2005		181,362			2,093		907			—			184,362
	2004		136,768			2,897		835			—			140,500
Income tax provision (benefit)	2006	$	19,834		$	7,309	$	447		$	—		$	27,590
	2005		5,980			7,104		1,366			—			14,450
	2004		(6,972	)		3,796		1,028			—			(2,148	)
Identifiable assets (c)(d)	2006	$	2,494,818		$	303,667	$	63,001		$	(419,549	)	$	2,441,937
	2005		2,638,141			298,318		68,131			(442,212	)		2,562,378
	2004		2,550,833			300,161		46,877			(392,863	)		2,505,008
Goodwill	2006	$	284,840		$	15,827	$	2,727		$	—		$	303,394
	2005		288,158			17,278		11,735			—			317,171
	2004		333,174			16,916		694			—			350,784
Cash paid for property, plant and equipment, net of proceeds from	2006	$	146,446		$	16,976	$	7,519		$	(7	)	$	170,934
sale of property, plant and equipment	2005		204,431			30,320		7,862			(2	)		242,611
and excluding acquisitions	2004		116,295			31,335		4,280			13			151,923

69

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

(a) On October 7, 2004, the Company acquired O-I Plastic.

(b) To eliminate intercompany balances, which include investments in the operating segments and inter-segment receivables and payables.

(c) The Company’s net sales for Europe include sales in France which totaled approximately $50.4 million, $63.5 million and $74.5 million for 2006, 2005 and 2004, respectively. Identifiable assets in France totaled approximately $115.8 million, $114.1 million and $132.9 million as of December 31, 2006, 2005 and 2004, respectively.

(d) The Company’s net sales for North America include sales in Mexico which totaled approximately $143.4 million, $132.5 million and $52.1 million for 2006, 2005 and 2004, respectively. Identifiable assets in Mexico totaled approximately $146.9 million, $165.5 million and $96.7 million as of December 31, 2006, 2005 and 2004, respectively. Approximately all of the North America reportable segment remaining net sales and identifiable assets are in the United States.

Product Net Sales Information

The following is supplemental information on net sales by product category:

	Food and Beverage		Household		Automotive Lubricants		Personal Care/Specialty		Total
								(1)
	(In thousands)
2006	$	1,478,764	$	512,294	$	284,726	$	245,152	$	2,520,936
2005		1,422,496		508,706		278,704		263,543		2,473,449
2004		769,921		273,929		240,587		68,518		1,352,955

(1) Prior to the Acquisition, sales of Personal Care/Specialty containers were not significant and are included in the Household category.

Note: Based upon a broader product offering and consolidation of production facilities resulting from the acquisition of O-I Plastic, the Company has reviewed and changed its traditional methodology for compiling product category data. Reclassifications have been made to the 2005 product category data to conform to the 2006 presentation.

22. Condensed Guarantor Data

On October 7, 2004 the Operating Company and CapCo I co-issued $250.0 million aggregate principal amount of 8.5% Senior Notes due 2012 and $375.0 million aggregate principal amount of 9.875% Senior Subordinated Notes due 2014. The notes were issued under Indentures issued on October 7, 2004. Holdings and the domestic subsidiaries of the Operating Company have fully and unconditionally guaranteed these notes. These guarantees are both joint and several. Both the Operating Company and CapCo I are 100%-owned subsidiaries of Holdings.

The following condensed consolidating financial statements present the financial position, results of operations and cash flows of Holdings, the Operating Company, guarantor domestic subsidiaries of the Operating Company, non-guarantor subsidiaries and CapCo I.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2006

(In thousands)

	Graham Packaging Holdings Company		Graham Packaging Company, L.P.			Guarantors		Non- Guarantors		GPC Capital Corp. I		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	1,456		$	1	$	11,870	$	—	$	—		$	13,327
Accounts receivable, net		—		83,134			85,872		71,686		—		—			240,692
Inventories		—		81,170			116,371		41,400		—		—			238,941
Deferred income taxes		—		—			11,838		3,571		—		—			15,409
Prepaid expenses and other current assets		—		24,832			10,747		29,291		—		—			64,870
Total current assets		—		190,592			224,829		157,818		—		—			573,239
Property, plant and equipment, net		—		570,811			568,732		286,469		—		—			1,426,012
Intangible assets, net		—		4,664			66,981		6,866		—		—			78,511
Goodwill		—		9,246			234,359		59,789		—		—			303,394
Net intercompany		—		1,191,899			—		—		—		(1,191,899	)		—
Investment in subsidiaries		—		319,980			273,213		—		—		(593,193	)		—
Other non-current assets		—		58,235			523		2,023		—		—			60,781
Total assets	$	—		2,345,427			1,368,637		512,965		—		(1,785,092	)		2,441,937
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)
Current liabilities:
Accounts payable	$	—	$	81,390		$	80,246	$	45,036	$	—	$	—		$	206,672
Accrued expenses		—		105,564			41,576		47,697		—		—			194,837
Current portion of long-term debt		—		26,504			—		5,804		—		—			32,308
Total current liabilities		—		213,458			121,822		98,537		—		—			433,817
Long-term debt		—		2,514,174			—		405		—		—			2,514,579
Deferred income taxes		—		—			17,894		10,644		—		—			28,538
Other non-current liabilities		—		28,462			18,534		15,763		—		—			62,759
Investment in subsidiaries		410,667		—			—		—		—		(410,667	)		—
Net intercompany		187,089		—			934,927		69,883		—		(1,191,899	)		—
Commitments and contingent liabilities		—		—			—		—		—		—			—
Partners’ capital (deficit)		(597,756)		(410,667	)		275,460		317,733		—		(182,526	)		(597,756	)
Total liabilities and partners’ capital (deficit)	$	—	$	2,345,427		$	1,368,637	$	512,965	$	—	$	(1,785,092	)	$	2,441,937

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2005

(In thousands)

	Graham Packaging Holdings Company			Graham Packaging Company, L.P.			Guarantors		Non- Guarantors		GPC Capital Corp. I		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	—		$	11,307		$	1	$	15,376	$	—	$	—		$	26,684
Accounts receivable, net		—			79,454			102,758		69,145		—		—			251,357
Inventories		—			93,205			145,121		49,484		—		—			287,810
Deferred income taxes		—			—			8,730		4,339		—		—			13,069
Prepaid expenses and other current assets		—			17,928			11,257		21,812		—		—			50,997
Total current assets		—			201,894			267,867		160,156		—		—			629,917
Property, plant and equipment, net		—			562,817			597,196		283,447		—		—			1,443,460
Intangible assets, net		—			4,331			73,212		4,090		—		—			81,633
Goodwill		—			9,240			236,921		71,010		—		—			317,171
Net intercompany		—			1,221,017			—		—		—		(1,221,017	)		—
Investment in subsidiaries		—			413,433			296,544		—		—		(709,977	)		—
Other non-current assets		—			82,306			897		6,994		—		—			90,197
Total assets	$	—		$	2,495,038		$	1,472,637	$	525,697	$	—	$	(1,930,994	)	$	2,562,378
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)
Current liabilities:
Accounts payable	$	—		$	68,294		$	49,471	$	59,835	$	—	$	—		$	177,600
Accrued expenses		—			85,270			45,876		45,286		—		—			176,432
Current portion of long-term debt		—			21,025			—		6,834		—		—			27,859
Total current liabilities		—			174,589			95,347		111,955		—		—			381,891
Long-term debt		—			2,609,618			—		863		—		—			2,610,481
Deferred income taxes		—			—			11,031		11,562		—		—			22,593
Other non-current liabilities		—			17,451			12,626		11,046		—		—			41,123
Investment in subsidiaries		306,620			—			—		—		—		(306,620	)		—
Net intercompany		187,090			—			988,412		45,515		—		(1,221,017	)		—
Commitments and contingent liabilities		—			—			—		—		—		—			—
Partners’ capital (deficit)		(493,710	)		(306,620	)		365,221		344,756		—		(403,357	)		(493,710	)
Total liabilities and partners’ capital (deficit)	$	—		$	2,495,038		$	1,472,637	$	525,697	$	—	$	(1,930,994	)	$	2,562,378

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2006

(In thousands)

	Graham Packaging Holdings Company			Graham Packaging Company, L.P.			Guarantors			Non- Guarantors			GPC Capital Corp. I		Eliminations			Consolidated
Net sales	$	—		$	1,078,906		$	1,060,141		$	466,731		$	—	$	(84,842	)	$	2,520,936
Cost of goods sold		—			911,341			989,062			417,878			—		(84,842	)		2,233,439
Gross profit		—			167,565			71,079			48,853			—		—			287,497
Selling, general and administrative expenses		—			56,730			49,385			25,299			—		—			131,414
Impairment charges		—			1,991			1,830			22,054			—		—			25,875
Net loss on disposal of fixed assets		—			5,396			8,019			436			—		—			13,851
Operating income		—			103,448			11,845			1,064			—		—			116,357
Interest expense, net		—			124,336			77,542			5,073			—		—			206,951
Other expense (income), net		—			3,858			(4,171	)		4,283			—		(1,778	)		2,192
Equity in loss of subsidiaries		120,376			91,543			37,880			—			—		(249,799	)		—
(Loss) income before income taxes		(120,376	)		(116,289	)		(99,406	)		(8,292	)		—		251,577			(92,786	)
Income tax provision		—			4,087			6,829			16,674			—		—			27,590
Net (loss) income	$	(120,376	)	$	(120,376	)	$	(106,235	)	$	(24,966	)	$	—	$	251,577		$	(120,376	)

73

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands)

	Graham Packaging Holdings Company			Graham Packaging Company, L.P.			Guarantors			Non- Guarantors		GPC Capital Corp. I		Eliminations			Consolidated
Net sales	$	—		$	1,013,899		$	1,075,238		$	455,689	$	—	$	(71,377	)	$	2,473,449
Cost of goods sold		—			883,467			970,305			395,523		—		(71,377	)		2,177,918
Gross profit		—			130,432			104,933			60,166		—		—			295,531
Selling, general and administrative expenses		1			52,003			50,130			25,400		—		—			127,534
Impairment charges		—			3,771			1,406			2,086		—		—			7,263
Net loss on disposal of fixed assets		—			9,272			1,981			2,338		—		—			13,591
Operating (loss) income		(1	)		65,386			51,416			30,342		—		—			147,143
Interest expense, net		—			114,902			65,531			3,929		—		—			184,362
Other (income) expense, net		—			(2,390	)		(1,290	)		895		—		3,029			244
Equity in loss (earnings) of subsidiaries		52,640			(1,218	)		(5,712	)		—		—		(45,710	)		—
(Loss) income before income taxes and minority interest		(52,641	)		(45,908	)		(7,113	)		25,518		—		42,681			(37,463	)
Income tax provision (benefit)		—			6,732			(2,658	)		10,376		—		—			14,450
Minority interest		—			—			—			728		—		—			728
Net (loss) income	$	(52,641	)	$	(52,640	)	$	(4,455	)	$	14,414	$	—	$	42,681		$	(52,641	)

74

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2004

(In thousands)

	Graham Packaging Holdings Company			Graham Packaging Company, L.P.			Guarantors			Non- Guarantors		GPC Capital Corp. I		Eliminations			Consolidated
Net sales	$	—		$	858,135		$	250,867		$	287,791	$	—	$	(43,838	)	$	1,352,955
Cost of goods sold		—			711,391			249,130			242,652		—		(43,838	)		1,159,335
Gross profit		—			146,744			1,737			45,139		—		—			193,620
Selling, general and administrative expenses		—			57,508			10,130			18,657		—		—			86,295
Impairment charges		—			5,340			—			1,656		—		—			6,996
Net loss on disposal of fixed assets		—			684			1			1,565		—		—			2,250
Operating income (loss)		—			83,212			(8,394	)		23,261		—		—			98,079
Interest expense, net		24,018			99,581			13,103			3,798		—		—			140,500
Other (income) expense, net		—			(1,798	)		(460	)		1,172		—		—			(1,086	)
Equity in loss (earnings) of subsidiaries		16,614			1,811			(1,933	)		—		—		(16,492	)		—
(Loss) income before income taxes and minority interest		(40,632	)		(16,382	)		(19,104	)		18,291		—		16,492			(41,335	)
Income tax provision (benefit)		—			232			(8,593	)		6,213		—		—			(2,148	)
Minority interest		—			—			—			1,445		—		—			1,445
Net (loss) income	$	(40,632	)	$	(16,614	)	$	(10,511	)	$	10,633	$	—	$	16,492		$	(40,632	)

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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2006

(In thousands)

	Graham Packaging Holdings Company		Graham Packaging Company, L.P.			Guarantors			Non- Guarantors			GPC Capital Corp. I		Eliminations		Consolidated
Operating activities:
Net cash provided by operating activities	$	—	$	171,366		$	60,161		$	31,424		$	—	$	—	$	262,951
Investing activities:
Net cash paid for property, plant and equipment		—		(80,809	)		(57,631	)		(32,494	)		—		—		(170,934	)
Acquisition of/investment in a business, net of cash acquired		—		2,198			(2,530	)		(1,094	)		—		—		(1,426	)
Net cash used in investing activities		—		(78,611	)		(60,161	)		(33,588	)		—		—		(172,360	)
Financing activities:
Proceeds from issuance of long-term debt		—		763,949			—			45,879			—		—		809,828
Payment of long-term debt		—		(865,852	)		—			(47,870	)		—		—		(913,722	)
Proceeds from issuance of partnership units		—		297			—			—			—		—		297
Debt issuance fees		—		(1,000	)		—			—			—		—		(1,000	)
Net cash used in financing activities		—		(102,606	)		—			(1,991	)		—		—		(104,597	)
Effect of exchange rate changes on cash and cash equivalents		—		—			—			649			—		—		649
Decrease in cash and cash equivalents		—		(9,851	)		—			(3,506	)		—		—		(13,357	)
Cash and cash equivalents at beginning of period		—		11,307			1			15,376			—		—		26,684
Cash and cash equivalents at end of period	$	—	$	1,456		$	1		$	11,870		$	—	$	—	$	13,327

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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands)

	Graham Packaging Holdings Company		Graham Packaging Company, L.P.			Guarantors			Non- Guarantors			GPC Capital Corp. I		Eliminations		Consolidated
Operating activities:
Net cash (used in) provided by operating activities	$	—	$	(38,202	)	$	99,412		$	58,787		$	—	$	—	$	119,997
Investing activities:
Net cash paid for property, plant and equipment		—		(99,085	)		(93,438	)		(50,088	)		—		—		(242,611	)
Acquisitions of/investments in businesses, net of cash acquired		—		(768	)		(5,973	)		(12,032	)		—		—		(18,773	)
Net cash used in investing activities		—		(99,853	)		(99,411	)		(62,120	)		—		—		(261,384	)
Financing activities:
Proceeds from issuance of long-term debt		—		1,068,305			—			47,457			—		—		1,115,762
Payment of long-term debt		—		(917,878	)		—			(47,794	)		—		—		(965,672	)
Debt issuance fees		—		(2,145	)		—			—			—		—		(2,145	)
Net cash provided by (used in) financing activities		—		148,282			—			(337	)		—		—		147,945
Effect of exchange rate changes on cash and cash equivalents		—		—			—			(2,005	)		—		—		(2,005	)
Increase (decrease) in cash and cash equivalents		—		10,227			1			(5,675	)		—		—		4,553
Cash and cash equivalents at beginning of period		—		1,080			—			21,051			—		—		22,131
Cash and cash equivalents at end of period	$	—	$	11,307		$	1		$	15,376		$	—	$	—	$	26,684

77

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

DECEMBER 31, 2006

GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2004

(In thousands)

	Graham Packaging Holdings Company			Graham Packaging Company, L.P.			Guarantors			Non- Guarantors			GPC Capital Corp. I		Eliminations		Consolidated
Operating activities:
Net cash provided by (used in) operating activities	$	150,832		$	(1,004,753	)	$	961,451		$	(69	)	$	—	$	—	$	107,461
Investing activities:
Net cash paid for property, plant and equipment		—			(103,689	)		(7,651	)		(40,583	)		—		—		(151,923	)
Acquisitions of/investments in businesses, net of cash acquired		18,168			(347,723	)		(953,800	)		52,792			—		—		(1,230,563	)
Net cash provided by (used in) investing activities		18,168			(451,412	)		(961,451	)		12,209			—		—		(1,382,486	)
Financing activities:
Proceeds from issuance of long-term debt		—			2,837,121			—			35,403			—		—		2,872,524
Payment of long-term debt		(169,000	)		(1,302,334	)		—			(34,200	)		—		—		(1,505,534	)
Contributions to minority shareholders		—			—			—			(182	)		—		—		(182	)
Debt issuance fees		—			(78,389	)		—			—			—		—		(78,389	)
Net cash (used in) provided by financing activities		(169,000	)		1,456,398			—			1,021			—		—		1,288,419
Effect of exchange rate changes on cash and cash equivalents		—			—			—			1,670			—		—		1,670
Increase in cash and cash equivalents		—			233			—			14,831			—		—		15,064
Cash and cash equivalents at beginning of period		—			847			—			6,220			—		—		7,067
Cash and cash equivalents at end of period	$	—		$	1,080		$	—		$	21,051		$	—	$	—	$	22,131

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The Company’s principal executive officer and principal financial officer evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure. Based on their evaluation and material weaknesses in the Company’s internal controls as described below, the Company’s principal executive officer and principal financial officer have concluded the Company’s system of disclosure controls and procedures was ineffective as of December 31, 2006.

The Company identified a material weakness in its internal controls related to its income tax accounting as of December 31, 2005. The Company’s tax structure is complex with significant tax jurisdictions located outside of the United States. The acquisition of O-I Plastic added to the complexity of the tax structure, involved significant issues with regard to purchase accounting and significantly added to the Company’s operations in Mexico. The Company had insufficient resources to determine that income tax accounting complied with generally accepted accounting principles, particularly as it relates to the tax accounting for the O-I Plastic acquisition and the tax accounting for its Mexican operations. This deficiency in the design and operation of internal controls could result in misstatements in the reported amount of deferred income tax balances and in the required disclosures of income tax amounts.

In response to the above determination, the Company has implemented certain remedies, including, among other items, the deployment of greater resources in the area of income tax accounting. The Company hired a tax director and a manager of international tax during the fourth quarter of 2006 to increase oversight of its income tax accounting and has added two tax professionals to its staff in Mexico. In addition, the Company has engaged qualified outside consultants to oversee the tax return preparation and the tax accounting reconciliations as well as conducted extensive management reviews for its Mexican operations. During 2006, the Company also reviewed and documented its income tax accounting processes and identified areas to strengthen the design and operation of its tax related controls. Although these improvements were implemented, the Company has concluded that, as of December 31, 2006, these changes were either not yet fully implemented or not operating effectively for a sufficient period of time in order to reduce the likelihood to remote that a material misstatement in its income tax accounts would occur. The Company expects to continue to implement additional changes relating to tax resources, training and policies during 2007.

During the fourth quarter of 2006, the Company also identified various other deficiencies that, when considered on an aggregate basis, constitute a material weakness. These deficiencies relate to matters such as segregation of duties and computer system access and approval processes. These deficiencies in the design and operation of internal controls could result in misstatements in the reported amount of various financial statement amounts. In order to eliminate certain segregation of duties concerns, the Company created a separate department to handle certain customer and pricing matters in the first quarter of 2007 and is also planning to segregate certain

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responsibilities relating to the human resources and payroll processes during the second quarter of 2007. In addition, the Company is implementing procedures to more closely limit user access to its information technology systems. The Company plans to make additional changes in its personnel, policies, systems and procedures during 2007 in order to specifically address the deficiencies identified and strengthen its internal controls.

At this time, the Company is not required to issue an internal control report or receive an independent opinion relating to its internal controls from its external auditors. The Company anticipates that it will be required to issue an internal control report beginning with its 2007 Annual Report on Form 10-K and will be required to receive an independent assessment beginning with its 2008 Annual Report on Form 10-K.

(b) Changes in Internal Controls

Other than those changes discussed in Item 9 (a) above, there are no changes that are reasonably likely to materially affect the Company’s internal control over financial reporting.

Item 9B. Other Information

All information required to be reported on a Form 8-K during the fourth quarter of 2006 has been so reported, except as set forth below.

On March 28, 2007, the Company entered into employment agreements with Warren D. Knowlton and Mark S. Burgess, respectively, as more fully described in “Item 11, Executive Compensation – Employment Agreements.” The Company has filed both employment agreements as Exhibits 10.14 and 10.15 to this Annual Report on Form 10-K and are incorporated herein by reference.

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PART III

Item 10. Advisory Committee Members and Executive Officers of the Registrant

The members of the Advisory Committee (as defined herein) and the executive officers of the Operating Company and Holdings and their respective ages as of March 20, 2007 are set forth in the table below. Unless otherwise indicated, all references to positions in this Item 10 are positions with the Operating Company. The Advisory Committee serves solely in an advisory role to the partnership and general partners of the Company and it does not have the power to act for or bind the Company. For a description of the Advisory Committee, see “The Partnership Agreements—Holdings Partnership Agreement.”

Name	Age	Position
Warren D. Knowlton	60	Chief Executive Officer
Roger M. Prevot	48	President and Chief Operating Officer
Mark S. Burgess	47	Chief Financial Officer of the Operating Company; Chief Financial Officer, Assistant Treasurer and Assistant Secretary of Holdings
Ashok Sudan	54	Executive Vice President and General Manager, Global Food and Beverage
Peter T. Lennox	44	Senior Vice President and General Manager, Household Chemical and Automotive
Chinh E. Chu	40	Member of the Advisory Committee; President, Treasurer and Assistant Secretary of Holdings
Philip R. Yates	59	Chairman of the Advisory Committee
James A. Quella	57	Member of the Advisory Committee
Charles E. Kiernan	62	Member of the Advisory Committee
Gary G. Michael	66	Member of the Advisory Committee
T.J. Dermot Dunphy	74	Member of the Advisory Committee
Colin J. Williams	65	Member of the Advisory Committee

Warren D. Knowlton was appointed as Chief Executive Officer in December 2006. He previously served as Chief Executive Officer of Morgan Crucible PLC, a specialty carbon and ceramic products producer, from December 2002 to August 2006. Prior to joining Morgan Crucible, Mr. Knowlton was an Executive Director of Pilkington PLC, a global glass manufacturer, from November 1997 to July 2002. Mr. Knowlton served as President of Pilkington’s Global Building Products from May 1997 to June 1998 and then served as President of the Global Automotive division from June 1998 to July 2002. Mr. Knowlton joined Pilkington from Owens-Corning, where he spent 20 years in a variety of positions.

Roger M. Prevot has served as President and Chief Operating Officer since February 2000. From February 1998 to February 2000, Mr. Prevot served as Senior Vice President or Vice President and General Manager, Food and Beverage. Prior to February 1998, Mr. Prevot served as Vice President and General Manager, U.S. Food and Beverage.

Mark S. Burgess has served as Chief Financial Officer since December 2006. Mr. Burgess served as President and Chief Executive Officer, as well as Chief Financial Officer, of Anchor Glass Container Corporation from May 2005 until September 2006. He previously served as Executive Vice President and Chief Financial Officer of Clean Harbors Environmental Services, Inc. from April 2003 to April 2005. Prior to that, he held senior financial and operational management roles at JL French Automotive Castings and Trailmobile Corporation.

Ashok Sudan has served as Executive Vice President and General Manager, Global Food and Beverage since November 2004. Prior to that Mr. Sudan served as Senior Vice President and General Manager, Global Food and Beverage; Senior Vice President and General Manager, Europe and North America Food and Beverage Polyolefins; or Vice President and General Manager, Europe since September 2000. Prior to September 2000, Mr. Sudan served as Vice President Operations, Food and Beverage/PET, a position he entered in 1998. Prior to that Mr. Sudan held various management positions in manufacturing.

Peter T. Lennox has served as Senior Vice President and General Manager of Household Chemical and Automotive since January 2006. Prior to that Mr. Lennox served as Vice President and General Manager for Household; Vice President and General Manager for the Personal Care/Specialty Business; Vice President and Business Manager for Food and Beverage PET Business; or Vice President and General Manager in the Company’s European Business. Prior to September 2000, Mr. Lennox served as Vice President of Sales, Marketing and Business Development, Food and Beverage, at the Kerr Group.

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Chinh E. Chu has been a member of the Advisory Committee since May 2005. Mr. Chu is a Senior Managing Director in the Blackstone Private Equity Group. Since joining Blackstone in 1990, Mr. Chu has led Blackstone’s investments in Celanese, Nalco, SunGard Data Systems, Nycomed and LIFFE. He has also been involved in Blackstone’s investments in FGIC, Sirius Satellite Radio, StorageApps, Haynes International, Prime Succession/Rose Hills, Interstate Hotels, HFS and Alco Holdings. Mr. Chu is currently a director of FGIC, SunGard Data Systems, Celanese and Nalco. Before joining Blackstone, Mr. Chu worked at Salomon Brothers in the Mergers and Acquisitions Department.

Philip R. Yates has served as Chairman of the Advisory Committee since July 2002. From February 2000 until December 2006, Mr. Yates served as Chief Executive Officer. From February 1998 until February 2000, Mr. Yates served as the Chief Executive Officer and President. Prior to February 1998, Mr. Yates served as President and Chief Operating Officer.

James A. Quella has been a member of the Advisory Committee and Vice President, Assistant Treasurer and Assistant Secretary of Holdings since October 2005. Mr. Quella is a Senior Managing Director and Senior Operating Partner in the Blackstone Private Equity Group. He is also a member of the firm’s Private Equity Investment Committee. Prior to joining Blackstone in 2004, Mr. Quella was a Managing Director and Senior Operating Partner with DLJ Merchant Banking Partners (“DLJMB”)-CSFB Private Equity. Prior to that, Mr. Quella worked at Mercer Management Consulting and Strategic Planning Associates, its predecessor firm, where he served as a senior consultant to CEOs and senior management teams, and was Co-Vice Chairman with shared responsibility for overall management of the firm. Mr. Quella is currently on the Boards of Celanese, Houghton-Mifflin and Allied Waste.

Charles E. Kiernan has been a member of the Advisory Committee since July 2002. Mr. Kiernan was the Executive Vice President and a member of the Executive Council for Aramark Corporation from 1998 to 2000, where he served as President of the Food and Support Services unit. Prior to 1998, Mr. Kiernan was employed by Duracell from 1986 to 1997. He served as the President and Chief Operating Officer of Duracell International Inc. from 1994 to 1997, during which time he also served as a Director of the company, and President of Duracell North America from 1992 to 1994. Mr. Kiernan served as a member of the Board of Trustees of the National Urban League.

Gary G. Michael has been a member of the Advisory Committee since October 2002.  Mr. Michael served as Interim President of the University of Idaho from June 2003 to July 2004.  Prior to this position, he served as Chairman of the Board and Chief Executive Officer of Albertson’s, Inc., a national food and drug retailer, from February 1991 until his retirement in April 2001.  Prior to that he served as Vice Chairman, Executive Vice President and Senior Vice President of Finance of Albertson’s and served on the Board of Directors from 1979 until his retirement.  Mr. Michael is a past Chairman of the Federal Reserve Bank of San Francisco and is a long-time member of the Financial Executives Institute.  He currently serves as a Director of Questar, Inc., Office Max, Inc., IdaCorp, Harrah’s Entertainment, Inc. and The Clorox Company.

T.J. Dermot Dunphy has been a member of the Advisory Committee since October 2005. Mr. Dunphy currently is the Chairman and CEO of Kildare Enterprises, L.L.C., a private equity firm. From 1971 to 1996, Mr. Dunphy was President and Chief Executive Officer of Sealed Air Corporation, a manufacturer of proprietary protective packaging products and systems. From 1996 to 2000, he served as Chairman and Chief Executive Officer of Sealed Air Corporation. Mr. Dunphy is currently a Director of Sealed Air Corporation. He is a former Director of FleetBoston Financial Corporation, Public Service Enterprise Group, Inc. and Noveon, Inc.

Colin J. Williams has been a member of the Advisory Committee since March 2006. Mr. Williams is currently Chairman of the Board of Directors of the Clondalkin Group and he serves as a Director of Yule Catto, Turkcell and Lecta. Previously, Mr. Williams was the President and Chief Executive Officer of SCA Packaging.

The Boards of Directors of CapCo I and CapCo II are comprised of Warren D. Knowlton, Mark S. Burgess, Chinh E. Chu and James A. Quella. The Board of Directors of Investor LP is comprised of Chinh E. Chu and James A. Quella.

Except as described above, there are no arrangements or understandings between any member of the Advisory Committee or executive officer and any other person pursuant to which that person was elected or appointed as a member of the Advisory Committee or executive officer.

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Mr. Michael, who serves on the audit committee of the Advisory Committee, is an audit committee financial expert. Mr. Michael is independent, as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act (based on Sections 303.01(B)(2)(a) and 303.01(3) of the New York Stock Exchange’s listing standards).

The Company continues to evaluate the adoption of a code of ethics for its Chief Executive Officer and Chief Financial Officer, but has not yet adopted such a code.

Item 11. Executive Compensation

Compensation Discussion and Analysis

Philosophy

The Company’s compensation philosophy for the Named Executive Officers (as defined herein) listed in the Summary Compensation Table is driven by the need to recruit, develop, motivate and retain top talent both in the short-term and long-term and to support the Company’s values in the areas of people, technology and profitability. Promotion from within is a key principle at the Company and a significant majority of the Named Executive Officers have reached their current positions through career development within the Company. The same compensation philosophy is applied to all levels of exempt employees from mid-level manager or professional and above, including the Named Executive Officers. While the amounts may be different, each of the components of the compensation package is the same and is applied using the same methodology. Exceptions to this principle are generally due to local requirements. Other factors affecting compensation are:

• annual Company performance;

• the job’s impact on Company results;

• the Company’s objective to provide total compensation that is higher than competitive levels when aggressive Company goals are exceeded; and

• internal equity.

Named Executive Officers generally receive the same benefits as other employees. As is the case with compensation, any differences are generally due to local requirements.

In establishing executive compensation, the Company believes that:

• base salaries should be at levels below the 50th percentile of national market compensation survey data and above the 50th percentile for total compensation, including annual incentive compensation; and

• annual cash incentive and stock option awards should reflect progress toward Company-wide financial and personal objectives, as well as salary grade level, and should balance rewards for short-term and long-term performance.

Purpose

The executive compensation program has been designed to accomplish the following long-term objectives:

• provide market–competitive compensation and benefits that will enable the Company to attract, motivate and retain talented executive officers;

• produce long-term positive results for the Company’s owners and employees; and

• provide balanced incentives for achieving short-term goals and long-term growth.

Administration

The Company’s executive compensation program is administered by the Compensation Committee of the Advisory Committee. The Compensation Committee has retained an independent consulting firm with respect to executive compensation matters. The consultants working on the Company’s executive compensation matters report

83

to and act at the direction of the Compensation Committee. The Company’s management does not direct or oversee the activities of the consulting firm with respect to the Company’s executive compensation program.

Elements of Compensation

General

The primary elements of the executive compensation program during an individual’s tenure consist of:

• base salary;

• annual cash incentive; and

• long-term incentives (stock option awards).

The selection of the three main elements allows the Company to remain competitive in attracting and retaining executive talent and to motivate executives with current and potential financial rewards.

In years of average performance the Committee deems it appropriate to position executive officer jobs at or around the median of the market for a comparable position. This means that the package remains competitive enough to attract and retain top talent but does not over reward average performance. Compensation is set around the 75^th percentile for exceptional business performance and for positions that are of high internal value.

Relative Size of Major Compensation Elements

The combination of base salary, annual cash incentive and stock options comprise total direct compensation. In setting executive compensation, the Compensation Committee considers the aggregate compensation payable to a Named Executive Officer and the form of the compensation. The Committee seeks to achieve the appropriate balance between immediate cash rewards and long-term financial incentives for the achievement of both annual and long-term financial and non-financial objectives.

The Committee reviews the mix of the compensation elements for the Named Executive Officers against companies surveyed nationally as part of the external consultants’ executive compensation analysis. The size and mix of each element in a compensation package is based on job impact on the Company, market practice and overall Company and individual performance. The level of incentive compensation typically increases in relation to an executive officer’s responsibilities. The Compensation Committee believes that making a significant portion of an executive officer’s compensation contingent on annual results more closely aligns the executive officer’s interests with those of the owner.

The Committee may decide, as appropriate, to modify the mix of base salary, annual cash incentive and long-term incentives to best fit a Named Executive Officer’s specific circumstances. For example, the Committee may make the decision to award more cash and not award a stock grant. This provides more flexibility to the Committee to reward executive officers appropriately as they near retirement, when they may only be able to partially fulfill the five-year vesting required for stock options. The Compensation Committee may also increase the size of stock option grants to an executive officer if the total number of career stock option grants does not adequately reflect the executive’s current position with the Company.

Selection of Surveyed Companies

The Compensation Committee approves the companies used in the executive compensation analysis based on surveys by the executive compensation consulting firm. The Company’s human resources function works with the executive compensation consultants to match Company positions against survey positions and to compile the compensation data for each executive officer. Additionally, an internal equity analysis is carried out to ensure that both the total compensation and individual compensation components for each executive officer position are sized appropriately in relation to each other.

Timing of Compensation Decisions

All elements of the Named Executive Officers compensation are reviewed each January, after a review of financial, operating and personal objectives with respect to the prior year’s results, and the financial, operating and

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personal objectives are determined for the current year. The Compensation Committee may, however, review salaries or grant stock options at other times as the result of new appointments or promotions during the year.

The following table summarizes the approximate timing of significant compensation events:

Event	Timing
Base salary review and recommendation.	First quarter of the fiscal year for base salary for the current year.
Executive performance evaluation and corresponding compensation recommendations.	Results approved in January of each fiscal year for annual cash incentive with respect to prior year. Earned incentive paid in March.
Merit increases for executives.	Effective first pay period in April.
Granting of options to executives.	No set period.
External consultants’ analysis provided to the Compensation Committee to evaluate executive compensation.	October of each year for compensation in the following fiscal year.
Advisory Committee meetings.	Advisory Committee typically meets quarterly.
Establish executive officer financial objective(s).	January of each fiscal year for the current year.
Establish executive officer personal objectives.	First quarter of the fiscal year for the current year.

Base Salary

Base salaries for each Named Executive Officer position are compared with similar jobs in national market surveys. A base salary change for a Named Executive Officer position, except the Chief Executive Officer, is recommended by the Chief Executive Officer and approved by the Compensation Committee according to:

• market movement of salaries survey data;

• comparison to internal peer positions;

• the Company’s relative performance during the year; and

• overall performance against objectives.

A base salary for a position at the executive level is generally fixed for several years, except for annual merit increases, which means that increases are usually more significant when they occur. This less frequent change of base salary is also consistent with the emphasis on the at-risk, or variable, portion of compensation, namely annual cash incentive and stock options. While the survey market data provides guidance in making decisions on executive compensation, the Committee considers the value of an executive officer’s position to the Company and the market competitiveness for the position’s requisite skills. If business or individual performance is below average, it is possible that no base salary increase will be awarded.

There are occasions when a base salary can be reduced such as when a Named Executive Officer moves to a position of lesser responsibility in the organization. Alternatively, the base salary can be frozen for a number of years until it falls in line with comparable positions. This depends on individual situations.

Base salary of the Chief Executive Officer is reviewed and recommended by the Committee.

2006 Annual Incentive

In 2006, annual incentives were not awarded.

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Total Cash Compensation

Cash compensation is comprised of base salary and annual cash incentive. Generally, the more senior position in management, the smaller the base salary as a percentage of total compensation. Therefore, the greater the job impact has on Company results, the larger the variable portion of compensation is as a percentage of total compensation.

Equity Options

Stock options are a vital piece of the Company’s total compensation package and are designed to give high value employees and executive officers a long-term stake in the Company. In addition, stock options act as a long-term retention tool and align employee and shareholder interests.

