Exhibit 10.4

INCOME TAX RECEIVABLE AGREEMENT

dated as of

February 10, 2010

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Table of Contents

 

          Page    ARTICLE I       DEFINITIONS   

Section 1.01.

   Definitions    2    ARTICLE II       DETERMINATION OF REALIZED TAX BENEFIT   

Section 2.01.

   Basis Adjustment    9

Section 2.02.

   Basis Adjustment Schedule    9

Section 2.03.

   Tax Benefit Schedule    9

Section 2.04.

   Procedures, Amendments    10

Section 2.05.

   Section 754 Election    10    ARTICLE III       TAX BENEFIT PAYMENTS   

Section 3.01.

   Payments    11

Section 3.02.

   No Duplicative Payments    11

Section 3.03.

   Coordination of Benefits With Other Tax Receivable Agreement.    11   
ARTICLE IV       TERMINATION   

Section 4.01.

   Early Termination and Breach of Agreement    12

Section 4.02.

   Early Termination Notice    13

Section 4.03.

   Payment upon Early Termination    13    ARTICLE V       LATE PAYMENTS   

Section 5.01.

   Late Payments by the Corporation    14    ARTICLE VI       NO DISPUTES;
CONSISTENCY; COOPERATION   

Section 6.01.

   Participation in the Corporation and Partnership Tax Matters    14

Section 6.02.

   Consistency    14

Section 6.03.

   Cooperation    15    ARTICLE VII       MISCELLANEOUS   

Section 7.01.

   Notices    15

 

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Section 7.02.

   Counterparts    16

Section 7.03.

   Entire Agreement; Third Party Beneficiaries    16

Section 7.04.

   Governing Law    16

Section 7.05.

   Severability    16

Section 7.06.

   Successors; Assignment; Amendments; Waivers    17

Section 7.07.

   Titles and Subtitles    17

Section 7.08.

   Resolution of Disputes    17

Section 7.09.

   Reconciliation    18

Section 7.10.

   Withholding    20

Section 7.11.

   Affiliated Corporations; Admission of the Corporation into a Consolidated
Group; Transfers of Corporate Assets    20

Section 7.12.

   Confidentiality    20

Section 7.13.

   Partnership Agreement    21

Section 7.14.

   Appointment of GPC L.P.    21

Section 7.15.

   Headings    21

 

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This INCOME TAX RECEIVABLE AGREEMENT (as amended from time to time, this
“Agreement”), dated as of February 10, 2010, is hereby entered into by and among
Graham Packaging Company Inc., a Delaware corporation (the “Corporation,
formerly known as BMP/Graham Holdings Corporation) and GPC Holdings, L.P, a
Pennsylvania limited partnership (“GPC L.P.”) (on behalf of the Graham Family
Entities (as defined below)).

RECITALS

WHEREAS, the Graham Family Entities hold limited partnership interests in Graham
Packaging Holdings Company, a Pennsylvania limited partnership (the
“Partnership”), which is treated as a partnership for U.S. federal income tax
purposes;

WHEREAS, in connection with the Reorganization Transactions (as defined below)
and the IPO (as defined below), the Corporation and the Graham Family Entities
will enter into an exchange agreement under which the Graham Family Entities
will have the right to exchange their Partnership Interests (as defined below)
for shares of the Corporation’s common stock, par value $0.01 per share (the
“Common Stock”), on a one-for-one basis, subject to customary adjustments;

WHEREAS, the Partnership and each of its direct and indirect subsidiaries that
are classified as partnerships for U.S. federal income tax purposes, if any,
will have in effect an election under Section 754 of the Internal Revenue Code
of 1986, as amended (the “Code”), for each Taxable Year in which such an
exchange will occur, which election is intended to result in an adjustment to
the tax basis of the assets owned by the Partnership and each of its direct and
indirect non-corporate subsidiaries at the time of an exchange of Partnership
Interests for the Common Stock or any other acquisition by the Corporation or
its successor (or any entity that is a member of the Corporation’s (or its
successor’s) affiliated or consolidated group) of Partnership Interests for cash
or otherwise, (an “Exchange”) (each such time, an “Exchange Date”) (such assets
and any asset whose tax basis is determined, in whole or in part, by reference
to the adjusted basis of any such asset, the “Original Assets”) by reason of
such Exchange, or the receipt of payments under this Agreement;

WHEREAS, the income, gain, loss, expense and other Tax (as defined below) items
of (i) the Partnership with respect to the Corporation may be affected by the
Basis Adjustment (as defined below) and (ii) the Corporation may be affected by
the Imputed Interest (as defined below);

WHEREAS, the parties to this Agreement desire to make certain arrangements with
respect to the effect of the Basis Adjustment and Imputed Interest (each as
defined below) on the reported liability for Taxes of the Corporation;

NOW, THEREFORE, in consideration of the foregoing and the respective covenants
and agreements set forth herein, and intending to be legally bound hereby, the
parties hereto agree as follows:

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ARTICLE I

DEFINITIONS

Section 1.01. Definitions. As used in this Agreement, the terms set forth in
this Article I shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined).

“Advisory Firm” means (i) Deloitte & Touche LLP or (ii) any other law or
accounting firm that is (A) nationally recognized as being expert in Tax matters
and (B) is agreed to by the Corporation and GPC L.P.

“Advisory Firm Report” shall mean (a) an attestation report from the Advisory
Firm expressing an opinion on management’s assertion as to whether the Tax
Benefit Schedule has been prepared, in all material respects, in accordance with
the Agreement, or (b) another type of report or letter from the Advisory Firm
related to whether the information in the Tax Benefit Schedule, Early
Termination Schedule and/or the Basis Adjustment Schedule has been prepared in a
manner consistent with the terms of the Agreement.

“Affiliate” means, with respect to any Person, any other Person that directly or
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under common Control with, such first Person.

“Agreed Rate” means LIBOR plus 100 basis points.

“Agreement” is defined in the preamble of this Agreement.

“Amended Schedule” is defined in Section 2.04(b) of this Agreement.

“Basis Adjustment” means the adjustment to the tax basis of an Original Asset
under Section 732 of the Code (in situations where, as a result of one or more
Exchanges, the Partnership becomes an entity that is disregarded as separate
from its owner for tax purposes) or Sections 743(b) and 754 of the Code (in
situations where, following an Exchange, the Partnership remains in existence as
an entity for tax purposes) and, in each case, comparable sections of state,
local and foreign tax laws (as calculated under Section 2.01 of this Agreement)
as a result of an Exchange or the payments made pursuant to this Agreement.
Notwithstanding any other provision of this Agreement, the amount of any Basis
Adjustment resulting from an Exchange of one or more Partnership Interests shall
be determined without regard to any Pre-Exchange Transfer of such Partnership
Interest, and as if any such Pre-Exchange Transfer had not occurred. Immediately
after any Section 732 Event, “Basis Adjustment” includes a portion of the tax
basis of an Original Asset equal to the Basis Adjustment attributable to such
Original Asset immediately prior to such Section 732 Event, and also includes,
for this purpose, any adjustment in the basis of an asset pursuant to
Section 1012 of the Code and Revenue Ruling 99-6, 1999-1 C.B. 432, due to an
Exchange that causes the Partnership to become an entity that is disregarded as
separate from its owner for tax purposes; for the avoidance of doubt, any such
asset shall be considered an Original Asset.

