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, 1998
                                      OR

     [  ] 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                           23-25553000
    (State or other jurisdiction of      (I.R.S. Employer Identification No.)
     incorporation or organization)

                           1110 East Princess Street
                              York, Pennsylvania
                   (Address of principal executive offices)
                                     17403
                                  (zip code)
                                (717) 849-8500
             (Registrant's telephone number, including area code)

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 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] No[  ].

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.  [  ]
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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
February 28, 1999 was $-0-.  As of February 28, 1999, 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

PART I:                                                                 Page  
                                                                        Number

Item 1.     Business.                                                     4

Item 2.     Properties.                                                  28

Item 3.     Legal Proceedings.                                           31

Item 4.     Submission of Matters to a Vote of Security Holders.         32

PART II:                                                                 33

Item 5.     Market for the Registrant's Common Equity and Related
            Stockholder Matters.                                         33

Item 6.     Selected Financial Data.                                     34

Item 7.     Management's Discussion and Analysis of Financial 
            Condition and Results of Operations.                         38

Item 7A.    Quantitative and Qualitative Disclosures about
            Market Risk.                                                 47

Item 8.     Financial Statements and Supplementary Data.                 49

Item 9.     Changes in and Disagreements With Accountants on
            Accounting and Financial Disclosure.                         84

PART III:                                                                84

Item 10.    Advisory Committee Members, Directors and Executive
            Officers of the Registrant.                                  84

Item 11.    Executive Compensation.                                      88

Item 12.    Security Ownership of Certain Beneficial Owners and
            Management.                                                  96

Item 13.    Certain Relationships and Related Transactions.              97

PART IV:                                                                107

Item 14:    Exhibits, Financial Statement Schedules, and Reports on
            Form 8-K                                                    107

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                                    PART I

Item 1.  Business

     Unless the context otherwise requires, all references herein to the
"Company," with respect to periods prior to the recapitalization described
below (the "Recapitalization"), refer to the business historically conducted
by Graham Packaging Holdings Company ("Holdings") (which served as the
operating entity for the business prior to the Recapitalization) and one of
its predecessors (Graham Container Corporation), together with Holdings'
subsidiaries and certain affiliates, and, with respect to periods subsequent
to the Recapitalization, refer to Holdings and its subsidiaries.  Since the
Recapitalization, Graham Packaging Company (the "Operating Company") has been
a wholly owned subsidiary of Holdings.  All references to the
"Recapitalization" herein shall mean the collective reference to the
recapitalization of Holdings and related transactions as described under "The
Recapitalization" below, including the initial borrowings under the New
Credit Agreement (as defined below), the  Offerings (as defined below) and
the related uses of proceeds.  References to "Continuing Graham Partners"
herein refer to Graham Packaging Corporation ("Graham GP Corp."), Graham
Family Growth Partnership or affiliates thereof or other entities controlled
by Donald C. Graham and his family, and references to "Graham Partners" refer
to the Continuing Graham Partners, Graham Engineering Corporation ("Graham
Engineering") and the other partners of Holdings (consisting of Donald C.
Graham and certain entities controlled by Mr. Graham and his family).  Since
July 27, 1998, the Company's operations have included the operations of Graham 
Emballages Plastiques S.A.; Graham Packaging U.K. Ltd.; Graham Plastpak Plastic,
Ambalaj A.S; and Graham Packaging Deutschland Gmbh, as a result of the
acquisition of selected plants of Crown Cork & Seal.  All references to
"Management" herein shall mean the management of the Company at the time in
question, unless the context indicates otherwise.  In addition, 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.


           CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

     All statements other than statements of historical facts included in
this Report on Form 10-K, including, without limitation, statements regarding
the Company's future financial position, economic performance and results of
operations, business strategy, budgets, projected costs and plans and
objectives of management for future operations, 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 the
negative thereof or variations thereon or similar terminology.  Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, the Company can give no assurance that such

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expectations will prove to have been correct.  Important factors that could
cause actual results to differ materially from the issuers' expectations
("cautionary statements") include, without limitation, the high degree of
leverage and substantial debt service obligations of the Operating Company
and Holdings, the restrictive covenants contained in instruments governing
indebtedness of the Company, including the New Credit Agreement, competition
in the Company's markets, including the impact of possible new technologies,
a decline in the domestic motor oil business, risks associated with the
Company's international operations, the Company's exposure to fluctuations in
resin prices and its dependence on resin supplies, 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 Company's dependence on key employees and the
material adverse effect that could result from the loss of their services,
the Company's dependence on certain continuing relationships with Graham
Engineering and other Graham Partners and affiliates thereof, risks
associated with environmental regulation, risks associated with possible
future acquisitions, risks associated with hedging transactions, and the
possibility that the Company may not be able to achieve success in developing
and expanding its business, including, without limitation, the Company's hot-
fill PET plastic container business.  See "--Certain Risks of the Business." 
All subsequent written and oral forward-looking statements attributable to
the Company, or persons acting on its behalf, are expressly qualified in
their entirety by the cautionary statements.

General

     The Company is a worldwide leader in the design, manufacture 
and sale of customized blow molded rigid plastic bottles, as hereinafter 
described.  Holdings was formed under the name "Sonoco Graham Company" 
on April 3, 1989 as a Pennsylvania limited partnership and changed 
its name to "Graham Packaging Company" on March 28, 1991.  The Operating 
Company was formed under the name "Graham Packaging Holdings I, 
L.P." on September 21, 1994 as a Delaware limited partnership. 
The predecessor to Holdings controlled by the Continuing Graham Partners was
formed in the mid-1970's as a regional domestic custom plastic bottle
supplier, using the proprietary Graham Rotational Wheel.

     Upon the Recapitalization, substantially all of the assets and
liabilities of Holdings were contributed to the Operating Company, and 
subsequent to the Recapitalization, the primary business activity of Holdings 
has consisted of its direct and indirect ownership of 100% of the partnership 
interests in the Operating Company.  Upon the Recapitalization, the Operating 
Company and Holdings changed their names to "Graham Packaging Company" and
"Graham Packaging Holdings Company," respectively.

     The principal executive offices of the Company are located at 1110 East
Princess Street, York, Pennsylvania 17403, Telephone (717) 849-8500.

     The Company is managed in three operating segments: North America, 
which includes the United States and Canada; Europe; and Latin America.  
Each operating segment includes three major service lines: Automotive, 
Food and Beverage and Household Cleaning and Personal Care.

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     The Company's customized blow molded rigid plastic bottles are made
primarily from high density polyethylene ("HDPE") and polyethylene
terephthalate ("PET") resins.  The Company's customers include many of the
world's largest branded consumer products companies for whom customized
packaging design is a critical component in their efforts to differentiate
their products to the consumer in the  (i) automotive, (ii) food and beverage
and (iii) household cleaning and personal care products businesses. With
leading positions in each of its businesses, the Company has been a major
beneficiary of the trend of conversion from glass, paper and metal containers
to plastic packaging and has grown its net sales over the past 16 years at a
compounded annual growth rate ("CAGR") of over 23%.  In contrast to the
carbonated soft drink bottle business, the businesses in which the Company
operates are characterized by more specialized technology, a greater degree
of customized packaging, shorter production runs, higher growth rates and
more attractive profit margins.

     In order to position itself to further capitalize on the conversion
trend, the Company has made substantial capital expenditures since 1992,
particularly in the fast growing hot-fill PET area for shelf-stable (i.e.,
unrefrigerated) beverages. In addition, Management believes, based on
internal estimates, that the Company has distinguished itself as the leader in
locating its manufacturing plants on-site at its customers' packaging
facilities and has over one-third of its 51 facilities at on-site locations.
The many benefits of on-site plants, in addition to the Company's track
record of innovative design, superior customer service and low cost
manufacturing processes, help account for the fact that the Company has
enjoyed long-standing relationships averaging 15 years with its top 20
customers. For the year ended December 31, 1998, over 70% of the Company's
net sales were generated by its top 20 customers, the majority of which were
under long-term contracts (i.e., with terms of between one and ten years) and
the remainder of which were customers with whom the Company has been doing
business for over 10 years on average. For the year ended December 31, 1998,
the Company generated net sales and Adjusted EBITDA  (as defined in Note 8 to
"Selected Financial Data" (Item 6) below) of $588.1 million and
$119.7 million, respectively.

     Automotive. The Company is the preeminent supplier of one quart HDPE
motor oil containers in the United States, producing over 1.4 billion units
in 1998, which Management believes, based on internal estimates, represents
approximately 73% of the one quart motor oil containers produced
domestically. The Company is a supplier of such containers to many of the top
domestic producers of motor oil, including Ashland Inc. ("Ashland," producer
of Valvoline motor oil), Castrol Inc. ("Castrol"), Chevron Corporation
("Chevron"), Equilon Enterprises LLC ("Equilon", an alliance between Texaco
Inc. "Texaco" and Shell Oil Company "Shell"), Pennzoil-Quaker State Company
("Pennzoil-Quaker State", the result of the merger between Pennzoil Products
Company, "Pennzoil", and The Quaker State Corporation, "Quaker State"), and
Sun Company, Inc ("Sun Company"), and management believes the Company is the
sole supplier of one quart motor oil containers to five of these producers. 

                                      -6-
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The Company also manufactures containers for other automotive products, such
as antifreeze and automatic transmission fluid. Capitalizing on its leading
position in the U.S., the Company has expanded its operations in Latin
America. In Brazil, where Management believes, based on internal estimates,
that the Company is among the largest independent suppliers of plastic
packaging for motor oil, the Company currently operates five plants. In
addition to benefitting from the conversion to plastic packaging for motor
oil in Latin America, Management believes that the Company will benefit from
the general growth in the automotive business in this region as the number of
motor vehicles per person increases.  For the years ended December 31, 1996,
1997 and 1998, the Company generated approximately 39.4%, 37.6% and 32.1%,
respectively, of its net sales from the automotive container business.

     Food & Beverage. In the food and beverage business, the Company produces
both HDPE and PET containers for customers for whom customized packaging
design is a critical component of their efforts to differentiate their
products to the consumer. From 1993 through December 31, 1998, the Company
grew its food and beverage business at a CAGR of 88%. This substantial growth
has been driven by the rapid conversion of metal, glass and paper containers
to plastic bottles, as the superior functionality, safety and improving
economics of plastic became more apparent and preferred by consumers. The
Company is a leader in the production of HDPE containers for non-carbonated
chilled juice and juice drinks and certain liquid foods that utilize HDPE
resins. From 1992 through December 31, 1998, the Company invested over $166
million in capital expenditures to build a strategic nationwide plant network
and to develop the specialized bottle manufacturing processes necessary to
produce the PET bottles required for the hot-fill packaging of non-
refrigerated, shelf-stable juices and juice drinks. The hot-fill process, in
which bottles are filled at between 180 degrees - 190 degrees Fahrenheit to
kill bacteria, permits the shipment and display of juices and juice drinks in
a shelf-stable state. The manufacturing process for hot-fill PET packaging is
significantly more demanding than that used for cold-fill carbonated soft
drink containers, and typically involves shorter production runs, greater
shape complexity and close production integration with customers.  The
Company's largest customers in the food and beverage business include
Clement-Pappas & Company, Inc. ("Clement-Pappas"), Groupe Danone ("Danone"),
Hershey Foods Corporation ("Hershey's"), Hi-Country Foods Corporation ("Hi-
Country"), The Minute Maid Company ("Minute Maid"), Nestle Food Company
("Nestle's"), Northland Cranberries, Inc. ("Northland Cranberries"), Ocean
Spray Cranberries, Inc. ("Ocean Spray"), Seneca Foods Corporation ("Seneca"),
Tree Top Inc. ("Tree Top"), Tropicana Products, Inc. ("Tropicana") and Welch
Foods, Inc. ("Welch's").  For the years ended December 31, 1996, 1997  and
1998,  the Company generated approximately 25.3%,  28.9% and 37.6%,
respectively, of its net sales from the food and beverage business.

     Household Cleaning & Personal Care ("HC/PC"). The Company is a leading
supplier of HDPE custom bottles to the North American HC/PC products business
which includes products such as hair care, liquid fabric care and dish care
products and hard service cleaners. By focusing on its customized product

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design capability, the Company provides its HC/PC customers with a key
component in their efforts to differentiate products on store shelves. The
Company's largest customers in this sector include The Clorox Company
("Clorox"), Colgate-Palmolive Company ("Colgate-Palmolive"), The Dial Corp.
("Dial"), Johnson & Johnson  ("J&J"), L'Oreal S.A. ("L'Oreal"), The Procter &
Gamble Company  ("Procter & Gamble") and  Unilever NV ("Unilever").  The
Company is pursuing significant growth opportunities both domestically and
internationally associated with the continued conversion to HDPE packaging of
both household cleaners and personal care products. The Company continues to
benefit as liquid fabric care products, which are packaged in plastic
containers, capture an increased share from powdered detergents, which are
predominantly packaged in cardboard. For the years ended December 31, 1996,
1997 and 1998, the Company generated approximately 35.3%, 33.5%, and 30.3%
respectively, of its net sales from the HC/PC business.

     Additional information regarding business  segments is provided in Note 19
of the Notes to Financial Statements.

Products

     The Company currently designs, manufactures and sells customized HDPE
and PET blow-molded rigid plastic bottles, thermo-formed rigid plastic
containers and injection molded caps and spouts, primarily for the
automotive, food and beverage and HC/PC products businesses. The Company's
custom packaging involves a high degree of design and engineering to
accommodate complex bottle shapes (e.g., handles, view stripes, pouring
features and customized labeling) and performance and material requirements
(e.g., hot-fill capability, recycled material usage and multiple layering).

     HDPE containers, which are non-transparent, are utilized to package
products such as motor oil, fabric care, dish care,  personal care products,
certain food products, chilled juices and juice drinks. The Company's HDPE
containers are designed with custom features, such as specially designed
shapes, handles and pouring spouts which differentiate customers' products to
consumers and which may consist of a single layer of plastic or multiple
layers for specialized uses. Customers request multi-layer containers for a
variety of reasons, including the increased differentiation of the packaging
(such as oxygen barrier layering properties), the desire to include recycled
materials in the product's packaging and the reduction of cost by limiting
the use of colorants to a single exterior layer. The Company operates one of
the largest HDPE recycling plants in North America and more than 60% of its 
North American HDPE units produced contain post-consumer recycled HDPE bottles.

     PET containers, which are transparent, are utilized for products where
glass-like clarity is valued and that require shelf stability, such as
carbonated soft drinks ("CSD"), juice, juice drinks, isotonics and teas. CSD
producers are the largest users of PET containers, and the cold-fill
manufacturing process used for this application is characterized by long
production runs and standardized technology due to a low degree of product

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differentiation through package design. By contrast, the hot-fill
manufacturing process used for the Company's products is characterized by
shorter production runs, high customization to facilitate greater packaging
differentiation and the ability to withstand the high temperatures under
which the containers are filled.

Customers

     Substantially all of the Company's sales are made to major branded
consumer products companies and oil companies located across the United
States and in foreign countries. The Company's customers demand a high degree
of packaging design and engineering to accommodate complex bottle shapes,
performance requirements, materials, speed to market and reliable delivery.
As a result, many customers opt for long-term contracts, many of which have
terms of one to ten years. A majority of the Company's top 20 customers are
under long-term contracts. The Company's contracts typically contain
provisions allowing for price adjustments based on the market price of resins
and colorants, energy and labor costs, among others, and contain, in certain
cases, the Company's right of first refusal to meet a competing third party
bid to supply the customer.

     In many cases, the Company is the sole supplier of all of its customer's
custom plastic bottle requirements nationally, regionally or for a specific
brand. For the year ended December 31, 1998 the Company had only one customer
(Unilever) that accounted for over 10% of the Company's total net sales (12%
for the year ended December 31, 1998). For the year ended December 31, 1998
the Company's twenty largest customers, who accounted for over 70% of net
sales, were, in alphabetical order:

                                                        Company Customer
Customer(1)                   Business                  Since(1)
-----------                   --------                  ----------------
Ashland(2)                    Automotive                Early 1970's
Castrol                       Automotive                Late 1960's
Chevron                       Automotive                Early 1970's
Clement Pappas                Food & Beverage           Mid 1990's
Colgate-Palmolive             HC/PC                     Mid 1980's
Danone                        Food & Beverage           Before 1980
Dial                          HC/PC                     Early 1990's
Equilon                       Automotive                Early 1970's
Hershey's                     Food & Beverage           Mid 1980's
Hi-Country                    Food & Beverage           Early 1990's
Northland Cranberries         Food & Beverage           Late 1990's
Ocean Spray                   Food & Beverage           Early 1990's
Pennzoil-Quaker State         Automotive                Early 1970's
Petrobras Distribuidora S.A.  Automotive                Early 1990's
Procter & Gamble              HC/PC                     Early 1980's
Sun Company                   Automotive                Early 1960's
Tree Top                      Food & Beverage           Early 1990's

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                                                        Company Customer
Customer(1)                   Business                  Since(1)
-----------                   --------                  ----------------
Tropicana                     Food & Beverage           Mid 1980's
Unilever                      HC/PC, Food & Beverage    Early 1970's
Welch's                       Food & Beverage           Early 1990's

(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.


Foreign Operations

     The Company has significant operations outside the United States in the
form of wholly owned subsidiaries, cooperative joint ventures and other
arrangements. The Company has 21 plants located in countries outside of the
United States, including Canada (4), Brazil (5), France (5), Germany (1),
Italy (2), Poland (1), Turkey (1), United Kingdom (1) and Hungary (1).

     Brazil and Argentina. In Brazil, the Company operates four on-site
plants for motor oil packaging, including for Petrobras Distribuidora S.A.,
the national oil company of Brazil. The Company also operates an off-site
plant for its motor oil and agricultural and chemical businesses.  On
April 30, 1997, the Company acquired 80% of certain assets and assumed 80% of
certain liabilities of Rheem-Graham Embalagens Ltda. in Brazil. Graham
Packaging do Brasil Industria e Comercio S.A. ("Graham Packaging do
Brasil") is the current name of the Company's subsidiary in Brazil. In
February 1998, the Company acquired the residual 20% ownership interest in
Graham Packaging do Brasil. In Argentina, the Company formed a subsidiary,
Lido-Plast Graham, to enter into a joint venture and manufacturing agreement
with Lido Plast S.A. and Lido Plast San Luis S.A. (collectively, "Lido
Plast").

     Western Europe. The Company operates an on-site plant in each of France
and Hungary, respectively, and nine off-site plants in France, Germany,
Italy, Turkey and the United Kingdom, all for the production of liquid food
HDPE containers, HC/PC, automotive and agricultural chemical products. Under
its long-term contract with Danone, the Company manufactures a substantial
portion of the plastic containers for drinkable yogurt in France.

     Poland. Through Masko-Graham, a 50% owned joint venture in Poland, the
Company manufactures HDPE bottles for HC/PC and the liquid food products.

Competition

     The Company faces substantial competition across its product lines from
a number of well-established businesses operating both regionally and

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internationally. The Company's primary competitors include Owens-Brockway (a
wholly owned subsidiary of Owens-Illinois, Inc.), Ball Corporation, Crown
Cork & Seal Company, Inc., Plastic Containers, Inc. (a wholly owned
subsidiary of Continental Can Company , Inc., which during 1998 was sold to 
Suiza Foods Corporation), Plastipak, Inc., Silgan Holdings Inc. (successor to
Silgan Corporation), Schmalbach-Lubeca Plastic Containers USA Inc., American
National Can, Inc. and Alpla Werke Alwin Lehner Gmbh. Several of these
competitors are larger and have greater financial and other resources than
the Company. Management believes that the Company's long-term success is
largely dependent on 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 through its applied design and
development capability. Other important competitive factors include rapid
delivery of products, production quality and price.

Marketing and Distribution

     The Company's sales are made through its own direct sales force; agents
or brokers are not utilized to conduct sales activities with customers or
potential customers. Sales activities are conducted from the Company's
corporate headquarters in York, Pennsylvania and from field sales offices
located, among other places, in Houston, Texas; Cincinnati, Ohio; 
Levittown, Pennsylvania;  Burlington, Ontario; Mississauga, Ontario;
Montreal, Quebec; Paris, France; Buenos Aires, Argentina; Rio de Janeiro and
Sao Paulo, Brazil; Milan, Italy and Sulejowek, Poland. The Company's products
are typically delivered by truck, on a daily basis, in order to meet its
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 their customers' manufacturing operations so that deliveries are made,
as needed, by direct conveyance to the customers' fill lines.