The Advisory Committee is responsible for option grants under the Company’s equity option and incentive plans. Awards for the Named Executive Officers are granted by the Advisory Committee. The Advisory Committee makes grants of equity options primarily to reward prior performance but also to retain Named Executive Officers and provide incentives for future exceptional performance. The size of the equity option grant increases with the level of position, and for the Chief Executive Officer is typically the largest element of the total compensation package. In determining the amount, if any, of equity options granted to executive officers, the Advisory Committee considers numerous factors including:

• the Company’s financial and operating performance during the relevant period;

• achievement of non-financial goals;

• the executive officer’s contribution to the Company’s success;

• the level of competition for executives with comparable skills and experience;

• a review of compensation for comparable positions with the comparator groups;

• the total number of equity options granted to an executive over the course of his or her career, together with the retentive effect of additional stock option grants; and

• a review of the internal equity of peer position career grants.

In 2006, the Company granted 628.4 options and 11.5 options were exercised. Upon their employment with the Company on December 4, 2006, Warren D. Knowlton and Mark S. Burgess received options to purchase 443.6 and 184.8 limited partnership interests in Holdings, respectively.

Benefits

Retirement Benefits

In line with the Company’s aim to provide careers and to promote retention, a 401(k) is provided for all US employees, including Named Executive Officers. The Company considers that both compensation and longer-term benefit plans are important elements of the compensation package. The 401(k) plan provides a non-elective cash contribution of 3% of total compensation (base salary plus incentive compensation) and a 50% company match up to 6% of total compensation.

The Company froze all its salaried defined benefit pension plans, effective December 31, 2006, and implemented the non-elective 401(k) benefit described above.

Deferred Compensation

Pursuant to Mr. Knowlton’s agreement, Mr. Knowlton will be eligible for a nonqualified pension benefit of $640,000 for each of the 10 years following his separation of employment. Mr. Knowlton will vest in this benefit upon the earliest of (i) the fourth anniversary of Mr. Knowlton’s commencement of employment, (ii) the date on which Mr. Knowlton’s employment is terminated by the Company without cause or by Mr. Knowlton for good reason, or (iii) a change of control of the Company while Mr. Knowlton remains employed by the Company.

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Employment Agreements

The Company enters into employment agreements with the Named Executive Officers. Employment agreements are reviewed by the Compensation Committee and approved by the Advisory Committee.

Other Benefits

The Company provides benefit plans, such as medical coverage and life and disability insurance. Named Executive Officers are eligible for the same benefit plans provided to other employees, including medical coverage and life and disability insurance, as well as supplemental plans chosen and paid for by employees who wish additional coverage. There are no special insurance plans for Named Executive Officers. The Company also provides perquisites to executive officers, such as relocation assistance and an executive automobile allowance.

Severance and change of control benefits

Named Executive Officers may receive payments under severance and change of control provisions of their employment agreements with the Company which are designed to offer incentives and retain executive officers during any potential or rumored changes in the Company, including changes in management, ownership, structure and other material changes that could potentially affect the Company. Each employment agreement contains a non-competition and non-solicitation provision upon termination or change of control, if applicable. The Company’s change of control and severance benefits are designed to be competitive with similarly situated companies and executives.

The following table sets forth all compensation awarded to, earned by or paid to the Chief Executive Officer, the Chief Financial Officer, the three other most highly compensated executive officers of the Company and the former Chief Executive Officer and Chief Financial Officer (the “Named Executive Officers”) for the year ended December 31, 2006.

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Summary Compensation Table

Name and Principal Position	Year	Salary ($)		Bonus ($)		Option Awards ($)	Non-Equity Incentive Plan Compensation ($)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)(1)	Total ($)
Warren D. Knowlton	2006	43,270	(2)	0		18,515	0		0	24,000	85,785
Chief Executive Officer
Roger M. Prevot	2006	485,897		0		0	0		12,943	20,615	519,455
President and Chief Operating Officer
Mark S. Burgess	2006	25,962	(2)	75,000	(3)	16,392	0		0	13,000	130,354
Chief Financial Officer
Ashok Sudan	2006	327,463		0		0	0		33,813	16,189	377,465
Executive Vice President and General Manager, Global Food and Beverage
Paul J. Young	2006	231,352		0		0	86,558	(4)	9,694	19,603	347,207
Vice President and General Manager, Food and Beverage PET
Philip R. Yates (5)	2006	727,968		0		0	0		34,164	135,240	897,372
Chief Executive Officer
John E. Hamilton (6)	2006	344,267		0		0	0		13,001	102,222	459,490
Chief Financial Officer

(1) Represents contributions to the Company’s 401(k) plan, amounts attributable to group term life insurance, payment of relocation costs, personal use of a company vehicle, legal fees for employment agreements, legal fees for separation agreements, career transition services, severance payments and patent awards. Legal fees for employment agreements for Warren D. Knowlton and Mark S. Burgess were $24,000 and $13,000, respectively. Relocation costs reimbursed to Paul J. Young were $12,675. Legal fees related to separation agreements for Philip R. Yates and John E. Hamilton were $10,000 for each. Career transition services for Philip R. Yates and John E. Hamilton were $45,000 for each. Severance payments to Philip R. Yates and John E. Hamilton were $64,894 and $29,445, respectively. Costs for personal use of a company vehicle for Roger M. Prevot were $12,440.

(2) Represents salaries from December 4, 2006, the beginning date of employment with the Company, through December 31, 2006.

(3) Represents a signing bonus awarded under his employment agreement.

(4) Represents a bonus earned and paid in 2006 under a special O-I Plastic integration incentive plan.

(5) Philip R. Yates served as the Company’s Chief Executive Officer until December 3, 2006.

(6) John E. Hamilton served as the Company’s Chief Financial Officer until December 3, 2006.

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2006 Grants of Plan-Based Awards

		Estimated Future Payouts Under Non-Equity Incentive Plan Awards				Estimated Future Payouts Under Equity Incentive Plan Awards
Name	Grant Date	Threshold ($)	Target ($)	Maximum ($)		Threshold (#)	Target (#)		Maximum (#)	Exercise or Base Price of Option Awards ($/Sh)	Grant Date Fair Value of Stock and Option Awards ($)
Warren D. Knowlton	12/4/06			1,350,000	(1)		295.7	(2)		38,684	1,206,767
							147.9	(3)		25,789	1,139,896
Roger M. Prevot
Mark S. Burgess	12/4/06			675,000	(1)		110.9	(4)		25,789	854,729
							73.9	(5)		25,789	569,563
Ashok Sudan
Paul J. Young
Philip R. Yates
John E. Hamilton

(1) Mr. Knowlton and Mr. Burgess are eligible for a maximum annual bonus of 180% and 150% of base salary, respectively.

(2) Upon his employment with the Company, Mr. Knowlton received an option to purchase 295.7 limited partnership interests in Holdings with an exercise price of $38,684 per unit.

(3) Upon his employment with the Company, Mr. Knowlton received an option to purchase 147.9 limited partnership interests in Holdings with an exercise price of $25,789 per unit. The option is exercisable upon (A) the Blackstone Investors’ sale of their interest in the Company and (B) the attainment of certain financial performance goals.

(4) Upon his employment with the Company, Mr. Burgess received an option to purchase 110.9 limited partnership interests in Holdings with an exercise price of $25,789 per unit.

(5) Upon his employment with the Company, Mr. Burgess received an option to purchase 73.9 limited partnership interests in Holdings with an exercise price of $25,789 per unit. The option is exercisable upon (A) the Blackstone Investors’ sale of their interest in the Company and (B) the attainment of certain financial performance goals.

Employment Agreements

The Company entered into employment agreements on March 28, 2007, effective December 4, 2006, with Mr. Knowlton and Mr. Burgess. Mr. Knowlton’s agreement provides for his employment as Chief Executive Officer of the Company through December 4, 2010. Mr. Burgess’ agreement provides for his employment as Chief Financial Officer of the Company through December 4, 2009. Each of their terms of employment automatically extend for additional successive one-year periods, unless either party to their agreements elects to terminate the agreement at least 90 days prior to the end of any of these employment periods.

Under their agreements, Mr. Knowlton will receive an annual base salary of at least $750,000 and Mr. Burgess will receive an annual base salary of at least $450,000. Each executive will be eligible to receive annual cash incentive awards in accordance with the Company’s cash bonus plans. Pursuant to his agreement, Mr. Burgess received a one-time cash bonus of $75,000 in December 2006. Upon joining the Company, Mr. Knowlton became eligible to receive a deferred signing bonus of $3,000,000 contingent upon his continued employment and payable in four equal quarterly installments of $750,000 on the three, six, nine and twelve month anniversaries of his hire date. Upon starting employment, Mr. Knowlton and Mr. Burgess each received options to purchase limited partnership interests in Holdings. Specifically, Mr. Knowlton received (i) an option to purchase 295.7 limited partnership interests in Holdings that vests over a four year period based upon Mr. Knowlton’s continued employment and (ii) an option to purchase 147.9 limited partnership interests in Holdings that vests upon (A) the Blackstone Investors’ sale of their entire equity interest in the Company and (B) the attainment of certain financial performance goals established by the Company. Mr. Burgess received (i) an option to purchase 110.9 limited partnership interests in Holdings that vests over a four year period based upon Mr. Burgess’ continued employment and the attainment of

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certain performance goals established by the Company and (ii) an option to purchase 73.9 limited partnership interests in Holdings that vests upon (A) the Blackstone Investors’ sale of their entire equity interest in the Company and (B) the attainment of certain financial performance goals established by the Company. The vesting on a portion of Mr. Knowlton’s and Mr. Burgess’ options shall accelerate upon (i) a change of control or (ii) a termination of the executive’s employment by the Company without cause or by the executive for good reason, in contemplation of a change of control. Both executives may also receive future equity grants under the Company’s equity incentive program consistent with other senior executives and competitive pay practices generally.

Pursuant to Mr. Knowlton’s agreement, Mr. Knowlton will be eligible for a nonqualified pension benefit of $640,000 for each of the 10 years following his separation of employment. Mr. Knowlton will vest in this benefit upon the earliest of (i) the fourth anniversary of Mr. Knowlton’s commencement of employment, (ii) the date on which Mr. Knowlton’s employment is terminated by the Company without cause or by Mr. Knowlton for good reason, or (iii) a change of control of the Company while Mr. Knowlton remains employed by the Company. Mr. Knowlton is also eligible to receive a transaction bonus in connection with the Blackstone Investors’ sale of their entire equity interest in the Company. Except upon Mr. Knowlton’s termination of employment by the Company without cause or his termination for good reason, any transaction bonus shall be payable upon the one year anniversary of his termination of employment.

The agreements of Mr. Knowlton and Mr. Burgess also provide for their participation in all employee compensation plans and welfare benefit plans generally available to the Company’s other senior executives. Each executive will receive reimbursement of all reasonable business expenses, fringe benefits, office and support staff and vacation benefits in accordance with the Company’s plans, policies and practices and in a manner comparable to other senior executives. During his employment, Mr. Knowlton will be entitled on an after-tax basis of (i) up to fifty round flights from the Company’s headquarters to Maine and (ii) accommodation and automobile benefits. Mr. Burgess will receive relocation benefits on an after-tax basis in an amount not to exceed $100,000 plus six months of temporary living expenses not to exceed a total of $50,000. The foregoing descriptions of Mr. Knowlton’s and Mr. Burgess’ employment agreements do not purport to be complete and are qualified in their entirety by the terms of their employment agreements, copies of which are filed as Exhibits 10.14 and 10.15 to this Annual Report on Form 10-K and are incorporated herein by reference.

On June 27, 2002, the Company entered into employment agreements with Messrs. Yates, Prevot, Hamilton and Sudan, and on January 1, 2005, with Mr. Young. The term of each agreement is for one year but automatically extends for an additional year unless either party gives 90 days written notice prior to the end of the term. Mr. Prevot’s and Mr. Sudan’s contracts were automatically extended for another year on June 27, 2006 and Mr. Young’s contract was automatically extended for another year on January 1, 2007. Mr. Yates and Mr. Hamilton entered into separation agreements with the Company on December 3, 2006. Under each employment agreement, the executive is entitled to a base salary and an annual bonus based on the achievement of performance criteria established by the Advisory Committee.

Outstanding Equity Awards at 2006 Fiscal Year End

On February 2, 1998, the Company adopted the Graham Packaging Holdings Company Management Option Plan (the “1998 Option Plan”). On November 17, 2004, the Company adopted a second option plan entitled 2004 Graham Packaging Holdings Company Management Option Plan (the “2004 Option Plan” and, together with the 1998 Option Plan, the “Option Plans”).

Under the 1998 Option Plan, in general, 50% of the options vest and become exercisable in 20% increments annually over five years, so long as the holder of the option is still an employee on the vesting date, and 50% of the options vest and become exercisable in 20% increments annually over five years, so long as the Company achieves specified earnings targets for each year, although these options do become exercisable in full without regard to the Company’s achievement of these targets on the ninth anniversary of the date of grant, so long as the holder of the option is still an employee on that date.

Under the 2004 Option Plan, in general, 100% of the options vest and become exercisable in 25% increments annually over four years, so long as the holder of the option is still an employee on the vesting date. For vesting details of the options granted to Mr. Knowlton and Mr. Burgess under the 2004 Option Plan, refer to the footnotes to the table below.

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The Option Plans provide for the grant to management employees of Holdings and its subsidiaries and non-employee members of the Advisory Committee, advisors, consultants and other individuals providing services to Holdings of options to purchase limited partnership interests in Holdings equal to 0.0075% of Holdings (prior to any dilution resulting from any interests granted pursuant to the Option Plans) (each 0.0075% interest being referred to as a “Unit”). The aggregate number of Units with respect to which options may be granted under the 1998 Option Plan shall not exceed 631.0 Units and the aggregate number of Units with respect to which options may be granted under the 2004 Option Plan shall not exceed 1,278.4 Units, representing a total of up to 12.5% of the equity of Holdings. A committee has been appointed to administer the Option Plans, including, without limitation, the determination of the individuals to whom grants will be made, the number of Units subject to each grant and the various terms of such grants.

The exercise price per Unit shall be at or above the fair market value of a Unit on the date of grant. The Company utilizes an independent appraisal firm to determine the fair market value of a Unit. The number and type of Units covered by outstanding options and exercise prices may be adjusted to reflect certain events such as recapitalizations, mergers or reorganizations of or by Holdings. The Option Plans are intended to advance the best interests of the Company by allowing such employees to acquire an ownership interest in the Company, thereby motivating them to contribute to the success of the Company and to remain in the employ of the Company.

A summary of the outstanding equity awards for each Named Executive Officer as of December 31, 2006 is as follows:

	Option Awards (1)
Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)	Option Expiration Date
Warren D. Knowlton	—	295.7(2)		38,684	12/3/2016
		147.9(3)		25,789	12/3/2016
Mark S. Burgess	—	110.9(4)		25,789	12/3/2016
		73.9(3)		25,789	12/3/2016
Roger M. Prevot	39.1	4.3(5)		25,789	2/1/2008
	7.4	1.9(6)		25,789	12/31/2008
	11.2	2.8(7)		25,789	3/31/2011
	34.0	34.0(8)		51,579	11/16/2014
Ashok Sudan	11.5	1.3(5)		25,789	2/1/2008
	3.6	1.6(9)		25,789	3/31/2012
	4.0	6.0(10)		29,606	3/30/2013
	14.5	14.5(8)		51,579	11/16/2014
Paul J. Young	7.3	7.2(8)		51,579	11/16/2014
Philip R. Yates(11)	57.4	6.4(5)		25,789	1/5/2007
	10.9	2.7(6)		25,789	1/5/2007
	67.9	67.8(8)		51,579	1/5/2007
John E. Hamilton(12)	26.8	3.0(5)		25,789	1/5/2007
	15.0	3.7(6)		25,789	1/5/2007
	21.1	21.1(8)		51,579	1/5/2007

(1) All options listed above were granted with a ten-year option term.

(2) Options granted on December 4, 2006, which vest and become exercisable with respect to 20% of the Units on the first anniversary of the grant date, an additional 40% of the Units on the second anniversary of the grant date, an additional 20% of the Units on the third anniversary of the grant date

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and an additional 20% of the Units on the fourth anniversary of the grant date, so long as the holder of the option is still an employee on the vesting date.

(3) Options granted on December 4, 2006, which vest and become exercisable upon (A) the Blackstone Investors’ sale of their interest in the Company and (B) the attainment of certain financial performance goals.

(4) Options granted on December 4, 2006. 50% of the options vest and become exercisable in 25% increments annually, on the anniversaries of the grant date, over four years so long as the holder of the option is still an employee on the vesting date. 50% of the options vest and become exercisable in 25% increments annually, on the anniversaries of the grant date, over four years so long as the Company achieves specified earnings targets each year and so long as the holder of the option is still an employee on the vesting date.

(5) Options granted on February 2, 1998 under the 1998 Option Plan.

(6) Options granted on January 1, 1999 under the 1998 Option Plan.

(7) Options granted on April 1, 2001 under the 1998 Option Plan.

(8) Options granted on November 17, 2004 under the 2004 Option Plan.

(9) Options granted on April 1, 2002 under the 1998 Option Plan.

(10) Options granted on March 31, 2003 under the 1998 Option Plan.

(11) Mr. Yates was the Company’s Chief Executive Officer until December 3, 2006, the date of his separation from the Company. Pursuant to the separation agreement for Mr. Yates, the options listed above were repurchased by the Company on January 5, 2007.

(12) Mr. Hamilton was the Company’s Chief Financial Officer until December 3, 2006, the date of his separation from the Company. Pursuant to the separation agreement for Mr. Hamilton, the options listed above were repurchased by the Company on January 5, 2007.

Pension Plans

In the year ended December 31, 2006, the Company participated in a noncontributory, defined benefit pension plan for salaried and hourly employees other than employees covered by collectively bargained plans. The Company also sponsored other noncontributory defined benefit plans under collective bargaining agreements. These plans covered substantially all of the Company’s U.S. employees. The defined benefit plan for salaried employees provides retirement benefits based on the final five years average compensation and years of service, while plans covering hourly employees provide benefits based on years of service. This plan was frozen as of December 31, 2006. As a result, the maximum years of service a participant can earn for benefit accrual is 18 years under the current Graham Packaging Plan benefit formula. See Note 14 of the Notes to Consolidated Financial Statements for information regarding the pension plans for each of the three years in the period ended December 31, 2006.

The compensation covered by the defined benefit plan for salaried employees is an amount equal to “Total Wages” (as defined therein). This amount includes the annual Salary and Bonus amounts shown in the Summary Compensation Table for the five Named Executive Officers who participated in the plan. Warren D. Knowlton and Mark S. Burgess accrued no years of service at the time the plan was frozen. Benefits under the plan are computed on the basis of straight-life annuity amounts.

2006 Pension Benefits

The table below shows the present value of accumulated benefits payable to each of the Named Executive Officers, including the number of years of service credited to each such Named Executive Officer under each of the Pension Plan and the Supplemental Income Plan determined using interest rate and mortality rate assumptions consistent with those used in the Company’s financial statements. Information regarding the Pension Plan and the Supplemental Income Plan can be found under the headings “Pension Plans” and “Supplemental Income Plan,” below.

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Name	Plan Name	Number of Years Credited Service (#)	Present Value of Accumulated Benefit ($)
Warren D. Knowlton	Pension Plan	0	0
Roger M. Prevot	Pension Plan	18	185,585
Mark S. Burgess	Pension Plan	0	0
Ashok Sudan	Pension Plan	18	268,676
Paul J. Young	Pension Plan	2	19,107
Philip R. Yates	Pension Plan	34	406,324
	Supplemental Income Plan	N/A	1,784,955
John E. Hamilton	Pension Plan	22	190,503

Supplemental Income Plan

Mr. Yates is the sole participant in the Graham Engineering Corporation Amended Supplemental Income Plan (the “SIP”). As part of the 1998 recapitalization, the Operating Company assumed Graham Engineering’s obligations under the SIP. The SIP provides that upon attaining age 65, Mr. Yates shall receive a fifteen-year annuity providing annual payments equal to 25% of his Final Salary (as defined therein). The SIP also provides that the annuity payments shall be increased annually by a 4% cost of living adjustment. The SIP permits Mr. Yates to begin to receive benefits upon attaining age 65. For purposes of determining the benefits he will receive under the SIP, his Final Salary is as of his date of separation from the Company.

2006 Nonqualified Deferred Compensation

Name	Registrant Contributions in Last FY ($)	Aggregate Balance at Last FYE ($)
Warren D. Knowlton (1)	3,000,000	3,000,000
(2)	5,138,787	5,138,787
Roger M. Prevot
Mark S. Burgess
Ashok Sudan
Paul J. Young
Philip R. Yates
John E. Hamilton

(1) Represents a deferred signing bonus payable quarterly in 2007 pursuant to the terms of Mr. Knowlton’s

employment agreement.

(2) Represents the present value of contingent annual pension payments of $640,000 per annum for ten (10) years payable upon the occurrence of certain defined events payable pursuant to the terms of Mr. Knowlton’s employment agreement.

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Potential Payments Upon Termination or Change of Control

Termination

If the Company terminates Mr. Knowlton’s employment without cause or Mr. Knowlton terminates his employment for good reason, Mr. Knowlton shall be entitled to receive (1) any unpaid base salary, accrued vacation, unpaid bonus for the year prior to his termination of employment, unpaid signing bonus and outstanding business expenses, (2) any earned transaction bonus, (3) a pro rata bonus for the year of his termination, and (4) the nonqualified pension payments under his agreement. If the Company terminates Mr. Burgess’ employment without cause or Mr. Burgess terminates his employment for good reason and Mr. Burgess executes a general release of claims, Mr. Burgess shall be entitled to receive (1) a severance payment equal to two times (A) his annual base salary and (B) his average annual bonus paid in the three most recent fiscal years, (2) a pro rata bonus for the year of his termination, (3) continued health and dental benefits for a period of 12 months, (4) outplacement services for 12 months not to exceed $25,000, and (5) full vesting of certain time vested options to purchase limited partnership interests in Holdings.

In the event that Messrs. Prevot, Sudan or Young is terminated by the Company without cause (as defined in each agreement) (including the Company’s election not to renew the term so that the term ends prior to the fifth anniversary of the agreement) or the executive resigns with good reason (as defined in the agreement), the executive will be entitled to (1) full vesting of all equity awards granted to the executive, (2) a pro rata bonus for the year of termination, (3) monthly payments for a period of 24 months of the executive’s base salary and average annual bonus for the preceding three years, (4) continued health and dental benefits for a period of 24 months and (5) outplacement services for a period of 12 months. If the Company elects not to extend the term so that the term ends following the fifth anniversary of the agreement, upon the executive’s termination of employment, the executive will be entitled to the same benefits described above except that the executive will only be entitled to continued monthly payments and health and dental benefits for a period of 12 months, rather than 24 months. During the term and for a period of 18 months following the term (12 months if the executive’s employment is terminated due to the Company’s election not to renew the term so that the term ends following the fifth anniversary of the agreement which was extended to October 2009), each executive is subject to a covenant not to compete with the Company or solicit the Company’s clients or employees. Each executive has also agreed not to reveal the Company’s confidential information during the term of employment or thereafter and to assign to the Company any inventions created by the executive while employed by the Company. With respect to the employment agreement of Mr. Prevot, if any payments by the Company to the executive would result in an excise tax under Section 280G of the Internal Revenue Code, the executive will be entitled to an additional payment so that the executive will receive an amount equal to the payments the executive would be entitled to receive without the imposition of the excise tax.

Change of Control

Upon a change of control, Mr. Knowlton will receive any unpaid deferred signing bonus and the non-qualified deferred pension benefit. In addition, certain of the vesting on a portion of the options granted to Mr. Knowlton and Mr. Burgess will accelerate upon a change of control. In the event that Mr. Knowlton or Mr. Burgess is subject to a tax under Section 4999 of the Internal Revenue Code as a result of a change of control as defined in Section 280G of the Internal Revenue Code, then the executive will receive a gross-up payment so that he will receive a payment equal to the payment that he would have been entitled to receive without the imposition of the excise tax and any additional taxes on the additional payment.

Upon a change of control of the Named Executive Officers other than Mr. Knowlton and Mr. Burgess, if (A) there is a material reduction in the Named Executive Officer’s target annual bonus after a change of control (as defined in each of their respective employment agreements), as compared to the preceding year, and (B) the cure period (as defined in each of their respective employment agreements) expires, the Named Executive Officer will be eligible to receive the same benefits as those provided for under termination for good reason.

The table below summarizes the potential payments upon termination or change of control as of December 31, 2006.

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	Good Reason or Without Cause		Potential Change of Control
Warren D Knowlton (1)(2)	$	8,138,787	$	11,516,353
Roger M. Prevot		1,562,343		1,562,343
Mark S. Burgess (1)		2,283,500		2,283,500
Ashok Sudan		1,014,918		1,014,918
Paul J. Young		577,142		577,142

(1) The potential change of control payment to each of Mr. Knowlton and Mr. Burgess assumes that each executive is also terminated in connection with the change of control. Each executive is subject to two years of post-termination employment restrictions. For purposes of the calculation of the excess parachute amount under section 280G of the Internal Revenue Code, the value of the post-termination employment restrictions for Mr. Knowlton and Mr. Burgess is deemed to equal the executive’s base salary for two years.

(2) Mr. Knowlton’s potential change of control payment includes a gross-up payment of $3,377,566 that makes Mr. Knowlton whole for the excise tax under Section 4999 of the Internal Revenue Code.

On December 3, 2006, Philip R. Yates, the Company’s Chief Executive Officer, ceased to be Chief Executive Officer and an employee of the Company, effective December 4, 2006. In connection therewith, on December 3, 2006, the Company and Mr. Yates entered into a separation agreement (the “Yates Agreement”). The Yates Agreement provides, among other things, that (i) Mr. Yates will receive severance payments in an amount totaling $3,615,500 (payable in 156 weekly installments) and be eligible for a pro rata 2006 bonus, (ii) the Company or its affiliates will repurchase Mr. Yates’ equity in the Company and its affiliates, (iii) Mr. Yates will continue to receive health and dental benefits until the earlier of (a) the expiration of the twenty-four month period commencing on the last day that Mr. Yates serves as a member of the Advisory Committee, or (b) the date or dates that Mr. Yates becomes eligible for comparable benefits under plans and programs of a subsequent employer, as applicable, (iv) Mr. Yates will receive under the SIP the entire annuity upon attaining age 65, and (v) Mr. Yates will receive other specified benefits and be subject to specified restrictions, including a non-competition covenant.

On December 3, 2006, John E. Hamilton, the Company’s Chief Financial Officer, ceased to be Chief Financial Officer and an employee of the Company, effective December 4, 2006. In connection therewith, on December 3, 2006, the Company and Mr. Hamilton entered into a separation agreement (the “Hamilton Agreement”). The Hamilton Agreement provides, among other things, that (i) Mr. Hamilton will receive severance payments in an amount totaling $1,640,500 (payable in 156 weekly installments) and be eligible for a pro rata 2006 bonus, (ii) the Company or its affiliates will repurchase Mr. Hamilton’s equity in the Company and its affiliates, (iii) Mr. Hamilton will continue to receive health and dental benefits for a twenty-four month period commencing the last day that Mr. Hamilton serves as a consultant to the Company (see description below) and (iv) Mr. Hamilton will receive other specified benefits and be subject to specified restrictions, including a non-competition covenant. In addition, Mr. Hamilton will facilitate as a consultant in the transitioning and integration of the new Chief Financial Officer, receiving a monthly consulting fee of $45,567 as compensation for a period of up to six months.

2006 Advisory Committee Compensation

The table below summarizes the compensation paid by the Company to non-employee members of the Advisory Committee for the year ended December 31, 2006. The Advisory Committee serves solely in an advisory role to the partnership and general partners of the Company and it does not have the power to act for or bind the Company. For a description of the Advisory Committee, see “The Partnership Agreements – The Holdings Partnership Agreement.”

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Name: (1) (2)	Fees Earned or Paid in Cash ($)	All Other Compensation ($)		Total ($)
T. J. Dermot Dunphy	128,079	0		128,079
Charles E. Kiernan	77,000	0		77,000
Gary G. Michael	77,000	0		77,000
Colin J. Williams	86,796	144,601	(3)	231,397

(1) Philip R. Yates, the Company’s Chairman of the Advisory Committee, is not included in this table as he was an employee of the Company and thus received no compensation for his services as a member of the Advisory Committee. The compensation received by Mr. Yates as an employee of the Company is shown in the Summary Compensation Table.

(2) Chinh E. Chu and James A. Quella are not included in this table as they are employees of Blackstone and thus receive no compensation for their services as members of the Advisory Committee.

(3) Represents consulting fees of €25,000 per month paid from August 17, 2006 through December 31, 2006 pursuant to an Addendum to Advisory Agreement between the Company and Mr. Williams.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table and accompanying footnotes set forth as of December 31, 2006 information with respect to the beneficial ownership of the partnership units of the Company by (i) each person who is known by the Company to own beneficially more than 5% of such interests, (ii) each member of the Advisory Committee, (iii) each of the Named Executive Officers and (iv) all members of the Advisory Committee and the executive officers of the Operating Company, as a group. For a more detailed discussion of certain ownership interests, see “Certain Relationships and Related Transactions” (Part III, Item 13).

Name and Address of Beneficial Owner*	Number of Partnership Units of Beneficial Ownership	Percentage of Outstanding Company Partnership Units Beneficially Owned
Members of the Advisory Committee:
Chinh Chu (1)	—	—
James A. Quella (1)	—	—
Charles E. Kiernan (2)	15	**
Gary G. Michael (3)	15	**
T. J. Dermot Dunphy	—	—
Colin J. Williams	—	—
Named Executive Officers:
Warren D. Knowlton (4)	—	—
Roger M. Prevot (5)	150	1.1%
Mark S. Burgess (6)	—	—
Ashok Sudan (7)	40	**
Paul J. Young (8)	7	**
Philip R. Yates (9)	252	1.9%
John E. Hamilton (10)	84	**
All Advisory Committee members and executive officers as a group (14 persons)	576	4.2%
5% Beneficial Owners:
Blackstone Investors (1)	10,518	78.6%
Graham Family Investors (11)	2,007	15.0%

_____________

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* Except as noted below, all beneficial owners are members of the Advisory Committee and/or officers of the Operating Company and can be reached c/o Graham Packaging Holdings Company, 2401 Pleasant Valley Road, York, Pennsylvania 17402.

** Less than 1%.

(1) The Blackstone Investors beneficially own 10,518 partnership units through its direct or indirect ownership in Investor GP and Investor LP. Investor GP is a wholly owned subsidiary of Investor LP. Investor LP directly owns 10,836 partnership units of the Company representing an 81% limited partnership interest in the Company. Investor GP directly owns 535 partnership units of the Company representing a 4% general partnership interest in the Company. The Blackstone Investors, collectively, beneficially own approximately 92.5% of the outstanding common stock of Investor LP. Blackstone Management Associates III L.L.C. (“BMA”) is the general partner of each of such entities. Messrs. Peter G. Peterson, Stephen A. Schwarzman, Chinh Chu and James A. Quella are members of BMA, which has investment and voting control over the shares of Investor LP held or controlled by Blackstone. Each of such persons disclaims beneficial ownership of such shares and of the partnership units of the Company held by Investor GP and Investor LP. Chinh Chu and James A. Quella are members of the Advisory Committee. Mr. Chu and Mr. Quella are Senior Managing Directors of The Blackstone Group L.P. The address of each of the preceding investors is c/o The Blackstone Group L.P., 345 Park Avenue, New York, New York 10154. Management owns approximately 2.7% of the outstanding common stock of Investor LP. In addition, DB Investment Partners, Inc. owns approximately 4.8% of the outstanding common stock of Investor LP.

(2) Charles E. Kiernan is a member of the Advisory Committee. Of the partnership units shown as beneficially owned, all 15 represent presently exercisable rights to acquire partnership units of the Company through options.

(3) Gary G. Michael is a member of the Advisory Committee. Of the partnership units shown as beneficially owned, all 15 represent presently exercisable rights to acquire partnership units of the Company through options.

(4) Warren D. Knowlton became the Chief Executive Officer of the Operating Company on December 4, 2006, and as of December 31, 2006 has no partnership units or exercisable rights to acquire partnership units of the Company through options.

(5) Roger M. Prevot is President and Chief Operating Officer of the Operating Company. Of the partnership units shown as beneficially owned, (a) 58 are owned indirectly by Mr. Prevot through his ownership of common stock in Investor LP and (b) 92 represent presently exercisable rights to acquire partnership units of the Company through options.

(6) Mark S. Burgess became the Chief Financial Officer of the Operating Company on December 4, 2006, and as of December 31, 2006 has no partnership units or exercisable rights to acquire partnership units of the Company through options.

(7) Ashok Sudan is Executive Vice President of the Operating Company. Of the partnership units shown as beneficially owned, (a) 6 are owned indirectly by Mr. Sudan through his ownership of common stock in Investor LP and (b) 34 represent presently exercisable rights to acquire partnership units of the Company through options.

(8) Paul J. Young is Vice President and General Manager, Food and Beverage PET of the Operating Company. Of the partnership units shown as beneficially owned, all 7 represent presently exercisable rights to acquire partnership units of the Company through options.

(9) Philip R. Yates is Chairman of the Advisory Committee. Of the partnership units shown as beneficially owned as of December 31, 2006, (a) 116 were owned indirectly by Mr. Yates through his ownership of common stock in Investor LP and (b) 136 represented exercisable rights to acquire partnership units of the Company through options. Pursuant to his separation agreement, dated as of December 3, 2006, the Company repurchased all partnership units on January 5, 2007.

(10) John E. Hamilton served as Chief Financial Officer of the Operating Company until December 3, 2006. Of the partnership units shown as beneficially owned as of December 31, 2006, (a) 21 were owned indirectly by Mr. Hamilton through his ownership of common stock in Investor LP and (b) 63 represented exercisable rights to acquire partnership units of the Company through options. Pursuant to his separation agreement, dated as of December 3, 2006, the Company repurchased all partnership units on January 5, 2007.

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(11) GPC Holdings, L.P. and Graham Packaging Corporation are wholly owned, directly or indirectly, by the Graham Family Investors. The address of both is c/o Graham Capital Company, P.O. Box 1104, York, Pennsylvania 17405-1104. GPC Holdings, L.P., a Pennsylvania limited partnership, directly owns 1,873 partnership units of the Company representing a 14% limited partnership interest in the Company. Graham Packaging Corporation, a Pennsylvania corporation, directly owns 134 partnership units of the Company representing a 1% general partnership interest in the Company.

The following table sets forth equity compensation plan information at December 31, 2006.

EQUITY COMPENSATION PLAN INFORMATION

	(a)	(b)	(c)
Plan category	Number of securities to be issued upon exercise of outstanding options	Weighted-average exercise price of outstanding options	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders	1,778.4	$36,150	131.0
Equity compensation plans not approved by security holders	N/A	N/A	N/A
Total	1,778.4	$36,150	131.0

Item 13. Certain Relationships and Related Transactions

The summaries of agreements set forth below do not purport to be complete and are qualified in their entirety by reference to all the provisions of such agreements. The Consulting Agreement, the Equipment Sales, Services and License Agreement and the Partners Registration Rights Agreement are incorporated by reference as exhibits to this Annual Report on Form 10-K.

Transactions with the Graham Entities and Others

Holdings and Graham Engineering entered into the Equipment Sales, Services and License Agreement (“Equipment Sales Agreement”) in 1998, which provides that, with certain exceptions, (i) Graham Engineering will sell to Holdings and its affiliates certain of Graham Engineering’s larger-sized extrusion blow molding wheel systems (“Graham Wheel Systems”) at a price to be determined on the basis of a percentage mark-up of material, labor and overhead costs that is as favorable to Holdings as the percentage mark-up historically offered by Graham Engineering to Holdings and is as favorable as the mark-up on comparable equipment offered to other parties, (ii) each party will provide consulting services to the other party at hourly rates ranging from $60 to $200 (adjusted annually for inflation) and (iii) Graham Engineering will grant to Holdings a nontransferable, nonexclusive, perpetual, royalty-free right and license to use certain technology. Subject to certain exceptions and conditions, including the condition that Holdings purchase high output extrusion blow molding equipment, described in the Equipment Sales Agreement, Holdings and its affiliates will have the exclusive right to purchase, lease or otherwise acquire the applicable Graham Wheel Systems in North America and South America, the countries comprising the European Economic Community as of February 2, 1998 and any other country in or to which Holdings has produced or shipped extrusion blow molded plastic containers representing sales in excess of $1.0 million in the most recent calendar year. The Equipment Sales Agreement terminates on December 31, 2007, unless mutually extended by the parties. Since December 31, 1998, both parties have had the right to terminate the other party’s right to receive consulting services. Effective January 21, 2000 Holdings terminated Graham Engineering’s rights to receive consulting services from Holdings.