“Basis Adjustment Schedule” is defined in Section 2.02 of this Agreement.

 

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A “Beneficial Owner” of a security is a Person who directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise has
or shares: (i) voting power, which includes the power to vote, or to direct the
voting of, such security and/or (ii) investment power, which includes the power
to dispose of, or to direct the disposition of, such security. The terms
“Beneficially Own” and “Beneficial Ownership” shall have correlative meanings.

“Board” means the board of directors of the Corporation.

“Business Day” means Monday through Friday of each week, except that a legal
holiday recognized as such by the government of the United States of America or
the State of New York shall not be regarded as a Business Day.

“Change of Control” means:

(i) a merger, reorganization, consolidation or similar form of business
transaction directly involving the Corporation or indirectly involving the
Corporation through one or more intermediaries unless, immediately following
such transaction, more than 50% of the voting power of the then outstanding
voting stock or other equities of the Corporation resulting from consummation of
such transaction (including, without limitation, any parent or ultimate parent
corporation of such Person that as a result of such transaction owns directly or
indirectly the Corporation and all or substantially all of the Corporation’s
assets) is held by the existing Corporation equityholders (determined
immediately prior to such transaction and related transactions); or

(ii) a transaction in which the Corporation, directly or indirectly, sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to another Person other than an Affiliate; or

(iii) a transaction in which there is an acquisition of control of the
Corporation by a Person or group of Persons (other than the Existing
Stockholders (as defined in the Existing Stockholders Tax Receivable Agreement)
and their Affiliates). The term “control” shall mean the possession, directly or
indirectly, of the power to either (i) vote more than 50% of the securities
having ordinary voting power for the election of directors (or comparable
positions in the case of partnerships and limited liability companies), or
(ii) direct or cause the direction of the management and policies of such Person
whether by contract or otherwise (for the avoidance of doubt, consent rights do
not constitute control for the purpose of this definition); or;

(iv) a transaction in which individuals who constitute the Board of Directors of
the Corporation (the “Incumbent Directors”) cease for any reason to constitute
at least a majority of the Board of Directors of the Corporation, provided that
any person becoming a director subsequent to the effective date of this
Agreement, whose election or nomination for election is either (A) contemplated
by a written agreement among equityholders of the Corporation on the effective
date of this Agreement or (B) was approved by a vote of at least two-thirds of
the Incumbent Directors then on the Board (either by a specific vote or by
approval of the proxy statement of the Corporation in which such person is named
as a nominee for director, without written objection to such nomination) shall
be an Incumbent Director; provided, however, that no individual

 

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initially elected or nominated as a director of the Corporation as a result of
an actual or threatened election contest with respect to directors or as a
result of any other actual or threatened solicitation of proxies or consents by
or on behalf of any Person other than the Board shall be deemed to be an
Incumbent Director; or

(v) the liquidation or dissolution of the Corporation.

“Code” means the Internal Revenue Code of 1986, as amended.

“Common Stock” is defined in the preamble of this Agreement.

“Control” means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
ownership of voting securities, by contract or otherwise.

“Compensated Basis Adjustments” means, for a Taxable Year, (i) the total amount
of depreciation, amortization and adjustments to gain or loss on disposition of
assets in such Taxable Year that is attributable to Basis Adjustments and is
utilized in determining the Realized Tax Benefit under this Agreement or (ii) if
Section 3.03 applies for such Taxable Year, then such total amount multiplied by
the fraction that is described in Section 3.03.

“Corporation” is defined in the preamble of this Agreement.

“Corporation Return” means the federal Tax Return and/or state and/or local
and/or foreign Tax Return, as applicable, of the Corporation filed with respect
to Taxes of any Taxable Year.

“Default Rate” means LIBOR plus 500 basis points.

“Determination” shall have the meaning ascribed to such term in Section 1313(a)
of the Code or similar provision of state, local and foreign tax law, as
applicable, or any other event (including the execution of a Form 870-AD) that
finally and conclusively establishes the amount of any liability for Tax.

“Early Termination Date” means the date of an Early Termination Notice for
purposes of determining the Early Termination Payment.

“Early Termination Notice” is defined in Section 4.02 of this Agreement.

“Early Termination Payment” is defined in Section 4.03(b) of this Agreement.

“Early Termination Rate” means LIBOR plus 100 basis points.

“Early Termination Schedule” is defined in Section 4.02 of this Agreement.

“Exchange” is defined in the preamble of this Agreement.

“Exchange Date” is defined in the preamble of this Agreement.

 

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“Existing Stockholders Tax Receivable Agreement” means the Income Tax Receivable
Agreement dated as of February 10, 2010, by and among the Corporation and
Blackstone Capital Partners III Merchant Banking Fund L.P., a Delaware limited
partnership.

“Expert” is defined in Section 7.09 of this Agreement.

“General Partner” means BCP/Graham Holdings L.L.C., a Delaware limited liability
company.

“Graham Family Entities” means GPC L.P. and Graham Packaging Corporation, a
Pennsylvania corporation.

“Imputed Interest” shall mean any interest imputed under Section 1272, 1274 or
483 or other provision of the Code and any similar provision of state, local and
foreign tax law with respect to the Corporation’s payment obligations under this
Agreement.

“Interest Amount” is defined in Section 3.01(b) of this Agreement.

“IPO” shall mean the initial public offering of Common Stock of the Corporation
pursuant to the Registration Statement

“IRS” means the United States Internal Revenue Service.

“ITR Payment” means any Tax Benefit Payment or Early Termination Payment
required to be made by the Corporation to the Graham Family Entities under this
Agreement.

“LIBOR” means for each month (or portion thereof) during any period, an interest
rate per annum equal to the rate per annum reported, on the date two days prior
to the first day of such month, on the Telerate Page 3750 (or if such screen
shall cease to be publicly available, as reported on Reuters Screen page “LIBO”
or by any other publicly available source of such market rate) for London
interbank offered rates for U.S. dollar deposits for such month (or portion
thereof).

“Market Value” shall mean the closing price of the Common Stock on the
applicable Exchange Date on the national securities exchange or interdealer
quotation system on which such Common Stock is then traded or listed, as
reported by the Wall Street Journal; provided that if the closing price is not
reported by the Wall Street Journal for the applicable Exchange Date, then the
Market Value shall mean the closing price of the Common Stock on the last
trading day immediately preceding such Exchange Date on the national securities
exchange or interdealer quotation system on which such Common Stock is then
traded or listed, as reported by the Wall Street Journal; provided further, that
if the Common Stock is not then listed on a national securities exchange or
interdealer quotation system, “Market Value” shall mean the cash consideration
paid for the Partnership Interests, or the fair market value of the other
property delivered for the Partnership Interests, as determined by the Board of
Directors of the Corporation in good faith.