Design and Development

     Design and development constitutes an important part of the Company's
competitive advantage both in the design, development and enhancement of new
customized products and in the creation of manufacturing technologies to
improve production efficiency. The Company is actively involved with its
customers in the design and introduction of new packaging features, including
the design of special wheel molds. In general, wheel molds are only able to
run on the machines for which they are built, thus encouraging customers to
retain the Company as their primary packaging provider. Management believes
that the Company's design and development capabilities, coupled with the
support of Graham Engineering in the design of blow molding wheels and
recycling systems, has positioned the Company as the packaging design and
development leader in the industry. Pursuant to the Equipment Sales
Agreement, Graham Engineering will continue to provide engineering,
consulting and other services and sell to the Company certain proprietary
blow molding wheels. Over the past several years, the Company has received
and has filed for numerous patents.  See "--The Recapitalization,"

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"--Intellectual Property"; and "Certain Relationships and Related
Transactions--Certain Business Relationships--Equipment Sales Agreement"
(Item 13).

Manufacturing

     A critical component of the Company's strategy is to locate its
manufacturing plants on-site, at its largest customers' manufacturing
operations, to provide the highest possible servicing levels, to reduce
expensive shipping and handling charges and to heighten production and
distribution efficiencies. The Company is the industry leader in providing 
on-site manufacturing arrangements, with over a third of its 51 facilities 
on-site at customers' facilities, substantially more than its competitors. See
"Properties" (Item 2). Within its 51 plants, the Company runs over 400
production lines. As necessary, the Company dedicates particular production
lines within a plant to better service its customers. The Company's 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
Company runs its plants seven days a week.

     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. 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. In the 1970's, the Company introduced the Graham Wheel.
The Graham Wheel is a single parison, electro-mechanical rotary blow molding
technology designed for its speed, reliability and ability to use virgin
resins, high barrier resins and recycled resins simultaneously without
difficulty. The Company has achieved very low production costs, particularly
in plants housing Graham Wheels. 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 a Husky injection molding machine that uses heat
and pressure to mold a test tube shaped parison or "preform." The preform is
then fed into the Sidel 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 Husky injection molders and Sidel
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

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hot-fill PET containers. Management believes that equipment for the
production of cold-fill containers can be refitted to accommodate the
production of hot-fill containers. However, such refitting has only been
accomplished at a substantial cost and has proven to be substantially less
efficient than the Company's equipment for producing hot-fill PET containers.

     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 types of automatic
inspection machines that electronically inspect containers for dimensional
conformity, flaws and various other performance requirements. 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 characteristics of the products and compliance with quality
standards.

     The Company has highly modernized equipment in its plants, consisting
primarily of the proprietary rotational wheel systems, sold to the Company by
Graham Engineering, and shuttle systems, both of which are used for HDPE blow
molding systems, and Husky/Sidel heat-set stretch blow molding systems for
custom hot-fill juice bottles. The Company is also pursuing design and
development initiatives in barrier and aseptic technologies to strengthen its
position in the food and beverage business. In the past, the Company has
achieved substantial cost savings in its manufacturing process by
productivity and process enhancements, including increasing line speeds,
utilizing recycled products, reducing scrap and optimizing plastic volume
requirements for each product's specifications. Management estimates that the
Company's operating efficiencies are among the highest in the industry.

     Management believes that capital investment to maintain and upgrade
property, plant and equipment is important to remain competitive. Total
capital expenditures for 1996, 1997 and 1998 were approximately $31.3
million, $53.2 million and $133.9 million, respectively. Management estimates
that the annual capital expenditure required to maintain the Company's
current facilities are approximately $20 million per year.  Additional
capital expenditures beyond this amount will be required to expand capacity.

Raw Materials

     HDPE and PET resins constitute the primary raw materials used to
manufacture the Company's products. These materials are available from a
number of suppliers, and the Company is not dependent upon any single
supplier for any of these materials. Based on the Company's experience,
Management believes that adequate quantities of these materials will be
available to supply all of its customers' needs, but there can be no

                                     -13-
<PAGE>
<PAGE>

assurance that they will continue to be available in adequate supply in the
future. In general, the Company's dollar gross profit is substantially
unaffected by fluctuations in resin prices because industry practice and the
Company's contractual arrangements with its customers permit changes in resin
prices to be passed through to customers by means of corresponding changes in
product pricing. In addition, the Company manages its inventory of HDPE and
PET to minimize its exposure to fluctuations in the price of these resins.

Through its wholly owned subsidiary, Graham Recycling Company ("Graham
Recycling"), the Company operates one of the largest HDPE bottle recycling
plants in North America, and more than 60% of its North American HDPE units
produced contain recycled HDPE bottles. Management believes that the Company 
can extend its recycling technology to take advantage of further opportunities 
in the HDPE and PET businesses. The recycling plant is located near the 
Company's headquarters in York, Pennsylvania.

The Recapitalization

     The recapitalization (the "Recapitalization") of Holdings was
consummated on February 2, 1998 pursuant to an Agreement and Plan of
Recapitalization, Redemption and Purchase, dated as of December 18, 1997 (the
"Recapitalization Agreement"), by and among (i) Holdings, (ii) the Graham
Partners, and (iii) BMP/Graham Holdings Corporation, a Delaware corporation
("Investor LP") formed by Blackstone Capital Partners III Merchant Banking
Fund L.P. (together with its affiliates, "Blackstone"), 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").

     On February 2, 1998, as part of the Recapitalization, the Operating
Company and GPC Capital Corp. I ("CapCo I" and, together with the Operating
Company, the "Company Issuers") consummated an offering (the "Senior
Subordinated Offering") pursuant to Rule 144A under the Securities Act of
1933, as amended (the "Securities Act"), of their Senior Subordinated Notes
Due 2008, consisting of $150,000,000 aggregate principal amount of their 8
3/4% Senior Subordinated Notes Due 2008, Series A  (the "Fixed Rate Senior
Subordinated Old Notes"), and $75,000,000 aggregate principal amount of their
Floating Interest Rate Subordinated Term Securities Due 2008, Series A
("FIRSTS"SM) (the "Floating Rate Senior Subordinated Old Notes" and, together
with the Fixed Rate Senior Subordinated Old Notes, the "Senior Subordinated
Old Notes"). ("FIRSTS" is a service mark of BT Alex. Brown Incorporated.)

     On February 2, 1998, as part of the Recapitalization, Holdings and GPC
Capital Corp. II ("CapCo II" and, together with the Holdings, the "Holdings
Issuers", which when referred to with the Company Issuers will collectively
be referred to as the "Issuers") consummated an offering (the "Senior
Discount Offering" and, together with the Senior Subordinated Offering, the
"Offerings") pursuant to Rule 144A under the Securities Act of $169,000,000
aggregate principal amount at maturity of their 10 3/4% Senior Discount Notes

                                     -14-
<PAGE>
<PAGE>

Due 2009, Series A (the "Senior Discount Old Notes" and, together with the
Senior Subordinated Old Notes, the "Old Notes").

     In connection with the Recapitalization, the Issuers entered into
Registration Rights Agreements with the Initial Purchasers of the Old Notes,
pursuant to which the Issuers agreed to exchange the respective issues of Old
Notes for Notes having the same terms but registered under the Securities Act
and not containing the restrictions on transfer that are applicable to the
Old Notes.

     Pursuant to the related Registration Rights Agreement, on September 8,
1998, the Company Issuers consummated exchange offers (the "Senior
Subordinated Exchange Offers"), pursuant to which the Company Issuers issued
$150,000,000 aggregate principal amount of their 8 3/4% Senior Subordinated
Notes Due 2008, Series B (the "Fixed Rate Senior Subordinated Exchange
Notes"), and $75,000,000 aggregate principal amount of their Floating
Interest Rate Subordinated Term Securities Due 2008, Series B (the "Floating
Rate Senior Subordinated Exchange Notes" and, together with the Fixed Rate
Senior Subordinated Exchange Notes, the "Senior Subordinated Exchange
Notes"), which were registered under the Securities Act, in exchange for
equal principal amounts of Fixed Rate Senior Subordinated Old Notes and
Floating Rate Senior Subordinated Old Notes, respectively.  The Senior
Subordinated Old Notes and the Senior Subordinated Exchange Notes  are herein
collectively referred to as the "Senior Subordinated Notes."  Pursuant to the
applicable Registration Rights Agreement, on September 8, 1998, the Holdings
Issuers consummated an exchange offer (the "Senior Discount Exchange Offer"),
pursuant to which the Holdings Issuers issued $169,000,000 aggregate
principal amount at maturity of their 10 3/4% Senior Discount Notes Due 2009,
Series B (the "Senior Discount Exchange Notes" and, together with the Senior
Discount Old Notes, the "Senior Discount Notes"), which were registered under
the Securities Act, in exchange for an equal principal amount at maturity of
Senior Discount Old Notes. 

     The Senior Subordinated Notes were issued under an Indenture dated as of
February 2, 1998 (the "Senior Subordinated Indenture")  between the Company
Issuers, Holdings, as guarantor, and United States Trust Company of New York,
as Trustee. The Senior Discount Notes (together with the Senior Subordinated
Notes, the " Notes")  were issued under an Indenture dated as of February 2,
1998 (the "Senior Discount Indenture" and together with the Senior
Subordinated Indenture, the "Indentures")  between the Holdings Issuers and
The Bank of New York, as Trustee.  The Senior Subordinated Old Notes were,
and the Senior Subordinated Exchange Notes are, fully and unconditionally
guaranteed by Holdings on a senior subordinated basis.

     The other principal components of the Recapitalization included the
following transactions:

-    The contribution by Holdings of substantially all of its assets and
     liabilities to the Operating Company;

                                     -15-
<PAGE>
<PAGE>

-    The contribution by certain Graham Partners to the Operating Company of
     their ownership interests in certain partially owned subsidiaries and
     certain real estate used but not owned by Holdings and its subsidiaries
     (the "Graham Contribution");

-    The initial borrowing by the Operating Company of $403.5 million (the
     "Bank Borrowings") in connection with the New Credit Agreement by and
     among the Operating Company, Holdings and a syndicate of lenders (see
     "Management's Discussion and Analysis of Financial Condition and Results
     of Operations--Liquidity and Capital Resources" (Item 7) ;

-    The repayment by the Operating Company of substantially all of the
     existing indebtedness and accrued interest of Holdings and its
     subsidiaries (approximately $264.9 million);

-    The distribution by the Operating Company to Holdings of all of the
     remaining net proceeds of the Bank Borrowings and the Senior
     Subordinated Offering (other than amounts necessary to pay certain fees
     and expenses and payments to Management) which, in aggregate, were
     approximately $313.7 million;

-    The repayment by the Graham Partners of $21.2 million owed to Holdings
     under certain promissory notes;

-    The redemption by Holdings of certain partnership interests in Holdings
     held by the Graham Partners for $429.6 million;

-    The purchase by the Equity Investors of certain partnership interests in
     Holdings held by the Graham Partners for $208.3 million; and

-    The payment of certain bonuses and other cash payments and the granting
     of certain equity awards to senior and middle level Management.

     Upon the consummation of the Recapitalization, Investor LP owned an 81%
limited partnership interest in Holdings, Investor GP owned a 4% general
partnership interest in Holdings, and the Continuing Graham Partners retained
a 1% general partnership interest and a 14% limited partnership interest in
Holdings. Upon the consummation of the Recapitalization, Holdings owned a 99%
limited partnership interest in the Operating Company, and GPC Opco GP LLC
("Opco GP"), a wholly owned subsidiary of Holdings, owned a 1% general
partnership interest in the Operating Company.  Following the consummation of
the Recapitalization, certain members of Management owned an aggregate of
approximately 3% of the outstanding common stock of Investor LP, which
constitutes approximately a 2.6% interest in Holdings. In addition, an
affiliate of BT Alex. Brown Incorporated and Bankers Trust International PLC
(which acted as Initial Purchasers of the Old Notes in the Offerings)
acquired approximately a 4.8% equity interest in Investor LP. See "Security
Ownership of Certain Beneficial Owners and Management" (Item 12).


                                     -16-
<PAGE>
<PAGE>

     CapCo I, a wholly owned subsidiary of the Operating Company, and 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 Subordinated Notes and as co-borrower under the New Credit Agreement. 
The sole purpose of CapCo II is to act as co-obligor of the Senior Discount
Notes and as co-guarantor with Holdings under the New Credit Agreement. 
CapCo I and CapCo II have only nominal assets, do not conduct any operations
and did not receive any proceeds of the Offerings.  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.

     Pursuant to the Recapitalization Agreement, the Graham Partners have
agreed that neither they nor their affiliates will, subject to certain
exceptions, for a period of five years from and after the Closing, engage in
the manufacture, assembly, design, distribution or marketing for sale of
rigid plastic containers for the packaging of consumer products less than ten
liters in volume.

     The Recapitalization Agreement contains various representations,
warranties, covenants and conditions.  The representations and warranties
generally did not survive the Closing.  The Graham Partners have agreed to
indemnify Holdings in respect of any claims by Management with respect to the
adequacy of the Management awards and, subject to a limit of $12.5 million on
payments by the Graham Partners, 50% of certain specified environmental costs
in excess of $5.0 million.

     Pursuant to the Recapitalization Agreement, upon the Closing, Holdings
entered into the Equipment Sales Agreement, the Consulting Agreement and
Partners Registration Rights Agreement (each as defined) described under
"Certain Relationships and Related Transactions" (Item 13).


                     SUMMARY OF SOURCES AND USES OF FUNDS

     The following table sets forth a summary of the sources and uses of the
funds associated with the Recapitalization.













                                     -17-
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<PAGE>

                                                                  AMOUNT
                                                               (In Millions)
SOURCE OF FUNDS:
Bank Borrowings . . . . . . . . . . . . . . . . . . . . . .           $403.5
Senior Subordinated Notes(1)  . . . . . . . . . . . . . . .            225.0
Senior Discount Notes . . . . . . . . . . . . . . . . . . .            100.6
Equity investments and retained equity(2) . . . . . . . . .            245.0
Repayment of Promissory notes . . . . . . . . . . . . . . .             21.2
Available cash  . . . . . . . . . . . . . . . . . . . . . .              1.7
                                                                      ------
                                                                      $997.0
     Total  . . . . . . . . . . . . . . . . . . . . . . . .           ======

USES OF FUNDS:
Repayment of existing indebtedness(3) . . . . . . . . . . .           $264.9
Redemption by Holdings of existing partnership interests  .            429.6
Purchase by Equity Investors of existing partnership
interests . . . . . . . . . . . . . . . . . . . . . . . . .            208.3
Partnership interests retained by Continuing Graham
Partners  . . . . . . . . . . . . . . . . . . . . . . . . .             36.7
Payments to Management  . . . . . . . . . . . . . . . . . .             15.4
Transaction costs and expenses  . . . . . . . . . . . . . .             42.1
                                                                      ------
                                                                      $997.0
     Total  . . . . . . . . . . . . . . . . . . . . . . . .           ======

(1)  Included $150.0 million of Fixed Rate Senior Subordinated Old Notes and
     $75.0 million of Floating Rate Senior Subordinated Old Notes.
(2)  Included a $208.3 million equity investment made by Blackstone and
     Management in the Equity Investors and a $36.7 million retained
     partnership interest of the Continuing Graham Partners. In addition, an
     affiliate of BT Alex. Brown Incorporated and Bankers Trust International
     PLC, two of the Initial Purchasers, acquired approximately a 4.8% equity
     interest in Investor LP. See "Security Ownership of Certain Beneficial
     Owners and Management" (Item 12).
(3)  Included $264.5 million of existing indebtedness and $0.4 million of
     accrued interest.

Employees

     As of December 31, 1998, the Company had approximately 3650 employees,
2000 of which were located in the United States. Approximately 75% of the
Company's employees are hourly wage employees, 50% of whom are members of
various labor unions and are covered by collective bargaining agreements that
expire between April 1999 and March 2004.  During the past three years, the
Company's subsidiary in France, Graham Packaging France, has experienced on
several occasions labor stoppages, none of which exceeded one day in
duration. Management believes that it enjoys good relations with the
Company's employees.

                                     -18-
<PAGE>
<PAGE>

Environmental Matters

     The Company and its operations, both in the U.S. and abroad, are subject
to national, state, 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, certain materials and
waste, and impose liability for the costs of investigating and cleaning up,
and certain damages resulting from, present and past spills, disposals, or
other releases of hazardous substances or materials (collectively,
"Environmental Laws"). Environmental Laws can be complex and may change
often, capital and operating expenses to comply 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 ("CERCLA" also known as "Superfund"), in the
United States, impose liability on several grounds for the investigation and
cleanup of contaminated soil, groundwater, and buildings, and for damages to
natural resources, at a wide range of properties: for example, contamination
at properties formerly owned or operated by the Company as well as at
properties the Company currently owns or operates, and properties to which
hazardous substances were sent by the Company, may result in liability for
the Company under Environmental Laws. 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 claim for liability with respect to
contamination at any location. For its operations to comply with
Environmental Laws, the Company has incurred and will continue to incur
costs, which were not material in fiscal 1998 and are not expected to be
material in the future.

     A number of governmental authorities both in the U.S. and abroad have
considered or are expected to consider legislation aimed at reducing the
amount of plastic wastes disposed of. Such 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. Such 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 certain customers of the Company) have
responded to these governmental initiatives and to perceived environmental
concerns of consumers by, for example, using bottles made in whole or in part
of recycled plastic. The Company operates one of the largest HDPE recycling
plants in North America and more than 60% of its North American HDPE units 
produced contain recycled HDPE bottles. To date these initiatives and 
developments have not materially and adversely affected the Company.





                                     -19-
<PAGE>
<PAGE>

Intellectual Property

     The Company holds various patents and trademarks.  While in the
aggregate its patents are of material importance to its business, the Company
believes that its business is not dependent upon any one of such patents or
trademarks. The Company also relies on unpatented proprietary know-how and
continuing technological innovation and other trade secrets to develop and
maintain its competitive position. There can be no assurance, however, that
others will not obtain knowledge of such 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 certain
licensing arrangements and other agreements authorizing the Company to use
certain other proprietary processes, know-how and related technology and/or
to operate within the scope of certain patents owned by other entities. The
Company also has licensed or sub-licensed certain intellectual property
rights to third parties.

Certain Risks of the Business

     Substantial Leverage.  Upon the consummation of the Recapitalization,
the Operating Company and Holdings became highly leveraged. The New Credit
Agreement, as amended by the Amendment (as defined below),  includes four
term loans to the Operating Company totaling up to $570.0 million, a $155.0
million Revolving Credit Facility, and a $100.0 million Growth Capital
Revolving Credit Facility. The Indentures (as defined) permit the Issuers to
incur additional indebtedness, subject to certain limitations. The annual
debt service requirements for the Company are as follows: 1999--$11.9
million; 2000--$15.2 million; 2001--$20.2 million; 2002--$25.8 million; and 
2003   $28.9 million The Company can incur $75 million in additional 
indebtedness beyond the amount of the New Credit Agreement. The Company does 
not anticipate that this additional indebtedness would be expressly 
subordinated to other indebtedness. Accordingly, if incurred at the Operating 
Company level, such additional indebtedness would be senior to the Operating 
Company's Senior Subordinated Notes, and the Senior Discount Notes of Holdings 
would be structurally subordinated to such additional indebtedness.

     The Issuers' high degree of leverage could have important consequences
to the holders of the Notes, including, but not limited to, the following:
(i) the Issuers' ability 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
Issuers' cash flow from operations must be dedicated to the payment of
principal and interest on their indebtedness, thereby reducing the funds
available to the Issuers for other purposes, including capital expenditures
necessary for maintenance of the Company's facilities and for the growth of
its businesses; (iii) certain of the Issuers' borrowings are and will
continue to be at variable rates of interest, which exposes the Issuers to
the risk of increased interest rates; (iv) the indebtedness outstanding under
the New Credit Agreement is secured and matures prior to the maturity of the

                                     -20-
<PAGE>
<PAGE>

Notes; (v) the Issuers may be substantially more leveraged than certain of
their competitors, which may place the Issuers at a competitive disadvantage;
and (vi) the Issuers' substantial degree of leverage, as well as the
covenants contained in the Indentures and the New Credit Agreement, may
hinder their ability to adjust rapidly to changing market conditions and
could make them more vulnerable in the event of a downturn in general
economic conditions or in their business.