Graham Engineering has supplied equipment to the Company. The Company received equipment and related services of approximately $10.3 million, $13.1 million and $13.6 million for the years ended December 31, 2006, 2005 and 2004, respectively.

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On July 9, 2002, the Company and Graham Engineering executed a First Amendment to the Equipment Sales Agreement to, among other things, (i) permit the Company to purchase certain extrusion blow molding wheel systems from a third party under certain circumstances if Graham Engineering is provided the opportunity to bid on supplying the same equipment; (ii) clarify that the Company’s exclusivity rights under the Equipment Sales Agreement do not apply to certain new generations of Graham Engineering equipment; (iii) in the event of the sale of Graham Engineering to a competitor, provide the Company the option to require the transfer of the existing agreement or obtain a perpetual, royalty-free license to make and use wheel equipment and components; (iv) provide Graham Engineering with the ability to terminate the Equipment Sales Agreement if an arbitrator determines that the Company has purchased certain high output extrusion blow molding equipment from another supplier in breach of the Equipment Sales Agreement; and (v) obligate the Company, retroactive to January 1, 2002, and subject to certain credits and carry-forwards, to make payments for products and services to Graham Engineering in the amount of at least $12.0 million per calendar year, or else pay to Graham Engineering a shortfall payment. The minimum purchase commitment for 2006 has been met.

The Equipment Sales Agreement terminates on December 31, 2007, unless mutually extended by the parties.

Subsequently, on January 13, 2004, the parties executed a Second Amendment to the Equipment Sales Agreement. Such amendment removed restrictions originally placed upon the Company with respect to the Company’s use of Graham Engineering technology to manufacture containers at blow molding plants co-located with dairies or dairy-focused facilities.

The Graham Family Investors have supplied management services to the Company since 1998. The Company received services of approximately $2.0 million, $2.1 million and $1.3 million for the years ended December 31, 2006, 2005 and 2004, respectively, including the annual fee paid pursuant to the Holdings Partnership Agreement and the Monitoring Agreement.

Blackstone Management Partners III L.L.C. has supplied management services to the Company since 1998. The Company received services of approximately $3.1 million, $3.1 million and $1.6 million for the years ended December 31, 2006, 2005 and 2004, respectively, including the annual fee paid pursuant to the Monitoring Agreement.

DB Investment Partners, Inc. owns approximately a 4.8% equity interest in Investor LP. See “Security Ownership of Certain Beneficial Owners and Management” (Item 12).

The Partnership Agreements

The Operating Company Partnership Agreement

The Operating Company was formed under the name “Graham Packaging Holdings I, L.P.” on September 21, 1994 as a limited partnership in accordance with the provisions of the Delaware Revised Uniform Limited Partnership Act. Pursuant to an Agreement and Plan of Recapitalization, Redemption and Purchase, dated as of December 18, 1997 (the “Recapitalization Agreement”), (i) Holdings, (ii) the then owners of the Company (the “Graham Entities”) and (iii) Investor LP agreed to a recapitalization of Holdings (the “Recapitalization”). Upon the closing of the Recapitalization, the name of the Operating Company was changed to “Graham Packaging Company, L.P.” The Operating Company will continue until its dissolution and winding up in accordance with the terms of the Operating Company Partnership Agreement (as defined herein).

Prior to the Recapitalization, Graham Recycling Corporation (“Recycling”) was the sole general partner of the Operating Company and Holdings was the sole limited partner of the Operating Company. As provided in the Recapitalization Agreement, immediately prior to the closing, Recycling contributed to Opco GP its general partnership interest in the Operating Company, and the partnership agreement of the Operating Company was amended and restated to reflect such substitution of sole general partner and certain other amendments (the “Operating Company Partnership Agreement”). Following the closing, Holdings has remained the sole limited partner of the Operating Company.

The purpose of the Operating Company is the manufacture and sale of rigid plastic containers and any business necessary or incidental thereto.

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Management. The Operating Company Partnership Agreement provides that the general partner shall be entitled in its sole discretion and without the approval of the other partners to perform or cause to be performed all management and operational functions relating to the Operating Company and shall have the sole power to bind the Operating Company. The limited partner shall not (a) have the power to sign for or to bind the Operating Company, (b) take any part in the management of the business of, or transact any business for, the Operating Company, or (c) except as required by the Delaware Limited Partner Act or expressly provided by this Operating Company Partnership Agreement, have any right to vote on or consent to any matter.

Exculpation and Indemnification. The Operating Company Partnership Agreement provides that neither the general partner nor any of its affiliates, nor any of its partners, shareholders, officers, directors, employees or agents, shall be liable to the Operating Company or any partner for any breach of the duty of loyalty or any act or omission not in good faith or which involves intentional misconduct or a knowing violation of law or the Operating Company Partnership Agreement. The Operating Company shall indemnify, defend and hold harmless the general partner and its affiliates, and its partners, shareholders, officers, directors, employees and agents, from and against any claim or liability of any nature arising out of the assets or business of the Operating Company.

Affiliate Transactions. The Operating Company may enter into transactions with any partner or any of its affiliates which is not prohibited by applicable law; provided that, any material transaction with any partner or any of its affiliates shall be on terms reasonably determined by the general partner to be comparable to the terms which can be obtained from third parties.

Transfers of Partnership Interests. The Operating Company Partnership Agreement provides that Partnership Interests may not be sold, transferred, assigned, pledged or otherwise disposed of without the consent of the General Partner, except that Partnership Interests may be pledged as collateral and such pledge may be foreclosed upon in the event of a default.

Dissolution. The Operating Company Partnership Agreement provides that the Operating Company shall be dissolved upon the earliest of (i) December 31, 2044, (ii) the sale, exchange or other disposition of all or substantially all of the Operating Company’s assets, (iii) the withdrawal, resignation, filing of a certificate of dissolution or revocation of the charter or bankruptcy of a general partner, or the occurrence of any other event which causes a general partner to cease to be a general partner unless there shall be another general partner, (iv) the withdrawal, resignation, filing of a certificate of dissolution or revocation of the charter or bankruptcy of a limited partner, or the occurrence of any other event which causes a limited partner to cease to be a limited partner unless there shall be another limited partner, (v) the acquisition by a single person of all of the partnership interests in the Operating Company, (vi) the issuance of a decree of dissolution by a court of competent jurisdiction, or (vii) otherwise as required by applicable law.

The Holdings Partnership Agreement

Holdings was formed under the name “Sonoco Graham Company” on April 3, 1989 as a limited partnership in accordance with the provisions of the Pennsylvania Uniform Limited Partnership Act, and on March 28, 1991, Holdings changed its name to “Graham Packaging Company.” Upon the closing of the Recapitalization, the name of Holdings was changed to “Graham Packaging Holdings Company.” Holdings will continue until its dissolution and winding up in accordance with the terms of the Holdings Partnership Agreement (as defined herein).

As contemplated by the Recapitalization Agreement, the Graham Family Investors (as successors and assigns of Graham Capital Corporation and Graham Family Growth Partnership), Graham GP Corp., Investor LP and Investor GP entered into a Fifth Amended and Restated Agreement of Limited Partnership (the “Holdings Partnership Agreement”). The general partners of the partnership are Investor GP and Graham GP Corp. The limited partners of the partnership are GPC Holdings, L.P. and Investor LP.

The purpose of Holdings is the manufacture and sale of rigid plastic containers and any business necessary or incidental thereto.

Management; Advisory Committee. The Holdings Partnership Agreement provides that the general partner elected by the general partner(s) holding a majority of the general partnership interests in Holdings (the “Managing General Partner”) shall be entitled in its sole discretion and without the approval of the other partners to perform or cause to be performed all management and operational functions relating to Holdings and shall have the sole power to bind Holdings, except for certain actions in which the Managing General Partner shall need the approval of the other general partners. The limited partners shall not participate in the management or control of the business.

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The partnership and the general partners shall be advised by a committee (the “Advisory Committee”) comprised of five individuals, each of whom shall be appointed from time to time by Investor GP. Such committee shall serve solely in an advisory role and shall not have any power to act for or bind Holdings.

Annual Fee. The Holdings Partnership Agreement provides that, so long as the Graham Family Investors and their affiliates do not sell more than two-thirds of their partnership interests owned at the time of the Recapitalization, Holdings will pay to Graham Family Growth Partnership an annual fee of $1.0 million. In addition, pursuant to the Monitoring Agreement, the Graham Entities will receive a monitoring fee equal to $1.0 million per annum, and will be reimbursed for certain out-of-pocket expenses.

Exculpation and Indemnification. The Holdings Partnership Agreement provides that no general partner nor any of its affiliates, nor any of its respective partners, shareholders, officers, directors, employees or agents, shall be liable to Holdings or any of the limited partners for any act or omission, except resulting from its own willful misconduct or bad faith, any breach of its duty of loyalty or willful breach of its obligations as a fiduciary or any breach of certain terms of the Holdings Partnership Agreement. Holdings shall indemnify, defend and hold harmless the general partners and their affiliates, and their respective partners, shareholders, officers, directors, employees and agents, from and against any claim or liability of any nature arising out of the assets or business of Holdings.

Affiliate Transactions. Holdings may not enter into any transaction with any partner or any of its affiliates unless the terms thereof are believed by the general partners to be in the best interests of Holdings and are intrinsically fair to Holdings and equally fair to each of the partners; provided that, Holdings may perform and comply with the Recapitalization Agreement, the Equipment Sales Agreement, the Consulting Agreement and the Monitoring Agreement.

Transfers of Partnership Interests. The Holdings Partnership Agreement provides that, subject to certain exceptions including, without limitation, in connection with an IPO Reorganization (as defined herein) and the transfer rights described below, general partners shall not withdraw from Holdings, resign as a general partner, nor transfer their general partnership interests without the consent of all general partners, and limited partners shall not transfer their limited partnership interests.

If any Continuing Graham Partner wishes to sell or otherwise transfer its partnership interests pursuant to a bona fide offer from a third party, Holdings and the Equity Investors must be given a prior opportunity to purchase such interests at the same purchase price set forth in such offer. If Holdings and the Equity Investors do not elect to make such purchase, then such Continuing Graham Partner may sell or transfer such partnership interests to such third party upon the terms set forth in such offer. If the Equity Investors wish to sell or otherwise transfer their partnership interests pursuant to a bona fide offer from a third party, the Graham Family Investors shall have a right to include in such sale or transfer a proportionate percentage of their partnership interests. If the Equity Investors (so long as they hold 51% or more of the partnership interests) wish to sell or otherwise transfer their partnership interests pursuant to a bona fide offer from a third party, the Equity Investors shall have the right to compel the Graham Family Investors to include in such sale or transfer a proportionate percentage of their partnership interests.

Dissolution. The Holdings Partnership Agreement provides that Holdings shall be dissolved upon the earliest of (i) the sale, exchange or other disposition of all or substantially all of Holdings’ assets (including pursuant to an IPO Reorganization), (ii) the withdrawal, resignation, filing of a certificate of dissolution or revocation of the charter or bankruptcy of a general partner, or the occurrence of any other event which causes a general partner to cease to be a general partner unless (a) the remaining general partner elects to continue the business or (b) if there is no remaining general partner, a majority-in-interest of the limited partners elect to continue the partnership, or (iii) such date as the partners shall unanimously elect.

IPO Reorganization. “IPO Reorganization” means the transfer of all or substantially all of Holdings’ assets and liabilities to CapCo II in contemplation of an initial public offering of the shares of common stock of CapCo II. The Holdings Partnership Agreement provides that, without the approval of each general partner, the IPO Reorganization may not be effected through any entity other than CapCo II.

Tax Distributions. The Holdings Partnership Agreement requires certain tax distributions to be made.

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Partners Registration Rights Agreement

Pursuant to the Recapitalization Agreement, Holdings, CapCo II, the predecessors of the Graham Family Investors, the Equity Investors and the Blackstone Investors entered into a registration rights agreement (the “Partners Registration Rights Agreement”). Under the Partners Registration Rights Agreement, CapCo II will grant, with respect to the shares of its common stock to be distributed pursuant to an IPO Reorganization, (i) to the Graham Family Investors and their affiliates (and their permitted transferees of partnership interests in Holdings) two “demand” registrations after an initial public offering of the shares of common stock of CapCo II has been consummated and customary “piggyback” registration rights (except with respect to such initial public offering, unless the Blackstone Investors and their affiliates are selling their shares in such offering) and (ii) to the Equity Investors, the Blackstone Investors and their affiliates an unlimited number of “demand” registrations and customary “piggyback” registration rights. The Partners Registration Rights Agreement also provides that CapCo II will pay certain expenses of the Graham Family Investors, the Equity Investors, the Blackstone Investors and their respective affiliates relating to such registrations and indemnify them against certain liabilities, which may arise under the Securities Act. See “The Partnership Agreements–The Holdings Partnership Agreement.”

Payment of Certain Fees and Expenses

In connection with the acquisition of O-I Plastic and the refinancing transactions, the Blackstone Investors received a fee of approximately $24.3 million, and the Operating Company has reimbursed the Blackstone Investors for all out-of-pocket expenses incurred in connection with these transactions. In addition, pursuant to an amended and restated monitoring agreement (the “Monitoring Agreement”) entered into as of September 30, 2004 among the Blackstone Investors, Graham Family Investors, Holdings and the Operating Company, Blackstone will receive a monitoring fee equal to $3.0 million per annum and the Graham Family Investors will receive a monitoring fee of $1.0 million per annum. Both the Blackstone Investors and the Graham Family Investors will also be reimbursed for reasonable out-of-pocket expenses. In the future, an affiliate or affiliates of the Blackstone Investors may receive customary fees for advisory and other services rendered to Holdings and its subsidiaries. If such services are rendered in the future, the fees will be negotiated from time to time on an arm’s length basis and will be based on the services performed and the prevailing fees then charged by third parties for comparable services.

Loans to Management

At December 31, 2006, the Company had loans outstanding to certain current and former management employees of $3.3 million, including loans to Philip R. Yates of $1.2 million, Roger M. Prevot of $0.6 million, John E. Hamilton of $0.2 million, Ashok Sudan of $0.1 million and other individuals totaling $1.2 million. These loans were made in connection with the capital call payments made on September 29, 2000 and March 29, 2001 pursuant to the capital call agreement dated as of August 13, 1998. The proceeds from the loans were used to buy stock in BMP/Graham Holdings Corp. to avoid any management ownership dilution at the time of the capital call payments. The loans mature on September 29, 2007 and March 29, 2008, respectively, and accrue interest at a rate of 6.22%. The loans are secured by a pledge of the stock purchased by the loans and by a security interest in any bonus due and payable to the respective borrowers on or after the maturity date of the loans. Pursuant to the separation agreements for Philip R. Yates and John E. Hamilton, dated as of December 3, 2006, the loans to these individuals were repaid on January 5, 2007.

Item 14. Principal Accounting Fees and Services

The following table summarizes the aggregate fees billed to the Company by the independent auditor, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu and their respective affiliates (collectively, "Deloitte"):

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	2006		2005
	(In millions)
Audit fees (a)	$	2.0	$	2.0
Audit-related fees (b)		0.1		0.6
Tax fees (c)		0.6		0.6
All other fees		0.0		0.0
Total	$	2.7	$	3.2

(a) Fees for audit services billed in 2006 and 2005 consisted of the following:

• Audit of the Company’s annual financial statements

• Reviews of the Company’s quarterly financial statements

• Statutory and regulatory audits

(b) Fees for audit-related services billed in 2006 and 2005 consisted of the following:

• Employee benefit plan audits

• Agreed-upon procedures engagements

• Acquisition due diligence

(c) Fees for tax services billed in 2006 and 2005 consisted of tax compliance and tax planning and advice.

In considering the nature of the services provided by Deloitte, the Audit Committee determined that such services are compatible with the provision of independent audit services. The Audit Committee discussed these services with Deloitte and Company management to determine that they are permitted under the rules and regulations concerning auditor independence promulgated by the SEC to implement the Sarbanes-Oxley Act of 2002, as well as the American Institute of Certified Public Accountants. The Audit Committee requires that all services performed by Deloitte are pre-approved prior to the services being performed. During 2006 all services were pre-approved.

There were no requests for audit, audit-related, tax and other services not contemplated on the list submitted and approved by the Audit Committee.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) The following Financial Statement Schedules are included herein:

Schedule I – Graham Packaging Holdings Company Condensed Financial Statements

Schedule II – Valuation and Qualifying Accounts

All other schedules are not submitted because they are not applicable or not required or because the required information is included in the financial statements or the notes thereto.

(b) The following exhibits are filed herewith or incorporated herein by reference:

Exhibit Number		Description of Exhibit
3.1	-	Certificate of Limited Partnership of Graham Packaging Holdings Company (incorporated herein by reference to Exhibit 3.5 to the Registration Statement on Form S-4 filed by the Company on July 13, 1998 (File No. 333-53603-03)).
3.2	-	Fifth Amended and Restated Agreement of Limited Partnership of Graham Packaging Holdings Company dated as of February 2, 1998 (incorporated herein by reference to Exhibit 3.6 to the Registration Statement on Form S-4 filed by the Company on May 26, 1998 (File No. 333-53603-03)).
4.1	-	Indenture dated as of October 7, 2004, among Graham Packaging Company, L.P. and GPC Capital Corp. I and Graham Packaging Holdings Company, as guarantor, and The Bank of New York as Trustee, relating to the Senior Notes Due 2012 of Graham Packaging Company, L.P. and GPC Capital Corp. I, unconditionally guaranteed by Graham Packaging Holdings Company (incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by the Company on October 14, 2004 (File No. 333-53603-03)).
4.2	-	Indenture dated as of October 7, 2004, among Graham Packaging Company, L.P. and GPC Capital Corp. I and Graham Packaging Holdings Company, as guarantor, and The Bank of New York, as Trustee, relating to the Senior Subordinated Notes Due 2014 of Graham Packaging Company, L.P. and GPC Capital Corp. I, unconditionally guaranteed by Graham Packaging Holdings Company (incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K filed by the Company on October 14, 2004 (File No. 333-53603-03)).
4.3	-	Form of 8 1/2% Senior Note due 2012 (included in Exhibit 4.1 to the Current Report on Form 8-K filed by the Company on October 14, 2004 (File No. 333-53603-03)).
4.4	-	Form of 9 7/8% Series Senior Subordinated Note due 2014 (included in Exhibit 4.2 to the Current Report on Form 8-K filed by the Company on October 14, 2004 (File No. 333-53603-03)).
10.1	-	First Lien Credit Agreement, dated as of October 7, 2004, among Graham Packaging Holdings Company, Graham Packaging Company, L.P., as the borrower, GPC Capital Corp. I, as the co- borrower, the lenders named therein, Deutsche Bank AG Cayman Islands Branch, as administrative agent and as collateral agent, Citigroup Global Markets Inc., as syndication agent, Goldman Sachs Credit Partners, L.P., General Electric Capital Corporation and Lehman Commercial Paper Inc., as co-documentation agents, and Lasalle Bank National Association and Manufacturers and Traders Trust Company, as senior managing agents (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on October 14, 2004 (File No. 333-53603-03)).

104

10.2	-	Second Lien Credit Agreement, dated as of October 7, 2004, among Graham Packaging Holdings Company, Graham Packaging Company, L.P., as the borrower, GPC Capital Corp. I, as the co- borrower, the lenders named therein, Deutsche Bank AG Cayman Islands Branch, as administrative agent and as collateral agent, Citigroup Global Markets Inc., as syndication agent, Goldman Sachs Credit Partners, L.P., General Electric Capital Corporation and Lehman Commercial Paper Inc., as co-documentation agents, and Lasalle Bank National Association and Manufacturers and Traders Trust Company, as senior managing agents (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on October 14, 2004 (File No. 333-53603-03)).
10.3	-	Consulting Agreement, dated as of February 2, 1998, between Graham Packaging Holdings Company and Graham Capital Corporation (incorporated herein by reference to Exhibit 10.2 to the Registration Statement on Form S-4 filed by the Company on July 13, 1998 (File No. 333-53603-03)).
10.4	-	Equipment Sales, Services and License Agreement dated February 2, 1998, between Graham Engineering Corporation and Graham Packaging Holdings Company (incorporated herein by reference to Exhibit 10.3 to the Registration Statement on Form S-4 filed by the Company on July 13, 1998 (File No. 333-53603-03)).
10.5	-	Forms of Retention Incentive Agreement (incorporated herein by reference to Exhibit 10.4 to the Registration Statement on Form S-4 filed by the Company on July 13, 1998 (File No. 333-53603-03)).
10.6	-	Forms of Severance Agreement (incorporated herein by reference to Exhibit 10.5 to the Registration Statement on Form S-4 filed by the Company on July 13, 1998 (File No. 333-53603-03)).
10.7	-	Registration Rights Agreement, dated as of February 2, 1998, by and among Graham Packaging Company, L.P., GPC Capital Corp. II, Graham Capital Corporation, Graham Family Growth Partnership, BCP /Graham Holdings L.L.C., BMP/Graham Holdings Corporation and the other parties named therein (incorporated herein by reference to Exhibit 10.6 to the Registration Statement on Form S-4 filed by the Company on July 13, 1998 (File No. 333-53603-03)).
10.8	-	Amended and Restated Monitoring Agreement, dated as of September 30, 2004, among Graham Packaging Holdings Company, L.P., Graham Packaging Company, L.P., Blackstone Management Partners III L.L.C. and Graham Alternative Investment Partners I (incorporated herein by reference to Exhibit 10.7 to Amendment No. 1 to the Registration Statement on Form S-4 filed by the Company on July 8, 2005 (File No. 333-125173)).
10.9	-	Management Stockholders Agreement, dated as of February 2, 1998, among Blackstone Capital Partners III Merchant Banking Fund L.P., Blackstone Offshore Capital Partners III L.P., Blackstone Family Investment Partnership III, L.P., BMP/Graham Holdings Corporation, Graham Packaging Holdings Company, L.P., GPC Capital Corp. II and the management investors named therein (incorporated herein by reference to Exhibit 10.8 to the Registration Statement on Form S-4 filed by the Company on July 13, 1998 (File No. 333-53603-03)).
10.10	-	Form of Equity Incentive Agreement (incorporated herein by reference to Exhibit 10.9 to the Registration Statement on Form S-4 filed by the Company on July 13, 1998 (File No. 333-53603-03)).
10.11	-	Stockholders’ Agreement, dated as of February 2, 1998, among Blackstone Capital Partners III Merchant Banking Fund L.P., Blackstone Offshore Capital Partners III L.P., Blackstone Family Investment Partnership III, L.P., BMP/Graham Holdings Corporation, Graham Packaging Holdings Company, GPC Capital Corp. II and BT Investment Partners, Inc. (incorporated herein by reference to Exhibit 10.10 to the Registration Statement on Form S-4 filed by the Company on July 13, 1998 (File No. 333-53603-03)).

105

10.12	-	Graham Packaging Holdings Company Management Option Plan (incorporated herein by reference to Exhibit 10.11 to the Registration Statement on Form S-4 filed by the Company on July 13, 1998 (File No. 333-53603-03)).
10.13	-	2004 Graham Packaging Holdings Company Management Option Plan (incorporated herein by reference to Exhibit 10.13 to Holdings’ Annual Report on Form 10-K, dated March 31, 2005 (File No. 333-53603-03)).
10.14*	-	Form of Employment Agreement, dated as of March 28, 2007, between Graham Packaging Holdings Company and Warren D. Knowlton.
10.15*	-	Form of Employment Agreement, dated as of March 28, 2007, between Graham Packaging Holdings Company and Mark S. Burgess.
10.16	-	Form of Employment Agreement, dated as of June 27, 2002, between Graham Packaging Holdings Company and Philip R. Yates (incorporated herein by reference to Exhibit 10.16 to Amendment No. 2 to the Registration Statement on Form S-1 filed by GPC Capital Corp. II on July 10, 2002 (File No. 333-89022)).
10.17	-	Form of Employment Agreement, dated as of June 27, 2002, between Graham Packaging Holdings Company and Roger M. Prevot (incorporated herein by reference to Exhibit 10.17 to Amendment No. 2 to the Registration Statement on Form S-1 filed by GPC Capital Corp. II on July 10, 2002 (File No. 333-89022)).
10.18	-	Form of Employment Agreement, dated as of June 27, 2002, between Graham Packaging Holdings Company and John E. Hamilton (incorporated herein by reference to Exhibit 10.18 to Amendment No. 2 to the Registration Statement on Form S-1 filed by GPC Capital Corp. II on July 10, 2002 (File No. 333-89022)).
10.19	-	Form of Employment Agreement, dated as of June 27, 2002, between Graham Packaging Holdings Company and Ashok Sudan (incorporated herein by reference to Exhibit 10.18 to Holdings’ Annual Report on Form 10-K, dated March 31, 2005 (File No. 333-53603-03)).
10.20		Form of Employment Agreement, dated as of January 1, 2005, between Graham Packaging Holdings Company and Peter T. Lennox (incorporated herein by reference to Exhibit 10.18 to Holdings’ Annual Report on Form 10-K, dated March 31, 2006 (File No. 333-53603-03)).
10.21	-	Form of Employment Agreement, dated as of January 1, 2005, between Graham Packaging Holdings Company and Paul J. Young (incorporated herein by reference to Exhibit 10.19 to Holdings’ Annual Report on Form 10-K, dated March 31, 2006 (File No. 333-53603-03)).
10.22	-	Form of Employment Agreement, dated as of February 6, 2006, between Graham Packaging Holdings Company and Sara G. Armstrong (incorporated herein by reference to Exhibit 10.20 to Holdings’ Annual Report on Form 10-K, dated March 31, 2006 (File No. 333-53603-03)).
10.23	-	First Amendment to Credit Agreement, dated as of December 9, 2005, among Graham Packaging Holdings Company, Graham Packaging Company, L.P., as the borrower, GPC Capital Corp. I, as the co-borrower, the lenders named therein, Citigroup Global Markets Inc., as syndication agent, Goldman Sachs Credit Partners, L.P., General Electric Capital Corporation and Lehman Commercial Paper Inc., as co-documentation agents, Deutsche Bank AG Cayman Islands Branch, as administrative agent and as collateral agent for the lenders, and LaSalle Bank National Association and Manufacturers and Traders Trust Company, as senior managing agents (incorporated herein by reference to Exhibit 10.21 to Holdings’ Annual Report on Form 10-K, dated March 31, 2006 (File No. 333-53603-03)).

106

10.24	-	Second Amendment to Credit Agreement, dated as of April 18, 2006, among Graham Packaging Holdings Company, Graham Packaging Company, L.P., as the borrower, GPC Capital Corp. I, as the co-borrower, the lenders named therein, Citigroup Global Markets Inc., as syndication agent, Goldman Sachs Credit Partners, L.P., General Electric Capital Corporation and Lehman Commercial Paper Inc., as co-documentation agents, Deutsche Bank AG Cayman Islands Branch, as administrative agent and as collateral agent for the lenders, and LaSalle Bank National Association and Manufacturers and Traders Trust Company, as senior managing agents (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on April 21, 2006 (File No. 333-53603-03)).
10.25*	-	Third Amendment to Credit Agreement, dated as of March 30, 2007, among Graham Packaging Holdings Company, Graham Packaging Company, L.P., as the borrower, GPC Capital Corp. I, as the co-borrower, the lenders named therein, Citigroup Global Markets Inc., as syndication agent, Goldman Sachs Credit Partners, L.P., General Electric Capital Corporation and Lehman Commercial Paper Inc., as co-documentation agents, Deutsche Bank AG Cayman Islands Branch, as administrative agent and as collateral agent for the lenders, and LaSalle Bank National Association and Manufacturers and Traders Trust Company, as senior managing agents.
10.26	-	Form of Separation Agreement, dated as of December 3, 2006, between Graham Packaging Holdings Company and Philip R. Yates (incorporated herein by reference to Exhibit 99.1 to the Current Report on Form 8-K filed by the Company on December 7, 2006 (File No. 333-53603-03)).
10.27	-	Form of Separation Agreement, dated as of December 3, 2006, between Graham Packaging Holdings Company and John E. Hamilton (incorporated herein by reference to Exhibit 99.2 to the Current Report on Form 8-K filed by the Company on December 7, 2006 (File No. 333-53603-03)).
12.1*	-	Statement of Ratio of Earnings to Fixed Charges.
21.1*	-	Subsidiaries of Graham Packaging Holdings Company.
24.1*	-	Power of Attorney (included on the signature pages hereto).
31.1*	-	Certification required by Rule 15d-14(a).
31.2*	-	Certification required by Rule 15d-14(a).
32.1*	-	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	-	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*	-	Filed herewith.

107

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned, thereunto duly authorized.

Date: April 2, 2007

GRAHAM PACKAGING HOLDINGS COMPANY
(Registrant)
By:	BCP/Graham Holdings L.L.C.
	its General Partner
By:	/s/ Mark S. Burgess
	Name: Mark S. Burgess
	Title: Chief Financial Officer
	(chief accounting officer and duly authorized officer)

 

108

POWER OF ATTORNEY

We, the undersigned officers of BCP/Graham Holdings L.L.C., as general partner of Graham Packaging Holdings Company, and directors of BMP/Graham Holdings Corporation, as sole member of BCP/Graham Holdings L.L.C., as the general partner of Graham Packaging Holdings Company, do hereby constitute and appoint Warren D. Knowlton and Mark S. Burgess, or either of them, our true and lawful attorneys and agents, to sign for us, or any of us, in our names in the capacities indicated below, any and all amendments to this report, and to cause the same to be filed with the Securities and Exchange Commission, granting to said attorneys, and each of them, full power and authority to do and perform any act and thing necessary or appropriate to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present, and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on the 2nd day of April, 2007 by the following persons on behalf of the registrant and in the capacities indicated, with respect to BCP/Graham Holdings L.L.C., as general partner of Graham Packaging Holdings Company, or BMP/Graham Holdings Corporation, as sole member of BCP/Graham Holdings L.L.C., as indicated below:

Signature	Title
/s/ Chinh E. Chu	President, Treasurer and Assistant Secretary
Chinh E. Chu	(Principal Executive Officer) of BCP /Graham
	Holdings L.L.C.
/s/ Mark S. Burgess	Vice President, Finance and Administration
Mark S. Burgess	(Principal Financial Officer and Principal
	Accounting Officer) of BCP / Graham Holdings L.L.C.
/s/ Chinh E. Chu	Director of BMP/Graham Holdings Corporation
Chinh E. Chu
/s/ James A. Quella	Director of BMP/Graham Holdings Corporation
James A. Quella

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.

No annual report to security holders covering the registrant’s last fiscal year has been sent to security holders. No proxy statement, form of proxy or other proxy soliciting material has been sent to more than 10 of the registrant’s security holders with respect to any annual or other meeting of security holders.

109

SCHEDULE I

GRAHAM PACKAGING HOLDINGS COMPANY

REGISTRANT’S CONDENSED FINANCIAL STATEMENTS

(In thousands)

	December 31,
BALANCE SHEETS	2006			2005
Assets:
Current assets	$	—		$	—
Other non-current assets		—			—
Total assets	$	—		$	—
Liabilities and partners’ capital (deficit):
Current liabilities	$	187,089		$	187,090
Investment in subsidiary		410,667			306,620
Total liabilities		597,756			493,710
Partners’ capital (deficit)		(597,756	)		(493,710	)
Total liabilities and partners’ capital	$	—		$	—
		Year Ended December 31,
STATEMENTS OF OPERATIONS		2006			2005			2004
Selling, general and administrative expenses	$	—		$	(1	)	$	—
Equity in loss of subsidiaries		(120,376	)		(52,640	)		(16,614	)
Interest expense		—			—			(24,018	)
Net loss	$	(120,376	)	$	(52,641	)	$	(40,632	)
		Year Ended December 31,
STATEMENTS OF CASH FLOWS		2006			2005			2004
Operating activities:
Net loss	$	(120,376	)	$	(52,641	)	$	(40,632	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of debt issuance fees		—			—			3,082
Changes in current liabilities		—			1			2,768
Proceeds from issuance of intercompany debt		—			—			169,000
Equity in loss of subsidiaries		120,376			52,640			16,614
Net cash provided by operating activities		—			—			150,832
Investing activities:
Return of capital from a subsidiary		—			—			18,168
Net cash provided by investing activities		—			—			18,168
Financing activities:
Payment of long-term debt		—			—			(169,000	)
Net cash used in financing activities		—			—			(169,000	)
Increase in cash and cash equivalents		—			—			—
Cash and cash equivalents at beginning of period		—			—			—
Cash and cash equivalents at end of period	$	—		$	—		$	—
Supplemental cash flow information:
Cash paid for interest	$	—		$	—		$	18,168

See footnotes to consolidated financial statements of Graham Packaging Holdings Company.

110

SCHEDULE II

GRAHAM PACKAGING HOLDINGS COMPANY

VALUATION AND QUALIFYING ACCOUNTS

(In thousands)

	Balance at Beginning of Year		Additions		Deductions		Balance at End of Year
Year ended December 31, 2006
Allowance for doubtful accounts	$	11,272	$	662	$	5,635	$	6,299
Allowance for inventory losses		4,451		1,132		78		5,505
Year ended December 31, 2005
Allowance for doubtful accounts	$	8,872	$	3,209	$	809	$	11,272
Allowance for inventory losses		3,021		2,071		641		4,451
Year ended December 31, 2004
Allowance for doubtful accounts	$	7,615	$	1,822	$	565	$	8,872
Allowance for inventory losses		2,464		1,115		558		3,021

111

EX-10

Exhibit 10.14

EMPLOYMENT AGREEMENT

Between

GRAHAM PACKAGING HOLDINGS COMPANY,

GRAHAM PACKAGING COMPANY, L.P.,

And

The Chief Executive Officer

Page 1 of 34

Exhibit 10-14

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT dated as of March 28, 2007 and effective as of December 4, 2006 (the “Agreement”) among Graham Packaging Holdings Company, a Delaware limited partnership (“Holdings”), Graham Packaging Company, L.P., a Delaware limited partnership (“Limited Partnership”, or “L.P.” or “Company”), and Warren D. Knowlton (“Executive”).

WHEREAS, the Company desires to employ Executive as its Chief Executive Officer and Executive desires to be employed as the Chief Executive Officer on the terms and subject to the conditions set forth herein:

NOW, THEREFORE, in consideration of the promises and the mutual agreements contained herein, the Company and Executive hereby agree as follows:

ARTICLE 1

DEFINITIONS

The terms set forth below have the following meanings (such meanings to be applicable to both the singular and plural forms, except where otherwise expressly indicated):

1.1.          “Accounting Firm” - see Exhibit A.

1.2.          “Accrued Base Salary” means the amount of Executive’s Base Salary that is accrued but not yet paid as of the Date of Termination.

1.3.          “Affiliate” means any Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, the Company. For the purposes of this definition, the term “control” when used with respect to any Person means the power to direct or cause the direction of management or policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

1.4.          “Agreement” - see the recitals to this Agreement

1.5.          “Agreement Date” means the effective date that is specified in the recitals to this Agreement.

1.6.          “Annual Bonus” - see Section 4.2(a).

1.7.          “Base Salary” - see Section 4.1.

1.8.          “Beneficial Owner” means a “beneficial owner,” as such term is defined in Rule 13d-3 under the Exchange Act (or any successor rule thereto).

1.9.          “Beneficiary” - see Section 9.3.