“Material Objection Notice” has the meaning set forth in Section 4.02 of this
Agreement.

 

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“Net Tax Benefit” is defined in Section 3.01(b) of this Agreement.

“Non-Stepped Up Tax Basis” means, with respect to any asset at any time, the tax
basis that such asset would have had at such time if (i) no Basis Adjustment had
been made or, immediately after any Section 732 Event, the tax basis that such
asset would have had if the Basis Adjustment were not included in such asset’s
tax basis, and (ii) there were no asset basis adjustments that are the subject
of the Existing Stockholders Tax Receivable Agreement.

“Non-Stepped Up Tax Liability” means, with respect to any Taxable Year, the
liability for Taxes of the Corporation using the same methods, elections,
conventions and similar practices used on the relevant Corporation Return, but
(i) using the Non-Stepped Up Tax Basis instead of the tax basis of the Original
Assets, (ii) assuming the Corporation does not have any Pre-IPO NOLs (as such
term is defined in the Existing Stockholders Tax Receivable Agreement) that are
the subject of the Existing Stockholders Tax Receivable Agreement and
(iii) excluding any deduction attributable to Imputed Interest under the Tax
Receivable Agreements. If all or a portion of the liability for Taxes for the
Taxable Year arises as a result of an audit by a Taxing Authority of such
Taxable Year, such liability shall not be included in determining the
Non-Stepped Up Tax Liability unless and until there has been a Determination.

“Objection Notice” has the meaning set forth in Section 2.04(a) of this
Agreement.

“Original Assets” is defined in the preamble of this Agreement.

“Overall Realized Tax Benefit” means, for a Taxable Year, the excess, if any, of
the Non-Stepped Up Tax Liability over the actual liability for Taxes of the
Corporation for such Taxable Year. If all or a portion of the actual liability
for Taxes for the Taxable Year arises as a result of an audit by a Taxing
Authority of any Taxable Year, such liability shall not be included in
determining the Realized Tax Benefit unless and until there has been a
Determination.

“Partnership” is defined in the preamble of this Agreement.

“Partnership Agreement” means the Sixth Amended and Restated Limited Partnership
Agreement of the Partnership, dated as of February 10, 2010.

“Partnership Interests” means the interests in the Partnership (or its
predecessor) owned by the Graham Family Entities immediately prior to the
Reorganization Transactions and the IPO.

“Payment Date” means any date on which a payment is required to be made pursuant
to this Agreement.

“Person” means any individual, corporation, firm, partnership, joint venture,
limited liability company, estate, trust, business association, organization,
governmental entity or other entity.

 

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“Pre-Exchange Transfer” means any transfer of one or more Partnership Interests
(i) that occurs prior to an Exchange of such Partnership Interests, and (ii) to
which Section 743(b) applies.

“Realized Tax Benefit” means, for a Taxable Year, the excess, if any, of the
Non-Stepped Up Tax Liability over the actual liability for Taxes of the
Corporation for such Taxable Year as modified by assuming (i) that the
Corporation could use all Uncompensated Basis Adjustments for such Taxable Year
and (ii) that the Corporation does not have any Pre-IPO NOLs (as such term is
defined in the Existing Stockholders Tax Receivable Agreement) or asset basis
adjustments that are the subject of the Existing Stockholders Tax Receivable
Agreement. If all or a portion of the actual liability for Taxes for the Taxable
Year arises as a result of an audit by a Taxing Authority of any Taxable Year,
such liability shall not be included in determining the Realized Tax Benefit
unless and until there has been a Determination.

“Reconciliation Dispute” has the meaning set forth in Section 7.09(a) of this
Agreement.

“Reconciliation Procedures” shall mean those procedures set forth in
Section 7.09 of this Agreement.

“Registration Statement” means the registration statement on Form S-1, as
amended (File No. 333-163956) of the Corporation.

“Reorganization Transactions” shall mean generally those transactions described
in the Registration Statement and any other transactions ancillary to such
transactions to effect the post-IPO organizational structure of the Corporation
and its Subsidiaries.

“Schedule” means any Basis Adjustment Schedule, Tax Benefit Schedule and any
Early Termination Schedule.

“Section 732 Event” is defined in Section 2.01(b) of this Agreement.

“Subsidiaries” means, with respect to any Person, as of any date of
determination, any other Person as to which such Person, owns, directly or
indirectly, or otherwise controls more than 50% of the voting power or other
similar interests or the sole general partner interest or managing member or
similar interest of such Person.

“Tax Benefit Payment” is defined in Section 3.01(b) of this Agreement.

“Tax Benefit Schedule” is defined in Section 2.03 of this Agreement.

“Tax Receivable Agreements” shall mean this Agreement and the Existing
Stockholders Tax Receivable Agreement.

“Tax Return” means any return, declaration, report or similar statement required
to be filed with respect to Taxes (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return and
declaration of estimated Tax.

 

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“Taxable Year” means a taxable year as defined in Section 441(b) of the Code or
comparable section of state, local or foreign tax law, as applicable, (and,
therefore, for the avoidance of doubt, may include a period of less than 12
months for which a Tax Return is made) ending on or after the date hereof.

“Taxes” means any and all U.S. federal, state, local and foreign taxes,
assessments or similar charges measured with respect to net income or profits
and any interest related to such Tax.

“Taxing Authority” shall mean any domestic, foreign, federal, national, state,
county or municipal or other local government, any subdivision, agency,
commission or authority thereof, or any quasi-governmental body exercising any
taxing authority or any other authority exercising Tax regulatory authority.

“Treasury Regulations” means the final, temporary and proposed regulations under
the Code promulgated from time to time (including corresponding provisions and
succeeding provisions) as in effect for the relevant taxable period.

“Uncompensated Basis Adjustments” means, for a Taxable Year, the excess, if any,
of (x) the total amount of depreciation, amortization and adjustments to gain or
loss on disposition of assets for all prior Taxable Years that is attributable
to Basis Adjustments over (y) the sum of all Compensated Basis Adjustments for
all prior Taxable Years.

“Valuation Assumptions” shall mean, as of an Early Termination Date, the
assumptions that (i) in each Taxable Year ending on or after such Early
Termination Date, the Corporation will generate an amount of taxable income in
accordance with management’s preexisting projections (or, in the absence of such
projections, as projected in good faith by management in a manner consistent
with their projections for other purposes), (ii) any deductions relating to the
Basis Adjustments and the Imputed Interest for such Taxable Year or future
Taxable Years, as applicable, will be determined based on the Tax laws in effect
on the Early Termination Date, (iii) the federal income tax rates and state,
local and foreign income tax rates that will be in effect for each such Taxable
Year will be those specified for each such Taxable Year by the Code and other
law as in effect on the Early Termination Date, (iv) if an Early Termination is
effected prior to an Exchange of all Partnership Interests, the Basis Adjustment
shall be calculated as if the Exchange of any remaining Partnership Interests
occurred on the Early Termination Date. For the purposes of clause (i) of this
definition, the taxable income projections made by the management of the
Corporation shall be subject to the Reconciliation Procedures. Such assumptions
shall relate only to the projected income and loss of the Corporation (extending
the same beyond the years of projection, as applicable, at the same imputed
growth rate), and shall include only the utilization of tax attributes subject
to the Tax Receivable Agreements and not any anticipated future attributes that
might result from acquisitions, dispositions, recapitalizations or refinancings.
For the avoidance of doubt, in the event of a Change of Control, such
assumptions shall not take into account any changes in the Corporation’s stand
alone tax position that might result from the transaction giving rise to the
Change of Control.