     Ability to Service Debt.  The Issuers' ability to make scheduled
payments or to refinance their obligations with respect to their indebtedness
will depend on their financial and operating performance, which, in turn, is
subject to prevailing economic conditions and to certain financial, business
and other factors beyond their control. If the Issuers' cash flow and capital
resources are insufficient to fund their respective debt service obligations,
they may be forced to reduce or delay planned expansion and capital
expenditures, sell assets, obtain additional equity capital or restructure
their debt. There can be no assurance that the Issuers' operating results,
cash flow and capital resources will be sufficient for payment of their
indebtedness. In the absence of such operating results and resources, the
Issuers could face substantial liquidity problems and might be required to
dispose of material assets or operations to meet their respective debt
service and other obligations, and there can be no assurance as to the timing
of such sales or the proceeds which the Issuers could realize therefrom. In
addition, because the Operating Company's obligations under the New Credit
Agreement will bear interest at floating rates, an increase in interest rates
could adversely affect, among other things, the Operating Company's ability
to meet its debt service obligations. In the future, the Operating Company 
will be required to make the following scheduled principal payments on the 
Term Loans under the New Credit Agreement: 1999--$5.0 million; 2000--$15.0
million; 2001--$20.0 million; 2002--$25.0 million; 2003--$27.5 million; 2004
--$93.0 million; 2005--$64.9 million; 2006--$242.7 million; and 2007--$74.0
million.  The Term Loan Facilities under the New Credit Agreement shall be
prepaid, subject to certain conditions and exceptions, with (i) 100% of the
net proceeds of any incurrence of indebtedness, subject to certain
exceptions, by Holdings or its subsidiaries, (ii) 75% of the net proceeds of
issuances of equity, subject to certain exceptions, after the Closing by
Holdings or any of its subsidiaries, (iii) 100% of the net proceeds of
certain asset dispositions, (iv) 50% of the annual excess cash flow (as such
term is defined in the New Credit Agreement) of Holdings and its subsidiaries
on a consolidated basis and (v) 100% of the net proceeds from any
condemnation and insurance recovery events, subject to certain reinvestment
rights. Outstanding balances under the Revolving Credit Facility and Growth
Capital Revolving Credit Facility are payable in 2004.

     Additionally, if the Issuers were to sustain a decline in their
operating results or available cash, they could experience difficulty in
complying with the covenants contained in the New Credit Agreement, the
Indentures or any other agreements governing future indebtedness. The failure
to comply with such covenants could result in an event of default under these

                                     -21-
<PAGE>
<PAGE>

agreements, thereby permitting acceleration of such indebtedness as well as
indebtedness under other instruments that contain cross-acceleration and
cross-default provisions.

     Holding Company Structure; Structural Subordination of Senior Discount
Exchange Notes.  Holdings is a holding company which has no significant
assets other than its direct and indirect partnership interests in the
Operating Company. CapCo II, a wholly owned subsidiary of Holdings, was
formed for the purpose of serving as a co-issuer of the Senior Discount Notes
and has no operations or assets from which it will be able to repay the
Senior Discount Notes. Accordingly, the Holdings Issuers must rely entirely
upon distributions from the Operating Company to generate the funds necessary
to meet their obligations, including the payment of Accreted Value or
principal and interest on the Senior Discount Notes. The Senior Subordinated
Indenture and the New Credit Agreement contain significant restrictions on
the ability of the Operating Company to distribute funds to Holdings. There
can be no assurance that the Senior Subordinated Indenture, the New Credit
Agreement or any agreement governing indebtedness that refinances such
indebtedness or other indebtedness of the Operating Company will permit the
Operating Company to distribute funds to Holdings in amounts sufficient to
pay the Accreted Value or principal or interest on the Senior Discount Notes
when the same become due (whether at maturity, upon acceleration or
otherwise).

     The only significant assets of Holdings are its partnership interests in
the Operating Company.  All such interests are pledged by Holdings
as collateral under the New Credit Agreement. Therefore, if Holdings were
unable to pay the Accreted Value or principal or interest on the Senior
Discount Notes, the ability of the holders of the Senior Discount Notes to
proceed against the partnership interests of the Operating Company to satisfy
such amounts would be subject to the prior satisfaction in full of all
amounts owing under the New Credit Agreement. Any action to proceed against
such partnership interests by or on behalf of the holders of Senior Discount
Notes would constitute an event of default under the New Credit Agreement
entitling the lenders thereunder to declare all amounts owing thereunder to
be immediately due and payable, which event would in turn constitute an event
of default under the Senior Subordinated Indenture, entitling the holders of
the Senior Subordinated Notes to declare the principal and accrued interest
on the Senior Subordinated Notes to be immediately due and payable. In
addition, as secured creditors, the lenders under the New Credit Agreement
would control the disposition and sale of the Operating Company partnership
interests after an event of default under the New Credit Agreement and would
not be legally required to take into account the interests of unsecured
creditors of Holdings, such as the holders of the Senior Discount Notes, with
respect to any such disposition or sale. There can be no assurance that the
assets of Holdings after the satisfaction of claims of its secured creditors
would be sufficient to satisfy any amounts owing with respect to the Senior
Discount Notes.


                                     -22-
<PAGE>
<PAGE>

     The Senior Discount Notes will be effectively subordinated to all
existing and future claims of creditors of Holdings' subsidiaries, including
the lenders under the New Credit Agreement, the holders of the Senior
Subordinated Notes and trade creditors. As described above, the rights of the
Holdings Issuers and their creditors, including the holders of the Senior
Discount Notes, to realize upon the assets of Holdings or any of its
subsidiaries upon any such subsidiary's liquidation (and the consequent
rights of the holders of the Senior Discount Notes to participate in the
realization of those assets) will be subject to the prior claims of the
lenders under the New Credit Agreement and the creditors of Holdings'
subsidiaries including in the case of the Operating Company, the lenders
under the New Credit Agreement and the holders of the Senior Subordinated
Notes. In such event, there may not be sufficient assets remaining to pay
amounts due on any or all of the Senior Discount Notes then outstanding.
Under the New 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 (i) in respect of overhead, tax
liabilities, legal, accounting and other professional fees and expenses, (ii)
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) or by any employee stock
ownership plan upon such person's death, disability, retirement or
termination of employment or other circumstances with certain annual dollar
limitations and (iii) to finance, starting on July 15, 2003, the payment of
cash interest payments on the Senior Discount Notes.

     The Senior Subordinated Notes and all amounts owing under the New Credit
Agreement will mature prior to the maturity of the Senior Discount Notes. The
Senior Discount Indenture requires that any agreements governing indebtedness
that refinances the Senior Subordinated Notes or the New Credit Agreement not
contain restrictions on the ability of the Operating Company to make
distributions to Holdings that are more restrictive than those contained in
the Senior Subordinated Indenture or the New Credit Agreement, respectively.
There can be no assurance that if the Operating Company is required to
refinance the Senior Subordinated Notes or any amounts under the New Credit
Agreement, it will be able to do so upon acceptable terms, if at all.

     Subordination of Senior Subordinated Notes and Holdings Guarantee.  The
Senior Subordinated Notes are unsecured obligations of the Company Issuers
that are subordinated in right of payment to all Senior Indebtedness of the
Company Issuers, including all indebtedness under the New Credit Agreement.
The Indentures and the New Credit Agreement will permit the Operating Company
to incur additional Senior Indebtedness, provided that certain conditions are
met, and the Operating Company expects from time to time to incur additional
Senior Indebtedness. In the event of the insolvency, liquidation,
reorganization, dissolution or other winding up of the Company Issuers or
upon a default in payment with respect to, or the acceleration of, or if a
judicial proceeding is pending with respect to any default under, any Senior

                                     -23-
<PAGE>
<PAGE>

Indebtedness, the lenders under the New Credit Agreement and any other
creditors who are holders of Senior Indebtedness must be paid in full before
a holder of the Senior Subordinated Notes may be paid. Accordingly, there may
be insufficient assets remaining after such payments to pay principal or
interest on the Senior Subordinated Notes. In addition, under certain
circumstances, no payments may be made with respect to the principal of or
interest on the Senior Subordinated Notes if a default exists with respect to
certain Senior Indebtedness.   CapCo I, a wholly owned subsidiary of the
Operating Company, was formed solely for the purpose of serving as a co-
issuer of the Senior Subordinated Notes and has no operations or assets from
which it will be able to repay the Senior Subordinated Notes. Accordingly,
the Company Issuers must rely entirely upon the cash flow and assets of the
Operating Company to generate the funds necessary to meet their obligations,
including the payment of principal and interest on the Senior Subordinated
Notes.

     The Senior Subordinated Notes are fully and unconditionally guaranteed
by Holdings on a senior subordinated basis. The Holdings Guarantee is
subordinated to all senior indebtedness of Holdings and effectively
subordinated to all indebtedness and other liabilities (including but not
limited to trade payables) of Holdings' subsidiaries. Because the Holdings
Guarantee will be subordinated in right of payment to all senior indebtedness
of Holdings and effectively subordinated to all indebtedness and other
liabilities (including trade payables) of Holdings' subsidiaries (including
the Operating Company), investors should not rely on the Holdings Guarantee
in evaluating an investment in the Senior Subordinated Exchange Notes.

     Restrictive Debt Covenants.  The New Credit Agreement and the Indentures
contain a number of significant covenants that, among other things, restrict
the ability of the Issuers to dispose of assets, repay other indebtedness,
incur additional indebtedness, pay dividends, prepay subordinated
indebtedness (including, in the case of the New Credit Agreement, the Notes),
incur liens, make capital expenditures and make certain investments or
acquisitions, engage in mergers or consolidations, engage in certain
transactions with affiliates and otherwise restrict the activities of the
Issuers. In addition, under the New Credit Agreement, the Operating Company
is required to satisfy specified financial ratios and tests. The ability of
the Operating Company to comply with such 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 New Credit Agreement.  In the
event of any such default, depending upon the actions taken by the lenders,
the Issuers could be prohibited from making any payments of principal or
interest on the Notes. In addition, the lenders could elect to declare all
amounts borrowed under the New Credit Agreement, together with accrued
interest, to be due and payable and could proceed against the collateral
securing such indebtedness. If the Senior Indebtedness were to be
accelerated, there can be no assurance that the assets of the Operating


                                     -24-
<PAGE>
<PAGE>

Company would be sufficient to repay in full that indebtedness and the other
indebtedness of the Operating Company.

     Risks Associated with International Operations.  The Company has
significant operations outside the United States in the form of wholly owned
subsidiaries, cooperative joint ventures and other arrangements. The Company
has 21 plants located in countries outside the United States, including
Canada (4), Brazil (5), France (5), Germany (1), Hungary (1), Italy (2),
Poland (1), Turkey (1) and the United Kingdom (1). As a result, the Company
is subject to risks associated with operating in foreign countries, including
fluctuations in currency exchange rates (recently in Brazil in particular),
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 certain foreign countries and imposition or increase of
investment and other restrictions by foreign governments or the imposition of
environmental or employment laws. In addition, the Company's operations in
France have undergone extensive restructuring over the past three years and
have been less profitable than its other businesses. To date, the above
factors in Europe, North America and Latin America have not had a material
impact on the Company's operations, but no assurance can be given that such
risks will not have a material adverse effect on the Company in the future.

     Exposure to Fluctuations in Resin Prices and Dependence on Resin
Supplies.  The Company uses large quantities of HDPE and PET resins in
manufacturing its products. While the Company historically has been able to
pass through changes in the cost of resins to its customers due to
contractual provisions and standard industry practice, the Company may not be
able to do so in the future and significant increases in the price of resin
could adversely affect the Company's operating margins and growth plans.
Furthermore, a significant increase in resin prices could slow the pace of
conversions from paper, glass and metal containers to plastic containers to
the extent that such costs are passed on to the consumer.

     Dependence on Significant Customer.  The Company's largest customer
(Unilever) accounted for approximately 12% of the Company's net sales for the
twelve months ended December 31, 1998. The termination by such customer of
its relationship with the Company could have a material adverse effect upon
the Company's business, financial position or results of operations. The
Company's existing customers' purchase orders and contracts typically vary
from one to ten years. Prices under these arrangements are tied to market
standards and therefore vary with market conditions. The contracts generally
are requirements contracts which do not obligate the customer to purchase any
given amount of product from the Company. Accordingly, notwithstanding the
existence of certain supply contracts, the Company faces the risk that
customers will not purchase the amounts expected by the Company pursuant to
such supply contracts.


                                     -25-
<PAGE>
<PAGE>

     Dependence on 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. In
particular, the loss of the services provided by G. Robinson Beeson, Scott G.
Booth, John E. Hamilton, Philippe LeJeune, Geoffrey R. Lu, Roger M. Prevot,
George W. Stevens and Philip R. Yates, among others, could have a material
adverse effect on the Company. The Company does not maintain "key" person
insurance on any of its employees.

     Relationship with Graham Affiliates.  The relationship of the Company
with Graham Engineering and Graham Capital Corporation ("Graham Capital"), or
their successors or assigns, is material to the business of the Company. To
date, certain affiliates of the Graham Partners have provided important
equipment, technology and services to Holdings and its subsidiaries. Upon the
Recapitalization, Holdings entered into the Equipment Sales Agreement (as
defined) with Graham Engineering, pursuant to which Graham Engineering will
provide the Company with the Graham Wheel and related technical support, and
the Consulting Agreement (as defined) with Graham Capital, pursuant to which
Graham Capital will provide the Company with certain consulting services. The
obligations of Holdings to make payments to the Graham affiliates under the
Equipment Sales Agreement and the Consulting Agreement would be
unsubordinated obligations of Holdings. Accordingly, such obligations would
be pari passu with the Senior Discount Notes and would be structurally
subordinated to the Senior Subordinated Notes. If any such agreements were
terminated prior to their scheduled terms or if the relevant Graham affiliate
fails to comply with any such agreement, the business, financial condition
and results of operations of the Company could be materially and adversely
affected.

     Fraudulent Conveyance.  In connection with the Recapitalization, the
Operating Company made a distribution to Holdings of $313.7 million of the
net proceeds of the Senior Subordinated Offering and the Bank Borrowings, and
Holdings redeemed certain partnership interests held by the Graham Partners
for $429.6 million (without giving effect to payment by the Graham Partners
of $21.2 million owed to Holdings under certain promissory notes).  If a court
in a lawsuit brought by an unpaid creditor of one of the Issuers or a
representative of such creditor, such as a trustee in bankruptcy, or one of
the Issuers as a debtor-in-possession, were to find under relevant federal
and state fraudulent conveyance statutes that such Issuer had (a) actual
intent to defraud or (b) did not receive fair consideration or reasonably
equivalent value for the distribution from the Operating Company to Holdings
or for incurring the debt, including the Notes, in connection with the
financing of the Recapitalization, and that, at the time of such incurrence,
such Issuer (i) was insolvent, (ii) was rendered insolvent by reason of such
incurrence, (iii) was engaged in a business or transaction for which the
assets remaining with such Issuer constituted unreasonably small capital or
(iv) intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured, such court could void such
Issuer's obligations under the Notes, subordinate the Notes to other

                                     -26-
<PAGE>
<PAGE>

indebtedness of such Issuer or take other action detrimental to the holders
of the Notes.

     The measure of insolvency for these purposes varies depending upon the
law of the jurisdiction being applied. Generally, however, a company would be
considered insolvent for these purposes if the sum of the company's debts
(including contingent debts) were greater than the fair saleable value of all
the company's property, or if the present fair saleable value of the
company's assets were less than the amount that would be required to pay its
probable liability on its existing debts as they become absolute and matured.
Moreover, regardless of solvency or the adequacy of consideration, a court
could void an Issuer's obligations under the Notes, subordinate the Notes to
other indebtedness of such Issuer or take other action detrimental to the
holders of the Notes if such court determined that the incurrence of debt,
including the Notes, was made with the actual intent to hinder, delay or
defraud creditors.

     The Issuers believe that the indebtedness represented by the Notes was
incurred for proper purposes and in good faith without any intent to hinder,
delay or defraud creditors, that the Issuers received reasonably equivalent
value or fair consideration for incurring such indebtedness, that the Issuers
were prior to the issuance of the Notes and, after giving effect to the
issuance of the Notes and the use of proceeds in connection with the
Recapitalization, continued to be, solvent under the applicable standards
(notwithstanding the negative net worth and insufficiency of earnings to
cover fixed charges for accounting purposes that will result from the
Recapitalization) and that the Issuers have and will have sufficient capital
for carrying on their businesses and are and will be able to pay their debts
as they mature. There can be no assurance, however, as to what standard a
court would apply in order to evaluate the parties' intent or to determine
whether the Issuers were insolvent at the time, or rendered insolvent upon
consummation, of the Recapitalization or the sale of the Notes or that,
regardless of the method of valuation, a court would not determine that an
Issuer was insolvent at the time, or rendered insolvent upon consummation, of
the Recapitalization.

     In rendering their opinions in connection with the Offerings, counsel
for the Issuers and counsel for the Initial Purchasers did not express any
opinion as to the applicability of federal or state fraudulent conveyance
laws.

     Control by Blackstone.  Since the consummation of the Recapitalization,
Blackstone has indirectly controlled approximately 80% of the general
partnership interests in Holdings. Pursuant to the Holdings Partnership
Agreement (as defined), holders of a majority of the general 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


                                     -27-
<PAGE>
<PAGE>

extraordinary transactions. There can be no assurance that the interests of
Blackstone will not conflict with the interests of holders of the Notes.

     Risks Associated with Possible Future Acquisitions.  The Company's
future growth may be a function, in part, of acquisitions of other consumer
goods packaging businesses. To finance such acquisitions, the Operating
Company or Holdings would likely incur additional indebtedness, as permitted
under the New Credit Agreement and the Indentures. To the extent that it
grows through acquisition, the Company will face the operational and
financial risks commonly encountered with such a strategy. The Company would
face certain operational risks, including but not limited to 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.
Customer satisfaction or performance problems at a single acquired firm could
have a materially adverse impact on the reputation of the Company as a whole.
Depending on the size of the acquisition, it can take up to two to three
years to completely integrate an acquired business into the acquiring
company's operations and systems and realize the full benefit of the
integration. Moreover, during the early part of this integration period, the
operating results of the acquiring business may decrease from results
attained prior to the acquisition. The Company would also face certain
financial risks associated with the incurring of additional indebtedness to
make the acquisition, such as reducing its liquidity, access to capital
markets and financial stability.

Item 2.  Properties

     The Company currently owns or leases 51 plants located in the United
States, Canada, Brazil, France, Germany, Hungary, Italy, Poland, Turkey and
the United Kingdom, not including the Lido Plast-Graham joint venture
facilities which are wholly owned and operated by its joint venture partner.
Twenty of the Company's packaging plants are located on-site at customer
plants. The Company's operation in Poland is pursuant to a joint venture
arrangement where the Company owns a 50% interest. Currently, the Company's
corporate headquarters are in multiple facilities located in York,
Pennsylvania, totaling approximately 45,000 square feet. In early 1999, the
Company will be consolidating and relocating its headquarters to a 58,000
square foot facility located in York, Pennsylvania. The Company believes that
its plants, which are of varying ages and types of construction, are in good
condition, are suitable for the Company's operations and generally provide
sufficient capacity to meet the Company's requirements for the foreseeable
future.