1.10.        “Blackstone” means collectively, Blackstone Capital Partners III Merchant Banking Fund L.P., Blackstone Offshore Capital Partners III L.P. and their Affiliates (other than the Company and its Subsidiaries).

1.11.        “Board” means the Board of Directors of the Company subsequent to the incorporation of the L.P. and the substitution of it as successor for the L.P. as a party to this Agreement. Prior thereto, the Board shall mean the General Partner (as defined in the LP Agreement).

1.12.          “Cause” means any of the following:

(a)           Executive commits an act of willful misconduct, fraud, embezzlement or misappropriation against Holdings, the Company or any of its affiliates or subsidiaries, or shall be convicted by a court of competent jurisdiction of, or shall plead guilty or nolo contendere to, any felony or any crime involving moral turpitude or any crime which is reasonably likely to materially adversely affect the reputation of Holdings, the Company or Executive’s ability to perform the duties required under the Agreement; or

Page 2 of 34

Exhibit 10.14

(b)           Executive commits a material breach of any of the covenants in the Employment Agreement, which breach has not been remedied within 30 days of notice thereof by the Company to Executive.

1.13.          “Change of Control” means any of the following events:

(a)           the sale or disposition, in one or a series of transactions, of all or substantially all the assets of the Company to any one or more “persons” or “groups” (as such terms are defined or used in Sections 13(d)(3) or 14(d)(2) of the Exchange Act) other than Blackstone;

(b)           before the effective date of an initial public offering of the equity securities of the Company (or of its successor after conversion to a corporation) (the “IPO Date”), representatives of Blackstone (individually or in the aggregate) cease to comprise a majority of the Board;

(c)           individuals who, as of the IPO Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute a majority of the members of the Board; provided that any individual who becomes a Director after the IPO Date whose election or nomination for election by the Company’s Shareholders was approved by a majority of the members of the Incumbent Board (other than an election or nomination of an individual (i) who is not a representative of Blackstone and (ii) whose initial assumption of office is in connection with an actual or threatened “election contest” relating to the election of the Directors of the Company (as such terms are used in Rule 14a-11 under the Exchange Act), “tender offer” (as such term is used in Section 14(d) of the Exchange Act) or a proposed merger) shall be deemed to be members of the Incumbent Board; or

(d)           any person or group, other than Blackstone, is or becomes the Beneficial Owner, directly or indirectly, of more than 50% of the total voting power of the then outstanding voting stock of the Company (or any entity which controls the Company or which is a successor to all or substantially all of the assets of the Company), including by way of merger, consolidation, tender or exchange offer or otherwise (other than an offering of stock to the general public through a registration statement filed with the Securities and Exchange Commission) and representatives of Blackstone (individually or in the aggregate) cease to comprise a majority of the Board.

Notwithstanding the foregoing, there shall not be a Change of Control if, in advance of such event, Executive agrees in writing that such event shall not constitute a Change of Control.

1.14.          “Code” means the Internal Revenue Code of 1986, as amended from time to time.

1.15.          “Committee” means the Compensation Committee of the Board.

1.16.        “Common Stock” means the common stock of the Company following its incorporation, and the equivalent L.P. units prior to its incorporation.

1.17.          “Company” - see the recitals to this Agreement.

1.18.          “Company Inventions” - see Section 8.2(b).

1.19.        “Date of Termination” means the effective date of a Termination of Employment for any reason, including death or Disability, whether by either the Company or the Executive.

1.20.        “Director” means a director of the Company subsequent to its incorporation or a member of the governing body of the general partner of the L.P. prior to its incorporation.

1.21.          “Disability” means the Executive is “disabled” as determined under Section 409A of the Code.

1.22.          “Employment Period” - see Section 3.1.

1.23.        “Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successors thereto.

1.24.          “Excise Tax” - see Exhibit A.

1.25.          “Executive” - see the recitals to this Agreement.

1.26.          “Extension Date” - see Section 3.2.

Page 3 of 34

Exhibit 10.14

1.27.        “Good Reason” means the termination of the Executive’s employment with the Company within 90 days following the occurrence, without Executive’s written consent, of any of the following events:

(a)           the reduction of the Executive’s position from that of Chief Executive Officer of the Company;

(b)           a decrease in Executive’s base salary or target bonus;

(c)           a reduction in Executive’s participation in the Company’s benefit plans and policies to a level materially less favorable to Executive unless such reduction applies to a majority of senior level executives;

(d)           a material reduction in (a) agreed level of transportation, (b) York, Pennsylvania accommodations or (c) remote office support, as provided in Section 5.6 and 5.7; or

(e)           any other material breach by the Company or Holdings of the Agreement, which breach has not been remedied within 30 days of notice thereof by Executive to Holdings.

1.28.          “Gross-Up Payment” – see Exhibit A.

1.29.          “Holdings Board” means the Board of Directors of Holdings.

1.30.          “Inventions” – see Section 8.2(a).

1.31.        “Liquidity Event” means a sale by Blackstone, in one or a series of transactions, of its entire interest in Holdings and the Company, regardless of whether such event constitutes a change in effective control or ownership of Holdings and the Company within the meaning of Section 409A of the Code. For avoidance of doubt, no Liquidity Event shall be deemed to occur until and unless Blackstone has sold its entire interest in Holdings and the Company.

1.32.        “LP Agreement” means the Amended and Restated Agreement of Limited Partnership of Graham Packaging Company.

1.33.          “MOIC” - see Section 6.4(a).

1.34.          “Option” means an option to purchase shares of Common Stock.

1.35.          “Payment” - see Exhibit A.

1.36.        “Permitted Transferee” means the spouse of Executive, a lineal descendant of Executive or a spouse of a lineal descendant of Executive or a trust, limited partnership or other entity principally benefiting all or a portion of such individuals.

1.37.        “Person” means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, entity or government instrumentality, division, agency, body or department.

1.38.          “Prior Inventions” - see Section 8.2(a).

1.39.        “Restricted Period” means the twenty-four month period immediately following a Termination of Employment for any reason.

1.40.          “Safe Harbor Amount” - see Exhibit A.

1.41.          “Shareholder” or “Stockholder” means an owner of the Company’s equity securities.

1.42.        “Subsidiary” means, with respect to any Person, (a) any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned by such Person, and (b) any partnership, limited liability company or other entity in which such Person has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%.

Page 4 of 34

Exhibit 10.14

1.43.        “Target Annual Bonus” means the product of Base Salary (for any Year) multiplied by 180 percent, as such percentage may be adjusted upwards from time to time by the Board.

1.44.        “Termination For Good Reason” means a Termination of Employment during the Employment Period by Executive for Good Reason.

1.45.        “Termination of Employment” means any termination by the Company or by Executive (or due to Executive’s death) of Executive’s employment with the Company or its Affiliates.

1.46.        “Termination Without Cause” means a Termination of Employment during the Employment Period by the Company for any reason other than Cause or Executive’s death or Disability.

1.47.          “Underpayment” - see Exhibit A.

1.48.          “Year” means a calendar year period ending on December 31.

ARTICLE 2

DUTIES

2.1           Duties. The Company shall employ Executive during the Employment Period as its Chief Executive Officer. During the Employment Period, Executive shall perform the duties assigned to him hereunder by the Board and the Holdings Board from time to time, and shall use his reasonable best efforts to promote the interests of the Company. During the Employment Period, and excluding any periods of disability, vacation, or sick leave to which Executive is entitled, Executive agrees to devote his full business time, attention and effort to the business and affairs of the Company. If requested, Executive shall also serve as a member of the Board without additional compensation.

2.2           Other Activities. Executive may (i) serve on those corporate, civic or charitable boards or committees he presently serves on, or a substitute for one or more such boards or committees, during the Employment Period, (ii) deliver lectures, fulfill speaking engagements, or teach at educational institutions, subject to the consent of the Board and the Holdings Board (which shall not be unreasonably withheld) and/or (iii) manage personal investments, provided that all such activities do not individually or in the aggregate significantly interfere with the performance of his duties under this Agreement or violate Section 8.1 of this Agreement.

ARTICLE 3

EMPLOYMENT PERIOD

3.1          Employment Period. Subject to Section 3.2 and the termination provisions hereinafter provided, the term of Executive’s employment under this Agreement (the “Employment Period”) shall begin on the Agreement Date and end on the fourth anniversary of the Agreement Date, or, if applicable at the end of any extension pursuant to Section 3.2. The employment of Executive by the Company shall not be terminated other than in accordance with Article 7.

3.2          Extensions of Employment Period. Commencing on the fourth anniversary of the Agreement Date, and on each anniversary date thereafter, (each an “Extension Date”) if at least 90 days before that date either Holdings or the Company has not delivered to Executive, and Executive has not delivered to Company and Holdings, a written notice that the Employment Period will not be extended, the Employment Period will be automatically extended for one year from its then scheduled expiration date (i.e., the next occurring Extension Date).

ARTICLE 4

COMPENSATION

4.1           Salary. The Company shall pay Executive in accordance with its normal payroll practices (but not less frequently than monthly) an annual salary at a rate of $750,000 per year (“Base Salary”). During the Employment Period, the Base Salary shall be reviewed at least annually by the Committee after consultation with Executive and may from time to time be increased as determined by the Committee. Effective as of the date of any

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such increase, the Base Salary as so increased shall be considered the new Base Salary for all purposes of this Agreement. Any increase in Base Salary shall not limit or reduce any other obligation of the Company to Executive under this Agreement.

4.2          “Annual Bonus.

(a)           Subject to Article 7, Executive shall be eligible to earn an annual cash bonus (“Annual Bonus”) in accordance with the terms hereof for the current Year and each subsequent Year that begins during the Employment Period. Executive shall be eligible for an Annual Bonus based upon the achievement of the financial budget or other performance criteria established by the Board after consultation with Executive and communicated to Executive prior to the beginning of each Year. The Annual Bonus shall be equal to the Target Annual Bonus upon full achievement of the performance criteria, but may be less than the Target Annual Bonus upon lesser levels of achievement.

(b)           The Company shall pay the entire Annual Bonus that is payable with respect to a Year in a lump-sum cash payment within 2½ months following the close of such Year. Any such Annual Bonus shall in any event be paid no later than the date annual bonuses are paid to the other senior executives of the Company.

ARTICLE 5

OTHER BENEFITS

5.1           Incentive, Savings and Retirement Plans. In addition to Base Salary and the Annual Bonus, Executive shall be entitled to participate during the Employment Period in all incentive, savings and retirement plans, practices, policies and programs that are from time to time generally available to other senior executives of the Company.

5.2           Welfare Benefits. During the Employment Period, Executive and/or his eligible dependents, as the case may be, shall be eligible for participation in all benefits under welfare benefit plans, practices, policies and programs provided by the Company (including any medical, prescription, dental disability, salary continuance, employee life, group life, dependent life, accidental death and travel accident insurance plans and programs) generally available to other senior executives of the Company.

5.3           Fringe Benefits. During the Employment Period, Executive shall be entitled to all fringe benefits that are from time to time generally available to other senior executives of the Company.

5.4          Vacation. During the Employment Period, Executive shall be entitled to paid vacation time in accordance with the plans, practices, policies, and programs generally available to other senior executives of the Company, but in no event less than the amount available to the current Chief Executive Officer of the Company.

5.5          Expenses. During the Employment Period, Executive shall be entitled to receive prompt reimbursement for all reasonable employment related expenses incurred by Executive for the prior month upon the receipt by the Company of accounting in accordance with practices, policies and procedures generally available to other senior executives of the Company; provided that all reimbursements shall in any event be made within 2½ months following the Year in which they were incurred.

5.6           Office; Support Staff. During the Employment Period, Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to secretarial and other assistance, appropriate to his position and duties under this Agreement, including a remote office in Maine with appropriate furnishings as determined by the Board in its reasonable discretion.

5.7           Transportation and Accommodation. During the Employment Period, Executive shall be entitled to receive, on an after-tax basis (i) round-trip plane transportation up to 50 times each year from Maine to York, Pennsylvania, aboard a King Air 200 (or the equivalent, in terms of cost to the Company, in other air transportation to other destinations each year, provided that either the beginning point or destination of such other air transportation is York, Pennsylvania, with any unused trips being carried forward to future years), and (ii) suitable accommodations and use of an automobile in the York, Pennsylvania area, as determined by the Board in its reasonable discretion.

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5.8           Tax Gross-Up Payment. If it shall be determined that any payment to Executive pursuant to this Agreement or any other payment or benefit from the Company would be subject to the excise tax imposed by section 4999 of the Code, then Executive shall receive a Gross-Up Payment pursuant to Exhibit A attached hereto.

ARTICLE 6

OTHER EXECUTIVE BENEFITS

6.1           Deferred Signing Bonus. Executive shall be eligible to receive a signing bonus, as incentive compensation, in the amount of $3.0 million, payable in four equal quarterly installments of $750,000 on each of the three, six, nine and twelve month anniversaries of the date of this Agreement, contingent, with respect to each such installment, upon Executive’s continued employment (or deemed continued employment pursuant to Section 7.5) with the Company as Chief Executive Officer on the earliest to occur of (i) with respect to each such installment, the anniversary date on which such installment is payable, (ii) the date of Executive’s termination of employment by the Company without Cause or by the Executive for Good Reason during the Employment Period or (iii) a Change of Control. If Executive’s employment as Chief Executive Officer with the Company terminates prior to any such date (subject to Section 7.5), other than a termination by the Company without Cause or by the Executive for Good Reason, the signing bonus amount that then remains unpaid shall be forfeited without further action required by the Company or Holdings.

6.2           Pension Payment. Executive shall be entitled to receive a pension payment of $640,000 for each of the 10 years following Executive’s separation of employment with the Company, contingent upon Executive’s continued employment (or deemed continued employment pursuant to Section 7.5) with the Company as Chief Executive Officer until the earliest to occur of: (i) the fourth anniversary of the Agreement Date, (ii) the date of the Executive’s termination of employment by the Company without Cause or by the Executive for Good Reason during the Employment Period, or (iii) a Change of Control. If Executive’s employment as Chief Executive Officer with the Company terminates prior to any such date (subject to Section 7.5), other than a termination by the Company without Cause or by the Executive for Good Reason, the pension payment amount shall be forfeited without further action required by the Company or Holdings. The pension payment will be paid on January 31 of each of the 10 years following the Executive’s severance of employment with the Company.

6.3          Equity Incentive Agreement. Executive shall be eligible to participate in Holdings 2004 Management Option Plan pursuant to those Option Agreements set forth as Exhibits B and C hereto.

6.4          “Transaction Bonus.

(a)           Executive shall be eligible to receive a bonus upon a Liquidity Event in the amount set forth in Exhibit D, reduced by any amount paid pursuant to Section 6.4(b), dependent upon the multiple of invested capital (“MOIC”) received in such transaction, and contingent upon Executive’s continued employment (or deemed continued employment pursuant to Section 7.5) with the Company as Chief Executive Officer on such date. If Executive ceases to serve as Chief Executive Officer of the Company prior to such date (subject to Section 7.5), he will forfeit 75% of such bonus amount and if Executive ceases to be employed by the Company prior to such date (subject to Section 7.5), he will forfeit 100% of such bonus. In calculating MOIC for all purposes under the Agreement, (i) any additional invested capital made during the first and second quarter of 2007 shall be excluded, and (ii) “invested capital” used in such calculation shall be the Company’s average invested equity capital during the latest four full fiscal quarters preceding the date of determination it being understood that invested capital on the date hereof equals $345,000,000. Notwithstanding the foregoing, if Executive’s employment is terminated prior to the occurrence of a Liquidity Event by the Company without Cause or by the Executive for Good Reason, and a Liquidity Event occurs within one year thereafter, then Executive shall be entitled to receive the bonus set forth on Exhibit D dependent upon the MOIC received in such transaction. Any transaction bonus earned shall be paid by the Company upon the one year anniversary of the date of such termination of employment.

(b)           Notwithstanding Section 6.4(a), in the event of an Initial Public Offering of the Company or Holdings or a Change in Control, Executive shall thereupon be paid by the Company a percentage of the Transaction Bonus that would otherwise be paid under Section 6.4(a) assuming that a Liquidity Event had occurred and in accordance with the MOIC received, which percentage shall be equal to the percentage reduction in Blackstone’s ownership in Holdings or the Company, as applicable, contingent upon Executive’s continued employment (or deemed continued employment pursuant to Section 7.5) with the Company as Chief Executive Officer on such date.

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Thereafter, with respect to each successive reduction in Blackstone’s ownership that occurs, Executive will thereupon be paid by the Company an additional such percentage of the Transaction Bonus, in accordance with the MOIC received, measuring the successive reduction against the amount of Blackstone’s ownership in Holdings and the Company as of the date hereof, such that, upon Blackstone’s ownership being reduced to zero, Executive will have received all amounts due him under Section 6.4(a), with such amounts (if any) payable to Executive as of the last day of each Year during the Employment Period.

6.5           Indemnification. The Company shall, to the maximum extent permitted by law, and in addition to any such right granted to or available to the Executive under the Company’s Charter, By-laws or standing or other resolutions, defend, indemnify and hold harmless the Executive from and against any and all claims made against the Executive concerning or relative to his service, actions or omissions on behalf of the Company as an officer, employee, director or agent thereof; provided, however, that the obligation to indemnify the Executive shall not apply to any claim made against the Executive that arises out of the act, omission or failure to act that would constitute Cause for the Executive’s termination of employment. The Company shall, upon the Executive’s request, promptly advance or pay any amounts for reasonable costs, charges, or expenses (including any legal fees and expenses incurred by counsel retained by the Executive) in respect of his right to indemnification hereunder or in furtherance of such right, subject to a later determination as to the Executive’s ultimate right to receive indemnification. The Executive’s right to indemnification shall survive until the expiration of all applicable statutes of limitations, without regard to the earlier termination of the Executive’s employment.

ARTICLE 7

TERMINATION BENEFITS

7.1           Termination of Employment. The Employment Period and Executive’s employment hereunder may be terminated by either party at any time and for any reason; provided that Executive will be required to give the Company at least 30 days’ advance written notice of any resignation of Executive’s employment. Notwithstanding any other provision of this Agreement, the provisions of this Article 7 shall exclusively govern Executive’s rights under this Agreement following the expiration of the Employment Period or if Executive’s employment with the Company or its Affiliates is terminated during the Employment Period for any reason.

7.2          “Termination for Cause or Other Than for Good Reason, etc.

(a)           If the Company terminates Executive’s employment during the Employment Period for Cause or Executive terminates his employment during the Employment Period other than for Good Reason, death or Disability, the Company shall pay to Executive immediately after the Date of Termination a lump-sum amount equal to Executive’s Accrued Base Salary, accrued but unpaid vacation and unpaid business expenses properly incurred by Executive in accordance with Company policy prior to the date of Executive’s termination.

(b)           Before terminating Executive’s employment for Cause, the Board will specify in writing to Executive in detail the nature of the act, omission, refusal, or failure that it deems to constitute Cause.

7.3           Termination for Death or Disability. If Executive’s employment terminates during the Employment Period due to his death or Disability, the Company shall pay to Executive or his Beneficiaries, as the case may be, immediately after the Date of Termination a lump-sum amount that is equal to the Executive’s Accrued Base Salary, accrued but unpaid vacation and unpaid business expenses properly incurred by Executive in accordance with Company policy prior to the date of Executive’s termination.

7.4           Termination Without Cause and Termination for Good Reason. In the event of a Termination Without Cause or a Termination for Good Reason during the Employment Period, the Executive shall receive the following:

(a)           Immediately after the Date of Termination, a lump-sum amount equal to the sum of Executive’s Accrued Base Salary, accrued but unpaid vacation and unpaid business expenses properly incurred by Executive in accordance with Company policy prior to the date of Executive’s termination;

(b)           The amount of the Transaction Bonus, if and to the extent earned pursuant to Section 6.4;

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(c)           An Annual Bonus, determined pursuant to Section 4.2, for the Year of such Termination of Employment, multiplied by a fraction, the numerator of which is the number of days that the Executive is employed by the Company during such Year and the denominator of which is 365, contingent upon achievement by the Company of the performance targets relative to such Annual Bonus;

(d)           An Annual Bonus, determined pursuant to Section 4.2, for the Year preceding the Year of such Termination of Employment, if and to the extent the Annual Bonus for such preceding Year has been earned and has not yet been paid to Executive;

(e)           The amount of the Deferred Signing Bonus, pursuant to Section 6.1; and

(f)           The amount of the Pension Payments, pursuant to Section 6.2.

7.5           Deemed Continuation of Employment. Notwithstanding anything to the contrary in this Agreement, in the event that the Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason, in either case in contemplation of a pending Change of Control, Executive shall be deemed to continue his employment as Chief Executive Officer of the Company pursuant to the Agreement until the effective date of such Change of Control provided that the Change of Control occurs within one year after Executive’s termination of employment.

7.6           Other Termination Benefits. In addition to any amounts or benefits payable upon a Termination of Employment hereunder, Executive shall, except as otherwise specifically provided herein, be entitled to any payments or benefits provided under the terms of any plan, policy or program of the Company in which Executive participates or as otherwise required by applicable law.

7.7          Election Not to Extend the Employment Period. If the Company elects not to extend the Employment Period pursuant to Section 3.2 such that the Employment Period terminates, the nonextension shall not be treated, for purposes of Section 7.4, as a Termination without Cause or constitute Good Reason for Executive to terminate employment.

7.8          Continued Employment Beyond the Expiration of the Employment Period. Unless the parties otherwise agree in writing, continuation of Executive’s employment with the Company beyond the expiration of the Employment Period shall be deemed an employment at-will and shall not be deemed to extend any of the provisions of this Agreement and Executive’s employment may thereafter be terminated at will by either Executive or the Company; provided that the provisions of Article 7 of this Agreement shall survive any termination of this Agreement or Executive’s termination of employment hereunder.

7.9          Board/Committee Resignation. Upon Executive’s Termination of Employment for any reason, Executive agrees to resign, as of the date of such termination and to the extent applicable, from the Board (and any committees thereof) and the Board of Directors (and any committees thereof) of any of the Company’s affiliates.

7.10         Property. Upon Executive’s termination of Employment with the Company for any reason, Executive shall return all property of the Company and Holdings to the Company.

ARTICLE 8

RESTRICTIVE COVENANTS

8.1          “Non-Solicitation of Employees; Confidentiality; Non-Competition.

(a)Executive covenants and agrees that, at no time during the Employment Period nor during the Restricted Period, will Executive:

(i)Directly or indirectly employ or seek to employ any person (other than his personal assistant) employed as of the date of Executive’s Termination of Employment or who left the employment of the Company or its Affiliates coincident with, or within six months prior to or after, the Executive’s Termination of Employment with the Company or otherwise encourage or entice any such person to leave such employment (provided that this Section 8.1(a)(i) shall not apply either to persons who had not become employed by the Company before the Date of Termination or to persons whose

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Exhibit 10.14

employment ended at any time as a result of the Company’s termination of those individuals and shall not apply to general solicitations);

(ii)Become employed by, enter into a consulting arrangement with or otherwise agree to perform personal services for a Competitor (as defined in section 8.1(b)).

(iii)Acquire an ownership interest, or an option to purchase an ownership interest in a Competitor, other than a publicly traded Competitor provided that ownership or option position in such publicly traded Competitor does not exceed 5 percent;

(iv)Solicit any business of the Company on behalf of or for the benefit of a Competitor; or

(v)Interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company or any of its affiliates and customers, clients, suppliers of the Company or its Affiliates.

(b)           For purposes of this Section, “Competitor” means (i) any Person that produces blowmolded plastic containers or produces or provides any other product or service of the Company that represents, as of the Date of Termination, at least 25% of the consolidated revenues of the Company (including, without limitation, products or services that Executive is aware, as of the Date of Termination, that the Company had specific plans (as evidenced through the most recent annual corporate business plan or by resolutions of the Board) to produce or provide during the twelve month period following the Date of Termination and such products or services are reasonably anticipated to represent at least 25% of the consolidated revenues of the Company within the two years following the Date of Termination) and (ii) any Person listed on Exhibit F. Notwithstanding anything to the contrary in subsection (i) of the foregoing sentence, a Competitor shall not include any Person of which a unit produces blowmolded plastic containers or products or such other products or services (a “Competitive Unit”) but as to which unit Executive does not have direct or indirect responsibilities for the products or services involved; provided, that such Competitive Unit contributes less than 25% of the consolidated revenues for the most recently completed fiscal year of such Person but shall include any Person listed on Exhibit F.

(c)           Subject to applicable law and legal process, Executive covenants and agrees that at no time during the Employment Period nor at any time following any Termination of Employment will Executive communicate, furnish, divulge or disclose in any manner to any Person any Confidential Information (as defined in Section 8.1(d) without the prior express written consent of the Company, other than in the course of Executive’s employment. After a Termination of Employment, Executive shall not, without the prior written consent of the Company, or as may otherwise be required by applicable law or legal process, communicate or divulge such Confidential Information to anyone other than the Company and its designees.

(d)           For purposes of this Section, “Confidential Information” shall mean financial information about the Company, the Company’s contract terms with vendors and suppliers, customer and supplier lists and data, know-how, software developments, inventions, formulae, technology, designs and drawings, or any Company property or confidential information relating to research, operations, finances, current and proposed products and services, vendors, customers, advertising, costs, marketing, trading, investment, sales activities, promotion, manufacturing processes, or the business and affairs of the Company generally, or of any subsidiary or affiliate of the Company, trade secrets and such other competitively-sensitive information, except that Confidential Information shall not include any information that was or becomes generally available to the public (i) other than as a result of a wrongful disclosure by Executive, (ii) as a result of disclosure by Executive during the Employment Period that he reasonably and in good faith believes is required by the performance of his duties under this Agreement, or (iii) any information compelled to be disclosed by applicable law or legal process; provided that Executive, to the extent not prohibited from doing so by applicable law or legal process, shall give the Company written notice of the information to be so disclosed pursuant to clause (iii) of this sentence as far in advance of its disclosure as is practicable.

(e)           Executive agrees that upon Executive’s Termination of Employment with the Company for any reason, he will promptly return to the Company or certify to the Company the destruction of all memoranda, books, papers, plans, information, letters and other data, and all copies thereof or therefrom, in any way relating to the business of the Company, its affiliates and subsidiaries, except that he may retain personal notes, notebooks and

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diaries, subject to his continuing obligation under Section 8.1(c). Executive further agrees that he will not retain or use for Executive’s own benefit, purposes or account or the benefit, purposes or account of any other person, firm, partnership, joint venture, association, corporation or other business designation, entity or enterprise, other than the Company and any of its Subsidiaries or Affiliates, at any time any trade names, trademark, service mark, other proprietary business designation, patent, or other intellectual property of the Company or its Affiliates.

8.2          “Inventions.

(a)           Prior Inventions. Executive has attached hereto, as Exhibit E, a list describing all inventions, works of authorship (including software, related items, databases, documentation, site content, text or graphics), developments, and improvements that relate to the Company’s proposed or current business, services, products or research and development (“Inventions”) that were created or contributed to by Executive either solely or jointly with others prior to Executive’s employment with the Company and that relate to the Company’s proposed or current business, services, products or research and development (collectively referred to as “Prior Inventions”); or, if no such list is attached, Executive represents that there are no such Prior Inventions. If in the course of Executive’s employment with the Company, Executive uses or relies upon a Prior Invention in Executive’s creation or contribution to any work of authorship, invention, product, service, process, machine or other property of the Company, Executive will inform the Company promptly and, upon request, use Executive’s best efforts to procure any consents of third parties necessary for the Company’s use of such Prior Invention. To the fullest extent permissible by law, Executive hereby grants the Company a non-exclusive royalty-free, irrevocable, perpetual, worldwide license under all of Executive’s Prior Inventions to make, have made, copy, modify, distribute, use and sell works of authorship, products, services, processes and machines and to otherwise operate the Company’s current and future business.

(b)           Ownership of Inventions. Executive agrees that Executive will promptly make full written disclosure to the Company, and hereby assign to the Company, or its designee, all of Executive’s right, title, and interest in and to any and all Inventions, whether or not patentable, that Executive may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time Executive is in the employ of the Company (collectively referred to as “Company Inventions”). Executive further acknowledges that all original works of authorship that are created or contributed to by Executive (solely or jointly with others) within the scope of and during the period of Executive’s employment with the Company are to be deemed “works made for hire,” as that term is defined in the United States Copyright Act (17 U.S.C. Section 101), and the Company will own all right, title and interest in such works, including all copyright and all intellectual property therein shall be the sole property of the Company or its designee for all territories of the world in perpetuity, including any and all copyright registrations, copyright applications and all other copyrightable materials, including any renewals and extensions thereof, and in and to all works based upon, derived from, or incorporating the works covered by such copyrights and in and to all income, royalties, damages, claims, and payments now or hereinafter due or payable with respect thereto, and in all causes of action, either in law or in equity for past, present or future infringement based on said copyrights, and in and to all rights corresponding to the foregoing throughout the world. To the extent any of such works are deemed not to be “works made for hire,” Executive hereby assigns the copyright and all other intellectual property rights in such works to the Company.

(c)           Contracts with the United States. Executive agrees to use all reasonable efforts to execute any licenses or assignments as required by any contract between the Company and the United States or any of its agencies.

(d)           Maintenance of Records. Executive agrees to keep and maintain adequate and current written records of all Company Inventions made by Executive (solely or jointly with others) during the term and within the scope of Executive’s employment with the Company. The records will be in the form of notes, sketches, drawings, and any other format that may be specified by the Company. The records will be available to and remain the sole property and intellectual property of the Company at all times.

(e)           Further Assurances. Executive covenants to take all reasonably requested actions and execute all reasonably requested documents to assist the Company, or its designee, at the Company’s expense (but without further remuneration), in every way to secure the Company’s above rights in the Prior Inventions and Company Inventions and any copyrights, patents, mask work rights or other intellectual property rights relating thereto in any and all countries, and to pursue any patents or registrations with respect thereto. This covenant shall survive the termination of this Agreement. If the Company is unable for any other reason to secure Executive’s signature on any

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document for this purpose, then Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Executive’s agent and attorney in fact, to act for and in Executive’s behalf and stead to execute any documents and to do all other lawfully permitted acts in connection with the foregoing.

8.3           Injunction. Executive acknowledges that monetary damages will not be an adequate remedy for the Company in the event of a breach of this Article 8, and that it would be impossible for the Company to measure damages in the event of such a breach. Therefore, Executive agrees that, in addition to other rights that the Company may have, the Company is entitled to (i) in the event of a breach by Executive of this Article 8 that is not cured within 10 days following written notice from the Company to the Executive detailing such breach, cease making any payments or providing any benefit otherwise required by this Agreement and/or (ii) an injunction preventing Executive from any breach of this Article 8.

ARTICLE 9

MISCELLANEOUS

9.1           Mitigation. In no event shall Executive be obligated to seek other employment or take any other action to mitigate the amounts payable to Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned as result of Executive’s employment by another employer.

9.2          Legal Fees. If Executive incurs legal or other fees and expenses in an effort to secure, preserve or establish entitlement to compensation and benefits under this Agreement, the Company shall reimburse Executive for such fees and expenses to the extent that the Executive substantially prevails in such dispute. In addition, the Company shall upon the Effective Date reimburse Executive for the fees and expenses of Sidley Austin LLP, his counsel, in connection with the negotiation of this Agreement, in an aggregate amount not to exceed $25,000.

9.3          Beneficiary. If Executive dies prior to receiving all the amounts payable to him in accordance with the terms of this Agreement, such amounts shall be paid to one or more beneficiaries (each, a “Beneficiary”) designated by Executive in writing to the Company during his lifetime, or if no such Beneficiary is designated, to Executive’s estate. Such payments shall be made in a lump sum to the extent so payable and, to the extent not payable in a lump sum, in accordance with the terms of this Agreement. Executive, without the consent of any prior Beneficiary may change his designation of Beneficiary or Beneficiaries at any time or from time by a submitting to the Company a new designation in writing.

9.4           Assignment; Successors. This Agreement shall not be assignable by Executive. This Agreement may be assigned by the Company to a person or entity that is a successor in interest to substantially all the business operations of the Company. Upon such assignment, the rights and obligations of the Company hereunder shall become the rights and obligations of such affiliate or successor person or entity. This Agreement shall be binding and inure to the benefit of Executive, his estates and Beneficiaries, the Company and the successors and permitted assigns of the Company.

9.5           Nonalienation. Benefits payable under this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, prior to actually being received by Executive or a Beneficiary, as applicable, and any such attempt to dispose of any right to benefits payable hereunder shall be void.

9.6           Severability. If one or more of this Agreement are declared by any court or government authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any part of this Agreement no declared to be unlawful or invalid. Any part so declared to be unlawful or invalid shall, if possible, be construed in a manner that will give effect to the terms of such part to the fullest extent possible while remaining lawful and valid.

9.7           Withholding Taxes. The Company may withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

9.8          Captions. The names of the Articles and Sections of this Agreement are for convenience of reference only and do not constitute a part hereof.

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9.9           Amendment; Waives. This Agreement shall not be amended or modified except by written instrument executed by the Company and Executive. A waiver of any term, covenant or condition, and any waiver of any default in any such term, covenant or condition shall not be deemed a waiver of any later default thereof.

9.10         Notices. All notices hereunder shall be in writing and deliver by hand, by nationally-recognized delivery service that guarantees overnight delivery, or by first-class, registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Company, to:	Graham Packaging Company L.P. 2401 Pleasant Valley Road York, PA 17402 Attention: General Counsel
With a copy to:	The Blackstone Group L.P. 345 Park Avenue, 31st Floor New York, NY 10154 Attention: Chinh Chu
If to Executive to:	Mr. Warren Knowlton 135 Bow Street, Number 12, Portsmouth, New Hampshire 03801
With a copy to:	Sidley Austin L.P. 787 Seventh Avenue New York, NY 10019 Attention: Robert Hardy

To the most recent address of Executive set forth in the personnel records of the Company.

Either party may from time to time designate a new address by notice given in accordance with this Section Notice shall be effective when actually received by the addressee.

9.11        Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

9.12        Entire Agreement. This Agreement forms the entire agreement between the parties hereto with respect to the subject matter contained in this Agreement.

9.13         Applicable Law. This Agreement shall be interpreted and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to its choice of law principles.

9.14         Survival of Executive’s Rights. All of Executive’s rights hereunder, including his rights to compensation and benefits, and his obligations under Section 8.1 hereof, shall survive the termination of Executive’s employment and/or the termination of this agreement.

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Exhibit 10.14

IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written.

Graham Packaging Company, L.P.

By:

Title:

Graham Packaging Company, L.P.

By:

Title:

Warren D. Knowlton

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Exhibit 10.14

Exhibit A

Gross-Up Payment

(a)           In the event it shall be determined that any payment or benefit under this Agreement or any other payment or benefit from the Company (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, or otherwise) (a “Payment”) is subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the “Excise Tax”), Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Exhibit A, if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Payment does not exceed 110% of the greatest amount that could be paid to Executive without giving rise to any Excise Tax (the “Safe Harbor Amount”), then no Gross-Up Payment shall be made to Executive and the amounts payable under this Agreement shall be reduced so that the Payment, in the aggregate, is reduced to the Safe Harbor Amount.

(b)           All determinations required to be made under this Exhibit A, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized accounting firm determined by the Company (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and Executive within ten business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company; provided that for purposes of determining the amount of any Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rates applicable to individuals in the calendar year in which any such Gross-Up Payment is to be made and deemed to pay state and local income taxes at the highest effective rates applicable to individuals in the state or locality of Executive’s residence or place of employment in the calendar year in which any such Gross-Up Payment is to be made, net of the reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account limitations applicable to individuals subject to federal income tax at the highest marginal rates. All fees and expenses of the Accounting Firm shall be borne by the Company. Any Gross-Up Payment, as determined pursuant to this Exhibit A, shall be paid by the Company to Executive (or to the appropriate taxing authority on Executive’s behalf) when due. If the Accounting Finn determines that no Excise Tax is payable by Executive, it shall so indicate in a written opinion provided to the Executive at least 10 days prior to the unextended due date of the Executive’s tax return with respect to the Year for which the Payment is made. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code, it is possible that the amount of the Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf of) Executive was lower than the amount actually due (“Underpayment”). In the event that the Company exhausts its remedies pursuant to Section (c) of this Exhibit A and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment (including without limitation any related interest or penalties) shall be promptly paid by the Company to or for the benefit of Executive.