 

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ARTICLE II

DETERMINATION OF REALIZED TAX BENEFIT

Section 2.01. Basis Adjustment. The Corporation, on the one hand, and the Graham
Family Entities (through GPC L.P.), on the other hand, acknowledge that, as a
result of:

(a) an Exchange and pursuant to applicable law, with respect to the Corporation,
the basis in the Original Assets shall be adjusted as determined under Sections
743 and 754 of the Code and the Treasury Regulations thereunder; and

(b) an actual or deemed liquidation of the Partnership or other transaction
pursuant to which the tax basis of Original Assets is determined in whole or in
part pursuant to Section 732 of the Code (a “Section 732 Event”), the tax basis
of such Original Assets shall be adjusted to equal the distributee’s tax basis
in the applicable interest in the Partnership.

The Corporation, on the one hand, and the Graham Family Entities (through GPC
L.P.), on the other hand, hereby agree to treat any payments made under this
Agreement as additional consideration for the applicable exchanged Partnership
Interests. For the avoidance of doubt, payments made under this Agreement shall
not be treated as resulting in a Basis Adjustment to the extent such payments
are treated as Imputed Interest.

Section 2.02. Basis Adjustment Schedule. Within ninety (90) calendar days after
the end of the Taxable Year in which a Section 732 Event or Exchange occurs, and
in any event at least ninety calendar days prior to the filing of the U.S.
federal income tax return of the Corporation for each Taxable Year in which any
such Section 732 Event or Exchange has been effected, the Corporation shall
deliver to GPC L.P a schedule that shows, in reasonable detail, the information
required under Sections 732, 743(b) and 755 of the Code, and the Treasury
Regulations thereunder, to calculate the Basis Adjustment with respect to such
Section 732 Event or Exchange, including without limitation, (i) the
Corporation’s proportionate share of the actual unadjusted tax basis of the
Original Assets as of each applicable Exchange Date, (ii) the Basis Adjustment
with respect to each class of the Original Assets as a result of any Section 732
Event and each Exchanges effected in such Taxable Year, (iii) the period or
periods, if any, over which the Original Assets are amortizable and/or
depreciable, and (iv) the period or periods, if any, over which each Basis
Adjustment is amortizable and/or depreciable (the “Basis Adjustment Schedule”).
Concurrently the Corporation shall also deliver to GPC L.P. all supporting
information (including work papers and valuation reports, if any) reasonably
necessary to support the calculation of the Basis Adjustment with respect to
such Section 732 Event or Exchange.

Section 2.03. Tax Benefit Schedule. Within ninety (90) calendar days after the
filing of the U.S. federal income tax return of the Corporation for any Taxable
Year in which there is a Realized Tax Benefit (or as soon as practicable
thereafter), the Corporation shall provide to GPC L.P. a schedule showing, in
reasonable detail, (i) the calculation of the Realized

 

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Tax Benefit for such Taxable Year, (ii) the calculation of any payment to be
made to the Graham Family Entities pursuant to Article III with respect to such
Taxable Year (collectively a “Tax Benefit Schedule”). Concurrently the
Corporation shall also provide to GPC L.P all supporting information (including
work papers and valuation reports) reasonably necessary to support the
calculation of such payment. The Schedule will become final as provided in
Section 2.04(a) and may be amended as provided in Section 2.04(b) (subject to
the procedures set forth in Section 2.04(a)).

Section 2.04. Procedures, Amendments.

(a) Procedure. Every time the Corporation delivers to GPC L.P. an applicable
Schedule under this Agreement, including any Amended Schedule delivered pursuant
to Section 2.04(b), and including any Early Termination Schedule or amended
Early Termination Schedule, the Corporation shall also (x) deliver to GPC L.P.
schedules, valuation reports, if any, and work papers providing reasonable
detail regarding the preparation of the Schedule and an Advisory Firm Report
related to such Schedule and (y) allow GPC L.P. reasonable access at no cost to
the appropriate representatives at each of the Corporation and the Advisory Firm
in connection with a review of such Schedule. The applicable Schedule shall
become final and binding on all parties unless GPC L.P., within thirty calendar
days after receiving any Schedule or amendment thereto, provides the Corporation
with notice of a material objection to such Schedule (“Objection Notice”) made
in good faith. If the parties, for any reason, are unable to successfully
resolve the issues raised in any notice within thirty calendar days of receipt
by the Corporation of such notice, the Corporation and GPC L.P. shall employ the
reconciliation procedures as described in Section 7.09 of this Agreement (the
“Reconciliation Procedures”).

(b) Amended Schedule. The applicable Schedule for any Taxable Year may be
amended from time to time by the Corporation (i) in connection with a
Determination affecting such Schedule, (ii) to correct material inaccuracies in
the Schedule identified as a result of the receipt of additional factual
information relating to a Taxable Year after the date the Schedule was provided
to GPC L.P., (iii) to comply with the Expert’s determination under the
Reconciliation Procedures, (iv) to reflect a material change (relative to the
amounts in the original Schedule) in the Realized Tax Benefit for such Taxable
Year attributable to a carryback or carryforward of a loss or other tax item to
such Taxable Year, (v) to reflect a material change (relative to the amounts in
the original Schedule) in the Realized Tax Benefit for such Taxable Year
attributable to an amended Tax Return filed for such Taxable Year, or (vi) to
adjust the Basis Adjustment Schedule to take into account payments made pursuant
to this Agreement (such Schedule, an “Amended Schedule”); provided, however,
that such a change under clause (i) attributable to an audit of a Tax Return by
an applicable Taxing Authority shall not be taken into account on an Amended
Schedule unless and until there has been a Determination with respect to such
change. The Corporation shall provide any Amended Schedule to GPC L.P. within
thirty calendar days of the occurrence of an event referred to in clauses
(i) through (vi) of the preceding sentence, and any such Amended Schedule shall
be subject to approval procedures similar to those described in Section 2.04(a).

Section 2.05 Section 754 Election. The Corporation will have in effect an
election under Section 754 of the Code for each Taxable Year during which an
Exchange Occurs and this Agreement remains in effect.

 

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ARTICLE III

TAX BENEFIT PAYMENTS

Section 3.01. Payments.