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


                                     -28-
<PAGE>
<PAGE>

                                          On Site                     Size
Location                                Or Off Site  Leased/Owned  (Sq. ft.)
--------                                -----------  ------------   ---------
U.S. Packaging Facilities
 1.  York, Pennsylvania*                 Off Site        Owned        395,554
 2.  York, Pennsylvania                  Off Site       Leased        110,270
     York, Pennsylvania (a)                 N/A         Leased         45,000
 3.  Maryland Heights, Missouri          Off Site        Owned        308,961
 4.  Atlanta, Georgia                     On Site       Leased        165,000
 5.  Atlanta, Georgia                    Off Site       Leased        112,400
 6.  Emigsville, Pennsylvania            Off Site       Leased        148,300
 7.  Levittown, Pennsylvania             Off Site       Leased        148,000
 8.  Rancho Cucamonga, California        Off Site       Leased        143,063
 9.  Santa Ana, California               Off Site        Owned        127,680
10.  Muskogee, Oklahoma                  Off Site       Leased        125,000
11.  Woodridge, Illinois                 Off Site       Leased        124,137
12.  Cincinnati, Ohio                    Off Site       Leased        103,119
13.  Berkeley, Missouri *                Off Site        Owned         75,000
14.  Selah, Washington                    On Site        Owned         70,000
15.  Cambridge, Ohio                      On Site       Leased         57,000
16.  Shreveport, Louisiana                On Site       Leased         56,400
17.  Whiting, Indiana (e)                 On Site       Leased         56,000
18.  Richmond, California                Off Site       Leased         54,985
19.  Houston, Texas                      Off Site        Owned         52,500
20.  New Kensington, Pennsylvania         On Site       Leased         48,000
21.  Bradford, Pennsylvania              Off Site       Leased         44,000
22.  Port Allen, Louisiana                On Site       Leased         44,000
23.  N. Charleston, South Carolina        On Site       Leased         40,000
24.  Jefferson, Louisiana                 On Site       Leased         37,000
25.  Vicksburg, Mississippi               On Site       Leased         31,200
26.  Bordentown, New Jersey               On Site       Leased         30,000
27.  Tulsa, Oklahoma                      On Site       Leased         28,500
28.  Wapato, Washington                  Off Site       Leased         20,300
29.  Bradenton, Florida                   On Site       Leased         12,191

Canadian Packaging Facilities
30.  Burlington, Ontario, Canada *       Off Site        Owned        145,200
     Burlington, Ontario, Canada            N/A          Owned          4,800
     (a) *
31.  Mississauga, Ontario, Canada *      Off Site        Owned         78,416
32.  Anjou, Quebec, Canada *             Off Site        Owned         44,875
33.  Toronto, Ontario, Canada             On Site         N/A           5,000

European Packaging Facilities
34.  Asnieres, France (f)                 On Site       Leased         15,000
35.  Assevent, France                    Off Site        Owned        186,470
36.  Bad Bevensen, Germany               Off Site        Owned         80,000
37.  Blyes, France                       Off Site        Owned         89,000
38.  Campochiaro, Italy                  Off Site        Owned         93,200

                                     -29-
<PAGE>
<PAGE>

                                          On Site                     Size
Location                                Or Off Site  Leased/Owned  (Sq. ft.)
--------                                -----------  ------------   ---------
39.  Istanbul, Turkey                    Off Site        Owned         50,000
40.  Meaux, France                       Off Site        Owned         80,000
41.  Noeux-les-Mines, France             Off Site        Owned        120,000
42.  Nyirbator, Hungary                   On Site       Leased          5,000
     Rueil, Paris, France(a)             Off Site       Leased          4,300
43.  Sovico (Milan), Italy               Off Site       Leased         74,500
44.  Sulejowek, Poland (b)               Off Site        Owned         83,700
45.  Wrexham UK                          Off Site        Owned        120,000

Latin American Packaging Facilities
46.  Sao Paulo, Brazil                   Off Site       Leased         23,440
47.  Rio de Janeiro, Brazil               On Site    Owned/Leased      20,000
                                                          (c)
     Rio de Janeiro, Brazil (a)             N/A         Leased          1,650
48.  Santos, Brazil                       On Site       Leased          5,400
49.  Rio de Janeiro, Brazil               On Site         N/A          10,000
50.  Rio de Janeiro, Brazil               On Site       Leased         16,685

Graham Recycling
51.  York, Pennsylvania *                Off Site        Owned         44,416

Graham Affiliated Packaging Facilities
(Lido Plast-Graham--Joint Venture) (d)
52.  Buenos Aires, Argentina             Off Site         N/A            N/A
53.  San Luis, Argentina                 Off Site         N/A            N/A
____________________

(a)  This indicates an administrative facility.
(b)  This facility is owned by the Masko-Graham Joint Venture, in which the
     Company holds a 50% interest.
(c)  The building is owned; land is leased.
(d)  The Lido Plast-Graham facilities are owned and operated by the Company's
     joint venture partner, Lido Plast, in which the Company does not own any
     interest. See "--Foreign Operations" (Item 1)
(e)  Facility closed at the end of February 1999.
(f)  Facility to close at the end of March 1999.

*    Contributed to the Operating Company as part of the Graham Contribution.
     With respect to the Berkeley, Missouri facility (Location 13 in the
     table above), a manufacturing plant, warehouse and parcel of land, the
     latter two of which are not listed in the table above, were contributed
     to the Operating Company as part of the Graham Contribution.





                                     -30-
<PAGE>
<PAGE>

Item 3.  Legal Proceedings

     The Company is party to various 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 such matters,
experience to date and discussions with counsel, that such ultimate liability
will not be material to the business, financial condition or results of
operations of the Company.

Holdings was sued in May 1995 for alleged patent infringement, trade secret
misappropriation and other related state law claims by Hoover Universal,
Inc., a subsidiary of Johnson Controls, Inc. ("JCI"), in the U.S. District
Court for the Central District of California, Case No. CV-95-3331 RAP (BQRx).
JCI alleged that the Company was misappropriating or threatened to
misappropriate trade secrets allegedly owned by JCI relating to the
manufacture of hot-fill PET plastic containers through the hiring of JCI
employees, and alleged that the Company infringed two patents owned by JCI by
manufacturing hot-fill PET plastic containers for several of its largest
customers using a certain "pinch grip" structural design. In December 1995,
JCI filed a second lawsuit alleging infringement of two additional patents,
which relate to a ring and base structure for hot-fill PET plastic
containers. The two suits were consolidated for all purposes. The Company
answered the complaints, denying infringement and misappropriation in all
respects and asserting various defenses, including invalidity and
unenforceability of the patents at issue based upon inequitable conduct on
the part of JCI in prosecuting the relevant patent applications before the
U.S. Patent Office and anticompetitive patent misuse by JCI. The Company 
also asserted counterclaims against JCI alleging violations of federal
antitrust law, based upon certain agreements regarding market division
allegedly entered into by JCI with another competitor and other alleged
conduct engaged in by JCI allegedly intended to raise prices and limit
competition. In March 1997, JCI's plastic container business was acquired by
Schmalbach-Lubeca Plastic Containers USA Inc. ("Schmalbach-Lubeca").
Schmalbach-Lubeca and certain affiliates were joined as successors to JCI and
as counter-claim defendants.

     On March 10, 1998, the U.S. District Court in California entered summary
judgment in favor of JCI and against the Company regarding infringement of
two patents, but did not resolve certain issues related to the patents
including certain of the Company's defenses. On March 6, 1998, the Company
also filed suit against Schmalbach-Lubeca in Federal Court in Delaware for
infringement of the Company's patent concerning pinch grip bottle design. On
April 24, 1998, the parties to the litigation reached an understanding on the
terms of a settlement of all claims in all of the litigation with JCI and
Schmalbach-Lubeca, subject to agreement upon and execution of a formal
settlement agreement. In June 1998, the Company finalized the settlement of
the JCI-Schmalbach-Lubeca litigation. The amounts paid in settlement, as well
as estimated litigation expenses and professional fees did not differ

                                     -31-
<PAGE>
<PAGE>

materially from the amounts accrued in Special Charges and Unusual Items in
respect thereof for the year ended December 31, 1997.  The cash paid in
settlement was funded by drawdowns under the New Credit Agreement. See Note
18 to the Financial Statements (Item 8).

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 1998.









































                                     -32-
<PAGE>
<PAGE>

                                    PART II

Item 5.  Market for Registrant's Common Equity
         and Related Stockholder Matters

     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 partner interests in Holdings:  Investor
GP and Graham Packaging Corporation.  The limited partnership interests in
Holdings are owned by Investor LP and two Graham family entities.  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.

     Holdings has made distributions to its partners totaling the amounts set
forth in the Statements of Partners' Capital/Owners' Equity (Deficit)
included in Item 8 of this Report, during the periods indicated therein.

     Under the New Credit Agreement, the Operating Company is subject to
restrictions on the payment of dividends and other distributions to Holdings,
as described in Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations -Liquidity and Capital Resources."

     As indicated under Item 1, "Business---The Recapitalization", upon the
Closing of the Recapitalization, (i) certain limited and general partnership
interests in Holdings held by the Graham Partners were redeemed by Holdings
for $429.6 million, and (ii) certain limited and general partnership
interests in Holdings held by the Graham Partners were purchased by the
Equity Investors for $208.3 million.

     As indicated under Item 1, "Business---The Recapitalization", upon the
Closing of the Recapitalization on February 2, 1998, the Company Issuers
consummated an offering pursuant to Rule 144A under the Securities Act of
their Senior Subordinated Notes Due 2008, consisting of $150,000,000
aggregate principal amount of their Fixed Rate Senior Subordinated Old Notes
and $75,000,000 aggregate principal amount of their Floating Rate Senior
Subordinated Old Notes.  On February 2, 1998, as part of the
Recapitalization, the Holdings Issuers also consummated an offering pursuant
to Rule 144A under the Securities Act of $169,000,000 aggregate principal
amount at maturity of their Senior Discount Old Notes.  Pursuant to the
Purchase Agreement dated January 23, 1998 (the "Purchase Agreement"), the

                                     -33-
<PAGE>
<PAGE>

Initial Purchasers, BT Alex. Brown Incorporated, Bankers Trust International
PLC, Lazard Freres & Co. LLC and Salomon Brothers Inc, purchased the Senior
Subordinated Old Notes at a price of 97.0% of the principal amount, for a
discount of 3% from the initial offering price of 100% or a total discount of
$6,750,000.  Pursuant to the Purchase Agreement, the Initial Purchasers
purchased the Senior Discount Old Notes at a price of 57.173% of the
principal amount for a discount of 2.361% from the initial offering price of
59.534% or a total discount of $3,990,090.  Pursuant to the Purchase
Agreement, the Issuers also reimbursed the Initial Purchasers for certain
expenses.  Pursuant to the Senior Subordinated Exchange Offers, on
September 8, 1998, the Company Issuers exchanged $150,000,000 aggregate
principal amount of their Fixed Rate Senior Subordinated Exchange Notes and
$75,000,000 aggregate principal amount of their Floating Rate Senior
Subordinated Exchange Notes for equal principal amounts of Fixed Rate Senior
Subordinated Old Notes and Floating Rate Senior Subordinated Old Notes,
respectively.  Pursuant to the Senior Discount Exchange Offer, on September
8, 1998, the Holdings Issuers exchanged $169,000,000 aggregate principal
amount at maturity of their Senior Discount Exchange Notes for an equal
principal amount of Senior Discount Old Notes.  The Senior Subordinated Old
Notes were, and the Senior Subordinated Exchange Notes are, fully and
unconditionally guaranteed by Holdings on a senior subordinated basis.

Item 6.  Selected Financial Data

     The following table sets forth certain selected historical financial
data for the Company for and at the end of each of the years in the five-year
period ended December 31, 1998.  The selected historical financial data for
each of the four years in the period ended December 31, 1997 are derived from
the Graham Packaging Group's combined financial statements.  The selected 
historical financial data for the year ended December 31, 1998 are derived from
Holdings' financial statements.  The combined financial statements as of 
December 31, 1995, 1996 and 1997 and for each of the four years in the period 
ended December 31, 1997 have been audited by Ernst & Young LLP, independent
auditors.  The consolidated financial statements as of, and for the year ended,
December 31, 1998 have been audited by Deloitte & Touche LLP, independent
auditors.  The combined financial statements of Graham Packaging Group (as 
defined in Note 1 to the Financial Statements (Item 8)) have been prepared 
for periods prior to the Recapitalization to include Holdings and its 
subsidiaries and the ownership interests and real estate constituting the 
Graham Contribution (as defined) for all periods that the operations were 
under common control. The selected historical financial data as of 
December 31, 1994, were derived from the unaudited combined financial 
statements of Graham Packaging Group which, in the opinion of Management, 
include all adjustments (consisting only of usual recurring adjustments) 
necessary for a fair presentation of such data.  The following table should 
be read in conjunction with "Management's Discussion and Analysis of 
Financial Condition and Results of Operations" (Item 7) and the combined 
financial statements of Graham Packaging Group, including the related
notes thereto, and the consolidated  financial statements of Holdings, 
including the related notes thereto, included under Item 8.


                                     -34-
<PAGE>
<PAGE>

<TABLE>
<CAPTION>
                                                                                 Year Ended December 31,
                                                        ------------------------------------------------------------------------
                                                        1994 (13) (14)      1995 (2)         1996         1997 (3)       1998(3)
                                                        ----------------  -------------  -------------  ------------  ----------
                                                                                      (In millions)
<S>                                                    <C>                <C>           <C>            <C>            <C>
INCOME STATEMENT DATA
Net Sales (4)                                               $396.0           $466.8         $459.7         $521.7        $588.1
Gross Margin (4)                                              69.5             66.8           77.2           84.4         117.4
Selling, general and administrative expenses                  29.7             35.5           35.5           34.9          37.8
Special charges and unusual items (5)                           --              5.9            7.0           24.4          24.2
Operating income                                              39.8             25.4           34.7           25.1          55.4
Interest expense, net                                         12.5             16.2           14.5           13.4          68.0
Other expense (income), net                                  (0.2)           (11.0)          (1.0)            0.7          (0.1)
Recapitalization expenses (1)                                   --               --             --             --          11.8
Income tax expense (benefit) (6)                             (0.3)            (0.3)             --            0.6           1.1
Minority interest                                               --               --             --            0.2            --
Extraordinary loss (7)                                          --              1.8             --             --           0.7
                                                            ------           ------         ------         ------        ------
Net income (loss)                                           $ 27.8           $ 18.7         $ 21.2         $ 10.2        $(26.1)
                                                            ======           ======         ======         ======        ======

OTHER DATA:
Cash flows provided by (used in):
  Operating activities                                      $ 74.6           $ 60.5         $ 68.0         $ 66.9        $ 41.8     
Investing activities                                         (53.0)           (68.4)         (32.8)         (72.3)       (181.2)
  Financing activities                                      (26.2)              9.2          (34.6)           9.5         139.7
Adjusted EBITDA (8)                                           81.3             77.1           90.6           89.8         119.7
Capital expenditures                                          53.8             68.6           31.3           53.2         133.9
Investments (9)                                                 --              3.2            1.2           19.0          45.2
Depreciation and amortization (10)                            41.3             45.7           48.2           41.0          39.3
Ratio of earnings to fixed charges (11)                       2.7x             2.0x           2.2x           1.6x                  
                                                                                                                      

BALANCE SHEET DATA:
Working capital (deficit) (as defined) (12)                 $ 16.6           $ 18.0         $ 17.0         $  2.4         $(5.5)
Total assets                                                 332.5            360.7          338.8          385.5         596.7
Total debt                                                   233.3            257.4          240.5          268.5         875.4
Partners' capital/owners' equity (deficit)                   15.6             15.3           16.8            0.3        (438.8)
____________________
<FN>
(1)  See "Management Discussion and Analysis of Financial Condition
     and Results of Operations" (Item 7) and the Financial Statements of
     Holdings, including the related notes thereto (Item 8).
(2)  In July 1995, Graham Packaging Group acquired an additional interest in
     its UK Operations and subsequently sold its interests for $5.6 million,
     recognizing a gain of $4.4 million. In addition, Graham Packaging Group

                                     -35-
<PAGE>
<PAGE>

     entered into an agreement with the purchaser of its UK Operations and
     recorded $6.4 million of non-recurring technical support services
     income. Both the gain and the technical support services income are
     included in other expense (income), net.
(3)  In April 1997, Graham Packaging Group acquired 80% of certain assets and
     assumed 80% of certain liabilities of Rheem-Graham Embalagens Ltda. for
     $20.3 million (excluding direct costs of the acquisition). The remaining
     20% was purchased in February 1998.   In July 1998, Graham Packaging
     Group acquired selected plastic bottle manufacturing operations of
     Crown, Cork & Seal located in France, Germany, the United Kingdom and
     Turkey for $41.0 million (excluding direct costs of the acquisition),
     net of liabilities assumed, subject to certain adjustments.  These
     transactions were accounted for under the purchase method of accounting.
     Results of operations are included since the dates of acquisitions.
(4)  Net sales increase or decrease based on fluctuations in resin prices as
     industry practice and the Company's agreements with its customers permit
     price changes to be passed through to customers by means of
     corresponding changes in product pricing. Therefore, the Company's
     dollar gross profit is substantially unaffected by changes in resin
     prices.
(5)  In 1997, represents certain legal, restructuring and systems conversion
     costs.  In 1998, represents certain recapitalization compensation,
     restructuring, systems conversion, aborted acquisition and legal costs. 
     See "Management's Discussion and Analysis of Financial Condition and
     Results of Operations" (Item 7) and the Financial Statements of
     Holdings, including the related notes thereto (Item 8).
(6)  As a limited partnership, Holdings is not subject to U.S. federal income
     taxes or most state income taxes. Instead, such taxes are assessed to
     Holdings' partners based on the income of Holdings. Holdings makes tax
     distributions to its partners to reimburse them for such tax
     liabilities. The Company's foreign operations are subject to tax in
     their local jurisdictions. Most of these entities have historically had
     net operating losses and recognized minimal tax expense.
(7)  Represents costs incurred (including the write-off of unamortized
     deferred financing fees) in connection with the early extinguishment of
     debt.
(8)  Adjusted 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. "Adjusted EBITDA"
     is defined as earnings before minority interest, extraordinary items,
     interest expense, interest income, income taxes, depreciation and
     amortization expense, fees paid pursuant to the Monitoring Agreement,
     non-cash equity income in earnings of joint ventures, other non-cash
     charges, Recapitalization expenses and special charges and unusual
     items. Also in 1995, Adjusted EBITDA excludes the $4.4 million gain on
     the sale of the UK operations and the related $6.4 million technical
     support services income as described in note (2) above. Adjusted EBITDA
     is included in this Report to provide additional information with

                                     -36-
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<PAGE>

     respect to the ability of Holdings and the Operating Company to satisfy
     their debt service, capital expenditure and working capital requirements
     and because certain covenants in Holdings' and the Operating Company's
     borrowing arrangements are tied to similar measures. While Adjusted
     EBITDA and similar variations thereof are frequently used as a measure
     of operations and the ability to meet debt service requirements, these
     terms are not necessarily comparable to other similarly titled captions
     of other companies due to the potential inconsistencies in the method of
     calculation.
(9)  Investments include the acquisitions made by Graham Packaging Group in
     Italy, Canada, France, the UK,  Brazil, Germany and Turkey described in
     notes (2) and (3) above. In addition, in 1995, the Company paid $1.9
     million for a 50% interest in the Masko-Graham Joint Venture in Poland
     and committed to make loans to the Joint Venture of up to $1.9 million.
     In 1996, the Company loaned $1.0 million to the Joint Venture. The Joint
     Venture is accounted for under the equity method of accounting, and its
     earnings are included in other expense (income), net. Amounts shown
     under this caption represent cash paid, net of cash acquired in the
     acquisitions.
(10) Depreciation and amortization excludes amortization of deferred
     financing fees, which is included in interest expense, net.
(11) For purposes of determining the ratio of earnings to fixed charges,
     earnings are defined as earnings before income taxes, minority interest
     and extraordinary items, plus fixed charges. Fixed charges include
     interest expense on all indebtedness, amortization of deferred financing
     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 $24.3 million for
     the year ended December 31, 1998.
(12) Working capital is defined as current assets (less cash and cash
     equivalents) minus current liabilities (less current maturities of long-
     term debt).
(13) In 1994, the Company adopted the Last-In-First-Out (LIFO) method of
     accounting for certain inventories which had the effect of reducing net
     income by $1.7 million.
(14) Balance sheet data at December 31, 1994 were derived from unaudited
     financial statements.
</TABLE>












                                     -37-
<PAGE>
<PAGE>

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

     The following discussion and analysis of the results of operations of
the Company includes a discussion of periods before the consummation of the
Recapitalization. The discussion and analysis of such periods does not
reflect the significant impact that the Recapitalization has had on the
Company. See "Business -The Recapitalization," and the section below under "-
-Liquidity and Capital Resources" for further discussion relating to the
impact that the Recapitalization has had and may have on the Company. The
following discussion should be read in conjunction with "Selected Financial
Data" (Item 6) and "Financial Statements and Supplementary Data" (Item 8),
including the related notes thereto, appearing elsewhere in this Report. 
References to "Management" should be understood in this section to refer to
the Company's management in the time periods in question.

Overview

     The Company is a worldwide leader in the design, manufacture and sale of
customized blow-molded rigid plastic bottles for the automotive, food and
beverage and HC/PC products business. Management believes that critical
success factors to the Company's business are its ability to (i) serve the
complex packaging demands of its customers which include some of the world's
largest branded consumer products companies, (ii) 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 (iii) make the correct investments in plant
and technology necessary to satisfy the two forces mentioned above.

     The Company's North American one quart motor oil container business is
in a mature industry. Unit volume in the one quart motor oil business has
been declining at approximately 1-2% per year and, as a result, the Company
has experienced competitive price pressures in this business throughout 1996,
1997 and 1998. The Company has reduced prices on contracts that have come up
for renewal to maintain its competitive position and has been able to
partially offset these price reductions by improving manufacturing
efficiencies, light-weighting of bottles, improving line speeds, reducing
material spoilage and by improving labor efficiency and inventory. Management
believes that the decline in the domestic one-quart motor oil business will
continue for the next several years but believes that there are significant
volume opportunities for its automotive product business in foreign
countries, particularly those in Latin America. On April 30, 1997, the
Company acquired 80% of certain assets and 80% of certain liabilities of
Rheem-Graham Embalagens Ltda., a leading supplier of bottles to the motor oil
industry in Brazil, and on February 17, 1998 purchased the residual 20%
ownership interest. The Company has since signed agreements to operate two
additional plants in Brazil, both of which are now in production.