(c)           Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of any Gross Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid; provided, that the failure of Executive to give notice within the time frame shall not affect the Company’s obligations hereunder unless the Company is materially prejudiced by the delayed notice. Executive shall not pay such claim prior to the expiration of the thirty day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing

Page 15 of 34

Exhibit 10-14

from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by the Company, (iii) cooperate with the Company in good faith in order to effectively contest such claim and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section (c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, further, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance (including without limitation with respect to forgiveness of such advance pursuant to Section (d)) or with respect to any imputed income with respect to such advance; provided, further, that if Executive is required to extend the statute of limitations to enable the Company to contest such claim, Executive may limit this extension solely to such contested amount. The Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(d)           If, after the receipt by Executive of an amount paid or advanced by the Company pursuant to this Exhibit A, Executive becomes entitled to receive any refund with respect to a Gross-Up Payment, Executive shall promptly pay to the Company the amount of such refund received (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section (c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.

Page 16 of 34

Exhibit 10.14

Exhibit B

Option Agreement

Page 17 of 34

Exhibit 10.14

Exhibit C

Option Agreement

Page 18 of 34

Exhibit 10.14

Exhibit D

Transaction Bonus Percentages

Equity MOIC	% of Total Equity
0.00x	0.00%
0.50x	0.00%
1.00x	0.00%
1.50x	0.00%
1.75x	0.30%
2.00x	0.55%
2.50x	0.85%
3.00x	1.00%
3.50x	1.20%
4.00x	1.30%

The values between the above-listed numbers will be interpolated on a scaled formula tbd.

Equity MOIC	% of Total Equity
Greater than or equal to 5.00x	Additional 100 basis points

The values above 4.00x MOIC and percentage of total equity attributable thereto will not be interpolated.

Page 19 of 34

Exhibit 10.14

Exhibit E

Prior Inventions

Page 20 of 34

Exhibit 10-14

Exhibit F

Additional Competitors

Page 21 of 34

W. Knowlton Performance-Based Option Exhibit 10.14

OPTION AGREEMENT

This AGREEMENT (this “Agreement”) is made as of March 28, 2007 (the “Grant Date”) and effective as of December 4, 2006 by and between Graham Packaging Holdings Company, a Delaware limited partnership (the “Company”), and Warren D. Knowlton (“Optionee”).

1.             Certain Definitions. Capitalized terms used, but not otherwise defined, in this Agreement will have the meanings given to such terms in the Company’s 2004 Management Option Plan (the “Plan”). As used in this Agreement:

(a)           “Board” means the Board of Directors of the L.P. subsequent to the incorporation of the L.P. and the substitution of it as successor for the L.P. as a party to the Employment Agreement. Prior thereto, the Board shall mean the General Partner (as defined in the LP Agreement).

(b)           “Blackstone” means collectively, Blackstone Capital Partners III Merchant Banking Fund L.P., Blackstone Offshore Capital Partners III L.P. and their Affiliates (other than the Company and its Subsidiaries).

(c)           “Cause” means any of the following:

(i)            Optionee commits an act of willful misconduct, fraud, embezzlement or misappropriation against the Company, the L.P. or any of its affiliates or subsidiaries, or shall be convicted by a court of competent jurisdiction of, or shall plead guilty or nolo contendere to, any felony or any crime involving moral turpitude or any crime which is reasonably likely to materially adversely affect the reputation of the Company or the L.P. or Optionee’s ability to perform the duties required under the Agreement; or

(ii)           Optionee commits a material breach of any of the covenants in the Employment Agreement, which breach has not been remedied within 30 days of notice thereof by the Company to Optionee.

(d)           “Change of Control” means any of the following events:

(i)            the sale or disposition, in one or a series of transactions, of all or substantially all the assets of the L.P. to any one or more “persons” or “groups” (as such terms are defined or used in Sections 13(d)(3) or 14(d)(2) of the Exchange Act) other than Blackstone;

(ii)           before the effective date of an initial public offering of the equity securities of the L.P. (or of its successor after conversion to a corporation) (the “IPO Date”), representatives of Blackstone (individually or in the aggregate) cease to comprise a majority of the Board;

(iii)          individuals who, as of the IPO Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute a majority of the members of the Board; provided that any individual who becomes a Director after the IPO Date whose election or nomination for election by the L.P.’s Shareholders was approved by a majority of the members of the Incumbent Board (other than an election or nomination of an individual (i) who is not a representative of Blackstone and (ii) whose initial assumption of office is in connection with an actual or threatened “election contest” relating to the election of the Directors of the L.P. (as such terms are used in Rule 14a-11 under the Exchange Act), “tender offer” (as such term is used in Section 14(d) of the Exchange Act) or a proposed merger) shall be deemed to be members of the Incumbent Board; or

(iv)          any person or group, other than Blackstone, is or becomes the Beneficial Owner, directly or indirectly, of more than 50% of the total voting power of the then outstanding voting stock of the Company (or any entity which controls the L.P. or which is a successor to all or substantially all of the assets of the L.P.), including by way of merger, consolidation, tender or exchange offer or otherwise (other than an offering of stock to the general public through a registration statement filed with the Securities and Exchange Commission) and representatives of Blackstone (individually or in the aggregate) cease to comprise a majority of the Board.

Page 22 of 34

W. Knowlton Performance-Based Option Exhibit 10.14

Notwithstanding the foregoing, there shall not be Change of Control if, in advance of such event, Optionee agrees in writing that such event shall not constitute a Change of Control.

(e)           “Credit Agreement” shall mean the Credit Agreement dated as of October 7, 2004 among Graham Packaging Holdings Company, Graham Packaging Company, L.P., GPC Capital Corp. I, the Lenders Named Therein, Deutsche Bank AG Cayman Islands Branch, Citigroup Global Markets Inc., Goldman Sachs Credit Partners, L.P., General Electric Capital Corporation and Lehman Commercial Paper Inc., and any extensions, renewals, refinancings or refundings thereof in whole or in part.

(f)            “Employment Agreement” means the Employment Agreement, effective as of December 4, 2006, among the Company, the L.P., and Optionee.

(g)           “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(h)           “Financing Default” shall mean an event which would constitute (or with notice or lapse of time or both would constitute) an event of default (which event of default has not been cured or waived) under any of the following as they may be amended from time to time: (i) the Credit Agreement; (ii) the Indentures and any extensions, renewals, refinancings or refundings thereof in whole or in part; and (iii) any other agreement under which an amount of indebtedness of the Company or any of its Subsidiaries is outstanding as of the time of the aforementioned event, and any extensions, renewals, refinancings or refundings thereof in whole or in part, (iv) any amendment of, supplement to or other modification of any of the instruments referred to in clauses (i) through (iii) above; and (v) any of the securities issued pursuant to or whose terms are governed by the terms of any of the agreements set forth in clauses (i) through (iii) above, and any extensions, renewals, refinancings or refundings thereof in whole or in part.

(i)            “Good Reason” means the termination of Optionee’s employment with the L.P. within 90 days following the occurrence, without Optionee’s written consent, of any of the following events:

(i)            the reduction of the Optionee’s position from that of Chief Executive Officer of the L.P.;

(ii)            a decrease in Optionee’s base salary or target bonus;

(iii)          a reduction in Optionee’s participation in the L.P.’s benefit plans and policies to a level materially less favorable to Optionee unless such reduction applies to a majority of senior level executives;

(iv)          a material reduction in (a) agreed level of transportation, (b) York, Pennsylvania accommodations or (c) remote office support, as described in Sections 5.6 and 5.7 of the Employment Agreement; or

(v)           any other material breach by the Company or the L.P. of the Employment Agreement, which breach has not been remedied within 30 days of notice thereof by Optionee to the Company.

(j)            “Indentures” shall mean the indentures dated as of October 7, 2004 among Graham Packaging Company, L.P., GPC Capital Corp. I, Graham Packaging Holdings Company, and The Bank of New York.

(k)           “Liquidity Event” means a sale by Blackstone, in one or a series of transactions, of its entire interest in Holdings and the Company, regardless of whether such event constitutes a change in effective control or ownership of Holdings and the Company within the meaning of Section 409A of the Code. For avoidance of doubt, no Liquidity Event shall be deemed to occur until and unless Blackstone has sold its entire interest in Holdings and the Company.

(l)           “L.P.” means Graham Packaging Company, L.P., a Delaware limited partnership.

(m)          “LP Agreement” means the Amended and Restated Agreement of Limited Partnership of Graham Packaging Company.

Page 23 of 34

W. Knowlton Performance-Based Option Exhibit 10.14

2.            Grant of Option. Subject to and upon the terms, conditions, and restrictions set forth in this Agreement and in the Plan, the Company hereby grants to Optionee an option (the “Option”) to purchase 147.9 Units (the “Units”) at a price (the “Option Price”) of $25,789.00 per Unit, which is not less than the Fair Market Value per Unit on the Grant Date, subject to adjustment. The Option may be exercised from time to time in accordance with the terms of this Agreement.

3.            Term of Option. The term of the Option shall commence at the Grant Date and, unless earlier terminated in accordance with Section 7 hereof, shall expire ten (10) years from the Effective Time.

4.             Right to Exercise. Unless terminated as hereinafter provided, the Option shall become exercisable only as follows:

(a)           The Optionee may earn the right to exercise the Option, provided, that (i) the Optionee shall have remained in the continuous employ of the Company, through the date of a Liquidity Event, and (ii) the Company shall have achieved specified performance targets with respect to the multiple of invested capital (“MOIC”) for such Liquidity Event as such targets are attached hereto as Attachment A. Any units as to which Optionee does not earn the right to exercise the related Option prior to the expiration date set forth in Section 3 hereof shall thereupon expire and terminate.

(b)           Notwithstanding the foregoing Section 4(a), if, prior to the date of a Liquidity Event, Optionee ceases to serve as Chief Executive Officer of the L.P., 75% of the Units shall be forfeited and terminate automatically, without any further action required by the Company.

(c)           Optionee shall be entitled to the privileges of ownership with respect to the Units purchased and delivered to Optionee upon the exercise of all or part of this Option, subject to Section 8 hereof. No election to exercise any Option granted hereunder shall become effective unless and until the Optionee executes a counterpart of the Company’s Agreement of Limited Partnership in order to become bound thereby.

(d)           Notwithstanding anything to the contrary in this Agreement, in the event that Optionee’s employment is terminated by the L.P. without Cause or by Optionee for Good Reason, in either case in contemplation of a pending Change of Control, Optionee shall be deemed to remain in the continuous employ of the L.P. until the effective date of such Change of Control, provided that the Change of Control occurs within one year after Optionee’s termination of employment.

5.             Option Nontransferable. Optionee may not transfer or assign all or any part of the Option other than by will or by the laws of descent and distribution. This Option may be exercised, during the lifetime of Optionee, only by Optionee, or in the event of Optionee’s legal incapacity, by Optionee’s guardian or legal representative acting on behalf of Optionee in a fiduciary capacity under state law and court supervision.

6.             Notice of Exercise; Payment..

(a)           To the extent then exercisable, the Option may be exercised in whole or in part by written notice to the Company stating the number of Units for which the Option is being exercised and the intended manner of payment. The date of such notice shall be the exercise date. Payment equal to the aggregate Option Price of the Units being purchased pursuant to an exercise of the Option must be tendered in full with the notice of exercise to the Company in cash, in Units, through cashless exercise arrangements, or in any other form of payment permitted under the Plan.

(b)           As soon as practicable upon the Company’s receipt of Optionee’s notice of exercise and payment, the Company shall direct the due issuance of the Units so purchased.

(c)           As a further condition precedent to the exercise of this Option in whole or in part, Optionee shall comply with all regulations and the requirements of any regulatory authority having control of, or supervision over, the issuance of the Units and in connection therewith shall execute any documents which the Board of the Company shall in its sole discretion deem necessary or advisable.

7.            Termination of Agreement. The Agreement and the Option granted hereby shall terminate automatically and without further notice on the earliest of the following dates:

Page 24 of 34

W. Knowlton Performance-Based Option Exhibit 10.14

(a)           After Optionee’s termination of employment for any reason, all unvested Options will be forfeited immediately, and all vested Options shall remain exercisable until the lesser of (i) ninety (90) days following the Optionee’s date of termination or (ii) the remaining term of the Option; or

(b)           Ten (10) years from the Effective Time.

8.             Call. The provisions of this Section 8 shall cease to apply subsequent to the later of (i) one hundred (100) days following a Public Offering, or (ii) the fifth anniversary of the date hereof.

(a)           On or after the date Optionee exercises all or a portion of an Option granted hereunder, the Company shall have the right and option to purchase for a period of 90 days from the date of Optionee’s termination of employment for any reason (or, if later, for a period of 200 days from the last date Optionee exercised an Option), and if the Company exercises such right Optionee shall be required to sell to the Company, any or all of his Units at a price per Unit equal to the Fair Market Value (as of the date the Company exercises such right).

(b)           If and to the extent the Options remain exercisable following Optionee’s termination of employment, as provided in Section 7, the Company shall, after Optionee’s employment has terminated for any reason, have the right and option to purchase and if the Company exercises such right, Optionee shall be required to sell to the Company, any or all of his then outstanding Options at a price per Option equal to the product of the (i) the excess of Fair Market Value over the Option Price, and (ii) the number of Units for which such Option was exercisable.

(c)           If the Company desires to exercise its right to purchase any Options or Units pursuant to this Section 8, the Company shall, not later than 60 days after the date of the Optionee’s termination of employment (or, with respect to Section 8(a), if later, 170 days from the last date an Option, or a portion of an Option, was exercised), send written notice of its intention to purchase such Units to Optionee. The closing of the purchase shall take place at the principal office of the Company on the 30th day after the giving of notice by the Company of its exercise of its option to purchase. The purchase price of such Options or Units shall be paid only by delivery of a cashier’s check or a certified check.

(d)           The Company shall have the right to assign any or all of its rights to purchase Options and/or Units pursuant to this Section 8.

If at any time the Company elects to purchase any Units pursuant to Section 8 hereof, the Company shall pay the purchase price for such Units, by the Company’s delivery of a bank cashier’s check or certified check; provided that if a Financing Default exists or, after giving effect to such payment (including any distribution or loan from an affiliate of the Company to the Company in connection therewith) would exist, which prohibits such cash payment, the portion of the cash payment so prohibited (which may not exceed 55% of the excess of the purchase price over the Option Price (such excess being the “Spread”)) shall be made, to the extent such payment is not prohibited by a Financing Default or would not result (after giving effect to any distributions or loans from an affiliate of the Company to the Company in connection therewith) in a Financing Default, by the Company’s delivery of a junior subordinated promissory note (which shall be subordinated and subject in right of payment to the prior payment of all indebtedness of the Company) of the Company (a “Junior Subordinated Note”) in a principal amount equal to the amount of the purchase price which cannot be paid in cash (which may not exceed 55% of the Spread), payable in up to five equal annual installments commencing on the first anniversary of the issuance thereof and bearing interest payable annually at the prime rate listed in the Wall Street Journal (“WSJ”) on the date of issuance. If the Company will pay any portion of the purchase price for Units with a Junior Subordinated Note, the Company shall give the Optionee notice of the amount of such note (which may not exceed 55% of the Spread) at least 20 days prior to such purchase.

9.             No Employment Contract. Nothing contained in this Agreement shall (a) confer upon Optionee any right to be employed by or remain employed by the Company or any affiliate, or (b) limit or affect in any manner the right of the Company or any affiliate to terminate the employment or adjust the compensation of Optionee.

10.          Taxes and Withholding. The Company may withhold, or require Optionee to remit to the Company, an amount sufficient to satisfy federal, state, local or foreign taxes (including the Optionee’s FICA obligation) in connection with any payment made or benefit realized by Optionee or other person under this Agreement or otherwise, and if the amounts available to the Company for such withholding are insufficient, it shall

Page 25 of 34

W. Knowlton Performance-Based Option Exhibit 10.14

be a condition to the receipt of such payment or the realization of such benefit that Optionee or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld.

11.           Compliance with Law. The Company shall make reasonable efforts to comply with all applicable federal and state securities laws.

12.           Adjustments. The Units shall be subject to adjustment as provided in the Plan. The Company agrees to make the adjustments specified in Section 8.2 of the Plan upon the occurrence of any of the events specified therein, or upon the occurrence of any stock dividend, stock split or distribution (other than an ordinary cash dividend) or any other event for which adjustment is permitted under Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations thereunder, in order to prevent dilution or enlargement of the rights of Optionee with respect to the Option.

13.           Relation to Other Benefits. Any economic or other benefit to Optionee under this Agreement shall not be taken into account in determining any benefits to which Optionee may be entitled under any profit-sharing, retirement or other benefit or compensation plan maintained by the Company.

14.           Amendments. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall adversely affect the rights of Optionee under this Agreement without Optionee’s prior written consent.

15.           Severability. If one or more of the provisions of this Agreement is invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable.

16.           Relation to Plan. This Agreement is subject to the terms and conditions of the Plan. In the event of any inconsistent provisions between this Agreement and the Plan, the Plan shall govern. The Board of the Company acting pursuant to the Plan, as constituted from time to time, shall, except as expressly provided otherwise herein, have the right to determine any questions which arise in connection with the Option or its exercise.

17.           Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of Optionee, and the successors and assigns of the Company.

18.          Governing Law. The interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of Delaware, without giving effect to the principles of conflict of laws thereof and all parties, including their successors and assigns, consent to the jurisdiction of the state and federal courts of Delaware.

19.           Prior Agreement. As of the Effective Time, this Agreement supersedes any and all prior and/or contemporaneous agreements, either oral or in writing, between the parties hereto, or between either or both of the parties hereto and the Company, with respect to the subject matter hereof, other than the Employment Agreement. Each party to this Agreement acknowledges that no representations, inducements, promises, or other agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, pertaining to the subject matter hereof, which are not embodied herein, and that no prior and/or contemporaneous agreement, statement or promise pertaining to the subject matter hereof that is not contained in this Agreement shall be valid or binding on either party, other than the Employment Agreement.

20.           Notices. For all purposes of this Agreement, all communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof confirmed), or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service such as Federal Express, UPS, or Purolator, addressed to the Company (to the attention of the Secretary of the Company) at its principal executive offices and to Optionee at his principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address shall be effective only upon receipt.

Page 26 of 34

W. Knowlton Performance-Based Option Exhibit 10.14

21.           Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officer and Optionee has executed this Agreement, as of the day and year first above written.

Graham Packaging Holdings Company

By:__________________________________

Name & Title:

________________________________

OPTIONEE

Name:

Page 27 of 34

W. Knowlton Performance-Based Option Exhibit 10.14

Attachment A

MOIC	% of Options Vested
3.0x	100%
2.75x	75%
2.50x	50%
2.25x	25%
2.0x	0%

Values between those listed above will be interpolated.

Page 28 of 34

W. Knowlton Time-Based Option Exhibit 10.14

OPTION AGREEMENT

This AGREEMENT (this “Agreement”) is made as of March 28, 2007 (the “Grant Date”) and effective as of December 4, 2006 by and between Graham Packaging Holdings Company, a Delaware limited partnership (the “Company”), and Warren D. Knowlton (“Optionee”).

1.             Certain Definitions. Capitalized terms used, but not otherwise defined, in this Agreement will have the meanings given to such terms in the Company’s 2004 Management Option Plan (the “Plan”). As used in this Agreement:

(a)           “Board” means the Board of Directors of the L.P. subsequent to the incorporation of the L.P. and the substitution of it as successor for the L.P. as a party to the Employment Agreement. Prior thereto, the Board shall mean the General Partner (as defined in the LP Agreement).

(b)           “Blackstone” means collectively, Blackstone Capital Partners III Merchant Banking Fund L.P., Blackstone Offshore Capital Partners III L.P. and their Affiliates (other than the Company and its Subsidiaries).

(c)           “Cause” means any of the following:

(i)            Optionee commits an act of willful misconduct, fraud, embezzlement or misappropriation against the Company, the L.P. or any of its affiliates or subsidiaries, or shall be convicted by a court of competent jurisdiction of, or shall plead guilty or nolo contendere to, any felony or any crime involving moral turpitude or any crime which is reasonably likely to materially adversely affect the reputation of the Company or the L.P. or Optionee’s ability to perform the duties required under the Agreement; or

(ii)           Optionee commits a material breach of any of the covenants in the Employment Agreement, which breach has not been remedied within 30 days of notice thereof by the Company to Optionee.

(d)           “Change of Control” means any of the following events:

(i)            the sale or disposition, in one or a series of transactions, of all or substantially all the assets of the L.P. to any one or more “persons” or “groups” (as such terms are defined or used in Sections 13(d)(3) or 14(d)(2) of the Exchange Act) other than Blackstone;

(ii)           before the effective date of an initial public offering of the equity securities of the L.P. (or of its successor after conversion to a corporation) (the “IPO Date”), representatives of Blackstone (individually or in the aggregate) cease to comprise a majority of the Board;

(iii)          individuals who, as of the IPO Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute a majority of the members of the Board; provided that any individual who becomes a Director after the IPO Date whose election or nomination for election by the L.P.’s Shareholders was approved by a majority of the members of the Incumbent Board (other than an election or nomination of an individual (i) who is not a representative of Blackstone and (ii) whose initial assumption of office is in connection with an actual or threatened “election contest” relating to the election of the Directors of the L.P. (as such terms are used in Rule 14a-11 under the Exchange Act), “tender offer” (as such term is used in Section 14(d) of the Exchange Act) or a proposed merger) shall be deemed to be members of the Incumbent Board; or

(iv)          any person or group, other than Blackstone, is or becomes the Beneficial Owner, directly or indirectly, of more than 50% of the total voting power of the then outstanding voting stock of the Company (or any entity which controls the L.P. or which is a successor to all or substantially all of the assets of the L.P.), including by way of merger, consolidation, tender or exchange offer or otherwise (other than an offering of stock to the general public through a registration statement filed with the Securities and Exchange Commission) and representatives of Blackstone (individually or in the aggregate) cease to comprise a majority of the Board.

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Notwithstanding the foregoing, there shall not be Change of Control if, in advance of such event, Optionee agrees in writing that such event shall not constitute a Change of Control.

(e)           “Credit Agreement” shall mean the Credit Agreement dated as of October 7, 2004 among Graham Packaging Holdings Company, Graham Packaging Company, L.P., GPC Capital Corp. I, the Lenders Named Therein, Deutsche Bank AG Cayman Islands Branch, Citigroup Global Markets Inc., Goldman Sachs Credit Partners, L.P., General Electric Capital Corporation and Lehman Commercial Paper Inc., and any extensions, renewals, refinancings or refundings thereof in whole or in part.

(f)            “Employment Agreement” means the Employment Agreement, effective as of December 4, 2006, among the Company, the L.P., and Optionee.

(g)           “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(h)           “Financing Default” shall mean an event which would constitute (or with notice or lapse of time or both would constitute) an event of default (which event of default has not been cured or waived) under any of the following as they may be amended from time to time: (i) the Credit Agreement; (ii) the Indentures and any extensions, renewals, refinancings or refundings thereof in whole or in part; and (iii) any other agreement under which an amount of indebtedness of the Company or any of its Subsidiaries is outstanding as of the time of the aforementioned event, and any extensions, renewals, refinancings or refundings thereof in whole or in part, (iv) any amendment of, supplement to or other modification of any of the instruments referred to in clauses (i) through (iii) above; and (v) any of the securities issued pursuant to or whose terms are governed by the terms of any of the agreements set forth in clauses (i) through (iii) above, and any extensions, renewals, refinancings or refundings thereof in whole or in part.

(i)            “Good Reason” means the termination of Optionee’s employment with the L.P. within 90 days following the occurrence, without Optionee’s written consent, of any of the following events:

(i)            the reduction of the Optionee’s position from that of Chief Executive Officer of the L.P.;

(ii)            a decrease in Optionee’s base salary or target bonus;

(iii)          a reduction in Optionee’s participation in the L.P.’s benefit plans and policies to a level materially less favorable to Optionee unless such reduction applies to a majority of senior level executives;

(iv)          a material reduction in (a) agreed level of transportation, (b) York, Pennsylvania accommodations or (c) remote office support, as described in Sections 5.6 and 5.7 of the Employment Agreement; or

(v)           any other material breach by the Company or the L.P. of the Employment Agreement, which breach has not been remedied within 30 days of notice thereof by Optionee to the Company.

(j)            “Indentures” shall mean the indentures dated as of October 7, 2004 among Graham Packaging Company, L.P., GPC Capital Corp. I, Graham Packaging Holdings Company, and The Bank of New York.

(k)           “L.P.” means Graham Packaging Company, L.P., a Delaware limited partnership.

(l)            “LP Agreement” means the Amended and Restated Agreement of Limited Partnership of Graham Packaging Company.

2.            Grant of Option. Subject to and upon the terms, conditions, and restrictions set forth in this Agreement and in the Plan, the Company hereby grants to Optionee an option (the “Option”) to purchase 295.7 Units (the “Units”) at a price (the “Option Price”) of $38,683.50 per Unit, which is not less than the Fair Market Value per Unit on the Grant Date, subject to adjustment. The Option may be exercised from time to time in accordance with the terms of this Agreement.

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3.            Term of Option. The term of the Option shall commence at the Grant Date and, unless earlier terminated in accordance with Section 7 hereof, shall expire ten (10) years from the Effective Time.

4.             Right to Exercise. Unless terminated as hereinafter provided, the Option shall become exercisable only as follows:

(a)           The Option shall become exercisable with respect to 20% of the Units on the first anniversary of the Effective Time, an additional 40% of the Units on the second anniversary of the Grant Date, an additional 20% of the Units on the third anniversary of the Grant Date and an additional 20% of the Units on the fourth anniversary of the Grant Date if Optionee remains in the continuous employ of the L.P. as of each such date.

(b)           Notwithstanding the foregoing, the Options granted hereby shall become immediately exercisable upon the occurrence of a Change of Control if Optionee remains in the continuous employ of the L.P. until the date of the consummation of such Change of Control.

(c)           Optionee shall be entitled to the privileges of ownership with respect to the Units purchased and delivered to Optionee upon the exercise of all or part of this Option, subject to Section 8 hereof. No election to exercise any Option granted hereunder shall become effective unless and until the Optionee executes a counterpart of the Company’s Agreement of Limited Partnership in order to become bound thereby.

(d)           Notwithstanding anything to the contrary in this Agreement, in the event that Optionee’s employment is terminated by the L.P. without Cause or by Optionee for Good Reason, in either case in contemplation of a pending Change of Control, Optionee shall be deemed to remain in the continuous employ of the L.P. until the effective date of such Change of Control provided that the Change of Control occurs within one year after Optionee’s termination of employment.

5.             Option Nontransferable. Optionee may not transfer or assign all or any part of the Option other than by will or by the laws of descent and distribution. This Option may be exercised, during the lifetime of Optionee, only by Optionee, or in the event of Optionee’s legal incapacity, by Optionee’s guardian or legal representative acting on behalf of Optionee in a fiduciary capacity under state law and court supervision.

6.             Notice of Exercise; Payment..

(a)           To the extent then exercisable, the Option may be exercised in whole or in part by written notice to the Company stating the number of Units for which the Option is being exercised and the intended manner of payment. The date of such notice shall be the exercise date. Payment equal to the aggregate Option Price of the Units being purchased pursuant to an exercise of the Option must be tendered in full with the notice of exercise to the Company in cash, in Units, through cashless exercise arrangements, or in any other form of payment, permitted under the Plan.

(b)           As soon as practicable upon the Company’s receipt of Optionee’s notice of exercise and payment, the Company shall direct the due issuance of the Units so purchased.

(c)           As a further condition precedent to the exercise of this Option in whole or in part, Optionee shall comply with all regulations and the requirements of any regulatory authority having control of, or supervision over, the issuance of the Units and in connection therewith shall execute any documents which the Board of the Company shall in its sole discretion deem necessary or advisable.

7.            Termination of Agreement. The Agreement and the Option granted hereby shall terminate automatically and without further notice on the earliest of the following dates:

(a)           After Optionee’s termination of employment for any reason, all unvested Options will be forfeited immediately, and all vested Options shall remain exercisable until the lesser of (i) ninety (90) days following the Optionee’s date of termination or (ii) the remaining term of the Option; or

(b)           Ten (10) years from the Effective Time.

8.             Call. The provisions of this Section 8 shall cease to apply subsequent to the later of (i) one hundred (100) days following a Public Offering, or (ii) the fifth anniversary of the date hereof.

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(a)           On or after the date Optionee exercises all or a portion of an Option granted hereunder, the Company shall have the right and option to purchase for a period of 90 days from the date of Optionee’s termination of employment for any reason (or, if later, for a period of 200 days from the last date Optionee exercised an Option), and if the Company exercises such right Optionee shall be required to sell to the Company, any or all of his Units at a price per Unit equal to the Fair Market Value (as of the date the Company exercises such right).

(b)           If and to the extent the Options remain exercisable following Optionee’s termination of employment, as provided in Section 7, the Company shall, after Optionee’s employment has terminated for any reason, have the right and option to purchase and if the Company exercises such right, Optionee shall be required to sell to the Company, any or all of his then outstanding Options at a price per Option equal to the product of the (i) the excess of Fair Market Value over the Option Price, and (ii) the number of Units for which such Option was exercisable.

(c)           If the Company desires to exercise its right to purchase any Options or Units pursuant to this Section 8, the Company shall, not later than 60 days after the date of the Optionee’s termination of employment (or, with respect to Section 8(a), if later, 170 days from the last date an Option, or a portion of an Option, was exercised), send written notice of its intention to purchase such Units to Optionee. The closing of the purchase shall take place at the principal office of the Company on the 30th day after the giving of notice by the Company of its exercise of its option to purchase. The purchase price of such Options or Units shall be paid only by delivery of a cashier’s check or a certified check

(d)           The Company shall have the right to assign any or all of its rights to purchase Options and/or Units pursuant to this Section 8.

If at any time the Company elects to purchase any Units pursuant to Section 8 hereof, the Company shall pay the purchase price for such Units, by the Company’s delivery of a bank cashier’s check or certified check; provided that if a Financing Default exists or, after giving effect to such payment (including any distribution or loan from an affiliate of the Company to the Company in connection therewith) would exist, which prohibits such cash payment, the portion of the cash payment so prohibited (which may not exceed 55% of the excess of the purchase price over the Option Price (such excess being the “Spread”)) shall be made, to the extent such payment is not prohibited by a Financing Default or would not result (after giving effect to any distributions or loans from an affiliate of the Company to the Company in connection therewith) in a Financing Default, by the Company’s delivery of a junior subordinated promissory note (which shall be subordinated and subject in right of payment to the prior payment of all indebtedness of the Company) of the Company (a “Junior Subordinated Note”) in a principal amount equal to the amount of the purchase price which cannot be paid in cash (which may not exceed 55% of the Spread), payable in up to five equal annual installments commencing on the first anniversary of the issuance thereof and bearing interest payable annually at the prime rate listed in the Wall Street Journal (“WSJ”) on the date of issuance. If the Company will pay any portion of the purchase price for Units with a Junior Subordinated Note, the Company shall give the Optionee notice of the amount of such note (which may not exceed 55% of the Spread) at least 20 days prior to such purchase.

9.             No Employment Contract. Nothing contained in this Agreement shall (a) confer upon Optionee any right to be employed by or remain employed by the Company or any affiliate, or (b) limit or affect in any manner the right of the Company or any affiliate to terminate the employment or adjust the compensation of Optionee.

10.          Taxes and Withholding. The Company may withhold, or require Optionee to remit to the Company, an amount sufficient to satisfy federal, state, local or foreign taxes (including the Optionee’s FICA obligation) in connection with any payment made or benefit realized by Optionee or other person under this Agreement or otherwise, and if the amounts available to the Company for such withholding are insufficient, it shall be a condition to the receipt of such payment or the realization of such benefit that Optionee or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld.

11.           Compliance with Law. The Company shall make reasonable efforts to comply with all applicable federal and state securities laws.

12.           Adjustments. The Options shall be subject to adjustment as provided in the Plan. The Company agrees to make the adjustments specified in Section 8.2 of the Plan upon the occurrence of any of the events

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specified therein, or upon the occurrence of any stock dividend, stock split or distribution (other than an ordinary cash dividend) or any other event for which adjustment is permitted under Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations thereunder, in order to prevent dilution or enlargement of the rights of Optionee with respect to the Option.

13.           Relation to Other Benefits. Any economic or other benefit to Optionee under this Agreement shall not be taken into account in determining any benefits to which Optionee may be entitled under any profit-sharing, retirement or other benefit or compensation plan maintained by the Company.

14.           Amendments. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall adversely affect the rights of Optionee under this Agreement without Optionee’s prior written consent.

15.           Severability. If one or more of the provisions of this Agreement is invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable.

16.           Relation to Plan. This Agreement is subject to the terms and conditions of the Plan. In the event of any inconsistent provisions between this Agreement and the Plan, the Plan shall govern. The Board of the Company acting pursuant to the Plan, as constituted from time to time, shall, except as expressly provided otherwise herein, have the right to determine any questions which arise in connection with the Option or its exercise.

17.           Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of Optionee, and the successors and assigns of the Company.

18.          Governing Law. The interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of Delaware, without giving effect to the principles of conflict of laws thereof and all parties, including their successors and assigns, consent to the jurisdiction of the state and federal courts of Delaware.

19.           Prior Agreement. As of the Effective Time, this Agreement supersedes any and all prior and/or contemporaneous agreements, either oral or in writing, between the parties hereto, or between either or both of the parties hereto and the Company, with respect to the subject matter hereof, other than the Employment Agreement. Each party to this Agreement acknowledges that no representations, inducements, promises, or other agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, pertaining to the subject matter hereof, which are not embodied herein, and that no prior and/or contemporaneous agreement, statement or promise pertaining to the subject matter hereof that is not contained in this Agreement shall be valid or binding on either party, other than the Employment Agreement.

20.           Notices. For all purposes of this Agreement, all communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof confirmed), or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service such as Federal Express, UPS, or Purolator, addressed to the Company (to the attention of the Secretary of the Company) at its principal executive offices and to Optionee at his principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address shall be effective only upon receipt.

21.           Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officer and Optionee has executed this Agreement, as of the day and year first above written.

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W. Knowlton Time-Based Option Exhibit 10.14

Graham Packaging Holdings Company

By:__________________________________

Name & Title:

_____________________________________

OPTIONEE

Name:

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EX-10

Exhibit 10.15

EMPLOYMENT AGREEMENT

Between

GRAHAM PACKAGING HOLDINGS COMPANY,

GRAHAM PACKAGING COMPANY, L.P.,

And

The Chief Financial Officer

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Exhibit 10.15

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT dated as of March 28, 2007 and effective as of December 4, 2006 (the “Agreement”) between Graham Packaging Holdings Company (“Holdings”), Graham Packaging Company, L.P., a Delaware Limited Partnership (“Limited Partnership”, or “L.P.” or “Company”), and Mark S. Burgess (“Executive”).

WHEREAS, the Company desires to employ Executive as its Chief Financial Officer and Holdings desires to employ Executive as its Chief Financial Officer, Assistant Treasurer and Assistant Secretary and Executive desires to be employed by the Company and Holdings in each such capacity and on the terms and subject to the conditions set forth herein:

NOW, THEREFORE, in consideration of the promises and the mutual agreements contained herein, the Company, Holdings and Executive hereby agree as follows:

ARTICLE I

DEFINITIONS

The terms set forth below have the following meanings (such meanings to be applicable to both the singular and plural forms, except where otherwise expressly indicated):

1.1           “Accounting Firm” - see Exhibit A.

1.2           “Accrued Base Salary” means the amount of Executive’s Base Salary that is accrued but not yet paid as of the Date of Termination.

1.3           “Affiliate” means any Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, the Company. For the purposes of this definition, the term “control” when used with respect to any Person means the power to direct or cause the direction of management or policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

1.4           “Agreement” - see the recitals to this Agreement

1.5           “Agreement Date” means the effective date that is specified in the recitals to this Agreement.