(a) Timing of Payments. Within five Business Days of a Tax Benefit Schedule
delivered to GPC L.P. becoming final in accordance with Section 2.04(a), the
Corporation shall pay to the Graham Family Entities for such Taxable Year an
aggregate amount equal to the Tax Benefit Payment determined pursuant to
Section 3.01(b), subject to reduction pursuant to Section 3.03. Each such Tax
Benefit Payment shall be made by wire transfer of immediately available funds to
a bank account of the Graham Family Entities previously designated by the Graham
Family Entities to the Corporation or as otherwise agreed by the Corporation and
the Graham Family Entities. For the avoidance of doubt, no Tax Benefit Payment
shall be made in respect of estimated tax payments, including, without
limitation, federal income tax payments.

(b) A “Tax Benefit Payment” means an amount, not less than zero, equal to 85% of
the sum of the Net Tax Benefit and the Interest Amount (as defined below). The
“Net Tax Benefit” shall equal: (i) the Corporation’s Realized Tax Benefit, if
any, for a Taxable Year plus (ii) the amount of the excess of the Realized Tax
Benefit reflected on an Amended Tax Benefit Schedule for a previous Taxable Year
over the Realized Tax Benefit reflected on the Tax Benefit Schedule for such
previous Taxable Year, minus (iii) the excess of the Realized Tax Benefit
reflected on a Tax Benefit Schedule for a previous Taxable Year over the
Realized Tax Benefit reflected on the Amended Tax Benefit Schedule for such
previous Taxable Year; provided, however, that to the extent of the amounts
described in 3.01(b)(ii) and (iii) were taken into account in determining any
Tax Benefit Payment in a preceding Taxable Year, such amounts shall not be taken
into account in determining a Tax Benefit Payment attributable to any other
Taxable Year; provided, further, for the avoidance of doubt, that the Graham
Family Entities shall not be required to return any portion of any previously
made Tax Benefit Payment. The “Interest Amount” shall equal the interest on the
Net Tax Benefit calculated at the Agreed Rate from the due date (without
extensions) for filing the Corporation Return with respect to Taxes for the
Taxable Year for which the Net Tax Benefit is being measured until the Payment
Date.

Section 3.02. No Duplicative Payments. It is intended that the provisions of
this Agreement will not result in duplicative payment of any amount (including
interest) required under this Agreement. It is also intended that the provisions
of this Agreement provide that 85% of the Corporation’s Realized Tax Benefit and
Interest Amount be paid to the Graham Family Entities pursuant to this
Agreement, and that with respect to any Taxable Year, the Corporation will not
make payments pursuant to the Tax Receivable Agreements exceeding 85% of the
Overall Realized Tax Benefit. The provisions of this Agreement shall be
construed in the appropriate manner so that such intentions are realized.

Section 3.03. Coordination of Benefits With Other Tax Receivable Agreement.

 

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In the event that payments are due from the Corporation in any Taxable Year with
respect to this Agreement and the Existing Stockholders Tax Receivable
Agreement, and the amount due under this Agreement plus the amount due under the
Existing Stockholders Tax Receivable Agreement exceeds 85% of the Overall
Realized Tax Benefit to the Corporation for such Taxable Year, then the Tax
Benefit Payments due (or deemed to be due) under each Tax Receivable Agreement
for such Taxable Year shall be equal to 85% of the Overall Realized Tax Benefit
for such Taxable Year multiplied by a fraction, the numerator of which is the
amount that would be due under such Tax Receivable Agreement for such Taxable
Year (without regard to Section 3.03 of either Tax Receivable Agreement), and
the denominator of which is the sum of the amounts that would be due under both
Tax Receivable Agreements for such Taxable Year (without regard to Section 3.03
of either Tax Receivable Agreement).

ARTICLE IV

TERMINATION

Section 4.01. Early Termination and Breach of Agreement.

(a) This Agreement shall terminate at the time that all Tax Benefit Payments
have been made to the Graham Family Entities under this Agreement.

(b) Notwithstanding Section 4.01(a), the Corporation may terminate this
Agreement with respect to all of the Partnership Interests held (or previously
held and exchanged) by the Graham Family Entities or any transferee by paying to
the Graham Family Entities the Early Termination Payment; provided that the
Corporation shall not so elect to terminate this Agreement by paying the Early
Termination Payment unless the Corporation contemporaneously elects to terminate
the Existing Stockholders Tax Receivable Agreement pursuant to Section 4.01
thereto. Upon payment of the Early Termination Payments by the Corporation,
neither the Graham Family Entities nor the Corporation shall have any further
payment obligations under this Agreement, other than any (i) Tax Benefit Payment
agreed to by the Corporation and the Graham Family Entities as due and payable
but unpaid as of the Early Termination Notice or (ii) Tax Benefit Payment due
for a Taxable Year ending prior to, with or including the date of the Early
Termination Notice (except to the extent that the amount described in this
clause (ii) is included in the Early Termination Payment). If an Exchange or
Section 732 Event occurs after the Corporation exercises its termination rights
under this Section 4.01(a), the Corporation shall have no obligations under this
Agreement with respect to such Exchange or Section 732 Event.

(c) In the event that the Corporation breaches any of its material obligations
under this Agreement, whether as a result of failure to make any payment when
due, failure to honor any other material obligation required hereunder or by
operation of law as a result of the rejection of this Agreement in a case
commenced under the Bankruptcy Code or otherwise, then all obligations hereunder
shall be accelerated and such obligations shall be calculated pursuant to
Article IV as if an Early Termination Notice had been delivered on the date of
such breach and shall include, but not be limited to, (1) the Early Termination
Payment calculated as if an Early Termination Notice had been delivered on the
date of a breach, (2) any Tax Benefit Payment agreed to by the Corporation and
the Graham Family Entities as due and payable but unpaid as

 

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of the Early Termination Notice and (3) any Tax Benefit Payment due for any
Taxable Year ending prior to, with or including the date of a breach.
Notwithstanding the foregoing, in the event that the Corporation breaches this
Agreement, the Graham Family Entities shall be entitled to elect to receive the
amounts set forth in (1), (2) and (3) above or to seek specific performance of
the terms hereof. The parties agree that the failure to make any payment due
pursuant to this Agreement within six months of the date such payment is due
shall be deemed to be a breach of a material obligation under this Agreement for
all purposes of this Agreement, and that it will not be considered to be a
breach of a material obligation under this Agreement to make a payment due
pursuant to this Agreement within six months of the date such payment is due,
provided that in the event that payment is not made within six months of the
date such payment is due, the Graham Family Entities shall be required to give
written notice to the Corporation that the Corporation has breached its material
obligations and so long as such payment is made within five Business Days of the
delivery of such notice to the Corporation, the Corporation shall no longer be
deemed to be in material breach of its obligations under this Agreement.