                                     -38-
<PAGE>
<PAGE>

     The Company's Household and Personal Care ("HC/PC") business continues
to grow, as package conversion trends continue from other packaging forms  in
certain segments of the Company's product lines.  The Company continues to
benefit as liquid fabric care products, which are packaged in plastic
containers, capture an increased share from powdered detergents, which are
predominantly packaged in cardboard. The Company has upgraded its proprietary
machinery to new larger blow molders to standardize its production lines ,
improve flexibility and reduce manufacturing costs. 

     Management believes that the area with the greatest opportunity for
growth continues to be in producing bottles for the North American food and
beverage business because of the continued conversion to plastic packaging,
and, in particular, the demand for hot-fill PET containers for juices, juice
drinks, sport drinks and teas. From 1992 to 1998 the Company has invested
over $166 million in capital expenditures to expand its technology, machinery
and plant structure to prepare for what Management estimated would be the
growth in this area. For the year ended December 31, 1998 sales of hot-fill
PET containers had grown to $134.4 million from negligible levels in 1993. In
this business, the Company continues to benefit from more experienced plant
staff, improved line speeds, higher absorption of SG&A and fixed overhead
costs and improved resin pricing and material usage.

     Following its strategy to expand in selected international areas, the
Company currently operates, either on its own or through joint ventures, in
Argentina, Brazil, Canada, France, Germany, Hungary, Italy, Poland, Turkey
and the United Kingdom.  Management is focusing on its operations in France,
which is a competitive arena and suffers from a lagging economy, and is
seeking to improve the profitability in that country.  The Company recently
acquired its operations in Germany, Turkey and the United Kingdom and
additional operations in France.   Management believes that the recent
acquisition of manufacturing plants in Europe from Crown/CMB has provided
additional competitive scale to the Company's global sales efforts. In
addition, given the recent troubled economy in Latin America, and more
specifically Brazil, management is closely monitoring its operations and
investment there.

     For the year ended December 31, 1998, over 70% of the Company's net
sales were generated by the top twenty customers, the majority of which are
under long-term contracts (i.e., with terms of between one and ten years) and
the remainder of which were generated by customers with whom the Company has
been doing business for over 10 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.

     Based on industry data, the following table summarizes average market
price per pound of PET and HDPE resins:


                                     -39-
<PAGE>
<PAGE>

                       Year Ended December 31,
                 ----------------------------------
                   1996         1997         1998
                 --------     --------     --------

PET                $0.63        $0.50       $0.53

HDPE                0.41         0.46        0.37


     In general, the Company's dollar gross profit is substantially
unaffected by fluctuations in the prices of HDPE and PET resins, the primary
raw materials for the Company's products, because industry practice and the
Company's agreements with its customers permit price changes to be passed
through to customers by means of corresponding changes in product pricing.
Consequently, Management believes that an analysis of the cost of goods sold,
as well as certain other expense items, should not be analyzed as a
percentage of net sales.

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 revenues:

                                    Year Ended December 31,
                        ---------------------------------------------------
                                        (In Millions)
                              1996             1997              1998
                        ----------------  ---------------  ----------------
 Automotive              $180.9    39.4%   $196.4   37.6%   $188.7    32.1%
 Food & Beverage          116.4    25.3%    150.6   28.9%    221.1    37.6%
 HC/PC                    162.4    35.3%    174.7   33.5%    178.3    30.3%
                         ------    ----    ------   ----    ------    ---- 
 Total Net Sales         $459.7   100.0%   $521.7  100.0%   $588.1   100.0%
                         ======   =====    ======  =====    ======   ===== 

                                   Year Ended December 31,
                                        (In Millions)
                       ----------------------------------------------------
                             1996                1997            1998
                       ---------------      --------------   ------------
 North America          $381.9    83.1%    $440.0   84.3%   $465.3    79.1%
 Europe                   77.8    16.9%      67.4   12.9%    100.8    17.2%
 Latin America              --      --       14.3    2.8%     22.0     3.7%
                       ------   ------    ------  -----    ------   ------ 
Total Net Sales        $459.7   100.0%    $521.7  100.0%   $588.1   100.0%
                       ======   =====     ======   =====   ======   ===== 





                                     -40-
<PAGE>
<PAGE>

1998 Compared to 1997

     Net Sales.   Net sales for the year ended December 31, 1998 increased
$66.4 million to $588.1 million from $521.7 million for the year ended
December 31, 1997.   The increase in sales was primarily due to a 12.4%
increase in resin pounds sold and changes in product mix. These increases
were partially offset by a net decrease in average resin prices.  On a
geographic basis, sales for the year ended December 31, 1998 in North America
were up $25.3 million or 5.8% from the year ended December 31, 1997.  The
North American sales increase included higher pounds sold of 8.4%.  North
American sales in the food and beverage business contributed $48.5 million to
the increase, while North American sales in the automotive business and HC/PC
business were $14.4 million and $8.8 million lower respectively. 
Approximately 76% of the decrease in North American sales in the automotive
business and approximately all of the decrease in North American sales in the
HC/PC business were attributable to declining resin pricing.  Sales for the
year ended December 31, 1998 in Europe were up $33.4 million or 49.6% from
the year ended December 31, 1997, principally in the food & beverage and
HC/PC businesses, primarily due to the inclusion of the Company's newly-
acquired European subsidiaries.  Overall, European sales reflected a 40.2%
increase in pounds sold. Additionally, sales in Latin America for the year 
ended December 31, 1998 were up $7.7 million primarily as a result of the 
Company's investment in its Latin American subsidiary in the second quarter 
of 1997.

     Gross Profit.  Gross profit for the year ended December 31, 1998
increased $33.0 million to $117.4 million from $84.4 million for the year
ended December 31, 1997. The increase in gross profit resulted primarily from
the higher sales volume as compared to the prior year, continued operational
improvements and the favorable impact of lower depreciation.  Gross profit in
North America was up $27.4 million or 33.6%.  Additionally, gross profit
increased $3.9 million in Europe and $1.7 million in Latin America.

     Selling, General & Administrative Expenses.   Selling, general and
administrative expenses for the year ended December 31, 1998 increased $2.9
million to $37.8 million from $34.9 million for the year ended December 31,
1997.  As a percent of sales, selling, general and administrative expenses
declined to 6.4% of sales in 1998 from 6.7% in 1997 generally due to the
leveraging of costs that are fixed in nature on higher sales.  The dollar
increase in 1998 selling, general and administrative expenses is due
primarily to the inclusion of the Company's Latin American subsidiary and the
newly-acquired European subsidiaries which were acquired in the second
quarter of 1997 and the third quarter of 1998, respectively.

     Special Charges and Unusual Items.  In 1998, special charges and unusual
items included $20,609,000 related to recapitalization compensation costs
(see "Business -- The Recapitalization" for a further discussion of the
recapitalization compensation), $1,960,000 of restructuring charges relating
to the operations in Europe ($1,220,000) and in North America ($740,000),
$963,000 in costs related to year 2000 system conversion (see "--Information

                                     -41-
<PAGE>
<PAGE>

Systems Initiative" for a further discussion), $427,000 of aborted
acquisition costs, and $285,000 of legal fees.  In 1997, special charges and
unusual items included $22,624,000 of legal fees and amounts  expected to be 
paid in settlement related to the JCI-Schmalbach-Lubeca litigation, 
$1,222,000 of restructuring charges relating to operations in Europe 
($746,000) and in North America ($476,000), and $515,000 in costs related to 
year 2000 system conversion.

     Recapitalization Expenses.  Recapitalization expenses of $11.8 million
relate to the Recapitalization that occurred on February 2, 1998 and also
include transaction fees and costs associated with the termination of
interest rate collar and swap agreements.

     Interest Expense, Net.   Interest expense, net increased $54.6 million
to $68.0 million (including $10.1 million of non-cash interest on the Senior
Discount Notes) for the year ended December 31, 1998 from $13.4 million for
the year ended December 31, 1997.  The increase was primarily related to the
increase in debt resulting from the Recapitalization and higher average
interest rates associated with the new debt.

     Other (Income) Expense.   Other (income) expense was $(0.1) million for
the year ended December 31, 1998 as compared to $0.8 million for the year
ended December 31, 1997.  The higher income was due primarily to lower
foreign exchange loss in the year ended December 31, 1998 as compared to the 
year ended December 31, 1997.

     Net Income (loss).   Primarily as a result of factors discussed above,
net loss for the year ended December 31, 1998 was $26.1 million compared to
net income of $10.2 million for the year ended December 31, 1997.

     Adjusted EBITDA.  Primarily as a result of factors discussed above,
Adjusted EBITDA in 1998 increased 33.3% to $119.7 million from $89.8 million
in 1997.

1997 Compared to 1996

     Net Sales. Net Sales in 1997 increased $62.0 million to $521.7 million
from $459.7 million in 1996. The increase in net sales was primarily due to
the effects of a 6.5% increase in unit volume and an 11.7% increase in resin
pounds sold. Net sales also increased as a result of the effect of net resin
price increases and changes in product mix. The most significant geographic
increase in net sales was in North America, where sales in 1997 were $58.1
million or 15.2% higher than in 1996. The North American sales increase
includes higher unit volume of 9% and higher pounds sold of 15%. North
American sales in the food and beverage business contributed $32.9 million of
the increase while the HC/PC business contributed $18.2 million.
Additionally, 1997 sales included a $14.3 million contribution as a result of
the Company's investment in its Latin American subsidiary. Sales in Europe in
1997 declined $10.4 million or 13.4% from 1996, primarily due to $9.1 million

                                     -42-
<PAGE>
<PAGE>

in foreign currency translation due to the weakening of the French Franc and
Italian Lire. Overall, European sales reflected a decline of 1.7% in unit
volume and 6.9% in pounds sold, primarily in the HC/PC product line.

     Gross Profit. Gross profit in 1997 increased $7.2 million to $84.4
million from $77.2 million in 1996. The increase in gross profit resulted
from the higher sales volume in 1997 as compared to the prior year and from
the favorable impact of lower depreciation. Gross profit in North America was
up $10.6 million or 15.0%, while European gross profit was down $5.7 million
due primarily to lower sales volumes. In addition, 1997 gross profit included
$2.3 million from the Company's Latin American subsidiary.

     Selling, General and Administrative Expenses. Selling, general and
administrative expenses in 1997 decreased $0.6 million to $34.9 million from
$35.5 million in 1996. Selling, general and administrative expenses, as a
percentage of sales, declined to 6.7% in 1997 from 7.7% in 1996. The decrease
was due to the favorable impact of foreign currency translation due to the
weakening French Franc and Italian Lire in Europe, where selling, general and
administrative expenses were $1.8 million lower in 1997 than in 1996,
partially offset by $1.0 million from the Company's Latin American subsidiary
and higher North American expenses of $0.2 million.

     Special Charges and Unusual Items. Special charges and unusual items
increased $17.4 million to $24.4 million in 1997 compared to $7.0 million in
1996. Special charges and unusual items included non-recurring legal fees in
both years, and in 1997, amounts expected to be paid in settlement of the JCI
Schmalbach-Lubeca litigation, aggregating $22.6 million in 1997 and $6.3
million in 1996. Special charges and unusual items also included $0.7 million
of restructuring charges relating to the European operations in each year,
while 1997 special charges and unusual items also included $0.5 million
related to restructuring of North American operations and $0.5 million
related to year 2000 system conversion expenditures. See "--Information
Systems Initiative" for a further discussion.

     Interest Expense, Net. Interest expense, net decreased 7.6% to $13.4
million in 1997 from $14.5 million in 1996. The decrease was primarily the
result of a lower average interest rate in 1997, partially offset by higher
borrowings during the same period.

     Other (Income) Expense, Net. Other (income) expense changed $1.8 million
in 1997 to $0.8 million of net expense from $1.0 million of net income in
1996. Other (income) expense included foreign currency exchange losses of
$1.0 million in 1997 compared to foreign exchange gains of $0.7 million in
1996. In addition, other (income) expense included equity in income of Masko
Graham, the Company's joint venture in Poland.

     Net Income. Primarily as a result of factors discussed above, net income
in 1997 decreased $11.0 million to $10.2 million from $21.2 million in 1996.


                                     -43-
<PAGE>
<PAGE>

     Adjusted EBITDA. Primarily as a result of factors discussed above,
Adjusted EBITDA in 1997 decreased 0.9% to $89.8 million from $90.6 million in
1996.

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 these other currencies
can have a favorable effect on the profitability of the Company, and an
increase in the value of the dollar relative to these other currencies can
have a negative effect on the profitability of the Company. Exchange rate
fluctuations did not have a material effect on the financial results of the
Company in 1996, 1997 or 1998.

Information Systems Initiative

     The Company has assembled a team of professionals and consultants to
ensure that significant Year 2000 issues which might have a material impact
on the Company's results of operations, liquidity or financial position are
timely identified and any resulting remediation timely resolved.

     The Company completed an evaluation and assessment to ensure that its
information systems and related hardware will be year 2000 compliant. As a
part of this process, the Company engaged outside consultants in 1997 to
assist with the evaluation and assessment of its information systems
requirements and the selection and implementation of enterprise resource
planning software. As a result of this evaluation and assessment, the Company
decided to replace all of its core application systems, including its
financial accounting system, manufacturing operation system and payroll and
human resources system.   Currently the Company is in the process of
converting its core application systems.  The Company expects to complete the
testing and training phases of the core application systems conversion by the
end of April 1999.  The conversion in the Company's North American operations
is expected to be completed by the end of the second quarter of 1999.  The
conversion in the Company's European operations will immediately follow the
North American conversion and is expected to be completed by the end of 1999. 
The conversion in the Company's Latin American operations is not expected to
be completed until after 1999.  For the Company's Latin American operations,
and if for some unforeseen reason the Company is unable to complete the
conversion of its IT systems on the timetable previously described for the
North American and European operations, the existing software will be
modified to allow for uninterrupted business operations until such conversion
can be completed.  

     During 1998 and 1997, the Company expensed $1.0 million and  $0.5
million, respectively, associated with its information systems evaluation and
assessment and capitalized $5.5 million related to the purchase of software and
and hardware.  The Company expects to incur during 1999 through the year 2000.


                                     -44-
<PAGE>
<PAGE>

approximately $12.6 million to purchase, test and install new software as
well as incur internal staff costs, consulting fees and other expenses.

     Based on the extensive reviews completed to date, the Company is not
aware of any conditions that will result in an interruption to production
capacity.  In addition, all critical material suppliers are either year 2000
compliant or have plans that will achieve these goals by the end of 1999.

     The Company expects to have its remediation efforts completed by the end
of 1999, and does not expect any material impact on its results of
operations, liquidity or financial position due to incomplete or untimely
resolution of the year 2000 issue.  As stated, critical material vendors are,
or will be year 2000 compliant by the end of 1999.  However, in forming a
total assessment, the ability of all critical third parties with whom the
Company transacts business to adequately address their year 2000 issues is
outside of the Company's control. There can be no assurance that the failure
of such third parties to adequately address their year 2000 issues would not
have a material adverse effect on the Company.   Risks to the Company include
the possible interruption of production and negative effects on cash flow
associated with reduced sales, increased production costs and reduced
customer collections.

     While there are issues beyond the control of the Company, where
practical, contingency plans are being implemented.  Contingency plans, such
as switching transportation modes, reviewing year-end inventory levels by
plant and performing record keeping functions on a manual basis are being
formulated.

Derivatives

     The Company enters into interest rate swap agreements to hedge the
exposure to increasing rates with respect to the New Credit Agreement. The
differential to be paid or received as a result of these swap agreements is
accrued as interest rates change and recognized as an adjustment to interest
expense related to the New Credit Agreement.  The Company also enters into
forward exchange contracts, when appropriate, to hedge the exchange rate
exposure on transactions that are denominated in a foreign currency.

Liquidity and Capital Resources

     In 1996, 1997 and 1998, the Company generated $176.7 million of cash
from operations and $618.8 million from increased indebtedness. This $795.5
million was primarily used to fund $218.4 million of capital expenditures,
$65.4 million of investments, make distributions of $55.3 million to the
Company's partners, make $409.3 million recapitalization cash distribution to
owners (net of owner note repayments), make $39.6 million of debt issuance
fee payments and for $7.5 million of other net uses.



                                     -45-
<PAGE>
<PAGE>

     On February 2, 1998, the Company refinanced the majority of its existing
credit facilities in connection with the Recapitalization and entered into a
new Credit Agreement (the "New Credit Agreement") with a consortium of banks. 
The New Credit Agreement was amended on August 13, 1998 (the "Amendment") to
provide for an additional Term Loan Borrowing of up to an additional $175
million which can be drawn in two installments (of which $75 million was
drawn and outstanding as of December 31, 1998 and the remaining $100 million
was drawn in February 1999). A commitment fee of .75% is
due on the unused portion.  The New Credit Agreement and the Amendment consist
of four term loans to the Operating Company totaling up to $570 million and
two revolving loan facilities to the Operating Company totaling $255 million. 
The obligations of the Operating Company under the New Credit Agreement and
Amendment are guaranteed by Holdings and certain other subsidiaries of
Holdings.  The term loans are payable in quarterly installments through
January 31, 2007, and require payments of  $5.0 million in 1999, $15.0
million in 2000, $20.0 million in 2001,  $25.0 million in 2002 and $27.5
million in 2003.  The revolving loan facilities expire on January 31, 2004. 
Interest is payable at (a) the "Alternate Base Rate" (the higher of the Prime
rate or the Federal Funds Rate plus 0.50%) plus a margin ranging from 0% to
2.00%; or (b) the "Eurocurrency Rate" (the applicable interest rate offered
to banks in the London interbank eurocurrency market) plus a margin ranging
from 0.625% to 3.0%.  A commitment fee ranging from 0.20% to 0.50% is due on
the unused portion of the revolving loan commitment.  As part of the
Amendment to the New Credit Agreement, if certain events of default  were to
occur (including, without limitation, if the Company's Net Leverage Ratio
were above 5.15:1.0 at March 31, 2000), Blackstone has agreed to make an
equity contribution to the Company through the administrative agent of up to
$50 million.   In addition, the New Credit Agreement and Amendment contain
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.  

     The Recapitalization also included the issuance of $225 million of
Senior Subordinated Old Notes and $100.6 million gross proceeds of Senior
Discount Old Notes ($169 million aggregate principal amount at maturity).
Additionally, the Recapitalization included net distributions to owners of
$409.3 million and debt issuance costs of $32.4 million.  At December 31,
1998, the Company's outstanding indebtedness was $875.4 million.

     During 1999, the Company expects to incur capital expenditures that are
similar in nature and size to those incurred in 1998.  However, total capital
expenditures for 1999 may vary significantly depending on the timing of
growth related opportunities. The Company's principal sources of cash to fund
capital requirements will be net cash provided by operating activities and
borrowings under the New Credit Agreement.

     Management believes that capital investment to maintain and upgrade
property, plant and equipment is important to remain competitive. Total
capital expenditures for 1996, 1997 and 1998 were approximately $31.3
million, $53.2 million and $133.9 million, respectively. Management estimates
that the annual capital expenditure required to maintain the Company's
current facilities are approximately $20 million per year.  Additional
capital expenditures beyond this amount will be required to expand capacity.

     Under the New 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 (i) in respect of overhead, tax

                                     -46-
<PAGE>
<PAGE>

liabilities, legal, accounting and other professional fees and expenses, (ii)
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) or by any employee stock
ownership plan upon such person's death, disability, retirement or
termination of employment or other circumstances with certain annual dollar
limitations and (iii) to finance, starting on July 15, 2003, the payment of
cash interest payments on the Senior Discount Notes.

     In June 1998, the Company finalized the settlement of the JCI-
Schmalbach-Lubeca litigation. The amounts paid in settlement, as well as
estimated litigation expenses and professional fees did not differ materially
from the amounts accrued in Special Charges and Unusual Items in respect
thereof for the year ended December 31, 1997. The cash paid in settlement was
funded by drawdowns under the New Credit Agreement. See Notes 7 and 18 to the
Financial Statements as of December 31, 1998 and 1997 and for each of the
three years in the period ended December 31, 1998 (Item 8).

     The Company does 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. The Company makes tax distributions to its
partners to reimburse them for such tax obligations. The Company's foreign
operations are subject to tax in their local jurisdictions. Most of these
entities have historically incurred net operating losses.