1.6           “Annual Bonus” - see Section 4.2(a).

1.7           “Base Salary” - see Section 4.1.

1.8           “Beneficial Owner” means a “beneficial owner,” as such term is defined in Rule 13d-3 under the Exchange Act (or any successor rule thereto).

1.9           “Beneficiary” - see Section 9.3.

1.10         “Blackstone” means collectively, Blackstone Capital Partners III Merchant Banking Fund L.P., Blackstone Offshore Capital Partners III L.P. and their Affiliates (other than the Company and its Subsidiaries).

1.11         “Board” means the Board of Directors of the Company subsequent to the incorporation of the L.P. and the substitution of it as successor for the L.P. as a party to this Agreement. Prior thereto, the Board shall mean the General Partner (as defined in the LP Agreement).

1.12           “Cause” means any of the following:

(a)           Executive commits an act of gross negligence, willful misconduct, fraud, embezzlement, misappropriation or breach of fiduciary duty against Holdings, the Company or any of its affiliates or subsidiaries, or shall be convicted by a court of competent jurisdiction of, or shall plead guilty or nolo contendere to, any felony or any crime involving moral turpitude or any crime which reasonably could affect the reputation of Holdings, the Company or the Executive’s ability to perform the duties required under the Employment Agreement;

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Exhibit 10.15

(b)           Executive commits a material breach of any of the covenants in the Employment Agreement, which breach has not been remedied within 30 days of notice thereof, or

(c)           Executive habitually and willfully neglects his obligations under the Employment Agreement or the Executive’s duties as an employee of Holdings or the Company and fails to correct such action within 30 days of notice thereof.

1.13           “Code” means the Internal Revenue Code of 1986, as amended from time to time.

1.14           “Committee” means the Compensation Committee of the Board.

1.15         “Common Stock” means the common stock of the Company following its incorporation, and the equivalent L.P. units prior to its incorporation.

1.16           “Company” see the recitals to this Agreement.

1.17           “Company Inventions” - see Section 8.2(b).

1.18         “Date of Termination” means the effective date of a Termination of Employment for any reason, including death or Disability, whether by either the Company or the Executive.

1.19         “Director” means a director of the Company subsequent to its incorporation or a member of the governing body of the L.P. prior to its incorporation.

1.20           “Disability” means the Executive is “disabled” as determined under Section 409A of the Code.

1.21           “Employment Period” - see Section 3.1.

1.22         “Exchange Act” means the Securities Exchange Act of 1934, as amended or any successors thereto.

1.23           “Excise Tax” - see Exhibit A.

1.24           “Executive” - see the recitals to this Agreement.

1.25           “Extension Date” - see Section 3.2.

1.26         “Good Reason” means the termination of the Executive’s employment with the Company within 90 days following the occurrence, without Executive’s written consent, of any of the following events:

(a)           a substantial diminution in Executive’s position, authority, duties or responsibilities as contemplated by the preamble to this Agreement, excluding any isolated, insubstantial and inadvertent action which is remedied by Company promptly after receipt of notice thereof from the Executive;

(b)           a decrease in Executive’s Base Salary or Target Annual Bonus;

(c)           a reduction in Executive’s participation in the Company’s benefit plans and policies to a level materially less favorable to Executive unless such reduction applies to a majority of senior level executives; or

(d)           the announcement of the relocation or the actual relocation of the Executive’s primary place of employment to a location 50 or more miles from the Company’s current headquarters; or

(e)           a breach by the Company of any of its obligations under Articles IV, V, VI and VII of this Agreement and the failure to correct the same within ten (10) days of notice thereof.

1.27           “Gross-Up Payment” - Exhibit A.

1.28           “Holdings Board” means the Board of Directors of Holdings

1.29           “Inventions” see Section 8.2(a).

1.30         “LP Agreement” means the Amended and Restated Agreement of Limited Partnership of Graham Packaging Company.

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Exhibit 10.15

1.31           “Payment” - see Exhibit A.

1.32         “Permitted Transferee” means the spouse of Executive, a lineal descendant of Executive or a spouse of a lineal descendant of Executive or a trust, limited partnership or other entity principally benefiting all or a portion of such individuals.

1.33         “Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, entity or government instrumentality, division, agency, body or department.

1.34           “Prior Inventions” - see Section 8.2(a).

1.35         “Prorata Annual Bonus” means the product of (a) the Annual Bonus Executive would have been entitled to receive pursuant to Section 4.2 hereof in the Year of the Executive’s Termination of Employment multiplied by (b) a fraction of which the numerator is the numbers of days that have elapsed in such Year of Termination of Employment through the Date of Termination and the denominator is 365.

1.36         “Restricted Period” means the twenty-four month period immediately following a Termination of Employment for any reason.

1.37           “Safe Harbor Amount” see Exhibit A.

1.38           “Shareholder” or “Stockholder” means an owner of the Company’s securities.

1.39         “Subsidiary” means, with respect to any Person, (a) any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned by such Person, and (b) any partnership, limited liability company or other entity in which such Person has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%.

1.40         “Target Annual Bonus” means the product of Base Salary (at a point in time) multiplied by 150 percent, as such percentage may be adjusted upwards from time to time by the Board.

1.41         “Termination For Good Reason” means a Termination of Employment during the Employment Period by Executive for Good Reason.

1.42         “Termination of Employment” means a termination by the Company or by Executive (or due to Executive’s death) of Executive’s employment with the Company or its Affiliates.

1.43         “Termination Without Cause” means a Termination of Employment during the Employment Period by the Company for any reason other than Cause or Executive’s death or Disability.

1.44           “Underpayment” - see Exhibit A.

1.45           “Year” means a calendar year period ending on December 31.

ARTICLE II

DUTIES

2.1           Duties. The Company shall employ Executive during the Employment Period as its Chief Financial Officer and Holdings shall employ Executive during the Employment Period as its Chief Financial Officer, Assistant Treasurer and Assistant Secretary. During the Employment Period, Executive shall perform the duties assigned to him hereunder by the Company’s Chief Executive Officer and the Holdings Board from time to time, shall devote his full business time, attention and effort to the affairs of the Company and shall use his reasonable best efforts to promote the interests of the Company. During the Employment Period, and excluding any periods of disability, vacation, or sick leave to which Executive is entitled, Executive agrees to devote his full

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Exhibit 10.15

business time and attention and time to the business and affairs of the Company. If requested, Executive shall also serve as a member of the Board without additional compensation.

2.2           Other Activities. Executive may serve on one corporate board other than the Company and Holdings, and may also (i) serve on other corporate, civic or charitable boards or committees, deliver lectures, fulfill speaking engagements, or teach at educational institutions, subject to the consent of the Board (which shall not be unreasonably withheld) and/or (ii) manage personal investments, provided that all such activities do not individually or in the aggregate significantly interfere with the performance of his duties under this Agreement or violate Section 8.1 of this Agreement.

ARTICLE III

EMPLOYMENT PERIOD

3.1          Employment Period. Subject to Section 3.2 and the termination provisions hereinafter provided, the term of Executive’s employment under this Agreement (the “Employment Period”) shall begin on the Agreement Date and end on the third anniversary of the Agreement Date, or, if applicable at the end of any extension pursuant to Section 3.2. The employment of Executive by the Company shall not be terminated other than in accordance with Article VII.

3.2          Extensions of Employment Period. Commencing on the third anniversary of the Agreement Date, and on each anniversary date thereafter, (each an “Extension Date”) if 90 days before that date either Holdings or the Company has not delivered to Executive, and Executive has not delivered to Company and Holdings, a written notice that the Employment Period will not be extended, the Employment Period will be automatically extended for one year from its then scheduled expiration date (i.e., the next occurring Extension Date).

ARTICLE IV

COMPENSATION

4.1           Salary. The Company shall pay Executive in accordance with its normal payroll practices (but not less frequently than monthly) an annual salary at a rate of $450,000 per year (“Base Salary”). During the Employment Period, the Base Salary shall be reviewed at least annually by the Committee after consultation with Executive and may from time to time be increased as determined by the Committee. Effective as of the date of any such increase, the Base Salary as so increased shall be considered the new Base Salary for all purposes of this Agreement. Any increase in Base Salary shall not limit or reduce any other obligation of the Company to Executive under this Agreement.

4.2           Annual Bonus.

(a)           Subject to Article 7, Executive shall be eligible to earn an annual cash bonus (“Annual Bonus”) in accordance with the terms hereof for the current Year and each subsequent Year that begins during the Employment Period. Executive shall be eligible for an Annual Bonus based upon the achievement of the financial budget or other performance criteria established by the Board at its discretion. The Annual Bonus shall be equal to the Target Annual Bonus upon full achievement of the performance criteria, but may be less than the Target Annual Bonus upon lesser levels of achievement.

(b)           The Company shall pay the entire Annual Bonus that is payable with respect to a Year in a lump-sum cash payment within 2½ months following the close of such Year. Any such Annual Bonus shall in any event be paid no later than the date annual bonuses are paid to the other senior executives of the Company.

ARTICLE V

OTHER BENEFITS

5.1           Incentive, Savings and Retirement Plans. In addition to Base Salary and the Annual Bonus, Executive shall be entitled to participate during the Employment Period in all incentive, savings and retirement

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Exhibit 10.15

plans, practices, policies and programs that are from time to time generally available to other senior executives of the Company.

5.2           Welfare Benefits. During the Employment Period, Executive and/or his eligible dependents, as the case may be, shall be eligible for participation in all benefits under welfare benefit plans, practices, policies and programs provided by the Company (including any medical, prescription, dental disability, salary continuance, employee life, group life, dependent life, accidental death and travel accident insurance plans and programs) generally available to other senior executives of the Company and, to the extent permissible under any medical and prescription plans, without regard to any applicable waiting periods.

5.3           Fringe Benefits. During the Employment Period, Executive shall be entitled to all fringe benefits that are from time to time generally available to other senior executives of the Company.

5.4          Vacation. During the Employment Period, Executive shall be entitled to paid vacation time in accordance with the plans, practices, policies, and programs generally available to other senior executives of the Company, with a minimum of 4 weeks vacation per year.

5.5          Expenses. During the Employment Period, Executive shall be entitled to receive prompt reimbursement for all reasonable employment related expenses incurred by Executive for the prior month upon the receipt by either of the Company of accounting in accordance with practices, policies and procedures generally available to other senior executives of the Company; provided that all reimbursements shall in any event be made within 2½ months following the Year in which they were incurred.

5.6           Office; Support Staff. During the Employment Period, Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to secretarial and other assistance, appropriate to his position and duties under this Agreement.

5.7          Relocation Package. The Executive shall be entitled to receive reimbursement of moving expenses and expenses in connection with the sale or purchase of a home (including brokerage commissions, closing costs and reasonable attorneys’ fees) up to a maximum total expense of $100,000. Such amount shall be provided, to the maximum extent possible, under an accountable plan and, to the extent not so provided, shall be reimbursed on an after-tax basis. In addition, the Executive shall be entitled to receive payment on an after-tax basis for temporary living expenses for six months, in the amount of $8,333 per month, payable on the first regularly scheduled payroll date in each month.

5.8           Tax Gross-Up Payment. If it shall be determined that any payment to Executive pursuant to this Agreement or any other payment or benefit from the Company would be subject to the excise tax imposed by section 4999 of the Code, then Executive shall receive a Gross-Up Payment pursuant to Exhibit A attached hereto.

5.9           Additional Bonus. Executive shall be entitled to receive an additional bonus (“Additional Bonus”) of $75,000, payable on December 31, 2006.

ARTICLE VI

OTHER EXECUTIVE BENEFITS

6.1          Equity Incentive Agreement. Executive shall be eligible to participate in Holdings 2004 Management Option Plan pursuant to those Option Agreements set forth as Exhibits B and C hereto.

6.2           Indemnification. The Company shall, to the maximum extent permitted by law, and in addition to any such right granted to or available to the Executive under the Company’s Charter, By-laws or standing or other resolutions, defend, indemnify and hold harmless the Executive from and against any and all claims made against the Executive concerning or relative to his service, actions or omissions on behalf of the Company as an officer, employee, director or agent of the Company and Holdings; provided, however, that the obligation to indemnify the Executive shall not apply to any claim made against the Executive that arises out of the act, omission or failure to act that would constitute Cause for the Executive’s termination of employment. The Company shall, upon the Executive’s request, promptly advance or pay any amounts for reasonable costs, charges, or expenses (including any legal fees and expenses incurred by counsel retained by the Executive) in respect of his right to indemnification hereunder or in furtherance of such right, subject to a later determination as to the Executive’s ultimate right to

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receive indemnification. The Executive’s right to indemnification shall survive until the expiration of all applicable statutes of limitations, without regard to the earlier termination of the Executive’s employment.

ARTICLE VII

TERMINATION BENEFITS

7.1           Termination of Employment. The Employment Period and Executive’s employment hereunder may be terminated by either party at any time and for any reason; provided that Executive will be required to give the Company at least 30 days’ advance written notice of any resignation of Executive’s employment except if such resignation is for Good Reason. Notwithstanding any other provision of this Agreement, the provisions of this Article VII shall exclusively govern Executive’s rights under this Agreement following the expiration of the Employment Period or if Executive’s employment with the Company or its Affiliates is terminated during the Employment Period for any reason.

7.2           Termination for Cause or Other Than for Good Reason, etc.

(a)           If the Company terminates Executive’s employment during the Employment Period for Cause or Executive terminates his employment during the Employment Period other than for Good Reason, death or Disability, the Company shall pay to Executive immediately after the Date of Termination an amount equal to Executive’s Accrued Base Salary, accrued but unpaid vacation, unpaid business expenses properly incurred by Executive in accordance with Company policy prior to the date of Executive’s termination.

(b)           Before terminating Executive’s employment for Cause, the Board will specify in writing to Executive in detail the nature of the act, omission, refusal, or failure that it deems to constitute Cause.

7.3           Termination for Death or Disability. If Executive’s employment terminates during the Employment Period due to his death or Disability, the Company shall pay to Executive or his Beneficiaries, as the case may be, immediately after the Date of Termination an amount that is equal to the total of (i) the Executive’s Accrued Base Salary, (ii) accrued but unpaid vacation, (iii) unpaid business expenses properly incurred by Executive in accordance with Company policy prior to the date of Executive’s termination, and (iv) any accrued but unpaid Annual Bonus.

7.4           Termination Without Cause or Resignation for Good Reason. Upon termination of the Executive’s employment with the Company and Holdings during the Employment Period either (i) by the Company and Holdings without Cause or (ii) by the Executive’s resignation for Good Reason, and subject to the Executive’s execution and non-revocation of a release in substantially such reasonable form as is provided by the Company (such release shall include provisions regarding non-disparagement of the Company and Holdings, the Executive’s cooperation with legal claims, and the Executive’s compliance with the covenants set forth in Article VIII of this Agreement), the Executive will receive in 24 monthly installments an amount equal to two times the sum of: (i) Base Salary and (ii) the average Annual Bonus earned in the preceding three years, or, if termination occurs prior to such three year period, the average Annual Bonus earned during such shorter period, or if termination occurs in the first Year of the Employment Period, the Target Bonus. In addition to the above payments, (a) Executive shall receive upon termination of employment, a Prorata Annual Bonus at the time the Annual Bonus would have otherwise been payable had Executive’s employment not terminated and the continuation of non-taxable health and dental benefits to which Executive is entitled as of the date of termination for 12 months; provided that such benefits shall cease upon the Executive becoming eligible for comparable benefits from a new employer; (b) Executive shall receive, for a period of 12 months following the date of termination, but no later than the point at which Executive is employed on a substantively full-time basis, executive career transition services, not to exceed $25,000 in the aggregate; and (c) the Time-Based Tranche Options provided to the Executive pursuant to the Option Agreement attached hereto as Exhibit B shall immediately become fully vested.

Notwithstanding the foregoing, if Executive is a “specified employee” under Section 409A of the Code, and any payments described above would result in the imposition of an additional tax under that section, then any of the above payments due during the six months following the termination of employment shall be accumulated and paid on the day following the six month anniversary of the Executive’s termination of employment.

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Exhibit 10.15

7.5           Other Termination Benefits. In addition to any amounts or benefits payable upon a Termination of Employment hereunder, Executive shall, except as otherwise specifically provided herein, be entitled to any payments or benefits provided under the terms of any plan, policy or program of the Company in which Executive participates or as otherwise required by applicable law.

7.6          Election Not to Extend the Employment Period. If the Company elects not to extend the Employment Period pursuant to Section 3.2 such that the Employment Period terminates, the nonextension shall be treated as a Termination without Cause.

7.7          Continued Employment Beyond the Expiration of the Employment Period. Unless the parties otherwise agree in writing, continuation of Executive’s employment with the Company beyond the expiration of the Employment Period shall be deemed an employment at-will and shall not be deemed to extend any of the provisions of this Agreement and Executive’s employment may thereafter be terminated at will by either Executive or the Company; provided that the provisions of Article VIII of this Agreement shall survive any termination of this Agreement or Executive’s termination of employment hereunder.

7.8          Board/Committee Resignation. Upon Executive’s Termination of Employment for any reason, Executive agrees to resign, as of the date of such termination and to the extent applicable, from the Board (and any committees thereof) and the Board of Directors (and any committees thereof) of any of the Company’s affiliates.

7.9           Property. Upon Executive’s termination of Employment with the Company for any reason, Executive shall return all property of the Company and Holdings to the Company.

ARTICLE VIII

RESTRICTIVE COVENANTS

8.1           Non-Solicitation of Employees; Confidentiality; Non-Competition..

(a)           Executive covenants and agrees that, at no time during the Employment Period nor during the Restricted Period, will Executive:

(i)            Directly or indirectly employ or seek to employ any person (other than his personal assistant) employed as of the date of Executive’s Termination of Employment or who left the employment of the Company or its Affiliates coincident with, or within six months prior to or after, the Executive’s Termination of Employment with the Company or otherwise encourage or entice any such person to leave such employment (provided that this Section 8.1(a)(i) shall not apply either to persons who had not become employed by the Company before the Date of Termination or to persons whose employment ended at any time as a result of the Company’s termination of those individuals without cause);

(ii)           Become employed by, enter into a consulting arrangement with or otherwise agree to perform personal services for a Competitor (as defined in section 8.1 (b)).

(iii)          Acquire an ownership interest, or an option to purchase an ownership interest in a Competitor, other than a publicly traded Competitor provided that ownership or option position in such publicly traded Competitor does not exceed 5 percent;

(iv)          Solicit any business of the Company on behalf of or for the benefit of a Competitor; or

(v)           Interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company or any of its affiliates and customers, clients, suppliers of the Company or its Affiliates.

(b)           For purposes of the Section, “Competitor” means any Person that produces blowmolded plastic containers or produces or provides any other product or service of the Company that represents, as of the Date of Termination, at least 10% of the consolidated revenues of the Company (including, without limitation, products or services that Executive is aware, as of the Date of Termination, that the Company had specific plans (as evidenced through the most recent annual corporate business plan or by resolutions of the Board) to produce or provide during the twelve month period following the Date of Termination and such products or services are reasonably anticipated

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to represent at least 10% of the consolidated revenues of the Company within the two years following the Date of Termination) that are competitive with those sold by a business that is being conducted by the Company or any Subsidiary at the time in question and was being conducted at the Date of Termination. Notwithstanding anything to the contrary in this Section, goods or services shall not be deemed to be competitive with those of the Company solely as a result of Executive’s being employed by or otherwise associated with a business of which a unit is in competition with the Company or any Subsidiary (a “Competitive Unit”) but as to which unit Executive does not have direct or indirect responsibilities for the products or services involved; provided, that such Competitive Unit contributes less than 25% of the consolidated revenues for the most recently completed fiscal year of such business.

(c)           Executive covenants and agrees that at no time during the Employment Period nor at any time following any Termination of Employment will Executive communicate, furnish, divulge or disclose in any manner to any Person any Confidential Information (as defined in Section 8.1(d) without the prior express written consent of the Company other than in the course of Executive’s employment. After a Termination of Employment, Executive shall not, without the prior written consent of the Company, or as may otherwise be required by law or legal process, communicate or divulge such Confidential Information to anyone other than the Company and its designees.

(d)           For purposes of this Section, “Confidential Information” shall mean financial information about the Company, contract terms with vendors and suppliers, customer and supplier lists and data, know-how, software developments, inventions, formulae, technology, designs and drawings, or any Company property or confidential information relating to research, operations, finances, current and proposed products and services, vendors, customers, advertising, costs, marketing, trading, investment, sales activities, promotion, manufacturing processes, or the business and affairs of the Company generally, or of any subsidiary or affiliate of the Company, trade secrets and such other competitively-sensitive information, except that Confidential Information shall not include any information that was or becomes generally available to the public (i) other than as a result of a wrongful disclosure by Executive, (ii) as a result of disclosure by Executive during the Employment Period that he reasonably and in good faith believes is required by the performance of his duties under this Agreement, or (iii) any information compelled to be disclosed by applicable law or administrative regulation; provided that Executive, to the extent not prohibited from doing so by applicable law or administrative regulation, shall give the Company written notice of the information to be so disclosed pursuant to clause (iii) of this sentence as far in advance of its disclosure as is practicable.

(e)           Executive agrees that upon Executive’s Termination of Employment with the Company for any reason, he will return to the Company immediately all memoranda, books, papers, plans, information, letters and other data, and all copies thereof or therefrom, in any way relating to the business of the Company, its affiliates and subsidiaries, except that he may retain only those portions of personal notes, notebooks and diaries that do not contain Confidential Information of the type described in the preceding sentence. Executive further agrees that he will not retain or use for Executive’s own benefit, purposes or account or the benefit, purposes or account of any other person, firm, partnership, joint venture, association, corporation or other business designation, entity or enterprise, other than the Company and any of its Subsidiaries or Affiliates, at any time any trade names, trademark, service mark, other proprietary business designation, patent, or other intellectual property of the Company or its Affiliates.

8.2           Inventions..

(a)           Prior Inventions. Executive has attached hereto, as Exhibit D, a list describing all inventions, works of authorship (including software, related items, databases, documentation, site content, text or graphics), developments, and improvements that relate to the Company’s proposed or current business, services, products or research and development (“Inventions”) that were created or contributed to by Executive either solely or jointly with others prior to Executive’s employment with the Company and that relate to the Company’s proposed or current business, services, products or research and development (collectively referred to as “Prior Inventions”); or, if no such list is attached, Executive represents that there are no such Prior Inventions. If in the course of Executive’s employment with the Company, Executive uses or relies upon a Prior Invention in Executive’s creation or contribution to any work of authorship, invention, product, service, process, machine or other property of the Company, Executive will inform the Company promptly and, upon request, use Executive’s best efforts to procure any consents of third parties necessary for the Company’s use of such Prior Invention. To the fullest extent permissible by law, Executive hereby grants the Company a non-exclusive royalty-free, irrevocable, perpetual, worldwide license under all of Executive’s Prior Inventions to make, have made, copy, modify, distribute, use and

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Exhibit 10.15

sell works of authorship, products, services, processes and machines and to otherwise operate the Company’s current and future business.

(b)           Ownership of Inventions. Executive agrees that Executive will promptly make full written disclosure to the Company, and hereby assign to the Company, or its designee, all of Executive’s right, title, and interest in and to any and all Inventions, whether or not patentable, that Executive may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time Executive is in the employ of the Company (collectively referred to as “Company Inventions”). Executive further acknowledges that all original works of authorship that are created or contributed to by Executive (solely or jointly with others) within the scope of and during the period of Executive’s employment with the Company are to be deemed “works made for hire,” as that term is defined in the United States Copyright Act (17 U.S.C. Section 101), and the Company will own all right, title and interest in such works, including all copyright and all intellectual property therein shall be the sole property of the Company or its designee for all territories of the world in perpetuity, including any and all copyright registrations, copyright applications and all other copyrightable materials, including any renewals and extensions thereof, and in and to all works based upon, derived from, or incorporating the works covered by such copyrights and in and to all income, royalties, damages, claims, and payments now or hereinafter due or payable with respect thereto, and in all causes of action, either in law or in equity for past, present or future infringement based on said copyrights, and in and to all rights corresponding to the foregoing throughout the world. To the extent any of such works are deemed not to be “works made for hire,” Executive hereby assigns the copyright and all other intellectual property rights in such works to the Company.

(c)           Contracts with the United States. Executive agrees to execute any licenses or assignments as required by any contract between the Company and the United States or any of its agencies.

(d)           Maintenance of Records. Executive agrees to keep and maintain adequate and current written records of all Company Inventions made by Executive (solely or jointly with others) during the term and within the scope of Executive’s employment with the Company. The records will be in the form of notes, sketches, drawings, and any other format that may be specified by the Company. The records will be available to and remain the sole property and intellectual property of the Company at all times.

(e)           Further Assurances. Executive covenants to take all requested actions and execute all requested documents to assist the Company, or its designee, at the Company’s expense (but without further remuneration), in every way to secure the Company’s above rights in the Prior Inventions and Company Inventions and any copyrights, patents, mask work rights or other intellectual property rights relating thereto in any and all countries, and to pursue any patents or registrations with respect thereto. This covenant shall survive the termination of this Agreement. If the Company is unable for any other reason to secure Executive’s signature on any document for this purpose, then Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Executive’s agent and attorney in fact, to act for and in Executive’s behalf and stead to execute any documents and to do all other lawfully permitted acts in connection with the foregoing.

8.3           Injunction. Executive acknowledges that monetary damages will not be an adequate remedy for the Company in the event of a breach of this Article VIII, and that it would be impossible for the Company to measure damages in the event of such a breach. Therefore, Executive agrees that, in addition to other rights that the Company may have, the Company is entitled to (i) in the event of a breach by Executive of this Article VII that is not cured within 10 days following written notice from the Company to the Executive detailing such breach, cease making any payments or providing any benefit otherwise required by this Agreement and/or (ii) an injunction preventing Executive from any breach of this Article VIII.

ARTICLE IX

MISCELLANEOUS

9.1           Mitigation. In no event shall Executive be obligated to seek other employment or take any other action to mitigate the amounts payable to Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned as result of Executive’s employment by another employer.

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Exhibit 10.15

9.2          Legal Fees. If Executive incurs legal or other fees and expenses in an effort to secure or preserve establish entitlement to compensation and benefits under this Agreement, the Company shall reimburse Executive for such fees and expenses to the extent that the Executive substantially prevails in such dispute. The Company agrees to pay the Executive’s reasonable attorneys’ fees and expenses related to the negotiation and execution of this Agreement up to a maximum of $15,000.

9.3          Beneficiary. If Executive dies prior to receiving all of the amounts payable to him in accordance with the terms of this Agreement, such amounts shall be paid to one or more beneficiaries (each, a “Beneficiary”) designated by Executive in writing to the Company during his lifetime, or if no such Beneficiary is designated, to Executive’s estate. Such payments shall be made in a lump sum to the extent so payable and, to the extent not payable in a lump sum, in accordance with the terms of this Agreement. Executive, without the consent of any prior Beneficiary may change his designation of Beneficiary or Beneficiaries at any time or from time by a submitting to the Company a new designation in writing.

9.4           Assignment; Successors. This Agreement shall not be assignable by Executive. This Agreement may be assigned by the Company to a person or entity that is a successor in interest to substantially all of the business operations of the Company. Upon such assignment, the rights and obligations of the Company hereunder shall become the rights and obligations of such affiliate or successor person or entity. This Agreement shall be binding and inure to the benefit of Executive, his estates and Beneficiaries, the Company and the successors and permitted assigns of the Company.

9.5           Nonalienation. Benefits payable under this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, prior to actually being received by Executive or a Beneficiary, as applicable, and any such attempt to dispose of any right to benefits payable hereunder shall be void.

9.6           Severability. If one or more parts of this Agreement are declared by any court of competent authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any other part of this Agreement not declared to be unlawful or invalid. Any part so declared to be unlawful or invalid shall, if possible, be construed in a manner that will give effect to the terms of such part to the fullest extent possible while remaining lawful and valid.

9.7           Withholding Taxes. The Company may withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

9.8          Captions. The names of the Articles and Sections of this Agreement are for convenience of reference only and do not constitute a part hereof.

9.9           Amendment; Waives. This Agreement shall not be amended or modified except by written instrument executed by the Company and Executive. A waiver of any term, covenant or condition, and any waiver of any default in any such term, covenant or condition shall not be deemed a waiver of any later default thereof.

9.10         Notices. All notices hereunder shall be in writing and delivered by hand, by nationally-recognized delivery service that guarantees overnight delivery, or by first-class, registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

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Exhibit 10.15

If to the Company, to:	Graham Packaging Company L.P. 2401 Pleasant Valley Road York, PA 17402 Attention: General Counsel
With a copy to:	The Blackstone Group L.P. 345 Park Avenue, 31st Floor New York, NY 10154 Attention: Chinh Chu
If to Executive to:	Mark S. Burgess 1402 Flores Court Trinity, FL 34655
With a copy to:	Davis Malm & D’Agostine One Boston Place, 37th Floor Boston, MA 02108 Attn: C. Michael Malm, Esq.

To the most recent address of Executive set forth in the personnel records of the Company.

Either party may from time to time designate a new address by notice given in accordance with this Section Notice shall be effective when actually received by the addressee.

9.11        Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

9.12        Entire Agreement. This Agreement forms the entire agreement between the parties hereto with respect to the subject matter contained in this Agreement.

9.13         Applicable Law. This Agreement shall be interpreted and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to its choice of law principles.

9.14         Survival of Executive’s Rights. All of Executive’s rights hereunder, including his rights to compensation and benefits, and his obligations under Section 8.1 hereof, shall survive the termination of Executive’s employment and/or the termination of this agreement.

9.15         Joint and Several Liability. The obligations of Holdings and the Company hereunder shall be joint and several.

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Exhibit 10.15

IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written.

Graham Packaging Company L.P.

By:__________________________

Title:

Graham Packing Holdings Company

By:___________________________

Title:

______________________________

Mark S. Burgess

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Exhibit 10.15

Exhibit A

Gross-Up Payment

(a)           In the event it shall be determined that any payment or benefit under this Agreement or any other payment or benefit from the Company (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, or otherwise) (a “Payment”) is subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the “Excise Tax”), Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Exhibit A, if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Payment does not exceed 110% of the greatest amount that could be paid to Executive without giving rise to any Excise Tax (the “Safe Harbor Amount”), then no Gross-Up Payment shall be made to Executive and the amounts payable under this Agreement shall be reduced so that the Payment, in the aggregate, is reduced to the Safe Harbor Amount.

(b)           All determinations required to be made under this Exhibit A, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized accounting firm determined by the Company (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and Executive within ten business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company; provided that for purposes of determining the amount of any Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rates applicable to individuals in the calendar year in which any such Gross-Up Payment is to be made and deemed to pay state and local income taxes at the highest effective rates applicable to individuals in the state or locality of Executive’s residence or place of employment in the calendar year in which any such Gross-Up Payment is to be made, net of the reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account limitations applicable to individuals subject to federal income tax at the highest marginal rates. All fees and expenses of the Accounting Firm shall be borne by the Company. Any Gross-Up Payment, as determined pursuant to this Exhibit A, shall be paid by the Company to Executive (or to the appropriate taxing authority on Executive’s behalf) when due. If the Accounting Finn determines that no Excise Tax is payable by Executive, it shall so indicate in a written opinion provided to the Executive at least 10 days prior to the unextended due date of the Executive’s tax return with respect to the Year for which the Payment is made. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code, it is possible that the amount of the Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf of) Executive was lower than the amount actually due (“Underpayment”). In the event that the Company exhausts its remedies pursuant to Section (c) of this Exhibit A and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment (including without limitation any related interest or penalties) shall be promptly paid by the Company to or for the benefit of Executive.

(c)           Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of any Gross Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive receives information in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid; provided, that the failure of Executive to give notice within the time frame shall not affect the Company’s obligations hereunder unless the Company is materially prejudiced by the delayed notice. Executive shall not pay such claim prior to the expiration of the thirty day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an

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Exhibit 10.15

attorney selected by the Company, (iii) cooperate with the Company in good faith in order to effectively contest such claim and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section (c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, further, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance (including without limitation with respect to forgiveness of such advance pursuant to Section (d)) or with respect to any imputed income with respect to such advance; provided, further, that if Executive is required to extend the statute of limitations to enable the Company to contest such claim, Executive may limit this extension solely to such contested amount. The Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(d)           If, after the receipt by Executive of an amount paid or advanced by the Company pursuant to this Exhibit A, Executive becomes entitled to receive any refund with respect to a Gross-Up Payment, Executive shall promptly pay to the Company the amount of such refund received (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section (c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.

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Exhibit 10.15

Exhibit B

Option Agreement

(Time-Based & Performance-Based Form)

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Exhibit 10.15

Exhibit C

Option Agreement

(Performance-Based MOIC Form)

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Exhibit 10.15

Exhibit D

Prior Inventions

None

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M. Burgess Performance-Based (MOIC) Option Exhibit 10.15

OPTION AGREEMENT

This AGREEMENT (this “Agreement”) is made as of March 28, 2007 (the “Grant Date”) and effective as of December 4, 2006 by and between Graham Packaging Holdings Company, a Delaware limited partnership (the “Company”), and Mark S. Burgess (the “Optionee”).

1.             Certain Definitions. Capitalized terms used, but not otherwise defined, in this Agreement will have the meanings given to such terms in the Company’s 2004 Management Option Plan (the “Plan”). As used in this Agreement:

(a)           “Blackstone” means collectively, Blackstone Capital Partners III Merchant Banking Fund L.P., Blackstone Offshore Capital Partners III L.P. and their Affiliates (other than the Company and its Subsidiaries).

(b)           “Credit Agreement” shall mean the Credit Agreement dated as of October 7, 2004 among Graham Packaging Holdings Company, Graham Packaging Company, L.P., GPC Capital Corp. I, the Lenders Named Therein, Deutsche Bank AG Cayman Islands Branch, Citigroup Global Markets Inc., Goldman Sachs Credit Partners, L.P., General Electric Capital Corporation and Lehman Commercial Paper Inc., and any extensions, renewals, refinancings or refundings thereof in whole or in part.

(c)           “Financing Default” shall mean an event which would constitute (or with notice or lapse of time or both would constitute) an event of default (which event of default has not been cured or waived) under any of the following as they may be amended from time to time: (i) the Credit Agreement; (ii) the Indentures and any extensions, renewals, refinancings or refundings thereof in whole or in part; and (iii) any other agreement under which an amount of indebtedness of the Company or any of its Subsidiaries is outstanding as of the time of the aforementioned event, and any extensions, renewals, refinancings or refundings thereof in whole or in part, (iv) any amendment of, supplement to or other modification of any of the instruments referred to in clauses (i) through (iii) above; and (v) any of the securities issued pursuant to or whose terms are governed by the terms of any of the agreements set forth in clauses (i) through (iii) above, and any extensions, renewals, refinancings or refundings thereof in whole or in part.

(d)           “Indentures” shall mean the indentures dated as of October 7, 2004 among Graham Packaging Company, L.P., GPC Capital Corp. I, Graham Packaging Holdings Company, and The Bank of New York.

(e)           “Liquidity Event” means a sale by Blackstone of its entire interest in the Company and Graham Packaging Company, L.P., if and only if such event constitutes a change in effective control or ownership of the Company and Graham Packaging Company, L.P., within the meaning of Section 409A of the Code.

2.            Grant of Option. Subject to and upon the terms, conditions, and restrictions set forth in this Agreement and in the Plan, the Company hereby grants to Optionee an option (the “Option”) to purchase 73.9 Units (the “Units”) at an Exercise Price of $25,789.00 per Unit, which is not less than the Fair Market Value per Unit on the Grant Date, subject to adjustment. The Option may be exercised from time to time in accordance with the terms of this Agreement.

3.            Term of Option. The term of the Option shall commence at the Grant Date and, unless earlier terminated in accordance with Section 7 hereof, shall expire ten (10) years from the Effective Time.