(d) Change of Control. In the event of a Change of Control, then all obligations
hereunder shall be accelerated and such obligations shall be calculated pursuant
to this Article IV as if an Early Termination Notice had been delivered on the
closing date of the Change of Control and shall include, but not be limited to,
(1) the Early Termination Payment calculated as if an Early Termination Notice
had been delivered on the effective date of a Change of Control, (2) any Tax
Benefit Payment agreed to by the Corporation and the Graham Family Entities as
due and payable but unpaid as of the Early Termination Notice and (3) any Tax
Benefit Payment due for any Taxable Year ending prior to, with or including the
effective date of a Change of Control. In the event of a Change of Control, the
Early Termination Payment shall be calculated utilizing the Valuation
Assumptions and by substituting in each case the terms “the closing date of a
Change of Control” for an “Early Termination Date”.

Section 4.02. Early Termination Notice. If the Corporation chooses to exercise
its right of early termination under Section 4.01 above, the Corporation shall
deliver to GPC L.P. notice of such intention to exercise such right (“Early
Termination Notice”) and a schedule (the “Early Termination Schedule”)
specifying the Corporation’s intention to exercise such right and showing in
reasonable detail the information required pursuant to Section 2.02 and the
calculation of the Early Termination Payment. The Early Termination Schedule
shall become final and binding on all parties unless GPC L.P., within thirty
calendar days after receiving the Early Termination Schedule provides the
Corporation with notice of a material objection to such Schedule made in good
faith (“Material Objection Notice”). If the parties, for any reason, are unable
to successfully resolve the issues raised in such notice within thirty calendar
days after receipt by the Corporation of the Material Objection Notice, the
Corporation and GPC L.P. shall employ the Reconciliation Procedures as described
in Section 7.09 of this Agreement.

Section 4.03. Payment upon Early Termination. (a) Within three Business Days
after agreement between GPC L.P. and the Corporation of the Early Termination
Schedule, the Corporation shall pay to the Graham Family Entities an amount
equal to the Early Termination Payment. Such payment shall be made by wire
transfer of immediately available funds to a bank account designated by the
Graham Family Entities or as otherwise agreed by the Corporation and the Graham
Family Entities.

 

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(b) The “Early Termination Payment” as of the date of the delivery of an Early
Termination Schedule shall equal with respect to the Graham Family Entities the
present value, discounted at the Early Termination Rate as of such date, of all
Tax Benefit Payments that would be required to be paid by the Corporation to the
Graham Family Entities beginning from the Early Termination Date assuming the
Valuation Assumptions are applied (and, for the avoidance of doubt, taking into
account Section 3.03 for purposes of such computation). For purposes of
calculating the present value pursuant to this Section 4.03(b) of all Tax
Benefits Payments that would required to be paid, it shall be assumed that
absent the Early Termination Notice all Tax Benefit Payments would be paid on
the due date (without extensions) for filing the Corporation Return with respect
to Taxes for each Taxable Year. The computation of the Early Termination Payment
is subject to the Reconciliation Procedures as described in Section 7.09(b) of
this Agreement.

ARTICLE V

LATE PAYMENTS

Section 5.01. Late Payments by the Corporation. The amount of all or any portion
of any ITR Payment not made to the Graham Family Entities when due under the
terms of this Agreement shall be payable together with any interest thereon,
computed at the Default Rate and commencing from the date on which such ITR
Payment was due and payable.

ARTICLE VI

NO DISPUTES; CONSISTENCY; COOPERATION

Section 6.01. Participation in the Corporation and Partnership Tax Matters.
Except as otherwise provided herein, the Corporation shall have full
responsibility for, and sole discretion over, all Tax matters concerning the
Corporation and the Partnership, including without limitation the preparation,
filing or amending of any Tax Return and defending, contesting or settling any
issue pertaining to Taxes, subject to a requirement that the Corporation act in
good faith in connection with its control of any matter which is reasonably
expected to affect the Graham Family Entities’ rights and obligations under this
Agreement. Notwithstanding the foregoing, the Corporation shall notify GPC L.P.
of, and keep GPC L.P. reasonably informed with respect to, the portion of any
audit of the Corporation and the Partnership by a Taxing Authority the outcome
of which is reasonably expected to affect the Graham Family Entities’ rights and
obligations under this Agreement, and shall give GPC L.P. reasonable opportunity
to provide information and participate in the applicable portion of such audit;
provided, however, that the Corporation and the Partnership shall not be
required to take any action that is inconsistent with any provision of the
Partnership Agreement.

Section 6.02. Consistency. Except upon the written advice of an Advisory Firm,
the Corporation and GPC L.P. agree to report and cause to be reported for all
purposes, including federal, state, local and foreign Tax purposes and financial
reporting purposes, all Tax-related items (including without limitation the
Basis Adjustment and each Tax Benefit Payment) in a manner consistent with that
specified by the Corporation in any Schedule required to be provided by or on
behalf of the Corporation under this Agreement. Any dispute concerning such
advice

 

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shall be subject to the terms of Section 7.09. In the event that an Advisory
Firm is replaced with another firm acceptable to the Corporation and GPC L.P.
pursuant to the definition of Advisory Firm, such replacement Advisory Firm
shall be required to perform its services under this Agreement using procedures
and methodologies consistent with those utilized by the previous Advisory Firm,
unless otherwise required by law or the Corporation and GPC L.P. agree to the
use of other procedures and methodologies.

Section 6.03. Cooperation. Each of the Corporation and the Graham Family
Entities (through GPC L.P.) shall (a) furnish to the other party in a timely
manner such information, documents and other materials as the other party may
reasonably request for purposes of making or approving any determination or
computation necessary or appropriate under this Agreement, preparing any Tax
Return or contesting or defending any audit, examination or controversy with any
Taxing Authority, (b) make itself available to the other party and its
representatives to provide explanations of documents and materials and such
other information as the requesting party or its representatives may reasonably
request in connection with any of the matters described in clause (a) above, and
(c) reasonably cooperate in connection with any such matter, and the requesting
party shall reimburse the other party for any reasonable third-party costs and
expenses incurred pursuant to this Section.

ARTICLE VII

MISCELLANEOUS

Section 7.01. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed duly given and
received (a) on the date of delivery if delivered personally, or by facsimile
upon confirmation of transmission by the sender’s fax machine if sent on a
Business Day (or otherwise on the next Business Day) or (b) on the first
Business Day following the date of dispatch if delivered by a recognized
next-day courier service. All notices hereunder shall be delivered as set forth
below, or pursuant to such other instructions as may be designated in writing by
the party to receive such notice:

If to the Corporation, to:

Graham Packaging Company Inc.

2401 Pleasant Valley Road

York, Pennsylvania 17402

(T) (717) 849-8500

Attention: Chief Financial Officer

with a copy to (which shall not constitute notice):

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

(F) (212) 455-2502

Attention: Wilson Neely

 

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If to GPC L.P., to:

GPC Holdings, L.P.

1420 Sixth Avenue

York, Pennsylvania 17405

(F) (717) 846-6931

Attention: Paul L. Rudy, III

with a copy to (which shall not constitute notice):

Drinker Biddle & Reath LLP

One Logan Square, 18th & Cherry Streets

Philadelphia, Pennsylvania 19103-6996

(F) (215) 988-2757

Attention: Stephen D. D. Hamilton

Any party may change its address or fax number by giving the other party written
notice of its new address or fax number in the manner set forth above.