New Accounting Pronouncements Not Yet Adopted

     In March 1998, the AICPA issued Statement of Position 
("SOP") 98-1, "Accounting For the Costs of Computer Software Developed 
For or Obtained For Internal-Use". The SOP is effective for the Company 
on January 1, 1999. The SOP will require the capitalization of certain 
costs incurred after the date of adoption in connection with developing 
or obtaining software for internal use. The Company has not yet assessed
what the impact of the SOP will be on the Company's future earnings or
financial position.

     In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities."  The SOP is effective for the Company  on January 1,
1999.  The SOP requires costs of start-up activities and organization costs
to be expensed as incurred.  The Company does not expect the adoption of the
SOP to have a significant impact on the Company's results of operations or 
financial position.

     In June 1998, the Financial Accounting Standards Board issued SFAS 
No. 133, "Accounting for Derivative Instruments and Hedging Activities". 
This standard establishes accounting and reporting standards for 
derivative instruments, including certain derivative instruments 
embedded in other contracts (collectively referred to as derivatives) 
and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This Standard is
effective for the Company's financial statements for all quarters in the year
beginning January 1, 2000. Management has not completed its assessment of
SFAS No. 133 and has not determined the impact adoption will have on the
Company's results of operations or financial position.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

      As a result of the Recapitalization, the Company has significant long and
short-term debt commitments outstanding as of December 31, 1998.  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. 


              -47-
<PAGE>
<PAGE>

     To the extent that the Company's financial instruments, including
off-balance sheet 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 table presents principal cash flows and related actual
weighted average interest rates as of December 31, 1998.  For fixed rate debt
obligations, the table presents 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, 1998 for the receive rate.  Note 8 to the Financial Statements 
should be read in conjunction with the table below.

<TABLE>                                                                                                                  
<CAPTION>                                                                (In thousands)                          
                                     Expected Maturity Date of Long-Term Debt (Including Current  
                                   Portion) and Interest Rate Swap Agreements at December 31, 1998               Fair Value      
                                        ------------------------------------------------------                   December 31,
                                   1999         2000       2001       2002       2003     Thereafter    Total       1998
                                 ---------   ---------   ---------   -------   ---------  -----------  ---------  -----------

<S>                                 <C>           <C>           <C>           <C>           <C>               <C>
Interest rate sensitive
liabilities:
Variable rate borrowings,
  including short-term 
  amounts . . . . . . . . . . .    11,929      15,192       20,208     25,771    28,905   512,695      614,700     614,700
  Average interest rate . . . .     6.39%      7.46%        7.41%      7.36%      7.28%     8.02%
Fixed rate borrowings . . . . .        --         --           --        --        --     260.697      260,697     271,400
  Average interest rate . . . .        --         --           --        --        --       9.60%           --        --    
                                   11,929      15,192       20,208     25,771    28,905   773,392      875,397     886,100
                                   ======      ======       ======     ======    ======    ======      =======      ======= 
Derivatives matched against
liabilities:

Pay fixed swaps . . . . . . . .       --         --       150,000    200,000   100,000        --      450,000      (8,784)
  Pay rate . . . . . .. . . . .       --         --          5.51%      5.81%    5.77%        --           --           --
  Receive rate . . . . . . .. .       --         --          5.56%      5.56%    5.56%        --           --           --

The Company also enters into forward exchange contracts, when considered
appropriate, to hedge foreign exchange rate exposure on transactions that are
denominated in a foreign currency.  See Note 8 to the Financial Statements.
                                        
</TABLE>



              -48-



















<PAGE>
<PAGE>


Item 8.  Financial Statements and Supplementary Data


                         INDEX TO FINANCIAL STATEMENTS


                                                                       Page
                                                                      Number
                                                                      ------
Reports of Independent Auditors                                         50


Audited Financial Statements                                            52

    Balance Sheets at December 31, 1998 and 1997                        52

    Statements of Operations for the years ended December 31, 1998,
    1997 and 1996                                                       54

    Statements of Partners' Capital/Owners' Equity (Deficit) for
    the years ended December 31, 1998, 1997 and 1996                    55

    Statements of Cash Flows for the years ended December 31, 1998,
    1997 and 1996                                                       56

    Notes to Financial Statements                                       58























                                     -49-
<PAGE>
<PAGE>

                         INDEPENDENT AUDITORS' REPORT



To the Owners
Graham Packaging Holdings Company

     We have audited the accompanying consolidated balance sheet of Graham
Packaging Holdings Company as of December 31, 1998, and the related
consolidated statements of operations, partners' capital/owners' equity
(deficit), and cash flows for the year then ended. Our audit also included
financial statement schedules I and II (as it pertains to 1998) listed in the 
index at Item 14(a). These financial statements and schedules are the 
responsibility of the Company's management. Our responsibility is to express 
n opinion on these  financial statements and schedules based on our audit. 

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

     In our opinion, such 1998 consolidated financial statements present 
fairly, in all material respects, the financial position of the Company 
as of December 31, 1998, and the results of its operations and its cash 
flows for the year then ended in conformity with generally accepted 
accounting principles.  Also in our opinion, the related financial 
statement schedules (as they pertain to 1998), when considered in
relation to the basic financial statements taken as a whole, present
fairly in all material respects the information set forth therein.

DELOITTE & TOUCHE LLP

Philadelphia, Pennsylvania
March 19, 1999










                                     -50-
<PAGE>
<PAGE>

                        REPORT OF INDEPENDENT AUDITORS


The Owners
Graham Packaging Group

     We have audited the accompanying combined balance sheet of the entities
and operations listed in Note 1, collectively referred to as the Graham
Packaging Group, as of December 31, 1997, and the related combined
statements of operations, partners' capital/owners' equity (deficit), and
cash flows for each of the two years in the period ended December 31, 1997.  
Our audits also included financial statement Schedule II (as it pertains to 1997
and 1996) as listed in the Index at Item 14(a).  These financial statements and 
schedule are the responsibility of the Group's management.  Our responsibility 
is to express an opinion on these financial statements and schedule based on our
audits.

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

     In our opinion, the financial statements referred to above present
fairly, in all material respects, the combined financial position of the
entities and operations listed in Note 1, at December 31, 1997, and
the combined results of their operations and their cash flows for each of the
two years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.  Also, in our opinion, the related
financial statement Schedule II, when considered in relation to the basic
1997 and 1996 financial statements taken as a whole, presents fairly in all 
material respects the information set forth therein.



/s/ Ernst & Young LLP

Harrisburg, Pennsylvania
March 23, 1998,
  except for the matters discussed in the last
  paragraph of Note 14 and the next to last
  paragraph of Note 18, as to which the date is 
  April 24, 1998




                                     -51-
<PAGE>
<PAGE>

                       GRAHAM PACKAGING HOLDINGS COMPANY
                                BALANCE SHEETS
                                (In thousands)




<TABLE>
<CAPTION>
                                                                            December 31,
                                                               ---------------------------------------
                                                                     1998                  1997
                                                                 Consolidated            Combined
                                                               -----------------   -------------------
<S>                                                           <C>                 <C>
                           ASSETS
Current assets:
 Cash and cash equivalents                                         $   7,476             $  7,218
 Accounts receivable, net                                             87,618               69,295
 Inventories                                                          41,247               32,236
 Prepaid expenses and other current assets                            14,587                9,198

                                                                    --------             --------
Total current assets                                                 150,928              117,947
Property, plant, and equipment:
 Machinery and equipment                                             560,585              478,534
 Land, buildings, and leasehold improvements                          85,462               68,146
 Construction in progress                                            105,541               41,230
                                                                    --------             --------
                                                                     751,588              587,910
 Less accumulated depreciation and amortization                      364,896              327,614
                                                                    --------             --------
                                                                     386,692              260,296
Other assets                                                          59,127                7,248
                                                                    --------             --------
Total assets                                                       $ 596,747             $385,491
                                                                    ========             ========
LIABILITIES AND PARTNERS' CAPITAL/OWNERS' EQUITY (DEFICIT)
Current Liabilities:
 Accounts payable                                                  $  77,485             $ 56,547
 Accrued expenses                                                     71,431               51,814
 Current portion of long-term debt                                    11,929                4,771
                                                                    --------             --------







                                     -52-
<PAGE>
<PAGE>

Total current liabilities                                            160,845              113,132
Long-term debt                                                       863,468              263,694
Other non-current liabilities                                         11,228                3,345
Minority interest                                                         --                4,983
Commitments and contingent liabilities                                    --                   --
Partners' capital/owners' equity (deficit):
 Partners'/owners' capital                                          (442,271)              20,383
 Notes receivable for ownership interests                                 --              (20,240)
 Accumulated other comprehensive income                                3,477                  194
                                                                    --------             --------
Total partners' capital/owners' equity (deficit)                   0(438,794)                 337
                                                                    --------             --------
Total liabilities and partners' capital/owners' equity              $596,747             $385,491
(deficit)
                                                                    ========             ========


                See accompanying notes to financial statements.
</TABLE>
































                                     -53-
<PAGE>
<PAGE>

                       GRAHAM PACKAGING HOLDINGS COMPANY
                             STATEMENTS OF OPERATIONS
                                (In thousands)


<TABLE>
<CAPTION>
                                                                                           Year Ended December 31, 
                                                                           --------------------------------------------------------
                                                                                 1998               1997                1996
                                                                             Consolidated         Combined            Combined
                                                                          -----------------   -----------------   -----------------
<S>                                                                      <C>                 <C>                 <C>
Net sales                                                                     $588,131            $521,707            $459,740

Cost of goods sold                                                             470,762             437,301             382,547
                                                                              --------            --------            --------
Gross profit                                                                   117,369              84,406              77,193
Selling, general, and administrative expenses                                   37,765              34,882              35,472

Special charges and unusual items                                               24,244              24,361               7,037
                                                                              --------            --------            --------
Operating income                                                                55,360              25,163              34,684
Recapitalization expenses                                                       11,769                  --                  --

Interest expense                                                                68,379              14,940              15,686
Interest income                                                                   (371)             (1,510)             (1,233)
Other (income) expense                                                            (122)                755                (977)

Minority interest                                                                   --                 165                  --
                                                                              --------            --------            --------
Income (loss) before income taxes and extraordinary item                       (24,295)             10,813              21,208
Income tax provision (benefit)                                                   1,092                 600                 (24)
                                                                              --------            --------            --------

Income (loss) before extraordinary item                                        (25,387)             10,213              21,232
Extraordinary loss from early extinguishment of debt                               675                  --                  --
                                                                              --------            --------            --------
Net income (loss)                                                             $(26,062)           $ 10,213            $ 21,232
                                                                              ========            ========            ========



                See accompanying notes to financial statements.
</TABLE>





                                     -54-
<PAGE>
<PAGE>

                       GRAHAM PACKAGING HOLDINGS COMPANY
           STATEMENTS OF PARTNERS' CAPITAL/OWNERS' EQUITY (DEFICIT) 
                                (In thousands)

<TABLE>
<CAPTION>
                                              Partners'        Notes         Accumulated
                                               Capital       Receivable         Other
                                               Owners'      for Ownership   Comprehensive
                                               Equity         Interests        Income             Total
                                            ------------    ------------   ----------------   --------------
<S>                                         <C>            <C>             <C>               <C>
Combined balance at January 1, 1996           $  37,822       $(20,240)        $ (2,326)         $  15,256
                                              ---------       --------         --------          ---------
 Net income for the year                         21,232             --               --             21,232
 Cumulative translation adjustment                   --             --              656                656
                                                                                                 ---------
 Comprehensive income                                                                               21,888
                                                                                                 ---------
 Cash distributions to owners                   (20,339)            --               --            (20,339)
                                              ---------       --------         --------          ---------
Combined balance at December 31, 1996            38,715        (20,240)          (1,670)            16,805
                                                                                                 ---------
 Net income for the year                         10,213             --               --             10,213
 Cumulative translation adjustment                   --             --            1,864              1,864

                                                                                                 ---------
 Comprehensive income                                                                               12,077
                                                                                                 ---------
 Cash distributions to owners                   (28,737)            --               --            (28,737)
 Other                                              192             --               --                192
                                              ---------       --------         --------          ---------
Combined balance at December 31, 1997            20,383        (20,240)             194                337
                                                                                                 ---------
 Net loss for the year                          (26,062)            --               --            (26,062)
 Cumulative translation adjustment                   --             --            3,283              3,283
                                                                                                 ---------
 Comprehensive income                                                                              (22,779)
                                                                                                 ---------
 Cash distributions to owners                    (6,852)            --               --             (6,852)
 Recapitalization                              (429,740)        20,240               --           (409,500)
                                              ---------       --------         --------          ---------
Consolidated balance at December 31, 1998     $(442,271)            --         $  3,477          $(438,794)
                                              =========       ========         ========          =========

                See accompanying notes to financial statements.
</TABLE>



                                     -55-
<PAGE>
<PAGE>

                       GRAHAM PACKAGING HOLDINGS COMPANY
                            STATEMENTS OF CASH FLOWS
                                (In thousands)

<TABLE>
<CAPTION>
                                                                                            Year Ended December 31,
                                                                            ------------------------------------------------------
                                                                                  1998               1997               1996
                                                                              Consolidated         Combined           Combined
                                                                            ----------------   ----------------   ----------------
<S>                                                                        <C>                 <C>                <C>
Operating activities:
 Net income (loss)                                                              $(26,062)          $ 10,213           $ 21,232
   Adjustments to reconcile net income (loss) to net cash provided 
   by operating activities:
    Depreciation and amortization                                                 39,281             41,039             48,218
    Amortization of debt issuance fees                                             3,823                320                216
    Accretion of senior discount notes                                            10,085                 --                 --
    Extraordinary loss                                                               675                 --                 --
    Write-off of license fees                                                      1,436                 --                 --
    Minority interest                                                                 --                165                 --
    Equity in earnings of joint venture                                             (274)              (200)              (257)
    Foreign currency  transaction (gain) loss                                         43              1,124             (1,045)
    Other non-current assets and liabilities                                         450                565             (1,499)
    Other non-cash recapitalization expense                                        3,419                 --                   
  Changes in operating assets and liabilities, net of acquisitions of
    businesses:
    Accounts receivable                                                           (1,565)           (10,918)              (996)
    Inventories                                                                   (2,770)            (3,605)             1,773
    Prepaid expenses and other current assets                                     (4,025)            (3,935)             3,751
    Accounts payable and accrued expenses                                         17,291             32,137             (3,375)
                                                                                --------           --------           --------
Net cash provided by operating activities                                         41,807             66,905             68,018
Investing activities:
    Net purchases of property, plant, and equipment                             (133,912)           (53,173)           (31,252)
    Acquisitions of Brazilian and European businesses, net of cash acquired      (45,152)           (19,016)                --
    Joint ventures and other investments                                               --                 --             (1,239)
    Other                                                                          (2,130)               (88)              (271)
                                                                                --------           --------           --------
Net cash used in investing activities                                           (181,194)           (72,277)           (32,762)










                                     -56-
<PAGE>
<PAGE>

Financing activities:
   Proceeds from issuance of long-term debt                                    1,130,411            174,049            117,528
   Payment of long-term debt                                                    (271,068)          (136,430)          (131,321)
   Recapitalization debt repayments                                             (264,410)                --                 --
   Recapitalization owner note repayments                                         20,240                 --                 --
   Recapitalization cash distributions to owners                                (429,566)                --                 --
   Other cash distributions to owners                                             (6,852)           (28,073)           (20,339)
   Debt issuance fees                                                            (39,100)                --               (541)
   Other                                                                              --                 --                 51
                                                                                --------           --------           --------
Net cash provided by (used in) financing activities                              139,655              9,546            (34,622)
Effect of exchange rate changes                                                      (10)              (387)               352
                                                                                --------           --------           --------
Increase in cash and cash equivalents                                                258              3,787                986
Cash and cash equivalents at beginning of year                                     7,218              3,431              2,445
                                                                                --------           --------           --------
Cash and cash equivalents at end of year                                        $  7,476           $  7,218           $  3,431
                                                                                ========           ========           ========

                See accompanying notes to financial statements.
</TABLE>





























                                     -57-
<PAGE>
<PAGE>

                       GRAHAM PACKAGING HOLDINGS COMPANY
                         NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 1998

1.  Summary of Significant Accounting Policies

Principles of Consolidation and Combination

     The consolidated and combined financial statements include the operations 
of Graham Packaging Holdings Company, a Pennsylvania limited partnership 
formerly known as Graham Packaging Company ("Holdings"); Graham Packaging 
Company L.P., a Delaware limited partnership formerly known as Graham Packaging 
Holdings I,L.P. (the "Operating Company"); Graham Packaging Italy, S.r.L.; 
Graham Packaging France Partners; Graham Packaging Poland, L.P.; Graham
Packaging do Brasil Industria e Comercio S.A.; Graham Packaging Canada Limited; 
Graham Recycling Company L.P.; subsidiaries thereof; and land and 
buildings that were used in the operations, owned by the control group of 
owners and contributed to the Graham Packaging Group (as defined).  Prior 
to February 2, 1998, these operations of the Graham Packaging Group were 
under common control by virtue of ownership of the Group  by the Donald C. 
Graham family. In addition, the 1998  consolidated financial statements of the 
Group include GPC Capital Corp. I, a wholly owned subsidiary of the 
Operating Company and GPC Capital Corp. II, a wholly owned subsidiary of 
Holdings.  The purpose of GPC Capital Corp. I is solely to act as 
co-obligor of the Senior Subordinated Notes and as co-borrower under 
the New Credit Agreement, and the purpose of GPC Capital Corp. II 
is solely to act as co-obligor of the Senior Discount Notes and 
as guarantor of the New Credit Agreement.  GPC Capital Corp. I and GPC 
Capital Corp. II have only nominal assets and do not conduct any independent 
operations.  Furthermore, since July 27, 1998 the consolidated financial 
statements of the Group  include the operations of Graham Emballages Plastiques
 S.A.; Graham Packaging U.K. Ltd.; Graham Plastpak Plastic, Ambalaj A.S.; and 
Graham Packaging Deutschland Gmbh as a result of the acquisition of selected 
plants of Crown Cork & Seal (see Note 3). These entities and assets are 
referred to collectively as Graham Packaging Group (the "Group").  With 
respect to the periods subsequent to the Recapitalization that occurred on
February 2, 1998 (see Note 2), the financial statements and references to the 
"Group" relate to Holdings and its subsidiaries on a consolidated basis 
and for the period prior to the Recapitalization to the "Group" on a combined
basis.  The combined financial statements include the accounts and results of 
operations of the Group for all periods that the operations were under common 
control.  Allamounts in the financial statements are those reported in the 
historic financial statements of the individual operations. All significant 
intercompany accounts and transactions have been eliminated in the 
consolidated and combined financial statements.

     Since the Recapitalization, Holdings has had no assets, liabilities or
operations other than its direct and indirect investments in the Operating
Company, its ownership of GPC Capital Corp. II and the Senior Discount Notes
and related unamortized issuance costs.  Holdings has fully and

                                     -58-
<PAGE>
<PAGE>

unconditionally guaranteed the Operating Company's Senior Subordinated Notes
on a senior subordinated basis.

Description of Business

     The Group sells plastic packaging products to large, multinational
companies in the automotive, food and beverage, and household cleaning and
personal care industries. The Group has manufacturing facilities in the
United States, Canada, United Kingdom, France, Germany, Italy, Poland,
Turkey, Hungary and Brazil.

Investment in Joint Venture

     The Group accounts for its investment in a joint venture in Poland under
the equity method of accounting.

Revenue Recognition

     Sales are recognized as products are shipped and upon passage of title
to the customer and as services are rendered.

Cash and Cash Equivalents

     The Group considers cash and investments with a maturity of three months
or less when purchased to be cash and cash equivalents.

Inventories

     Inventories are stated at the lower of cost or market with cost
determined by the last-in, first-out (LIFO) and first-in, first-out (FIFO)
methods.

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. Lease amortization is included in depreciation expense.  Interest 
costs are capitalized during the period of construction of capital assets as 
a component of the cost of acquiring those assets. 

Other Assets

     Other assets include debt issuance fees, goodwill and license fees for
which amortization is computed by the straight-line method over the term of
the related debt for debt issuance fees, twenty years for goodwill and from
five to ten years for license fees. Accumulated amortization on goodwill 
is $342,000 as of December 31, 1998.  

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.  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.




                                     -59-
<PAGE>
<PAGE>

Derivatives

     The Group enters into interest rate swap agreements to hedge the
exposure to increasing rates with respect to its Credit Agreement. The
differential to be paid or received as a result of these swap agreements is
accrued as interest rates change and recognized as an adjustment to interest
expense related to the Credit Agreement.  The Group also enters into forward
exchange contracts, when considered appropriate, to hedge the exchange rate
exposure on transactions that are denominated in a foreign currency.  During
1997, the Group used a combination of interest rate collar and swap agreements 
to hedge interest rate risk.