4.             Right to Exercise. Unless terminated as hereinafter provided, the Option shall become exercisable only as follows:

(a)           The Optionee shall earn the right to exercise the Option, provided, that (i) the Optionee shall have remained in the continuous employ of the Company, through the date of a Liquidity Event, and (ii) the Company shall have achieved specified performance targets with respect to the multiple of invested capital (“MOIC”) for such Liquidity Event as such targets are attached hereto as Attachment A. Any units as to which Optionee does not earn the right to exercise the related Option prior to the expiration date set forth in Section 3 hereof shall thereupon expire and terminate; provided, however, that if the Optionee’s employment is terminated without Cause or for Good Reason during the Employment Period, as such terms are defined in the Optionee’s Employment Agreement with the Company and Graham Packaging Company, L.P., effective as of December 4,

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M. Burgess Performance-Based (MOIC) Option Exhibit 10.15

2006 (the “Employment Agreement”), and a Liquidity Event occurs within one year of such termination of employment, then the Options shall become immediately exercisable upon such Liquidity Event.

(b)           Optionee shall be entitled to the privileges of ownership with respect to the Units purchased and delivered to Optionee upon the exercise of all or part of this Option, subject to Section 8 hereof. No election to exercise any Option granted hereunder shall become effective unless and until the Optionee executes a counterpart of the Company’s Agreement of Limited Partnership in order to become bound thereby.

5.             Option Nontransferable. Optionee may not transfer or assign all or any part of the Option other than by will or by the laws of descent and distribution. This Option may be exercised, during the lifetime of Optionee, only by Optionee, or in the event of Optionee’s legal incapacity, by Optionee’s guardian or legal representative acting on behalf of Optionee in a fiduciary capacity under state law and court supervision.

6.             Notice of Exercise; Payment.

(a)           To the extent then exercisable, the Option may be exercised in whole or in part by written notice to the Company stating the number of Units for which the Option is being exercised and the intended manner of payment. The date of such notice shall be the exercise date. Payment equal to the aggregate Exercise Price of the Units being purchased pursuant to an exercise of the Option must be tendered in full with the notice of exercise to the Company as provided in the Plan.

(b)           As soon as practicable upon the Company’s receipt of Optionee’s notice of exercise and payment, the Company shall direct the due issuance of the Units so purchased.

(c)           As a further condition precedent to the exercise of this Option in whole or in part, Optionee shall comply with all regulations and the requirements of any regulatory authority having control of, or supervision over, the issuance of the Units and in connection therewith shall execute any documents which the Board shall in its sole discretion deem necessary or advisable.

7.            Termination of Agreement. The Agreement and the Option granted hereby shall terminate automatically and without further notice on the earliest of the following dates:

(a)           After Optionee’s termination of employment for any reason, all unvested Options will be forfeited immediately, and all vested Options shall remain exercisable until the lesser of (i) ninety (90) days following the Optionee’s date of termination or (ii) the remaining term of the Option; provided, however, if the Optionee is terminated for Cause, as defined in an employment agreement between the Company and the Optionee, all vested and unvested Options will be forfeited immediately and terminate; or

(b)           Ten (10) years from the Effective Time.

In the event that Optionee’s employment is terminated for Cause as described in Section 7(a) hereof, this Agreement shall terminate at the time of such termination notwithstanding any other provision of this Agreement and Optionee’s Option will cease to be exercisable to the extent exercisable as of such termination and will not be or become exercisable after such termination.

8.             Call. The provisions of this Section 8 shall cease to apply subsequent to the later of (i) one hundred (100) days following a Public Offering, or (ii) the fifth anniversary of the date hereof.

(a)           On or after the date the Optionee exercises all or a portion of an Option granted hereunder, the Company shall have the right and option to purchase for a period of 90 days from the date of the Optionee’s termination of employment for any reason (or, if later, for a period of 200 days from the last date the Optionee exercised an Option), and if the Company exercises such right each Optionee shall be required to sell to the Company, any or all of his Units at a price per Unit equal to the Fair Market Value (as of the date the Company exercises such right); provided, however, that in the event of a Optionee’s termination of employment by the Company for Cause, then the purchase price per Unit shall be the lesser of (A) Cost or (B) Fair Market Value.

(b)           If and to the extent the Options remain exercisable following the Optionee’s termination of employment, as provided in Section 7, the Company shall, after an Optionee’s employment has terminated for any reason, have the right and option to purchase and if the Company exercises such right each Optionee shall be required to sell to the Company, any or all of his or her then outstanding Options at a price per Option equal to the

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M. Burgess Performance-Based (MOIC) Option Exhibit 10.15

product of the (i) the excess of Fair Market Value over the Exercise Price, and (ii) the number of Units for which such Option was exercisable.

(c)           If the Company desires to exercise its right to purchase any Options or Units pursuant to this Section 8, the Company shall, not later than 60 days after the date of the Optionee’s termination of employment (or, with respect to Section 8(a), if later, 170 days from the last date an Option, or a portion of an Option, was exercised), send written notice of its intention to purchase such Units. The closing of the purchase shall take place at the principal office of the Company on the 30th day after the giving of notice by the Company of its exercise of its option to purchase.

(d)           The Company shall have the right to assign any or all of its rights to purchase Options and/or Units pursuant to this Section 8; provided, however, that the assignee of such rights may purchase Options and/or Option Units only by delivery of a cashier’s check or a certified check.

If at any time the Company elects to purchase any Units pursuant to Section 8 hereof, the Company shall pay the purchase price for such Units, by the Company’s delivery of a bank cashier’s check or certified check; provided that if a Financing Default exists or, after giving effect to such payment (including any distribution or loan from an affiliate of the Company to the Company in connection therewith) would exist, which prohibits such cash payment, the portion of the cash payment so prohibited (which may not exceed 55% of the excess of the purchase price over the Exercise Price (such excess being the “Spread”)) shall be made, to the extent such payment is not prohibited by a Financing Default or would not result (after giving effect to any distributions or loans from an affiliate of the Company to the Company in connection therewith) in a Financing Default, by the Company’s delivery of a junior subordinated promissory note (which shall be subordinated and subject in right of payment to the prior payment of all indebtedness of the Company) of the Company (a “Junior Subordinated Note”) in a principal amount equal to the amount of the purchase price which cannot be paid in cash (which may not exceed 55% of the Spread), payable in up to five equal annual installments commencing on the first anniversary of the issuance thereof and bearing interest payable annually at the prime rate listed in the Wall Street Journal (“WSJ”) on the date of issuance. If the Company will pay any portion of the purchase price for Units with a Junior Subordinated Note, the Company shall give the Optionee notice of the amount of such note (which may not exceed 55% of the Spread) at least 20 days prior to such purchase.

9.             No Employment Contract. Nothing contained in this Agreement shall (a) confer upon Optionee any right to be employed by or remain employed by the Company or any affiliate, or (b) limit or affect in any manner the right of the Company or any affiliate to terminate the employment or adjust the compensation of Optionee.

10.          Taxes and Withholding. The Company may withhold, or require Optionee to remit to the Company, an amount sufficient to satisfy federal, state, local or foreign taxes (including the Optionee’s FICA obligation) in connection with any payment made or benefit realized by Optionee or other person under this Agreement or otherwise, and if the amounts available to the Company for such withholding are insufficient, it shall be a condition to the receipt of such payment or the realization of such benefit that Optionee or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld.

11.           Compliance with Law. The Company shall make reasonable efforts to comply with all applicable federal and state securities laws; provided, however, that notwithstanding any other provision of this Agreement, the Option shall not be exercisable if the exercise thereof would result in a violation of any such law.

12.           Adjustments. The Units shall be subject to adjustment as provided in the Plan.

13.           Relation to Other Benefits. Any economic or other benefit to Optionee under this Agreement shall not be taken into account in determining any benefits to which Optionee may be entitled under any profit-sharing, retirement or other benefit or compensation plan maintained by the Company.

14.           Amendments. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall adversely affect the rights of Optionee under this Agreement without Optionee’s prior written consent.

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M. Burgess Performance-Based (MOIC) Option Exhibit 10.15

15.           Severability. If one or more of the provisions of this Agreement is invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable.

16.           Relation to Plan. This Agreement is subject to the terms and conditions of the Plan. In the event of any inconsistent provisions between this Agreement and the Plan, the Plan shall govern. The Board acting pursuant to the Plan, as constituted from time to time, shall, except as expressly provided otherwise herein, have the right to determine any questions which arise in connection with the Option or its exercise.

17.           Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of Optionee, and the successors and assigns of the Company.

18.          Governing Law. The interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of Delaware, without giving effect to the principles of conflict of laws thereof and all parties, including their successors and assigns, consent to the jurisdiction of the state and federal courts of Delaware.

19.           Prior Agreement. As of the Effective Time, this Agreement supersedes any and all prior and/or contemporaneous agreements, either oral or in writing, between the parties hereto, or between either or both of the parties hereto and the Company, with respect to the subject matter hereof. Each party to this Agreement acknowledges that no representations, inducements, promises, or other agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, pertaining to the subject matter hereof, which are not embodied herein, and that no prior and/or contemporaneous agreement, statement or promise pertaining to the subject matter hereof that is not contained in this Agreement shall be valid or binding on either party.

20.           Notices. For all purposes of this Agreement, all communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof confirmed), or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service such as Federal Express, UPS, or Purolator, addressed to the Company (to the attention of the Secretary of the Company) at its principal executive offices and to Optionee at his principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address shall be effective only upon receipt.

21.           Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officer and Optionee has executed this Agreement, as of the day and year first above written.

Graham Packaging Holdings Company

By:__________________________________

Name & Title:

_______________________________________

OPTIONEE

Name:

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M. Burgess Performance-Based (MOIC) Option Exhibit 10.15

Attachment A

MOIC*	% of Options Vested
3.0x	100%
2.75x	75%
2.50x	50%
2.25x	25%
2.0x	0%

Values between those listed above will be interpolated.

*In calculating MOIC, any additional invested capital made during the first and second quarter of 2007 will be excluded. The invested capital on the date hereof equals $345,000,000.

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M. Burgess - Time-Based & Performance-Based Option Exhibit 10.15

OPTION AGREEMENT

This AGREEMENT (this “Agreement”) is made as of March 28, 2007 (the “Grant Date”) and effective as of December 4, 2006 by and between Graham Packaging Holdings Company, a Delaware limited partnership (the “Company”), and Mark S. Burgess (“Optionee”).

1.             Certain Definitions. Capitalized terms used, but not otherwise defined, in this Agreement will have the meanings given to such terms in the Company’s 2004 Management Option Plan (the “Plan”). As used in this Agreement:

(a)           “Blackstone” means collectively, Blackstone Capital Partners III Merchant Banking Fund L.P., Blackstone Offshore Capital Partners III L.P. and their Affiliates (other than the Company and its Subsidiaries).

(b)           “Change in Control” shall have the same meaning as in the Credit Agreement as of the date hereof.

(c)           “Credit Agreement” shall mean the Credit Agreement dated as of October 7, 2004 among Graham Packaging Holdings Company, Graham Packaging Company, L.P., GPC Capital Corp. I, the Lenders Named Therein, Deutsche Bank AG Cayman Islands Branch, Citigroup Global Markets Inc., Goldman Sachs Credit Partners, L.P., General Electric Capital Corporation and Lehman Commercial Paper Inc., and any extensions, renewals, refinancings or refundings thereof in whole or in part.

(d)           “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(e)           “Financing Default” shall mean an event which would constitute (or with notice or lapse of time or both would constitute) an event of default (which event of default has not been cured or waived) under any of the following as they may be amended from time to time: (i) the Credit Agreement; (ii) the Indentures and any extensions, renewals, refinancings or refundings thereof in whole or in part; and (iii) any other agreement under which an amount of indebtedness of the Company or any of its Subsidiaries is outstanding as of the time of the aforementioned event, and any extensions, renewals, refinancings or refundings thereof in whole or in part, (iv) any amendment of, supplement to or other modification of any of the instruments referred to in clauses (i) through (iii) above; and (v) any of the securities issued pursuant to or whose terms are governed by the terms of any of the agreements set forth in clauses (i) through (iii) above, and any extensions, renewals, refinancings or refundings thereof in whole or in part.

(f)            “Indentures” shall mean the indentures dated as of October 7, 2004 among Graham Packaging Company, L.P., GPC Capital Corp. I, Graham Packaging Holdings Company, and The Bank of New York.

2.            Grant of Option. Subject to and upon the terms, conditions, and restrictions set forth in this Agreement and in the Plan, the Company hereby grants to Optionee an option (the “Option”) to purchase 110.9 Units (the “Units”) at an Exercise Price of $25,789.00 per Unit, which is not less than the Fair Market Value per Unit on the Grant Date, subject to adjustment. The Option may be exercised from time to time in accordance with the terms of this Agreement. Subject to adjustment as hereinafter provided, (a) one-half of the Units (55.45 units) constitute, and may be purchased pursuant to the provisions of the “Time-Based Tranche”, and (b) one-half of the Units (55.45 units) constitute and may be purchased pursuant to the provisions of the Performance-Based Tranche.

3.            Term of Option. The term of the Option shall commence at the Grant Date and, unless earlier terminated in accordance with Section 7 hereof, shall expire ten (10) years from the Effective Time.

4.             Right to Exercise. Unless terminated as hereinafter provided, the Option shall become exercisable only as follows:

(a)           The Option shall become exercisable with respect to 25% of the Units on the first anniversary of the Effective Time, an additional 25% of the Time-Based Tranche on the second anniversary of the Grant Date, an additional 25% of the Time-Based Tranche on the third anniversary of the Grant Date and an additional 25% of the Time-Based Tranche on the fourth anniversary of the Grant Date if Optionee remains in the continuous employ of the Company as of each such date. Notwithstanding the foregoing, the Units of the Time-

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M. Burgess - Time-Based & Performance-Based Option Exhibit 10.15

Based Tranche shall become immediately exercisable upon the Optionee’s termination of employment without Cause or for Good Reason during the Employment Period, as such terms are defined in Optionee’s Employment Agreement with the Company and Graham Packaging Company, L.P., effective as of December 4, 2006 (the “Employment Agreement”).

(b)           The Optionee shall earn the right to exercise the option to purchase 25% of the Performance-Based Tranche on each of the first four anniversaries of the Date of Grant, provided, that (i) Optionee shall have remained in the continuous employ of the Company as of each such date, and (ii) the Company shall have achieved certain specified annual performance targets for the performance criteria as specified periodically by the Board, or its delegate, in good faith, and as such criteria and targets may be attached hereto as Attachment A from time to time. Except as set forth in Section 4(c), below, any shares included in the Performance-Based Tranche as to which Optionee does not earn the right to exercise the related Units in a particular year shall thereupon expire and terminate.

(c)           Notwithstanding the foregoing, the Options granted hereby shall become immediately exercisable in full upon the occurrence of a Change in Control if Optionee remains in the continuous employ of the Company until the date of the consummation of such Change in Control; provided, further, that if the Optionee’s employment is terminated without Cause or for Good Reason during the Employment Period, as such terms are defined in the Optionee’s Employment Agreement, and a Change in Control occurs within one year of such termination of employment, then the Performance-Based Tranche Options shall become immediately exercisable upon such Change in Control.

(d)           Optionee shall be entitled to the privileges of ownership with respect to the Units purchased and delivered to Optionee upon the exercise of all or part of this Option, subject to Section 8 hereof. No election to exercise any Option granted hereunder shall become effective unless and until the Optionee executes a counterpart of the Company’s Agreement of Limited Partnership in order to become bound thereby.

5.             Option Nontransferable. Optionee may not transfer or assign all or any part of the Option other than by will or by the laws of descent and distribution. This Option may be exercised, during the lifetime of Optionee, only by Optionee, or in the event of Optionee’s legal incapacity, by Optionee’s guardian or legal representative acting on behalf of Optionee in a fiduciary capacity under state law and court supervision.

6.             Notice of Exercise; Payment.

(a)           To the extent then exercisable, the Option may be exercised in whole or in part by written notice to the Company stating the number of Units for which the Option is being exercised and the intended manner of payment. The date of such notice shall be the exercise date. Payment equal to the aggregate Exercise Price of the Units being purchased pursuant to an exercise of the Option must be tendered in full with the notice of exercise to the Company as provided in the Plan.

(b)           As soon as practicable upon the Company’s receipt of Optionee’s notice of exercise and payment, the Company shall direct the due issuance of the Units so purchased.

(c)           As a further condition precedent to the exercise of this Option in whole or in part, Optionee shall comply with all regulations and the requirements of any regulatory authority having control of, or supervision over, the issuance of the Units and in connection therewith shall execute any documents which the Board shall in its sole discretion deem necessary or advisable.

7.            Termination of Agreement. The Agreement and the Option granted hereby shall terminate automatically and without further notice on the earliest of the following dates:

(a)           Subject to Sections 4(a) and 4(c) hereof, after Optionee’s termination of employment for any reason, all unvested Options will be forfeited immediately, and all vested Options shall remain exercisable until the lesser of (i) ninety (90) days following the Optionee’s date of termination or (ii) the remaining term of the Option; provided, however, if the Optionee is terminated for Cause, as defined in the Employment Agreement, all vested and unvested Options will be forfeited immediately and terminate; or

(b)           Ten (10) years from the Effective Time.

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M. Burgess - Time-Based & Performance-Based Option Exhibit 10.15

In the event that Optionee’s employment is terminated for Cause as described in Section 7(a) hereof, this Agreement shall terminate at the time of such termination notwithstanding any other provision of this Agreement and Optionee’s Option will cease to be exercisable to the extent exercisable as of such termination and will not be or become exercisable after such termination.

8.             Call. The provisions of this Section 8 shall cease to apply subsequent to the later of (i) one hundred (100) days following a Public Offering, or (ii) the fifth anniversary of the date hereof.

(a)           On or after the date the Optionee exercises all or a portion of an Option granted hereunder, the Company shall have the right and option to purchase for a period of 90 days from the date of the Optionee’s termination of employment for any reason (or, if later, for a period of 200 days from the last date the Optionee exercised an Option), and if the Company exercises such right each Optionee shall be required to sell to the Company, any or all of his Units at a price per Unit equal to the Fair Market Value (as of the date the Company exercises such right); provided, however, that in the event of a Optionee’s termination of employment by the Company for Cause, then the purchase price per Unit shall be the lesser of (A) Cost or (B) Fair Market Value.

(b)           If and to the extent the Options remain exercisable following the Optionee’s termination of employment, as provided in Section 7, the Company shall, after an Optionee’s employment has terminated for any reason, have the right and option to purchase and if the Company exercises such right each Optionee shall be required to sell to the Company, any or all of his or her then outstanding Options at a price per Option equal to the product of the (i) the excess of Fair Market Value over the Exercise Price, and (ii) the number of Units for which such Option was exercisable.

(c)           If the Company desires to exercise its right to purchase any Options or Units pursuant to this Section 8, the Company shall, not later than 60 days after the date of the Optionee’s termination of employment (or, with respect to Section 8(a), if later, 170 days from the last date an Option, or a portion of an Option, was exercised), send written notice of its intention to purchase such Units. The closing of the purchase shall take place at the principal office of the Company on the 30th day after the giving of notice by the Company of its exercise of its option to purchase.

(d)           The Company shall have the right to assign any or all of its rights to purchase Options and/or Units pursuant to this Section 8; provided, however, that the assignee of such rights may purchase Options and/or Option Units only by delivery of a cashier’s check or a certified check.

If at any time the Company elects to purchase any Units pursuant to Section 8 hereof, the Company shall pay the purchase price for such Units, by the Company’s delivery of a bank cashier’s check or certified check; provided that if a Financing Default exists or, after giving effect to such payment (including any distribution or loan from an affiliate of the Company to the Company in connection therewith) would exist, which prohibits such cash payment, the portion of the cash payment so prohibited (which may not exceed 55% of the excess of the purchase price over the Exercise Price (such excess being the “Spread”)) shall be made, to the extent such payment is not prohibited by a Financing Default or would not result (after giving effect to any distributions or loans from an affiliate of the Company to the Company in connection therewith) in a Financing Default, by the Company’s delivery of a junior subordinated promissory note (which shall be subordinated and subject in right of payment to the prior payment of all indebtedness of the Company) of the Company (a “Junior Subordinated Note”) in a principal amount equal to the amount of the purchase price which cannot be paid in cash (which may not exceed 55% of the Spread), payable in up to five equal annual installments commencing on the first anniversary of the issuance thereof and bearing interest payable annually at the prime rate listed in the Wall Street Journal (“WSJ”) on the date of issuance. If the Company will pay any portion of the purchase price for Units with a Junior Subordinated Note, the Company shall give the Optionee notice of the amount of such note (which may not exceed 55% of the Spread) at least 20 days prior to such purchase.

9.             No Employment Contract. Nothing contained in this Agreement shall (a) confer upon Optionee any right to be employed by or remain employed by the Company or any affiliate, or (b) limit or affect in any manner the right of the Company or any affiliate to terminate the employment or adjust the compensation of Optionee.

10.          Taxes and Withholding. The Company may withhold, or require Optionee to remit to the Company, an amount sufficient to satisfy federal, state, local or foreign taxes (including the Optionee’s FICA

Page 26 of 28

M. Burgess - Time-Based & Performance-Based Option Exhibit 10.15

obligation) in connection with any payment made or benefit realized by Optionee or other person under this Agreement or otherwise, and if the amounts available to the Company for such withholding are insufficient, it shall be a condition to the receipt of such payment or the realization of such benefit that Optionee or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld.

11.           Compliance with Law. The Company shall make reasonable efforts to comply with all applicable federal and state securities laws; provided, however, that notwithstanding any other provision of this Agreement, the Option shall not be exercisable if the exercise thereof would result in a violation of any such law.

12.           Adjustments. The Units shall be subject to adjustment as provided in the Plan.

13.           Relation to Other Benefits. Any economic or other benefit to Optionee under this Agreement shall not be taken into account in determining any benefits to which Optionee may be entitled under any profit-sharing, retirement or other benefit or compensation plan maintained by the Company.

14.           Amendments. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall adversely affect the rights of Optionee under this Agreement without Optionee’s prior written consent.

15.           Severability. If one or more of the provisions of this Agreement is invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable.

16.           Relation to Plan. This Agreement is subject to the terms and conditions of the Plan. In the event of any inconsistent provisions between this Agreement and the Plan, the Plan shall govern. The Board acting pursuant to the Plan, as constituted from time to time, shall, except as expressly provided otherwise herein, have the right to determine any questions which arise in connection with the Option or its exercise.

17.           Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of Optionee, and the successors and assigns of the Company.

18.          Governing Law. The interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of Delaware, without giving effect to the principles of conflict of laws thereof and all parties, including their successors and assigns, consent to the jurisdiction of the state and federal courts of Delaware.

19.           Prior Agreement. As of the Effective Time, this Agreement supersedes any and all prior and/or contemporaneous agreements, either oral or in writing, between the parties hereto, or between either or both of the parties hereto and the Company, with respect to the subject matter hereof. Each party to this Agreement acknowledges that no representations, inducements, promises, or other agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, pertaining to the subject matter hereof, which are not embodied herein, and that no prior and/or contemporaneous agreement, statement or promise pertaining to the subject matter hereof that is not contained in this Agreement shall be valid or binding on either party.

20.           Notices. For all purposes of this Agreement, all communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof confirmed), or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service such as Federal Express, UPS, or Purolator, addressed to the Company (to the attention of the Secretary of the Company) at its principal executive offices and to Optionee at his principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address shall be effective only upon receipt.

21.           Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officer and Optionee has executed this Agreement, as of the day and year first above written.

Page 27 of 28

M. Burgess - Time-Based & Performance-Based Option Exhibit 10.15

Graham Packaging Holdings Company

By:__________________________________

Name & Title:

______________________________________

OPTIONEE

Name:

Page 28 of 28

EX-10

Exhibit 10.25

THIRD AMENDMENT TO CREDIT AGREEMENT

THIRD AMENDMENT TO CREDIT AGREEMENT (this “Third Amendment”), dated as of March 30, 2007, among GRAHAM PACKAGING HOLDINGS COMPANY, a Pennsylvania limited partnership (“Holdings”), GRAHAM PACKAGING COMPANY, L.P., a Delaware limited partnership (the “Borrower”), GPC CAPITAL CORP. I, a Delaware corporation (the “Co-Borrower”), the Lenders party thereto from time to time, CITIGROUP GLOBAL MARKETS INC., as syndication agent (in such capacity, the “Syndication Agent”), GOLDMAN SACHS CREDIT PARTNERS, L.P., GENERAL ELECTRIC CAPITAL CORPORATION and LEHMAN COMMERCIAL PAPER INC., as co-documentation agents (in such capacity, each a “Co-Documentation Agent”), DEUTSCHE BANK AG CAYMAN ISLANDS BRANCH, as administrative agent (in such capacity, the “Administrative Agent”) and as collateral agent (in such capacity, the “Collateral Agent”) for the Lenders, LASALLE BANK NATIONAL ASSOCIATION and MANUFACTURERS AND TRADERS TRUST COMPANY, as senior managing agents (in such capacity, each a “Senior Managing Agent”), DEUTSCHE BANK SECURITIES INC., as joint lead arranger and joint book runner (“DBSI”), CITIGROUP GLOBAL MARKETS INC., as joint lead arranger and joint book runner (“Citigroup”), and GOLDMAN SACHS CREDIT PARTNERS, L.P., as joint book runner (“Goldman Sachs”, and together with DBSI and Citigroup in their respective capacities as joint lead arrangers and joint book runners, the “Arrangers”). Unless otherwise indicated, all capitalized terms used herein and not otherwise defined shall have the respective meanings provided such terms in the Credit Agreement referred to below.

WITNESSETH:

WHEREAS, Holdings, the Borrower, the Co-Borrower, the Lenders from time to time party thereto, and the Agents are parties to a Credit Agreement, dated as of October 7, 2004 (as amended, modified and/or supplemented to, but not including, the date hereof, the “Credit Agreement”); and

WHEREAS, the parties hereto wish to enter into certain agreements and amendments regarding the Credit Agreement as herein provided;

NOW, THEREFORE, it is agreed:

I.             Amendments to the Credit Agreement

1.             The definition of “Financial Performance Covenants” appearing in Section 1.01 of the Credit Agreement is hereby amended to read in its entirety as follows:

“Financial Performance Covenants” shall mean the covenant of Holdings and the Borrower set forth in Section 6.12.

2.             The definition of “Incremental Commitment Request Requirements” appearing in Section 1.01 of the Credit Agreement is hereby amended by restating clause (y) thereof in its entirety as follows:

“(y) the Senior Secured Net Leverage Ratio on the last day of the Test Period most recently ended prior to the date of the request for Incremental Revolving Credit Commitments or Incremental B Term Loan Commitments, as the case may be, shall not exceed 4.50:1.00, with such calculation to be made on a Pro Forma Basis, as if the relevant Loans to be made pursuant to such Incremental Revolving Credit Commitments or to such Incremental B Term Loan Commitments (in each case, assuming the full utilization thereof) had been incurred, and the proposed Permitted Business Acquisition (if any) to be financed with the proceeds of such Loans (as well as other Permitted Business Acquisitions theretofore consummated after the first day of such Test Period) had occurred, on the first day of such Test Period or (ii) the Senior Secured Net Leverage Ratio calculated in the manner described above shall be less than the Senior Secured Net Leverage Ratio calculated as provided above but prior to giving effect to the incurrence of such Loans and the consummation of the Permitted Business Acquisition (if any) to be financed with the proceeds of such Loans as described above in this clause (z).”

3.             The definition of “Interest Coverage Ratio” appearing in Section 1.01 of the Credit Agreement is hereby amended in its entirety to read as follows:

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“Interest Coverage Ratio” shall mean, for any Test Period, the ratio of (a) EBITDA of the Borrower and its Subsidiaries for such Test Period to (b) Cash Interest Expense for such Test Period.

4.             The definition of “Permitted Business Acquisition” appearing in Section 1.01 of the Credit Agreement is hereby amended by deleting the text “Sections 6.11 and 6.12” appearing in clause (d)(i) thereof and inserting the text “Section 6.12” in lieu thereof.

5.             The definition of “Permitted Business Acquisition Amount” appearing in Section 1.01 of the Credit Agreement is hereby amended by deleting the parenthetical statement appearing therein in its entirety and inserting the following new parenthetical statement in lieu thereof:

“(as established pursuant to a certificate of a Financial Officer of the Borrower showing the Net Leverage Ratio for the most recently ended Test Period for which financial statements were delivered (or required to be delivered) pursuant to Section 5.04(a) or (b), as the case may be)”.

6.             The definition of “Pro Forma Basis” appearing in Section 1.01 of the Credit Agreement is hereby amended by deleting the second parenthetical statement appearing in clause (ii) of such definition in its entirety and inserting the following new parenthetical statement in lieu thereof:

“(or, in the case of determinations made pursuant to the definition of Permitted Business Acquisition or Section 6.01(y) contained herein, occurring during the Reference Period or thereafter and through and including the date upon which the respective Permitted Business Acquisition is consummated or the respective Subordinated Indebtedness is assumed or incurred in accordance with Section 6.01(y), as the case may be)”.

7.             Section 1.01 of the Credit Agreement is hereby amended by inserting the following new definitions in the appropriate alphabetical order:

“Final Third Amendment Effective Date” shall have the meaning provided in the Third Amendment”.

“Preliminary Third Amendment Effective Date” shall have the meaning provided in the Third Amendment Effective Date.

“Senior Secured Net Indebtedness” shall mean, at any time, all outstanding Indebtedness of the Borrower and its Subsidiaries at such time that is secured by a Lien on any property owned by the Borrower or any of its Subsidiaries, minus (i) unrestricted cash and cash equivalents (determined in accordance with GAAP) of the Borrower and its Subsidiaries at such time;provided that in determining the aggregate amount of cash and cash equivalents as provided above, such determination shall be made without giving effect to any cash or cash equivalents constituting (in whole or in part) Designated Capital Contributions or proceeds thereof, (ii) all outstanding Subordinated Indebtedness at such time and (iii) all Indebtedness outstanding at such time that is secured only by a Lien (or Liens) that is (or are) subordinated to the Liens securing the Obligations and the Obligations (as defined in the Guarantee Agreements) pursuant to effective subordination provisions that are satisfactory to the Administration Agent.

“Senior Secured Net Leverage Ratio” shall mean, on any date, the ratio of (a) Senior Secured Indebtedness on such date to EBITDA for four consecutive fiscal quarters of the Borrower most recently ended as of such date.

“Subordinated Indebtedness” shall mean Indebtedness of Borrower and its Subsidiaries that is by its terms expressly subordinated in right of payment to the Obligations of Borrower or such Subsidiary, as applicable, provided that (a) such Indebtedness shall be subject to subordination provisions that are reasonably satisfactory to and approved by the Administrative Agent and (b) such Indebtedness shall not have any principal payments or prepayments (other than pursuant to customary asset sale and change of control offers to purchase) or mature while any Loans are outstanding.

“Third Amendment” shall mean the Third Amendment to the Credit Agreement, dated as of March 30, 2007, among Holdings, the Borrower, the Co-Borrower, the Loan Parties, certain Lenders and the Administrative Agent.”

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Exhibit 10.25

8.             Section 2.05(f) of the Credit Agreement is hereby amended to read in its entirety as follows:

“(f) All prepayments (and/or conversions) of principal of B Term Loans (whether voluntary or mandatory) made in connection with a Repricing Transaction after the Final Third Amendment Effective Date and on or prior to the first anniversary of the Final Third Amendment Effective Date will be subject to payment to the Administrative Agent, for the ratable account of each Lender with outstanding B Term Loans, of a fee in an amount equal to 1.0% of the aggregate principal amount of the B Term Loans so prepaid and/or converted. Such prepayment fees shall be due and payable upon the date of any such prepayment or conversion of B Term Loans in connection with a Repricing Transaction.”.

9.             Section 2.11(a) of the Credit Agreement is hereby amended by deleting the table contained therein and inserting the following table in lieu thereof:

Date	B Term Loan Amount
June 30, 2007	$4,687,500
September 30, 2007	$4,687,500
December 31, 2007	$4,687,500
March 31, 2008	$4,687,500
June 30, 2008	$4,687,500
September 30, 2008	$4,687,500
December 31, 2008	$4,687,500
March 31, 2009	$4,687,500
June 30, 2009	$4,687,500
September 30, 2009	$4,687,500
December 31, 2009	$4,687,500
March 31, 2010	$4,687,500
June 30, 2010	$4,687,500
September 30, 2010	$4,687,500
December 31, 2010	$4,687,500
March 31, 2011	$4,687,500
June 30, 2011	$4,687,500
September 30, 2011	$4,687,500
B Term Loan Maturity Date	$1,790,625,000

10.           Section 2.11(a) of the Credit Agreement is hereby further amended by deleting the penultimate sentence thereof in its entirety. Any changes to the above schedule pursuant to the last sentence of Section 2.11(a) of the Credit Agreement and Section 2.11(c) of the Credit Agreement shall only occur as a result of incurrences or prepayments of B Term Loans after the Final Third Amendment Effective Date (as defined below).

11.           The Lenders hereby waive the mandatory prepayment required pursuant to Section 2.12(d) with respect to the Excess Cash Flow Period ending closest to December 31, 2006.

12.           Section 2.12(e) of the Credit Agreement is hereby amended by deleting the second proviso contained therein in its entirety.

13.           Section 2.22(a) of the Credit Agreement is hereby amended by restating clause (iv) thereof in its entirety as follows:

“(iv) the aggregate amount of all Incremental Revolving Credit Commitments provided pursuant to this Section 2.22 after the Final Third Amendment Effective Date, when combined with the aggregate amount of all Incremental B Term Loan Commitments provided pursuant to Section 2.23 after the Final Third Amendment Effective Date, shall not exceed $300,000,000”.

14.           Section 2.23(a) of the Credit Agreement is hereby amended by restating clause (iv) thereof in its entirety as follows:

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Exhibit 10.25

“(iv) the aggregate amount of all Incremental B Term Loan Commitments provided pursuant to this Section 2.23 from and after the Final Third Amendment Effective Date, when combined with the aggregate amount of all Incremental Revolving Credit Commitments provided pursuant to Section 2.22 from and after the Final Third Amendment Effective Date, shall not exceed $300,000,000”.

15.           Section 3.13 of the Credit Agreement is hereby amended by inserting the following proviso at the end of the first sentence of such Section:

“, provided that the proceeds of the New Term Loans and the Additional New Term Loans (each as defined in the Third Amendment) shall be used only for the purposes specified in the Third Amendment”.

16.           Section 5.04(c) of the Credit Agreement is hereby amended by deleting the text “covenants contained in Sections 6.10, 6.11 and 6.12” and inserting the text “covenant contained in Section 6.10 and 6.12 “ in lieu thereof.

17.           Section 5.08 of the Credit Agreement is hereby amended by inserting the following proviso at the end of such Section:

“, provided that the proceeds of the New Term Loans and the Additional New Term Loans (each as defined in the Third Amendment) shall be used only for the purposes specified in the Third Amendment”.

18.           Section 5.11 of the Credit Agreement is hereby amended by deleting the text “$3,000,000” each place such text appears therein and inserting the text “$5,000,000” in lieu thereof.

19.           Section 5.17 of the Credit Agreement is hereby amended to read in its entirety as follows:

“Third Amendment Mortgage Amendments.     Within 60 days following the Preliminary Third Amendment Effective Date (unless otherwise agreed by the Collateral Agent), if and to the extent required by the Collateral Agent, the Borrower shall have delivered to the Collateral Agent, or caused to be delivered to the Collateral Agent, fully executed counterparts of amendments (the “Third Amendment Mortgage Amendments”), in form and substance reasonably satisfactory to the Administrative Agent, to each of the Mortgages covering the Mortgaged Properties, together with evidence that counterparts of each of the Third Amendment Mortgage Amendments have been delivered to the title company insuring the Lien on the Mortgages for recording in all places to the extent necessary or desirable, in the judgment of the Collateral Agent, effectively to maintain a valid and enforceable perfected mortgage lien superior to and prior to the rights of all third parties (except Liens under Section 6.02) and subject to no other Liens except as are permitted by Section 6.02 on the Mortgaged Properties in favor of the Collateral Agent for the benefit of the Secured Parties securing all of the Obligations.”