Section 7.02. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart. Delivery of an executed signature
page to this Agreement by facsimile transmission shall be as effective as
delivery of a manually signed counterpart of this Agreement.

Section 7.03. Entire Agreement; Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement shall be binding upon and inure solely to
the benefit of each party hereto and their respective successors and permitted
assigns. The parties to this Agreement agree that (i) the Graham Family Entities
are expressly made third party beneficiaries to this Agreement and (ii) the
parties to the Existing Stockholders Tax Receivable Agreement are expressly made
third party beneficiaries of the provisions of Section 3.03 and the first
sentence of Section 4.01(b) of this Agreement. Other than as provided in the
preceding sentence, nothing in this Agreement, express or implied, is intended
to or shall confer upon any other Person any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.

Section 7.04. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the law of the State of New York.

Section 7.05. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other

 

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provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.

Section 7.06. Successors; Assignment; Amendments; Waivers. (a) GPC L.P. may not
assign this Agreement to any person without the prior written consent of the
Corporation; provided, however, (i) that, to the extent Partnership Interests
are effectively transferred in accordance with the terms of the Partnership
Agreement and any other agreements the Graham Family Entities may have entered
into with the Corporation and/or the General Partner, the Graham Family Entities
shall have the option to assign to the transferee of such Partnership Interests
the Graham Family Entities’ rights under this Agreement with respect to such
transferred Partnership Interests, as long as such transferee has executed and
delivered, or, in connection with such transfer, executes and delivers, a
joinder to this Agreement, in form and substance reasonably satisfactory to the
Corporation, agreeing to become a “Graham Family Entity” for all purposes of
this Agreement, except as otherwise provided in such joinder, and (ii) that,
once an Exchange has occurred, any and all payments that may become payable to
the Graham Family Entities pursuant to this Agreement with respect to such
Exchange may be assigned to any Person or Persons, as long as any such Person
has executed and delivered, or, in connection with such assignment, executes and
delivers, a joinder to this Agreement, in form and substance reasonably
satisfactory to the Corporation, agreeing to be bound by all provisions of this
Agreement and acknowledging specifically the last sentence of the next
paragraph.

(b) No provision of this Agreement may be amended unless such amendment is
approved in writing by the Corporation, on behalf of itself and the Partnership,
and by the Graham Family Entities (through GPC L.P.), and, in the case of
Section 3.03, the first sentence of Section 4.01(b), the third sentence of
Section 7.03 and this Section 7.06(b), by the parties to the Existing
Stockholders Tax Receivable Agreement. No provision of this Agreement may be
waived unless such waiver is in writing and signed by the party against whom the
waiver is to be effective.

(c) All of the terms and provisions of this Agreement shall be binding upon,
shall inure to the benefit of and shall be enforceable by the parties hereto and
their respective successors, assigns, heirs, executors, administrators and legal
representatives. The Corporation shall require and cause any direct or indirect
successor (whether by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, by written
agreement, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
if no such succession had taken place.

Section 7.07. Titles and Subtitles. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

Section 7.08. Resolution of Disputes.

 

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(a) Any and all disputes which cannot be settled amicably, including any
ancillary claims of any party, arising out of, relating to or in connection with
the validity, negotiation, execution, interpretation, performance or
non-performance of this Agreement (including the validity, scope and
enforceability of this arbitration provision) shall be finally settled by
arbitration conducted by a single arbitrator in Pennsylvania in accordance with
the then-existing Rules of Arbitration of the International Chamber of Commerce.
If the parties to the dispute fail to agree on the selection of an arbitrator
within thirty calendar days of the receipt of the request for arbitration, the
International Chamber of Commerce shall make the appointment. The arbitrator
shall be a lawyer and shall conduct the proceedings in the English language.
Performance under this Agreement shall continue if reasonably possible during
any arbitration proceedings.

(b) Notwithstanding the provisions of paragraph (a), the Corporation may bring
an action or special proceeding in any court of competent jurisdiction for the
purpose of compelling a party to arbitrate, seeking temporary or preliminary
relief in aid of an arbitration hereunder, and/or enforcing an arbitration award
and, for the purposes of this paragraph (b), the Graham Family Entities (through
GPC L.P.) (i) expressly consent to the application of paragraph (c) of this
Section 7.08 to any such action or proceeding, (ii) agree that proof shall not
be required that monetary damages for breach of the provisions of this Agreement
would be difficult to calculate and that remedies at law would be inadequate,
and (iii) irrevocably appoint the Corporation as the Graham Family Entities’
agent for service of process in connection with any such action or proceeding
and agrees that service of process upon such agent, who shall promptly advise
GPC L.P. of any such service of process, shall be deemed in every respect
effective service of process upon the Graham Family Entities in any such action
or proceeding.

(c)(i) THE GRAHAM FAMILY ENTITIES (THROUGH GPC L.P.) HEREBY IRREVOCABLY SUBMIT
TO THE JURISDICTION OF COURTS LOCATED IN HARRISBURG, PENNSYLVANIA FOR THE
PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF
PARAGRAPH (B) OF THIS SECTION 7.08, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN
ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR
CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit,
action or proceeding to compel arbitration, to obtain temporary or preliminary
judicial relief in aid of arbitration, or to confirm an arbitration award. The
parties acknowledge that the fora designated by this paragraph (c) have a
reasonable relation to this Agreement, and to the parties’ relationship with one
another.

(ii) The parties hereby waive, to the fullest extent permitted by applicable
law, any objection which they now or hereafter may have to personal jurisdiction
or to the laying of venue of any such ancillary suit, action or proceeding
brought in any court referred to in paragraph (c) (i) of this Section 7.08 and
such parties agree not to plead or claim the same.

Section 7.09. Reconciliation.

(a) In the event that the Corporation and GPC L.P. are unable to resolve a
disagreement with respect to the matters governed by Sections 2.04, 4.02 and
6.02 within the relevant period designated in this Agreement (“Reconciliation
Dispute”), the Reconciliation

 

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Dispute shall be submitted for determination to a nationally recognized expert
(the “Expert”) in the particular area of disagreement mutually acceptable to
both parties. The Expert shall be a partner in a nationally recognized
accounting firm or a law firm (other than the Advisory Firm), and the Expert
shall not, and the firm that employs the Expert shall not, have any material
relationship with the Corporation or the Graham Family Entities or other actual
or potential conflict of interest. If the parties are unable to agree on an
Expert within fifteen calendar days of receipt by the respondent(s) of written
notice of a Reconciliation Dispute, the Expert shall be appointed by the
International Chamber of Commerce Centre for Expertise. The Expert shall resolve
any matter relating to the Basis Adjustment Schedule or an amendment thereto or
the Early Termination Schedule or an amendment thereto within thirty calendar
days and shall resolve any matter relating to a Tax Benefit Schedule or an
amendment thereto within fifteen calendar days or as soon thereafter as is
reasonably practicable, in each case after the matter has been submitted to the
Expert for resolution. Notwithstanding the preceding sentence, if the matter is
not resolved before any payment that is the subject of a disagreement is due or
any Tax Return reflecting the subject of a disagreement is due, such payment
shall be made on the date prescribed by this Agreement and such Tax Return may
be filed as prepared by the Corporation, subject to adjustment or amendment upon
resolution. The costs and expenses relating to the engagement of such Expert or
amending any Tax Return shall be borne by the Corporation; except as provided in
the next sentence. Each of the Corporation and the Graham Family Entities shall
bear their own costs and expenses of such proceeding. Any dispute as to whether
a dispute is a Reconciliation Dispute within the meaning of this Section 7.09
shall be decided by the Expert. The Expert shall finally determine any
Reconciliation Dispute and the determinations of the Expert pursuant to this
Section 7.09 shall be binding on the Corporation and the Graham Family Entities
and may be entered and enforced in any court having jurisdiction.