Foreign Currency Translation

     The Group uses the local currency as the functional currency for all
foreign operations. All assets and liabilities of 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/owners' equity.

Comprehensive Income

     As of January 1, 1998, the Group adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income.
SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of this
Statement had no impact on the Group's net income or partners' 
capital/owners' equity.  SFAS No. 130 requires foreign currency translation 
adjustments, which prior to adoption were reported separately in partners' 
capital/owners' equity, to be included in other
comprehensive income and added with net income to determine total
comprehensive income which is displayed in the Statements of Partners'
Capital/Owners' Equity (Deficit). Prior year financial statements have been
reclassified to conform to the requirements of SFAS No. 130.

Income Taxes

     The Group does 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/owners. For the Group's foreign operations
subject to tax in their local jurisdictions, deferred 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.

Segment Disclosure

     The Group adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", which requires certain information to be

                                     -60-
<PAGE>
<PAGE>

reported about operating segments on a basis consistent with the Group's
internal reporting structure (see Note 19).

Management Option Plan

     The Group accounts for equity based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees".  SFAS No. 123, "Accounting For
Stock Based Compensation", established accounting and disclosure requirements
using a fair-value based method of accounting for equity based employee
compensation plans.  The Group has elected to remain on its current method of
accounting as described above and has adopted the disclosure requirements of
SFAS No. 123.

Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles 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.

Reclassifications

     Certain Reclassifications have been made to the 1997 and 1996 financial 
statements to conform to the 1998 presentation.

New Accounting Pronouncements Not Yet Adopted

     In March 1998, the AICPA issued Statement of Position ("SOP") 98-1, 
"Accounting For the Costs of Computer Software Developed 
For or Obtained For Internal-Use." The SOP is
effective for the Group on January 1, 1999. The SOP will require the
capitalization of certain costs incurred after the date of adoption in
connection with developing or obtaining software for internal use.  The Group
has not yet assessed what the impact of the SOP will be on the Group's future
earnings or financial position.

     In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities."  The SOP is effective for the Group on January 1, 1999. 
The SOP requires costs of start-up activities and organization costs to be
expensed as incurred.  The Group does not expect the adoption of the SOP to
have a significant impact on the Group's results of operations or financial
position.

     In June 1998, the Financial Accounting Standards Board issued 
SFAS No. 133, "Accounting for Derivative Instruments and Hedging 
Activities." This standard establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This Standard is
effective for the Group's financial statements for all quarters in the year

                                     -61-
<PAGE>
<PAGE>

beginning January 1, 2000. Management has not completed its assessment of
SFAS No. 133 and has not determined the impact adoption will have on the
Group's results of operations or financial position.

2.   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 owners of the Group (the "Graham Partners") and (iii)
BMP/Graham Holdings Corporation, a Delaware corporation formed by Blackstone
Capital Partners III Merchant Banking Fund L.P. ("Investor LP"), 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.

     The principal components and consequences of the Recapitalization
included the following:

-    A change in the name of Holdings to Graham Packaging Holdings Company;

-    The contribution by Holdings of substantially all of its assets and
     liabilities to the Operating Company, which was renamed "Graham
     Packaging Company";

-    The contribution by certain Graham Partners to the Group of their
     ownership interests in certain partially-owned subsidiaries of Holdings
     and certain real estate used but not owned by Holdings and its
     subsidiaries;

-    The initial borrowing by the Operating Company of $403.5 million (the
     "Bank Borrowings") in connection with the New Credit Agreement entered
     into by and among the Operating Company, Holdings and a syndicate of
     lenders;

-    The issuance of $225 million Senior Subordinated Notes by the Operating
     Company and $100.6 million gross proceeds ($169 million aggregate
     principal amount at maturity) Senior Discount Notes by Holdings.  A
     wholly owned subsidiary of each of the Operating Company and Holdings
     serves as co-issuer with its parent for its respective issue of Notes;

-    The repayment by the Operating Company of substantially all of the
     existing indebtedness and accrued interest of Holdings and its
     subsidiaries;

-    The distribution by the Operating Company to Holdings of all of the
     remaining net proceeds of the Bank Borrowings and the Senior


                                     -62-
<PAGE>
<PAGE>

     Subordinated Notes (other than amounts necessary to pay certain fees and
     expenses and payments to Management);

-    The redemption by Holdings of certain partnership interests in Holdings
     held by the Graham Partners for $429.6 million;

-    The purchase by the Equity Investors of certain partnership interests in
     Holdings held by the Graham Partners for $208.3 million;

-    The repayment by the Graham Partners of amounts owed to Holdings under
     the $20.2 million promissory notes;

-    The recognition of additional compensation expense under the Equity
     Appreciation Plan;

-    The payment of certain bonuses and other cash payments and the granting
     of certain equity awards to senior and middle level management;

-    The execution of various other agreements among the parties; and

-    The payment of a $6.2 million tax distribution by the Operating Company
     on November 2, 1998 to certain Graham Partners for tax periods prior to
     the Recapitalization.

     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 Partners or
affiliates thereof or other entities controlled by Donald C. Graham and his
family, 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.

     As a result of the Recapitalization, the Group incurred charges of
approximately $32 million related to the issuance of debt which will be
recognized as interest expense over 6 to 11 years based upon the terms of the
related debt instruments.  In addition, Recapitalization expenses of
approximately $25 million, which related to transaction fees, expenses,
compensation, unamortized licensing fees and costs associated with the
termination of the interest rate collar and swap agreements were incurred. 
The Recapitalization also resulted in the write-off of unamortized debt
issuance fees which is reflected as an extraordinary loss in the financial
statements.  Compensation expense totaling $10.7 million, of which $6.8
 million had been expensed as of December 31, 1998, related to stay bonuses 
and the granting of certain ownership interests to management which will be
 recognized over a period up to three years from the date of the
Recapitalization.  See Note 14.



                                     -63-
<PAGE>
<PAGE>

3.   Acquisitions

Purchase of Certain Plants of Crown, Cork & Seal:
 
     On July 27, 1998 the Company acquired selected plastic bottle
manufacturing operations of Crown, Cork & Seal located in France, Germany,
the United Kingdom and Turkey for a total purchase price (including
acquisition-related costs) of $42.2 million, net of liabilities assumed,
subject to certain adjustments.  The acquisition was recorded under the
purchase method of accounting and accordingly, the results of operations of
the acquired operations are included in the financial statements of the Group
beginning on July 27, 1998.  The initial purchase price has been allocated on
a preliminary basis to assets acquired and liabilities assumed based on 
estimated fair values.  Negotiations regarding the final purchase price are 
still ongoing which could result in a reduction of the purchase price which 
is not expected to be significant.  Goodwill is being amortized over 20 years 
on the straight-line basis.

     The initial allocated fair value of assets acquired and liabilities
assumed is summarized as follows (in thousands):

    Current assets                                               $21,771
    Property, plant and equipment                                 29,597
    Other assets                                                   2,379
    Goodwill                                                      16,230
                                                                 -------
    Total                                                         69,977
    Less liabilities assumed                                      27,820
                                                                 -------
    Net cost of acquisition                                      $42,157
                                                                 =======

 Purchase of Rheem-Graham Embalagens, Ltda:

     On April 30, 1997, Graham Packaging do Brasil Industria e Comercio S.A.,
then a wholly owned subsidiary of Holdings with no operations, and
owners of Holdings, acquired 80% of the operating assets of Rheem-Graham
Embalagens Ltda., which manufactures and sells plastic packaging products,
from Rheem Empreendimentos Industrialis e Comerciais. Rheem Empreendimentos
Industrialis e Comerciais contributed the remaining 20% of the operating
assets of Rheem-Graham Embalagens Ltda. in exchange for a 20% minority
interest in Graham Packaging do Brasil Industria e Comercio S.A. The
purchase price related to the 80% of the operating assets of Rheem-Graham
Embalagens Ltda. was approximately $21.1 million, which was funded through
borrowings under the Group's bank facilities. The acquisition was recorded
under the purchase method of accounting and accordingly, the results of
operations of the business acquired by Graham Packaging do Brasil Industria e 
Comercio S.A. are included in the financial statements of the Group
beginning on April 30, 1997, less a minority interest amount equal to 20% of

                                     -64-
<PAGE>
<PAGE>

Graham Packaging do Brasil Industria e Comercio S.A. owned by the
unaffiliated entity.  The purchase price has been allocated to 
assets acquired and liabilities assumed based upon fair values
on the date of acquisition. The fair value of assets
and liabilities acquired and contributed to Graham Packaging do Brasil 
Industria e Comercio S.A. during 1997 is summarized as follows (in thousands):

    Net working capital                                           $2,451
    Property, plant and equipment                                 23,679
                                                                 -------
                                                                 $26,130
                                                                 =======

In February 1998, the Group acquired the remaining 20% minority interest
of $4,983,000 in Graham Packaging do Brasil Industria e Comercio S.A.
from Rheem Empreendimentos Industrialis e Comerciais for $2,995,000.
The difference of $1,988,000 has been recorded as a 
reduction of the carrying amount of property, plant & equipment 

 Pro Forma Information

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

                                         Year Ended December 31,
                                       --------------------------
                                          1998             1997
                                        --------         --------
                                             (In thousands)
          Net sales                      $631,567         $600,507
          Net income (loss)               (29,322)           4,128

     These unaudited pro forma results have been prepared for comparative
purposes only and include certain adjustments, such as additional
depreciation expense as a result of a step-up in the basis of fixed assets
and increased interest expense on acquisition debt.  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.

4.   Accounts Receivable

     Accounts receivable are presented net of an allowance for doubtful
accounts of $1,435,000 and $1,635,000 at December 31, 1998 and 1997
respectively. Management performs ongoing credit evaluations of its customers
and generally does not require collateral.

     The Group's sales to one customer, which exceeded 10% of total sales in
each of the past three years, were 12%, 14% and 12% for the years ended
December 31, 1998, 1997 and 1996, respectively. For the year ended
December 31, 1998, approximately 67%, 24% and 9% of the sales to this
customer were made in the United States, Europe and Canada, respectively.



                                     -65-
<PAGE>
<PAGE>

5.   Inventories

     Inventories consisted of the following:

                                                   December 31,
                                              ----------------------
                                                 1998        1997
                                               --------    --------
                                                  (In thousands)
        Finished goods                           $23,497      $18,759
        Raw materials and parts                   17,750       15,447
                                                 -------      -------
                                                  41,247       34,206
        Less LIFO allowance                           --        1,970
                                                 -------      -------
                                                 $41,247      $32,236
                                                 =======      =======

     The December 31, 1998 and 1997 inventories valued using the LIFO method
totaled $23,269,000 and $22,446,000 respectively.






























                                     -66-
<PAGE>
<PAGE>

6.   Accrued Expenses

     Accrued expenses consisted of the following:

                                                        December 31,
                                                 -------------------------
                                                     1998          1997
                                                   --------      --------
                                                       (In thousands)
  Accrued  employee  compensation  and
       benefits                                        $19,983      $16,305
  Special charges and unusual items                      7,744       18,472
  Accrued Interest                                      16,736          512
  Other                                                 26,968       16,525
                                                       -------      -------
                                                       $71,431      $51,814
                                                       =======      =======



7.   Debt Arrangements
     Long-term debt consisted of the following:

                                                           December 31,
                                                       -----------------------
                                                          1998         1997
                                                        --------     --------
                                                           (In thousands)
Credit Agreement:
   Term loan                                             $466,800     $125,000
   Revolving loan                                          61,000      132,179
   Revolving credit facilities                              7,055        6,653
   Senior Subordinated Notes                              225,000           --
   Senior Discount Notes                                  110,697           --
   Other                                                    4,845        4,633
                                                         --------     --------
                                                          875,397      268,465
Less amounts classified as current                         11,929        4,771
                                                         --------     --------
                                                         $863,468     $263,694
                                                         ========     ========

     On February 2, 1998, as discussed in Note 2 to the Financial Statements,
the Group refinanced the majority of its existing credit facilities in
connection with the Recapitalization and entered into a new Credit Agreement
(the "New Credit Agreement") with a consortium of banks.  The New Credit
Agreement was amended on August 13, 1998 (the "Amendment") to provide for an
additional Term Loan Borrowing of up to an additional $175 million which can
be drawn in two installments (of which $75 million was drawn and outstanding
as of December 31, 1998).  A commitment fee of .75% is due on the unused

                                     -67-
<PAGE>
<PAGE>

portion.  The New Credit Agreement and the Amendment consist of four term
loans to the Operating Company totaling up to $570 million and two revolving
loan facilities to the Operating Company totaling $255 million.  The
obligations of the Operating Company under the New Credit Agreement and
Amendment are guaranteed by Holdings and certain other subsidiaries of
Holdings. The term loans are payable in quarterly installments through
January 31, 2007, and require payments of  $5.0 million in 1999, $15.0
million in 2000, $20.0 million in 2001, $25.0 million in 2002 and $27.5 
million in 2003.  The revolving loan facilities expire on January 31, 2004. 
Interest is payable at (a) the "Alternate Base Rate" (the higher of the Prime
Rate or the Federal Funds Rate plus 0.50%) plus a margin ranging from 0% to
2.00%; or (b) the "Eurocurrency Rate" (the applicable interest rate offered
to banks in the London interbank eurocurrency market) plus a margin ranging
from 0.625% to 3.00%.   A commitment fee ranging from 0.20% to 0.50% is due
on the unused portion of the revolving loan commitment. As part of the
Amendment to the New Credit Agreement, if certain events of default  were to
occur (including, without limitation, if the Group's Net Leverage Ratio
were above 5.15:1.0 at March 31, 2000), Blackstone has agreed to make an
equity contribution to the Group through the administrative agent of up to
$50 million. In addition, the New Credit Agreement and Amendment contain 
certain affirmative and negative covenants as to the operations and financial 
condition of the Group, as well as certain restrictions on the payment of 
dividends and other distributions to Holdings.

     The Recapitalization also included the issuance of $225 million in
Senior Subordinated Notes of the Operating Company and $100.6 million gross
proceeds in Senior Discount Notes ($169 million aggregate principal amount at
maturity) of Holdings.  The Senior Subordinated Notes are unconditionally
guaranteed on a senior subordinated basis by Holdings and mature on
January 15, 2008, with interest payable on $150 million at a fixed rate of  
8.75% and with interest payable on $75 million at LIBOR plus 3.625%.  The
Senior Discount Notes mature on January 15, 2009, with cash interest payable
quarterly beginning January 15, 2003 at 10.75%.  The effective interest rate to
maturity on the Senior Discount Notes is 10.75%.

     At December 31, 1998, the Operating Company had entered into three U.S.
Dollar interest rate swap agreements that effectively fix the Eurocurrency
Rate on $450 million of the term loans, on $200 million through April 9, 2002
at 5.8075%, on $100 million through April 9, 2003 at 5.77% and on $150
million through September 10, 2001 at 5.5075%.

     Under the New Credit Agreement and Amendment, 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 (i) in respect
of overhead, tax liabilities, legal, accounting and other professional fees
and expenses, (ii) to fund purchases and redemptions of equity interests of
Holdings or Investor LP held by their present or former officers or employees
of Holdings, the Operating Company or their Subsidiaries (as defined) or by
any employee stock ownership plan upon such person's death, disability,
retirement or termination of employment or other circumstances with certain
annual dollar limitations and (iii) to finance starting on July 15, 2003, the
payment of cash interest payments on the Senior Discount Notes.


                                     -68-
<PAGE>
<PAGE>

     On September 8, 1998, Holdings and GPC Capital Corp. II consummated an
exchange offer for all of their outstanding Senior Discount Notes Due 2009
which had been issued on February 2, 1998 (the "Senior Discount Old Notes")
and issued in exchange therefor their Senior Discount Notes Due 2009,
Series B (the "Senior Discount Exchange Notes"), and the Operating Company
and GPC Capital Corp. I consummated exchange offers for all of their
outstanding Senior Subordinated Notes Due 2008 which had been issued on
February 2, 1998 (the "Senior Subordinated Old Notes" and, together with the
Senior Discount Old Notes, the "Old Notes") and issued in exchange therefor
their Senior Subordinated Notes Due 2008, Series B (the "Senior Subordinated
Exchange Notes" and, together with the Senior Discount Exchange Notes, the
"Exchange Notes").  Each issue of Exchange Notes has the same terms as the
corresponding issue of Old Notes, except that the Exchange Notes are
registered under the Securities Act of 1933 and do not include the
restrictions on transfer applicable to the Old Notes.  The Senior
Subordinated Old Notes were, and the Senior Subordinated Exchange Notes are,
fully and unconditionally guaranteed by Holdings on a senior subordinated
basis.

     The Group's effective rate on the outstanding borrowings under the term
loan and revolving loan was 7.73% and 6.03% at December 31, 1998 and 1997,
respectively.

     The Group had several variable-rate revolving credit facilities
denominated in U.S. Dollars, French Francs and Italian Lire, with aggregate
available borrowings at December 31, 1998 equivalent to $15.9 million. The
Group's average effective rate on borrowings of  $7.1 million on these credit
facilities at December 31, 1998 was 4.95%. The Group's average effective rate
on borrowings of $6.7 million on these credit facilities at December 31, 1997
was 6.70%.

     Interest paid during 1998, 1997 and 1996, net of amounts capitalized of
$2,639,000, $615,000 and $572,000 respectively, totaled $41,985,000,
$14,900,000 and $15,868,000 respectively.

     Based upon the repayment terms under the New Credit Agreement,
maturities of long-term debt for the succeeding five years are as follows:
1999--$11.9 million; 2000--$15.2 million; 2001--$20.2 million; 2002--$25.8
million; 2003--$28.9 million.

8.  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.

                                     -69-
<PAGE>
<PAGE>

     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 and was estimated using discounted cash
flow analyses based on current incremental borrowing rates for similar types
of borrowing arrangements.  Other long-term debt at December 31, 1998
consisted of approximately $260.7 million of fixed-rate debt instruments. The
fair value of this long-term debt, including the current portion, was
approximately $271.4 million at December 31, 1998.  The fair value of other
long-term debt at December 31, 1997 approximates the carrying amounts.

     Derivatives

     The Group is exposed to market risk from changes in interest rates and
currency exchange rates.  The Group 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 Group
does not hold or issue derivative financial instruments for trading purposes.

      Interest rate swap agreements are used to hedge exposure to interest
rates associated with the Group's Credit Agreement.  Under these agreements,
the Group 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.  The interest rate
differential is reflected as an adjustment to interest expense over the life
of the interest rate swap agreements. 

     The following table presents information for all interest rate
instruments.  The notional amount does not necessarily represent amounts
exchanged by the parties and, therefore is not a direct measure of the
Group's exposure to credit risk.  The fair value approximates the cost to
settle the outstanding contracts.  The carrying value, which represents
accrued interest due to counterparties under swap agreements, was not
material.

(in thousands)                             1998                     1997 (1)
                                        ----------                  --------
Notional amount                           $450,000                  $179,045
Fair value                                 (8,784)                       354

(1)  The Group used a combination of interest rate collar and swap agreements
     in 1997.

     Although derivatives are an important component of the Group's interest
rate management program, their incremental effect on interest expense for
1998, 1997 and 1996 was not material.


                                     -70-
<PAGE>
<PAGE>

     The Group 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 Group 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 deferred in other current assets
and are included in the basis of the underlying transactions.  To the extent
that a qualifying hedge is terminated or ceases to be effective as a hedge,
any deferred gains and losses up to that point continue to be deferred and
are included in the basis of the underlying transaction.  At December 31,
1998 the Group had foreign currency forward exchange contracts totalling 
$5,793,000 with a fair value of $5,936,000.  The deferred gains and losses on 
these instruments were not material.  There were no similar instruments at 
December 31, 1997.

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

9.   Lease Commitments

     The Group was a party to various leases involving real property and
equipment during 1998, 1997 and 1996. Total rent expense for operating leases
amounted to $10,627,000 in 1998,  $9,599,000 in 1997 and $8,432,000 in 1996.
Minimum future lease obligations on long-term noncancelable operating leases
in effect at December 31, 1998, are as follows: 1999--$5,620,000; 2000--
$4,213,000; 2001--$3,261,000; 2002--$2,425,000; 2003--$1,900,000; and
thereafter--$4,155,000.