20.           Section 6.01(k) of the Credit Agreement is hereby amended by deleting the text “$60,000,000” and inserting the text “$75,000,000” in lieu thereof.

21.           Section 6.01(p) of the Credit Agreement is hereby amended to read in its entirety as follows:

“(p) (x) Indebtedness of the Borrower and the Guarantors under the Senior Notes and the other Senior Note Documents, and any Permitted Refinancing Indebtedness in respect thereof (or in respect of Permitted Refinancing Indebtedness previously incurred pursuant to this sub-clause (x)), in an aggregate principal amount not to exceed $250,000,000, and (y) Indebtedness of the Borrower and the Guarantors under the Senior Subordinated Notes and the other Senior Subordinated Notes Documents, and any Permitted Refinancing Indebtedness in respect thereof (or in respect of Permitted Refinancing Indebtedness previously incurred pursuant to this sub-clause (y)), in an aggregate principal amount not to exceed $375,000,000.”

22.           Section 6.01 of the Credit Agreement is hereby further amended by (i) deleting the text “and” appearing at the end of clause (w) thereof, (ii) deleting the period appearing at the end thereof and inserting the text “; and” in lieu thereof and (iii) inserting the following new clause (y) at the end thereof:

“(y) Subordinated Indebtedness (which may be guaranteed on a subordinated basis by the Subsidiary Guarantors); provided that both immediately prior and after giving effect to the incurrence (or assumption) thereof (i) no Default or Event of Default shall exist or result therefrom and (ii) the Interest

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Exhibit 10.25

Coverage Ratio for the most recently ended Test Period (calculated after giving effect to the assumption or incurrence of such Subordinated Indebtedness on a Pro Forma Basis) shall be greater than 2.00:1.00”.

23.           Section 6.02(r) of the Credit Agreement is hereby amended by deleting the text “$40,000,000” and inserting the text “$50,000,000” in lieu thereof.

24.           Section 6.02(y) of the Credit Agreement is hereby amended to read in its entirety as follows:

“[Intentionally Omitted.]”.

25.           Section 6.03 of the Credit Agreement is hereby amended by deleting the text “$60,000,000” appearing therein and inserting the text “$75,000,000” in lieu thereof.

26.           Section 6.04(k) of the Credit Agreement is hereby amended by deleting the text “$125,000,000” appearing therein and inserting the text “$150,000,000” in lieu thereof.

27.           Section 6.09(b) of the Credit Agreement is hereby amended to read in its entirety as follows:

“(b)(i) Make (or give any notice in respect thereof that cannot be revoked at the option of the Borrower) any voluntary or optional payment or prepayment on or redemption or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto money or securities before the date due for the purpose of paying when due), or any prepayment or redemption as a result of any asset sale, change of control, receipt of Net Proceeds, generation of excess cash flow, or any similar event of, any Senior Notes or any refinancing or successive refinancing thereof or the Senior Subordinated Notes or any refinancing or successive refinancing thereof, except, in each case, with the proceeds of any Permitted Refinancing Indebtedness incurred pursuant to the relevant sub-clause of Section 6.01(p), or (ii) amend or modify, or permit the amendment of modification of, any Senior Notes (or any refinancing or successive refinancing thereof) or the Senior Subordinated Notes (or any refinancing or successive refinancing thereof), or any agreement (including, without limitation any Senior Note Document or Senior Subordinated Notes Document) relating thereto, other than amendments or modifications which do not in any way adversely affect, in any material respect, the interest of the Lenders and which do not affect the subordination provisions thereof, if any.”

28.           Section 6.11 of the Credit Agreement is hereby amended by deleting said section in the entirety and inserting the following in lieu thereof:

“Section 6.11. [Intentionally omitted.].”

29.           SECTION 6.12 of the Credit Agreement is hereby amended to read in its entirety as follows:

“Section 6.12. Senior Secured Net Leverage Ratio. Permit the Senior Secured Net Leverage Ratio to exceed 5.50:1.00 on the last day of any fiscal quarter.”.

30.           Schedule A to the Credit Agreement is hereby amended (effective only for periods from and after the Final Third Amendment Effective Date (as defined below)) by deleting the table appearing in said schedule in its entirety and inserting the following table in lieu thereof:

Category Period	LIBOR Margin for Revolving Loans	LIBOR Margin for B Term Loans	ABR Margin for Revolving Loans	ABR Margin for B Term Loans
Category A Period	2.75%	2.50%	1.75%	1.50%
Category B Period	2.75%	2.25%	1.75%	1.25%
Category C Period	2.50%	2.00%	1.50%	1.00%

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Exhibit 10.25

31.           Schedule A to the Credit Agreement is hereby further amended by restating the definition of “Category A Period” appearing therein in its entirety as follows:

“Category A Period” shall exist at any time when the Borrower’s corporate credit rating issued by Moody’s Investors Service, Inc. is B3 or lower.

32.           Schedule A to the Credit Agreement is hereby further amended by restating the definition of “Category B Period” appearing therein in its entirety as follows:

“Category B Period” shall exist at any time no other Category Period is then in effect.

33.           Schedule A to the Credit Agreement is further amended by inserting the following definition of “Category C Period” immediately following the definition of “Category B Period” as follows:

“Category C Period” shall exist at any time if (i) Holdings has received cash proceeds from the sale after the Final Third Amendment Effective Date of its Equity Interests pursuant to a public offering of common stock, (ii) the Net Leverage Ratio is less than or equal to 4.75 to 1.00 as at the last day of the most recent fiscal quarter for which financial statements have been, or were required to be, delivered pursuant to Section 5.04(a) or (b), as applicable and (iii) on or prior to the day that Holdings has received such cash proceeds, the Borrower shall have received a corporate family rating from Moody’s Investors Service, Inc. of at least B1, and such rating shall be in effect on the day that Holdings has received such cash proceeds.

II.             New Term Loans

1.             The New Term Lenders (as defined below) hereby agree to provide a new Tranche of term loans under the Credit Agreement as contemplated in Section 9.08(c)(ii)(a) thereof (such term loans, the “New Term Loans”). The proceeds of the New Term Loans shall be applied on the Preliminary Third Amendment Effective Date (as defined below) to refinance all outstanding B Term Loans.

On the Preliminary Third Amendment Effective Date, all outstanding B Term Loans shall be refinanced, as described below, with New Term Loans having the following terms: (i) the borrower of the New Term Loans shall be the Borrower, (ii) the aggregate principal amount of the New Term Loans on the Preliminary Third Amendment Effective Date shall equal the aggregate principal amount of all outstanding B Term Loans outstanding on the Preliminary Third Amendment Effective Date prior to giving effect to this Third Amendment, (iii) after giving effect to this Third Amendment, all terms applicable to the New Term Loans (including, without limitation, maturity) shall be the same as those that theretofore applied to the B Term Loans; provided that the interest rate margins applicable to the New Term Loans shall be as provided in Part I.30 of this Third Amendment and (iv) after the refinancing contemplated by this Part II.2. has occurred (and at all times after the Third Amendment Effective Date), the New Term Loans made hereunder shall thereafter for all purposes of the Credit Agreement be referred to as (and constitute) “B Term Loans”, with all provisions of the Credit Agreement and related Loan Documents applicable to B Term Loans (and to Loans) to fully apply to said New Term Loans (which shall thereafter be called (and constitute) “B Term Loans” and shall constitute “Loans” under the Credit Agreement and for purposes of the Loan Documents); provided that, notwithstanding the foregoing provisions of this clause (iii), the New Term Loans made hereunder shall not constitute “B Term Loans” with respect to provisions of the Credit Agreement that were applicable only on the Closing Date, including, Section 2.01(a), Section 2.03 and Section 2.04(e) (to the extent relating to the Closing Date or assignments effected before the Third Amendment Effective Date) of the Credit Agreement.

3.             The Administrative Agent has prepared a schedule (the “New Term Loan Commitment Schedule”) which sets forth the allocated commitments received by it (“New Term Loan Commitments”) from various Lenders (including Persons to become Lenders on the Preliminary Third Amendment Effective Date) (each, a “New Term Loan Lender”) to make New Term Loans on the Preliminary Third Amendment Effective Date in accordance with the relevant provisions of this Third Amendment. The Administrative Agent has notified each New Term Loan Lender of its allocated New Term Loan Commitment, and each of the New Term Loan Lenders is listed as a signatory to this Third Amendment. Prior to the Preliminary Third Amendment Effective Date, the Administrative Agent has furnished to the Borrower a copy of the New Term Loan Commitment Schedule. On the Preliminary Third Amendment Effective Date, all then outstanding B Term Loans shall be refinanced in full as follows (and as described in following Part II.4.):

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Exhibit 10.25

(i)            the aggregate principal amount of B Term Loans of each Lender holding outstanding B Term Loans and which does not have a New Term Loan Commitment shall be repaid in full in cash; and

(ii)           the aggregate principal amount of B Term Loans of each Lender holding outstanding B Term Loans and which has a New Term Loan Commitment shall automatically be converted into New Term Loans; provided that (x) if the New Term Loan Commitment of such Lender exceeds the then outstanding principal amount of its B Term Loans, such Lender shall fund additional New Term Loans in an amount equal to such difference as set forth in Part II.4. below and (y) if the New Term Loan Commitment of such Lender is less than the aggregate principal amount of such Lender’s then outstanding B Term Loans, the principal amount of its then outstanding B Term Loans shall be repaid to such Lender in cash in an amount equal to such difference.

4.             On the Preliminary Third Amendment Effective Date, each Lender with a New Term Loan Commitment hereby agrees to fund its New Term Loans to the Borrower in an aggregate principal amount equal to such Lender’s New Term Loan Commitment as follows:

(i)            each New Term Loan Lender which has then outstanding B Term Loans, shall fund its New Term Loans by converting its then outstanding principal of B Term Loans (up to the amount of its New Term Loan Commitment) into New Term Loans as (and to the extent) provided in Part II.3.(ii) above;

(ii)           each New Term Loan Lender which has then outstanding B Term Loans and which has a New Term Loan Commitment which exceeds the aggregate amount of its then outstanding B Term Loans shall also fund an amount equal to such excess to the Borrower; and

(iii)          each New Term Loan Lender which has no then outstanding B Term Loans shall fund the full amount of its New Term Loan Commitment to the Borrower.

5.             The Borrower shall give the Administrative Agent, for distribution to the New Term Loan Lenders and the Lenders of then outstanding B Term Loans, written notice of the funding of the New Term Loans at least one Business Day prior to the Preliminary Third Amendment Effective Date, which notice shall be in form and substance reasonably satisfactory to the Administrative Agent and shall be deemed to be both a notice of borrowing and, subject to Part II.8. below, of prepayment for purposes of Section 2.12(a) of the Credit Agreement. All Interest Periods applicable to B Term Loans shall continue in effect (for the same amount of principal of New Term Loans) after the Third Amendment Effective Date and shall apply to the New Term Loans made on the Third Amendment Effective Date (until such Interest Periods expire, at which time subsequent Interest Periods shall be determined in accordance with the provisions of Section 2.10 of the Credit Agreement). The New Term Loans of the various New Term Loan Lenders shall be allocated ratably to such Interest Periods (based upon the relative principal amounts subject thereto immediately prior to the Preliminary Third Amendment Effective Date), with the effect being that B Term Loans which are converted hereunder shall continue to be subject to the same Interest Periods and any amounts funded in cash on the Third Amendment Effective Date shall be ratably allocated to the various Interest Periods as described above. To the extent any New Term Loan Lender which is funding New Term Loans in cash suffers any loss as a result of funding its New Term Loans during an Interest Period rather than on the first day thereof (after taking such steps as may be reasonably available to it to mitigate or avoid such loss), it shall provide prompt notice thereof to the Borrower through the Administrative Agent (certifying that it has suffered such a loss and the amount thereof, describing in reasonable detail the nature of such loss and the reasons therefor, and setting forth a reasonably detailed explanation of the calculation thereof) and the Borrower shall promptly following receipt of such request reimburse it for such loss so sustained.

6.            Each New Term Loan Lender shall be required to execute and deliver a counterpart of this Third Amendment on or prior to the Preliminary Third Amendment Effective Date, and any such Person which was not already a Lender under the Credit Agreement hereby agrees that it shall be party to the Credit Agreement (as amended from time to time) as a Lender as fully as if it were a Lender originally party thereto, and agrees to furnish to the Administrative Agent from time to time following any request therefor all documentation required of Lenders party to the Credit Agreement on the Closing Date, as fully as if it were a party thereto on the Closing Date.

7.             The Borrower hereby agrees that, upon request to the Administrative Agent by any New Term Loan Lender made on or prior to the Third Amendment Effective Date, in order to evidence such New Term Loan Lender’s New Term Loans hereunder, the Borrower will execute and deliver to such New Term Loan Lender a Note, with appropriate insertions therein as to payee, date and principal amount, payable to the order of such New Term Loan Lender and in a principal amount equal to the unpaid principal amount of the New Term Loans made by

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Exhibit 10.25

such New Term Loan Lender to the Borrower. Each such Note evidencing a New Term Loan shall (x) be dated the Preliminary Third Amendment Effective Date, (y) be payable as provided in Section 2.04 of the Credit Agreement and (z) provide for the payment of interest in accordance with Section 2.06 of the Credit Agreement. If any New Term Loan Lender which was already a Lender of B Term Loans prior to the Third Amendment Effective Date requests a replacement Note hereunder, such Lender shall surrender the respective Note, if any, held by it. Any Notes so surrendered shall be delivered to the Administrative Agent and returned by it to the Borrower marked “cancelled.” If a New Term Loan Lender was already a Lender of B Term Loans prior to the Preliminary Third Amendment Effective Date, and is a holder of a Note issued prior to the Preliminary Third Amendment Effective Date evidencing same, such Note shall continue to evidence its outstanding New Term Loans following the Third Amendment Effective Date unless replaced in accordance with the foregoing provisions, as and to the extent otherwise contemplated by the Credit Agreement (although if the respective New Term Loan Lender is making New Term Loans in excess of the aggregate principal amount of such Note, it shall be entitled to receive a replacement Note in accordance with the preceding provisions).

8.             On the Third Amendment Effective Date, the Borrower shall pay (a) in cash all interest accrued on the B Term Loans through the Preliminary Third Amendment Effective Date and (b) to each B Term Lender that is not a New Term Loan Lender, and to each New Term Loan Lender to the extent such Lender is repaid cash pursuant to clause (y) in the proviso to Part II.3.(ii) above, any breakage loss or expenses due under Section 2.15 of the Credit Agreement (it being understood that existing Interest Periods of the B Term Loans held by New Term Loan Lenders prior to the Preliminary Third Amendment Effective Date shall continue on and after the Third Amendment Effective Date and shall accrue interest in accordance with Section 2.06 of the Credit Agreement on and after the Preliminary Third Amendment Effective Date).

9.             The Borrower hereby further acknowledges and agrees that all indemnifications provided in the Credit Agreement and Loan Documents which are applicable to Lenders shall continue to apply to the Lenders of B Term Loans which are refinanced pursuant to this Third Amendment.

III.             Additional New Term Loans

1.             The Required Lenders (determined after giving effect to the Preliminary Third Amendment Effective Date) hereby consent and agree to allow additional extensions of credit (the “Additional New Term Loans”) under the Credit Agreement as contemplated in Section 9.08(c)(i) thereof which shall be provided by the Additional New Term Loan Lenders (as defined below) and shall be drawn on the Final Third Amendment Effective Date (as defined below). The proceeds of the Additional New Term Loans shall be applied on the Third Amendment Effective Date to (i) repay approximately $50,000,000 of outstanding Revolving Loans, (ii) refinance all outstanding Second Lien Loans and (iii) pay fees and expenses in connection with this Third Amendment.

2.             The Additional New Term Loans having the following terms: (i) the borrower of the Additional New Term Loans shall be the Borrower, (ii) the aggregate principal amount of the Additional New Term Loans shall not exceed $306,000,000, (iii) all terms applicable to the Additional New Term Loans as amended hereby (including, without limitation, maturity) shall be the same as those that theretofore applied to the New Term Loans; provided that the Additional New Term Loans, together with the New Term Loans (all of which shall, after giving effect to the Final Third Amendment Effective Date, constitute “B Term Loans” under the Credit Agreement as described below), shall amortize as set forth on the table appearing in Part I.9 of this Third Amendment and (iv) at all times after the Final Third Amendment Effective Date, the Additional New Term Loans made hereunder shall, together with all New Term Loans, thereafter for all purposes of the Credit Agreement be referred to as (and constitute) “B Term Loans”, with all provisions of the Credit Agreement and related Loan Documents applicable to B Term Loans (and to Loans) to fully apply to said Additional New Term Loans (which shall thereafter be called (and constitute) “B Term Loans” and shall constitute “Loans” under the Credit Agreement and for purposes of the Loan Documents); provided that, notwithstanding the foregoing provisions of this clause (iv), the Additional New Term Loans made hereunder shall not constitute “B Term Loans” with respect to provisions of the Credit Agreement that were applicable only on the Closing Date or the Preliminary Third Amendment Effective Date, including, Section 2.01(a), Section 2.03 and Section 2.04(e) (to the extent relating to the Closing Date or assignments effected before the Final Third Amendment Effective Date) of the Credit Agreement.

3.             The Administrative Agent has prepared a schedule (the “Additional New Term Loan Commitment Schedule”) which sets forth the allocated commitments received by it (“Additional New Term Loan

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Exhibit 10.25

Commitments”) from various Lenders (including Persons to become Lenders on the Third Amendment Effective Date) (each, an “Additional New Term Loan Lender”) to make Additional New Term Loans on the Final Third Amendment Effective Date in accordance with the relevant provisions of this Third Amendment. The Administrative Agent has notified each Additional New Term Loan Lender of its allocated Additional New Term Loan Commitment, and each of the Additional New Term Loan Lenders is listed as a signatory to this Third Amendment. Prior to the Final Third Amendment Effective Date, the Administrative Agent has furnished to the Borrower a copy of the Additional New Term Loan Commitment Schedule.

4.             On the Final Third Amendment Effective Date, each Lender with an Additional New Term Loan Commitment hereby agrees to fund its Additional Term Loans to the Borrower in an aggregate principal amount equal to such Lender’s Additional New Term Loan Commitment.

5.             The Required Lenders (determined after giving effect to the Preliminary Third Amendment Effective Date) and each Additional New Term Loan Lender hereby agree that any written notice of the borrowing of the Additional New Term Loans required pursuant to the provisions of the Credit Agreement is deemed satisfied by virtue of the occurrence of the Final Third Amendment Effective Date. All Interest Periods applicable to New Term Loans shall continue in effect (for the same amount of principal of New Term Loans plus additional amounts attributable to the Additional New Term Loans allocated thereto under the next sentence) after the Final Third Amendment Effective Date and shall apply to the New Term Loans made on the Preliminary Third Amendment Effective Date (until such Interest Periods expire, at which time subsequent Interest Periods shall be determined in accordance with the provisions of Section 2.10 of the Credit Agreement). Each Borrowing of New Term Loans outstanding immediately prior to the Final Third Amendment Effective Date will, on the Third Amendment Effective Date, be increased ratably (based on the relative principal amounts of each such Borrowing) by the amount by which the aggregate principal amount of Additional New Term Loans, and the Additional New Term Loans of the various Additional New Term Loan Lenders shall be allocated ratably to such Interest Periods (based upon the relative principal amounts subject thereto immediately prior to the Final Third Amendment Effective Date), with the effect being that New Term Loans funded as described in Part II of this Third Amendment shall continue to be subject to the same Interest Periods and all Additional New Term Loans shall be ratably allocated to the various Interest Periods as described above. To the extent any Additional New Term Loan Lender suffers any loss as a result of funding its Additional New Term Loans during an Interest Period rather than on the first day thereof (after taking such steps as may be reasonably available to it to mitigate or avoid such loss), it shall provide prompt notice thereof to the Borrower through the Administrative Agent (certifying that it has suffered such a loss and the amount thereof, describing in reasonable detail the nature of such loss and the reasons therefor, and setting forth a reasonably detailed explanation of the calculation thereof) and the Borrower shall promptly following receipt of such request reimburse it for such loss so sustained.

6.            Each Additional New Term Loan Lender shall be required to execute and deliver a counterpart of this Third Amendment on or prior to the Final Third Amendment Effective Date, and any such Person which was not already a Lender under the Credit Agreement hereby agrees that it shall be party to the Credit Agreement (as amended from time to time) as a Lender as fully as if it were a Lender originally party thereto, and agrees to furnish to the Administrative Agent from time to time following any request therefor all documentation required of Lenders party to the Credit Agreement on the Closing Date, as fully as if it were a party thereto on the Closing Date.

7.             The Borrower hereby agrees that, upon request to the Administrative Agent by any Additional New Term Loan Lender made on or prior to the Final Third Amendment Effective Date, in order to evidence such Additional New Term Loan Lender’s Additional New Term Loans hereunder, the Borrower will execute and deliver to such Additional New Term Loan Lender a Note, with appropriate insertions therein as to payee, date and principal amount, payable to the order of such Additional New Term Loan Lender and in a principal amount equal to the unpaid principal amount of the Additional New Term Loans made by such Additional New Term Loan Lender to the Borrower. Each such Note evidencing a Additional New Term Loan shall (x) be dated the Final Third Amendment Effective Date, (y) be payable as provided in Section 2.04 of the Credit Agreement and (z) provide for the payment of interest in accordance with Section 2.06 of the Credit Agreement. If any Additional New Term Loan Lender which was already a Lender of New Term Loans requests a replacement Note hereunder, such Lender shall surrender the respective Note, if any, held by it. Any Notes so surrendered shall be delivered to the Administrative Agent and returned by it to the Borrower marked “cancelled”.

IV.             Miscellaneous Provisions

Page 9 of 14

Exhibit 10.25

1.             In order to induce the Lenders to enter into this Third Amendment, the Borrower hereby represents and warrants that (i) no Default or Event of Default exists as of the Preliminary Third Amendment Effective Date or the Final Amendment Effective Date after giving effect to this Third Amendment and the applicable transactions permitted (or required) hereunder as described in preceding Part I, and (ii) all of the representations and warranties contained in the Credit Agreement or the other Loan Documents are true and correct in all material respects on both the Third Amendment Effective Date and the Final Amendment Effective Date after giving effect to this Third Amendment, with the same effect as though such representations and warranties had been made on and as of the Third Amendment Effective Date (it being understood that any representation or warranty made as of a specific date shall be true and correct in all material respects as of such specific date).

2.             This Third Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Loan Document.

3.             This Third Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Borrower and the Administrative Agent.

4.             THIS THIRD AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

5.             (a) Part I.30 and Part II of this Third Amendment shall become effective on the date (the “Preliminary Third Amendment Effective Date”) when each of the following conditions shall have been satisfied:

(i)            the Administrative Agent, the Borrower, each other Loan Party and each New Term Loan Lender shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of facsimile transmission or electronic mail) the same to White & Case LLP, 1155 Avenue of the Americas, New York, NY 10036 Attention: Yanni Guo (facsimile number 212-354-8113);

(ii)           the notice required pursuant to (x) Part II.5 of this Third Amendment and Section 2.12(a) of the Second-Lien Credit Agreement shall have been given and each such notice period shall have expired;

(iii)          the Borrower shall have paid in full all fees, costs and expenses (including legal fees and expenses) then due and payable pursuant to the Credit Agreement;

(iv)          there shall have been delivered to Administrative Agent copies of resolutions of the board of directors of each Loan Party approving and authorizing the execution, delivery and performance of this Third Amendment and the Loan Documents as amended by this Third Amendment, certified as of the Third Amendment Effective Date by the corporate secretary or an assistant secretary of such Loan Party as being in full force and effect without modification or amendment;

(v)            the Administrative Agent shall have received from Simpson Thacher & Bartlett, special New York counsel to the Borrower, an opinion addressed to each Agent, the Collateral Agent and each of the Lenders and dated the Third Amendment Effective Date, which opinion shall be in form and substance reasonably satisfactory to the Administrative Agent; and

(vi)          the Administrative Agent shall have received an officer’s certificate from a Responsible Officer of the Borrower accompanied by supporting schedules reasonably satisfactory to the Administrative Agent evidencing compliance with the Senior Note Indenture and the Senior Subordinated Note Indenture; and

(b)           Part I (other than Section 30 thereof, which shall become effective pursuant to the terms of preceding clause (a)) and Part III of this Third Amendment shall become effective on the date (the “Final Third Amendment Effective Date”) when each of the following conditions shall have been satisfied:

(i)           the Third Amendment Effective Date shall have occurred; and

(ii)           the Required Lenders (determined after giving effect to the Preliminary Third Amendment Effective Date and the funding of the New Term Loans) shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of facsimile

Page 10 of 14

Exhibit 10.25

transmission or electronic mail) the same to White & Case LLP, 1155 Avenue of the Americas, New York, NY 10036 Attention: Yanni Guo (facsimile number 212-354-8113).

6.            By executing and delivering a copy hereof, each Loan Party hereby agrees that all Loans shall be fully guaranteed pursuant to the Guarantee Agreements in accordance with the terms and provisions thereof and shall be fully secured pursuant to the Security Documents.

7.             From and after the Preliminary Third Amendment Effective Date and the Final Third Amendment Effective Date, all references in the Credit Agreement and each of the other Loan Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement, as modified hereby.

* * *

Page 11 of 14

Exhibit 10.25

IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Third Amendment as of the date first above written.

GRAHAM PACKAGING COMPANY, L.P.

By: GPC Opco LLC, its general partner

By:__________________________________

Name:

Title:

GRAHAM PACKAGING HOLDINGS COMPANY

By: BCP/Graham Holdings L.L.C., its general partner

By:__________________________________

Name:

Title:

GPC CAPITAL CORP. I

By:__________________________________

Name:

Title:

DEUTSCHE BANK AG CAYMAN ISLANDS BRANCH,

as Administrative Agent

By:__________________________________

Name:

Title:

Page 12 of 14

Exhibit 10.25

SIGNATURE PAGE TO THE THIRD AMENDMENT TO CREDIT AGREEMENT, DATED AS OF MARCH 19, 2007, AMONG GRAHAM PACKAGING HOLDINGS COMPANY, GRAHAM PACKAGING COMPANY, L.P., GPC CAPITAL CORP. I, THE LENDERS PARTY THERETO FROM TIME TO TIME, CITIGROUP GLOBAL MARKETS INC., AS SYNDICATION AGENT, GOLDMAN SACHS CREDIT PARTNERS, L.P., GENERAL ELECTRIC CAPITAL CORPORATION AND LEHMAN COMMERCIAL PAPER INC., AS CO-DOCUMENTATION AGENTS, DEUTSCHE BANK AG CAYMAN ISLANDS BRANCH, AS ADMINISTRATIVE AGENT AND AS COLLATERAL AGENT FOR THE LENDERS, LASALLE BANK NATIONAL ASSOCIATION AND MANUFACTURERS AND TRADERS TRUST COMPANY, AS SENIOR MANAGING AGENTS, DEUTSCHE BANK SECURITIES INC. AND CITIGROUP GLOBAL MARKETS INC., AS JOINT LEAD ARRANGERS AND JOINT BOOK RUNNERS, AND GOLDMAN SACHS CREDIT PARTNERS, L.P., AS JOINT BOOK RUNNER

NAME OF INSTITUTION:

__________________________________________

By:_______________________________________

Name:

Title:

Page 13 of 14

Exhibit 10.25

Each of the undersigned, each being a Subsidiary Guarantor under, and as defined in, the Credit Agreement referenced in the foregoing Third Amendment, hereby consents to the entering into of the Third Amendment and agrees to the provisions thereof (including, without limitation, Part III, Section 6 thereof).

GPC CAPITAL CORP. I

GRAHAM PACKAGING POLAND, L.P.

By: GPC Sub GP LLC, its general partner

GRAHAM RECYCLING COMPANY, L.P.

By: GPC Sub GP LLC, its general partner

GRAHAM PACKAGING FRANCE PARTNERS

By: Graham Packaging Company, L.P., its general partner

By: GPC Opco GP LLC, its general partner

GRAHAM PACKAGING LATIN AMERICA, LLC

GPC SUB GP LLC

GRAHAM PACKAGING WEST JORDAN, LLC

GRAHAM PACKAGING ACQUISITION CORP.

GRAHAM PACKAGING PLASTIC PRODUCTS INC.

GRAHAM PACKAGING PET TECHNOLOGIES INC.

GRAHAM PACKAGING LEASING USA INC.

GRAHAM PACKAGING CONTROLLERS USA, INC.

GRAHAM PACKAGING COMERC USA INC.

GRAHAM PACKAGING REGIOPLAST STS INC.

GRAHAM PACKAGING TECHNOLOGICAL SPECIALTIES INC.

GRAHAM PACKAGING INTERNATIONAL PLASTIC PRODUCTS INC.

on behalf of each of the above Subsidiary Guarantors

By:________________________________

Name:

Title:

Page 14 of 14

EX-12

Exhibit 12.1

Computation of Ratio of Earnings to Fixed Charges

	Year Ended December 31,
	2006			2005			2004			2003			2002
	(In thousands)
(Loss) income before income taxes and minority interest	$	(92,786	)	$	(37,463	)	$	(41,335	)	$	17,355		$	13,277
Plus fixed charges:
Interest expense, net		206,951			184,362			140,500			96,586			81,784
Capitalized interest		9,482			6,070			1,758			1,638			1,525
Portion of rent expense representative of interest expense		18,096			16,352			10,802			7,949			7,635
Plus amortization of capitalized interest		2,253			1,464			1,418			1,339			1,252
Less capitalized interest		(9,482	)		(6,070	)		(1,758	)		(1,638	)		(1,525	)
Adjusted earnings		134,514			164,715			111,385			123,229			103,948
Fixed charges		234,529			206,784		$	153,060		$	106,173		$	90,944
Ratio of earnings to fixed charges		—			—			—			1.2			1.1
Deficiency of earnings to cover fixed charges	$	100,015		$	42,069			41,675			—		$	—

EX-21

Exhibit 21.1

SUBSIDIARIES OF GRAHAM PACKAGING HOLDINGS COMPANY

Name	Jurisdiction and Type of Formation:
Graham Packaging Company, L.P.	Delaware Limited Partnership
GPC Capital Corp. I	Delaware Corporation
GPC Capital Corp. II	Delaware Corporation
GPC Opco GP LLC	Delaware Limited Liability Company
GPC Sub GP LLC	Delaware Limited Liability Company
Graham Recycling Company, L.P.	Pennsylvania Limited Partnership
Financière Graham Emballages Plastiques SNC	French General Partnership
Financière Graham Packaging France SNC	French General Partnership
Graham Emballages Plastiques S.A.S.	French Corporation
Graham Packaging Acquisition Corp.	Delaware Corporation
Graham Packaging Argentina S.A.	Argentine Corporation
Graham Packaging Belgium S.A.	Belgian Corporation
Graham Packaging Canada Limited	Ontario Corporation
Graham Packaging Comerc USA LLC.	Delaware Limited Liability Company
Graham Packaging Company BV	Netherlands Limited Liability Company
Graham Packaging Company de Ecuador SA	Ecuador Public Limited Company
Graham Packaging Company OY	Finnish Limited Liability Company
Graham Packaging Consultores en Controles S.A. de C.V.	Mexican Corporation with Variable Capital
Graham Packaging Controllers USA LLC.	Delaware Limited Liability Company
Graham Packaging de Mexico S. de R.L. de C.V.	Mexican Limited Liability Company
Graham Packaging do Brasil Industria e Comercio S.A.	Brazilian Corporation
Graham Packaging Especialidades Tecnologicas S.A. de C.V.	Mexican Corporation with Variable Capital
Graham Packaging Europe SNC	French General Partnership
Graham Packaging European Services, Ltd.	English & Wales Limited Liability Company
Graham Packaging France Partners	Pennsylvania General Partnership
Graham Packaging France, S.A.S.	French Corporation
Graham Packaging Holdings BV	Netherlands Limited Liability Company
Graham Packaging Hungary Kft.	Hungarian Limited Liability Company
Graham Packaging Iberica S.L.	Spanish Limited Liability Company
Graham Packaging International Plastic Products Inc.	Delaware Corporation
Graham Packaging Latin America, LLC	Delaware Limited Liability Company
Graham Packaging Leasing S.A. de C.V.	Mexican Corporation with Variable Capital
Graham Packaging Leasing USA LLC.	Delaware Limited Liability Company
Graham Packaging Lummen NV	Belgian Limited Liability Corporation
Graham Packaging Minster LLC	Ohio Limited Liability Company
Graham Packaging Noeux SARL	French Limited Liability Company
Graham Packaging PET Holdings S. de R.L. de C.V.	Mexican Limited Liability Company
Graham Packaging PET Technologies de Mexico S.A. de C.V.	Mexican Corporation with Variable Capital
Graham Packaging PET Technologies Inc.	Delaware Corporation
Graham Packaging Plastic Products de Mexico S. de R.L. de C.V.	Mexican Limited Liability Company
Graham Packaging Plastic Products Inc.	Delaware Corporation
Graham Packaging Plasticos de Venezuela C.A.	Venezuelan Corporation
Graham Packaging Plastics Limited	English & Wales Limited Liability Company
Graham Packaging Poland, L.P.	Pennsylvania Limited Partnership
Graham Packaging Regioplast STS Inc.	Delaware Corporation
Graham Packaging Technological Specialties LLC.	Delaware Limited Liability Company
Graham Packaging U.K. Ltd.	English & Wales Corporation
Graham Packaging Villecomtal SARL	French Limited Liability Company
Graham Packaging West Jordan, LLC	Utah Limited Liability Company

Page 1 of 2

Exhibit 21.1

Graham Packaging Zoetermeer BV	Netherlands Limited Liability Company
Graham Plastpak Plastik Ambalaj A.S.	Turkish Corporation
Industrias Graham Packaging de Irapuato S. de R.L. de C.V.	Mexican Limited Liability Company
Industrias Graham Packaging S. de R.L. de C.V.	Mexican Limited Liability Company
Lido Plast San Luis S.A.	Argentine Corporation
Lido Plast-Graham S.r.L.	Argentine Limited Liability Company
Graham Packaging Poland Sp. Z.o.o.	Polish Limited Liability Company
Polo GR Industria e Comercio, Ltda.	Brazilian Limited Liability Company
Resin Rio Comercio Ltda.	Brazilian Limited Liability Company
Servicios Graham Packaging S. de R.L. de C.V.	Mexican Limited Liability Company
Societa Imballagi Plastici, S.r.L.	Italian Limited Liability Company

Page 2 of 2

EX-31

Exhibit 31.1

CERTIFICATION

I, Warren D. Knowlton, certify that:

1) I have reviewed this Annual Report on Form 10-K of Graham Packaging Holdings Company;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a -15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 2, 2007

By:	/s/ Warren D. Knowlton
	Warren D. Knowlton
	Chief Executive Officer

EX-31

Exhibit 31.2

CERTIFICATION

I, Mark S. Burgess, certify that:

1) I have reviewed this Annual Report on Form 10-K of Graham Packaging Holdings Company;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a -15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 2, 2007

By:	/s/ Mark S. Burgess
	Mark S. Burgess
	Chief Financial Officer

EX-32

Exhibit 32.1

CERTIFICATION

In connection with the Annual Report of Graham Packaging Holdings Company on Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Warren D. Knowlton, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:

1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Graham Packaging Holdings Company.

Date: April 2, 2007

By:	/s/ Warren D. Knowlton
	Warren D. Knowlton
	Chief Executive Officer

The foregoing certification is being furnished solely pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being filed as part of the Report or as a separate disclosure document.

EX-32

Exhibit 32.2

CERTIFICATION

In connection with the Annual Report of Graham Packaging Holdings Company on Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark S. Burgess, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:

1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Graham Packaging Holdings Company.

Date: April 2, 2007

By:	/s/ Mark S. Burgess
	Mark S. Burgess
	Chief Financial Officer

The foregoing certification is being furnished solely pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being filed as part of the Report or as a separate disclosure document.