(b) Income Projections for Early Termination Payments. Notwithstanding the
provisions of Section 7.09(a), solely with respect to disagreements regarding
the computation of an Early Termination Payment that relates to the taxable
income projections described in clause (i) of the definition of “Valuation
Assumptions,” the Corporation and the Graham Family Entities (through GPC L.P.)
shall each submit the Reconciliation Dispute for determination to an Expert in
the area of valuation services. Based on the income projections of such Experts,
if the higher of the resulting Early Termination Payment computations does not
exceed 110% of the lower, then the Early Termination Payment shall be the
average of such two amounts. If the higher of the Early Termination Payment
computations is more than 110% of the lower, then the two Experts shall, within
20 days from such determination, select a third Expert and shall notify the
Corporation and the Existing Holders of such selection. If the Early Termination
Payment computed by the third Expert is equal to the average of the first two
Early Termination Payment computations, then the Early Termination Payment shall
be such average. If the third Early Termination Payment computation is higher
than the average of the first two computations, then the Early Termination
Payment shall be the average of such third computation and the higher of the
first two computations; provided that if such average exceeds 110% of the higher
of the first two computations, then the Early Termination Payment shall be 110%
of the higher of the first two computations. If the third Early Termination
Payment computation is lower than the average of the first two computations,
then the Early Termination Payment shall be the average of such third
computation and the lower of the first two computations; provided that if such
average is less than 90% of the lower of the first two computations, then the
Early Termination Payment shall be 90% of the lower of the first two
computations.

 

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Section 7.10. Withholding. The Corporation shall be entitled to deduct and
withhold from any payment payable pursuant to this Agreement such amounts as the
Corporation is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld and paid over to the appropriate
Taxing Authority by the Corporation, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the Graham Family
Entities. The Corporation shall provide evidence of such payment to the Graham
Family Entities (through GPC L.P.), to the extent that such evidence is
available.

Section 7.11. Affiliated Corporations; Admission of the Corporation into a
Consolidated Group; Transfers of Corporate Assets.

(a) If the Corporation is or becomes a member of an affiliated or consolidated
group of corporations that files a consolidated income tax return pursuant to
Sections 1501 et seq. of the Code or any corresponding provisions of state,
local or foreign law, then: (i) the provisions of this Agreement shall be
applied with respect to the group as a whole; and (ii) Tax Benefit Payments
shall be computed with reference to the consolidated taxable income of the group
as a whole.

(b) If any Person the income of which is included in the income of the
Corporation’s affiliated or consolidated group transfers one or more assets to a
corporation with which such entity does not file a consolidated tax return
pursuant to Section 1501 of the Code, for purposes of calculating the amount of
any Exchange Payment (e.g., calculating the gross income of the Corporation’s
affiliated or consolidated group and determining the Realized Tax Benefit) due
hereunder, such Person shall be treated as having disposed of such asset in a
fully taxable transaction on the date of such transfer. The consideration deemed
to be received by such entity shall be equal to the fair market value of the
transferred asset, plus (i) the amount of debt to which such asset is subject,
in the case of a transfer of an encumbered asset or (ii) the amount of debt
allocated to such asset, in the case of a transfer of a partnership interest.

Section 7.12. Confidentiality. (a) The Graham Family Entities (through GPC L.P.)
and each of their assignees acknowledges and agrees that the information of the
Corporation is confidential and, except in the course of performing any duties
as necessary for the Corporation and its Affiliates, as required by law or legal
process or to enforce the terms of this Agreement, shall keep and retain in the
strictest confidence and not to disclose to any Person all confidential matters,
acquired pursuant to this Agreement, of the Corporation or the Graham Family
Entities. This clause 7.12 shall not apply to (i) any information that has been
made publicly available by the Corporation or any of its Affiliates, becomes
public knowledge (except as a result of an act of the Graham Family Entities in
violation of this Agreement) or is generally known to the business community and
(ii) the disclosure of information to the extent necessary for the Graham Family
Entities to prepare and file its Tax returns, to respond to any inquiries
regarding the same from any taxing authority or to prosecute or defend any
action, proceeding or audit by any Taxing Authority with respect to such Tax
returns. Notwithstanding anything to the contrary herein, the Graham Family
Entities (and each employee, representative or other agent of the Graham Family
Entities) may disclose to any and all Persons, without limitation of any kind,
the tax treatment and tax structure of (x) the Corporation and (y) any of its
transactions, and all

 

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materials of any kind (including opinions or other tax analyses) that are
provided to the Graham Family Entities relating to such tax treatment and tax
structure.

(b) If GPC L.P. or an assignee commits a breach, or threatens to commit a
breach, of any of the provisions of this Section 7.12, the Corporation shall
have the right and remedy to have the provisions of this Section 7.12
specifically enforced by injunctive relief or otherwise by any court of
competent jurisdiction without the need to post any bond or other security, it
being acknowledged and agreed that any such breach or threatened breach shall
cause irreparable injury to the Corporation or any of its Subsidiaries and the
accounts and funds managed by the Corporation and that money damages alone shall
not provide an adequate remedy to such Persons. Such rights and remedies shall
be in addition to, and not in lieu of, any other rights and remedies available
at law or in equity.

Section 7.13. Partnership Agreement. This Agreement shall be treated as part of
the Partnership Agreement as described in Section 761(c) of the Code, and
Sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations.

Section 7.14. Appointment of GPC L.P.

GPC L.P. is hereby appointed to act as the sole representative, agent and
attorney-in-fact for the Graham Family Entities and their successors and assigns
for all the purposes specified under this Agreement, and GPC L.P., by its
signature below, agrees to serve in such capacity.

Section 7.15. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

[Signature page follows]

 

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IN WITNESS WHEREOF, the Corporation and GPC L.P. have duly executed this
Agreement as of the date first written above.

 

GRAHAM PACKAGING COMPANY INC. By:  

/s/ Chinh E. Chu

  Name: Chinh E. Chu   Title: President and Assistant Secretary GPC HOLDINGS,
L.P. By:   GPC Investments, LLC, its General Partner By:  

/s/ Paul L. Rudy, III

  Name: Paul L. Rudy, III   Title: Vice President