                                     -71-
<PAGE>
<PAGE>

10.   Transactions with Affiliates

     Transactions with entities affiliated through common ownership included
the following:

                                                Year Ended December 31,
                                                -----------------------
                                                1998      1997      1996
                                                     (In thousands)
Equipment purchases from affiliates           $22,045   $11,104    $5,223
                                              

Management services provided by affiliates, 
     including management, legal,
     tax, accounting, insurance, treasury,
     and employee benefits administration
     services                                  $2,071    $2,820    $2,623
    
Management services provided and sales to
     Graham Engineering Corporation including
     engineering services and raw materials     $1,414      $945      $739

Interest income on notes receivable from
     owners                                       $103    $1,026    $1,026


                                     -72-
<PAGE>
<PAGE>

     Account balances with affiliates include the following:

                                                     Year Ended December 31,
                                                     -----------------------
                                                         1998         1997
                                                       --------     --------
                                                          (In thousands)
Accounts receivable                                       $1,116       $361
Prepaid expenses and other current assets                     --        917
Accounts payable                                           2,804      3,470

     Certain land and buildings included in the accompanying financial
statements were leased by the Group from the control group of owners under
operating leases until the assets were contributed to the Group. The lease
payments totaling zero in 1998, and approximately $2.6 million in 1997 and
$2.8 million in 1996 are classified as distributions to owners in the
accompanying financial statements. The depreciation and operating expenses
related to the land and buildings are included in the operations of the
Group. Certain of the real property leased from the control group was
contributed to the Group as part of the Recapitalization and the related
leases were terminated.

11.   Pension Plans

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

     The 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
Group's policy is to fund the normal cost plus amounts required to amortize
actuarial gains and losses and prior service costs over a period of ten
years. Plan assets consist of a diversified portfolio including U.S.
Government securities, certificates of deposit issued by commercial banks,
and domestic common stocks and bonds.

     Prior to the Recapitalization, the Group participated in a plan
sponsored by an affiliated company.  As part of the Recapitalization, the
Group's portion of pension obligations and related plan assets were spun off
into a newly established plan.  The transactions resulted in a one-time
allocation of additional plan assets.

     Effective December 31, 1998, the Group adopted SFAS No. 132,
 "Employers' Disclosures about Pensions and other Postretirement Benefits." 
SFAS No. 132 does not change the measurement or recognition of these plans,
 but revises the disclosure requirements for pension and other postretirement 
benefit plans for all years presented." 

     The following table sets forth the change in the Group's benefit
obligation and pension plan assets at market value for the years ended
December 31, 1998 and 1997:





                                     -73-
<PAGE>
<PAGE>

<TABLE>
<CAPTION>
                                                                    1998                 1997
                                                              -----------------   -----------------
<S>                                                          <C>                 <C>
Change in benefit obligation:

Benefit obligation at beginning of year                           $(15,018)            $(11,898)
Service cost                                                        (1,628)              (1,317)
Interest cost                                                       (1,120)                (947)
Benefits paid                                                          276                  158
Change in benefit payments due to experience                          (109)                 (37)
Increase in benefit obligation due to change in discount            (1,975)                (958)
rate
Increase in benefit obligation due to plan change                     (385)                 (19)
                                                                  --------             --------
Benefit obligation at end of year                                  (19,959)             (15,018)

Change in plan assets:

Plan assets at market value at beginning of year                    12,092                9,489
Actual return on plan assets                                         1,914                  850
Employer contribution                                                1,997                1,911
Benefits paid                                                         (276)                (158)
Acquisitions (spin off from affiliated company)                      1,424                      
                                                                  --------             --------
Plan assets at market value at end of year                          17,151               12,092

Funded status                                                       (2,808)              (2,926)
Unrecognized net actuarial loss                                       (338)                  (4)
Unrecognized prior service cost                                        785                  446
                                                                  --------             --------
Accrued pension expense                                            $(2,361)             $(2,484)
                                                                  ========             ========
</TABLE>

 
     Significant actuarial assumptions used to develop the projected benefit
obligations were as follows:

                                                             December 31,
                                                         --------------------
                                                            1998        1997
Assumed discount rate                                       7.0%        7.5%
Assumed rate of compensation increase (salaried plan)       5.0%        5.0%
Expected return on plan assets                              8.0%        8.0%


                                     -74-
<PAGE>
<PAGE>

     The Group's net pension cost for its defined benefit pension plans
includes the following components:

                                                Year Ended December 31,
                                            ------------------------------
                                              1998        1997       1996
                                            ---------   --------    -------
                                                    (In thousands)
Service cost                                   $1,628     $1,317    $1,349 
Interest cost                                   1,120        947       793 
Actual return on plan assets                   (1,914)      (850)     (320)
Net amortization and deferral                   1,041        135      (238)
                                               ------     ------    ------ 

Net periodic pension costs                      $1,875     $1,549    $1,584
                                                ======     ======    ======


     The Group sponsors a defined contribution plan under Internal Revenue
Code Section 401(k) which covers all hourly and salaried employees other than
employees represented by a collective bargaining unit.  The Group also
sponsored other defined contribution plans under collective bargaining
agreements.  The Group's contributions are determined as a specified
percentage of employee contributions, subject to certain maximum limitations. 
The Group's cost for these plans for 1998, 1997, and 1996 were $787,000,
$742,000 and $722,000 respectively.

12.   Partners' Capital/Owners' Equity

     Owners' equity included the partners' capital and shareholders' equity
of the various entities and operations included in the financial statements,
as described in Note 1. Prior to the Recapitalization, as described in Note
2, owners' equity included the partners' capital and shareholders' equity of
those entities and operations included in the combined financial statements. 
Effective January 1, 1994, pursuant to an ownership structure reorganization
of Holdings and several affiliated entities, Holdings obtained 60% of the
outstanding voting interests of members of the Group operating in France,
Italy, and the United Kingdom. The remaining 40% of the outstanding voting
interests was obtained directly by owners of Holdings.  Also, Holdings
obtained 99% of the voting interest in Graham Recycling Company L.P.  During
1995, the members operating in France and Italy issued 100% of their
nonvoting preferred interests to Holdings.


                                     -75-
<PAGE>
<PAGE>


     At December 31, 1997, Holdings owned 100% of the outstanding stock of
Graham Packaging Canada, Ltd., a Canadian limited liability company, 15.8% of
the outstanding stock of Graham Packaging do Brasil Industria e Comercio S.A.
 and a 99% limited partnership interest in the Operating Company. The
remaining 1% interest in Graham Recycling Company, L.P. and the Operating
Company were owned directly by owners of Holdings. In addition, 64.2% of
Graham Packaging do Brasil Industria e Comercio S.A. was owned directly
by owners of Holdings and the remaining 20% was owned by an unrelated entity.  
As noted in Note 3 in February 1998, the Group acquired the remaining 20% 
interest in Graham Packaging do Brasil Industria e Comercio S.A.

     At December 31, 1997, Holdings held notes receivable from limited
partners of $20,240,000, bearing interest at 5.07% for partnership interests
in it. The notes were classified as a reduction of owners' equity in the
balance sheets.  As a result of the Recapitalization (see note 2), this
obligation was repaid by the limited partners in 1998.

         At December 31, 1998, Holdings owned a 99% direct limited
partnership interest in the Operating Company.  The remaining 1% interest
in the Operating Company is owned as a general partnership interest by
GPC Opco GP LLC, which is 100% owned by Holdings.  The Operating Company
in turn owns a 99% interest and, through its 100% owned subsidiary GP Sub
GP, LLC, a 1% general partnership interest in the various entities and
operations included in the financial statements, as described in Note 1,
except for Graham Packaging Canada, Ltd.  GPC Capital Corp. I and CMB
Plastpak Plastic, Ambalaj Sanayi A.S., where the Operating Company owns
100% of the capital stock of these subsidiaries.  In addition, Holdings
owns 100% of the capital stock of GPC Capital Corp. II.  As a result of
the Recapitalization, any interests in these entities formerly held by
owners of Holdings were contributed to Holdings , which in turn
contributed these interests to the Operating Company.   


13.   Management Option Plan

     Pursuant to the Recapitalization Agreement, the Group has adopted the
Graham Packaging Holdings Company Management Option Plan (the "Option Plan").

     The Option Plan provides for the grant to certain management employees
of Holdings and its subsidiaries of options ("Options") to purchase limited
partnership interests in Holdings equal to 0.01% of Holdings (prior to any
dilution resulting from any interests granted pursuant to the Option Plan),
each 0.01% interest being referred to as a "Unit". The aggregate number of
Units with respect to which Options may be granted under the Option Plan
shall not exceed 500 Units, representing a total of up to 5% of the equity of
Holdings.

     The exercise price per Unit shall be the fair market value of the 0.01%
interest on the date of the grant.  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 Plan is intended to advance the best interests of the
Group by allowing such employees to acquire an ownership interest in the
Group, thereby motivating them to contribute to the success of the Group and
to remain in the employ of the Group.

     A committee has been appointed to administer the Option Plan, including,
without limitation, the determination of the employees to whom grants will be

                                     -76-
<PAGE>
<PAGE>

made, the number of Units subject to each grant, and the various terms of
such grants.   As of December 31, 1998, 399.1 Unit Options have been granted 
at an exercise price of $25,789 per Unit. No options were vested, forfeited,
cancelled or exercised as of December 31, 1998. 

     The Group applies APB 25 in accounting for the Option Plan.  The
exercise price of the Unit equals the fair market value of the 0.01% interest
on the date of the grant and, accordingly no compensation cost has been
recognized under the provisions of APB 25 for Units granted.  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 the option plan been determined under SFAS 123, based
on the fair market value at the grant dates, the Group's pro forma net loss
for 1998 would have been reflected as follows:

                                                    (In thousands)
Net loss                                           ---------------
   As reported                                        $(26,062)
   Pro forma                                          $(26,483)

     The fair value of each option Unit is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted-
average assumptions used for Units granted in 1998: pay out yield 0%,
expected volatility of 0%, risk free interest rate of 5.558%, and expected
life of 4.6 years.
 
14.   Special Charges and Unusual Items

     The special charges and unusual items were as follows:

<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                                 -------------------------------------
                                                      1998          1997        1996
                                                 -------------   ----------   --------
                                                             (In thousands)
<S>                                             <C>             <C>          <C>
Restructuring of facilities                         $ 1,960       $  1,222     $  754
Systems conversion                                      963            515         --
Litigation                                              285         22,624      6,283
Recapitalization compensation                        20,609             --         --
Aborted acquisition costs                               427             --         --
                                                    -------        -------    -------
                                                    $24,244       $ 24,361     $7,037
                                                    =======        =======    =======
</TABLE>

     In 1996, the Group incurred $754,000 to move assets from its plant in
Lagnieu, France to Blyes, France, and in 1997, the Group incurred an

                                     -77-
<PAGE>
<PAGE>

additional $746,000 related to the restructuring of the facilities in France.
Also in 1997, the Group incurred $476,000 in restructuring costs at its
corporate offices. In 1998, the Group incurred restructuring charges of 
$1,960,000 related to the decision to close a plant in Whiting, Indiana and to
restructure a plant in Blyes, France.  Included in the $1,960,000 is 
$1,200,000 related to the legal liability of severing 51 employees at the 
Blyes plant in France and $350,000 related to the severing of 26 employees 
at the Whiting, Indiana plant.  Additional severance costs of $1,000,000 
are expected to be incurred in the first quarter of 1999 related to the 
restructuring of the Blyes plant. 

     The systems conversion expenses relate to costs incurred by the Group as
part of a multi-year project to ensure that its information systems and
related hardware will be year 2000 compliant. The Group engaged outside
consultants beginning in 1997 to assist with the evaluation and assessment of
its information systems requirements and the selection and implementation of
enterprise resource planning software.

     Recapitalization expenses included in special charges and unusual items
relate to compensation and to write-off of unamortized licensing fees. 
Additionally, Recapitalization expenses relate to stay bonuses and the
granting of certain ownership interests to Management pursuant to the terms
of the Recapitalization (see Note 2), which are being recognized over a
period of up to three years.

     The litigation costs in 1997 and 1996 are primarily costs incurred and
accrued by the Group for legal fees in connection with the claims against the
Group for alleged patent infringements and the counterclaims brought by the
Group alleging violations of federal antitrust law by the plaintiffs and, for 
the year ended December 31, 1997, amounts expected to be paid in settlement 
of the claims in the JCI Schmalbach-Lubeca matter. See Note 18 to the 
Financial Statements.


15.   Other (Income) Expense

     Other (income) expense consisted of the following:

<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                                     ------------------------------
                                                       1998       1997       1996
                                                     --------   --------   --------
                                                             (In thousands)
                                                           ------------------
<S>                                                 <C>        <C>        <C>
Foreign exchange (gain) loss                             152     $  955     $ (720)
Equity income in earnings of joint ventures             (274)      (200)      (257)
                                                      ------     ------     ------
                                                      $ (122)    $  755     $ (977)
                                                      ------     ------     ------
</TABLE>




                                     -78-
<PAGE>
<PAGE>

16.   Income Taxes

     Certain legal entities in the Group 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 $482.6 million
at December 31, 1998.  The reported amount of their assets net of the
reported amount of their liabilities exceeded the related tax bases of their
assets net of liabilities by $14.8 million at December 31, 1997.

     Income of certain legal entities related principally to the foreign
operations of the Group is taxable to the legal entities. The following table
sets forth the deferred tax assets and liabilities that result from temporary
differences between the reported amounts and the tax bases of the assets and
liabilities of such entities:

<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                  ---------------------------------------------
                                                                           1998                    1997
                                                                  ---------------------   ---------------------
                                                                                  (In thousands)
                                                                                  --------------
<S>                                                               <C>                     <C>
Deferred tax assets:
 Net operating loss carryforwards                                        $ 24,654                $ 13,613
 Accrued retirement indemnities                                             1,614                     799
 Inventories                                                                  582                     253
 Accruals and reserves                                                      1,149                      17
 Capital leases                                                               829                     256
 Other items                                                                   24                                               
                                                                         --------                --------
Gross deferred tax assets                                                  28,852                  14,938
Valuation allowance                                                       (13,903)                 (7,034)
                                                                         --------                --------
Net deferred tax assets                                                    14,949                   7,904
Deferred tax liabilities:
 Fixed Assets, principally due to differences in depreciation             
   and assigned values                                                     10,778                   8,359
 Goodwill                                                                    4,462
 Other items                                                                    41                     328
                                                                         --------                -------- 
Gross deferred tax liabilities                                             15,281                   8,687
                                                                         --------                --------
Net deferred tax liabilities                                             $    332                $    783
                                                                         --------                --------
</TABLE>


                                     -79-
<PAGE>
<PAGE>

       The valuation allowance reduces the Group's deferred tax assets 
to an amount that Management believes is more likely than not to be realized.

       The provision for income taxes at December 31, 1998 is comprised of 
$328,000 of current provision and $764,000 of deferred.  The amounts relate 
entirely to the Group's foreign legal entities.

      The difference between the 1998 actual income tax provision computed by 
applying the U.S. federal statutory rate to earnings before income taxes 
is attributable to the following:

                                                     Year Ended
                                                  December 31, 1998
                                                  ---------------
                                                    (In thousands)
                                                   ---------------
   Taxes at U.S. federal statutory rate                $(9,504)
   Partnership income not subject to 
    federal income taxes                                 7,531
   Foreign loss without current tax benefit              2,617
   Other                                                   448
                                                       -------   
                                                        $1,092   
                                                       =======   
    



     At December 31, 1998, the Group's various taxable entities had net
operating loss carryforwards for purposes of reducing future taxable income
by approximately $59.6 million, for which no benefit has been recognized. Of
this amount, $15.9 million related to carryforwards that will expire, if
unused, at various dates ranging from 1999 to 2003 and the remaining
carryforwards have no expiration date.

     At December 31, 1998, the unremitted earnings of non-U.S. subsidiaries
totalling $7.0 million were deemed to be permanently invested  No deferred tax
liability has been recognized with regard to the remittance of such earnings. 
If such earnings were remitted to the United States, approximately $260,000 of
withholdings taxes would apply.

17.   Commitments 

     In connection with plant expansion and improvement programs, the Group
had commitments for capital expenditures of approximately $33.0 million at
December 31, 1998.

18.   Contingencies and Legal Proceedings

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

     Holdings was sued in May, 1995, for alleged patent infringement, trade
secret misappropriation and other related state law claims by Hoover
Universal, Inc., a subsidiary of Johnson Controls, Inc. ("JCI"), in the U.S.
District Court for the Central District of California (the "JCI Litigation").
JCI alleged that Holdings was misappropriating or threatened to
misappropriate trade secrets allegedly owned by JCI relating to the
manufacture of hot-fill PET plastic containers through the hiring of JCI
employees and alleged that Holdings infringed two patents owned by JCI by
manufacturing hot-fill PET plastic containers for several of its largest
customers using a certain "pinch grip" structural design. In December, 1995,
JCI filed a second lawsuit alleging infringement of two additional patents,
which relate to a ring and base structure for hot-fill PET plastic
containers. The two suits were consolidated for all purposes. Holdings has
answered the complaints, denying infringement and misappropriation in all
respects and asserting various defenses, including invalidity and
unenforceability of the patents at issue based upon inequitable conduct on
the part of JCI in prosecuting the relevant patent applications before the
U.S. Patent Office and anticompetitive patent misuse by JCI. Holdings has
also asserted counterclaims against JCI alleging violations of federal
antitrust law, based upon certain agreements regarding market division

                                     -80-

<PAGE>

allegedly entered into by JCI with another competitor and other alleged
conduct engaged in by JCI allegedly intended to raise prices and limit
competition in the market for hot-fill PET plastic containers. In March,
1997, JCI's plastic container business was acquired by Schmalbach-Lubeca
Plastic Containers USA Inc. ("Schmalbach-Lubeca"). Schmalbach-Lubeca and
certain affiliates were joined as successors to JCI and as counter-claim
defendants.

     On March 10, 1998, the U.S. District Court in California entered summary
judgment in favor of JCI and against the Group regarding infringement of two
patents, but did not resolve certain issues related to the patents including
certain of the Group's defenses. On March 6, 1998, the Group also filed suit
against Schmalbach-Lubeca in Federal Court in Delaware for infringement of
the Group's patent concerning pinch grip bottle design. On April 24, 1998,
the parties to the litigation reached an understanding on the terms of a
settlement of all claims in all of the litigation with JCI and Schmalbach-
Lubeca, subject to agreement upon and execution of a formal settlement
agreement.  Management believed that the amounts that would ultimately be paid 
in settlement, as well as estimated litigation expenses and professional fees, 
would not differ materially from the amounts accrued in Special Charges and 
Unusual Items in respect thereof for the year ended December 31, 1997.  See 
Note 14 to the Financial Statements. 

     In June 1998, the Group finalized the settlement of the JCI-
Schmalbach-Lubeca litigation.  The amounts paid in settlement as well as
estimated litigation expenses and professional fees did not differ materially
from the amounts accrued in special charges and unusual items in respect
thereof in 1997.  See Note 14 to the Financial Statements.

19.   Segment Information

     The Group has adopted SFAS No. 131, "Disclosures about Segments of a
Business Enterprise and Related Information".  The Group is managed in three
operating segments: North America, which includes the United States and
Canada; Europe and Latin America.  The accounting policies of the segments 
are consistent with those described in Note 1.





















                                     -81-
<PAGE>
<PAGE>

                                                                (In thousands)
<TABLE>
<CAPTION>
                                                      North                       Latin
                                        Year         America       Europe        America      Eliminations       Total
                                     -----------   -----------   -----------   -----------   --------------   -----------
<S>                                 <C>           <C>           <C>           <C>           <C>               <C>
Net sales                               1998           $465,317      $100,835       $21,979                       $588,131
                                        1997            439,977        67,408        14,322                        521,707
                                        1996            381,916        77,824                                      459,740

Special charges and unusual items       1998            $22,422       $ 1,572          $250                        $24,244
                                        1997             23,615           746            --                         24,361
                                        1996              6,283           754            --                          7,037


Operating income (loss)                 1998            $61,891      $(7,010)          $479                        $55,360
                                        1997             34,393       (8,841)          (389)                        25,163
                                        1996             39,606       (4,922)                                       34,684


Depreciation and amortization           1998            $31,384        $9,405        $2,315                        $43,104
                                        1997             33,065         6,436         1,858                         41,359
                                        1996             41,373         7,061                                       48,434

Interest expense (income), net          1998            $68,331        $(496)          $173                        $68,008
                                        1997             11,191         1,517           722                         13,430
                                        1996             11,982         2,471                                       14,453

Income tax expense (benefit)            1998                             $311          $781                         $1,092
                                        1997                               28           572                            600
                                        1996                             (24)                                         (24)

Identifiable assets                     1998           $569,521      $172,553       $38,783       $(184,110)      $596,747
                                        1997            319,760        80,896        36,555         (51,720)       385,491
                                        1996            294,516        85,152                       (40,855)       338,813


Capital expenditures                    1998           $114,048       $13,243        $6,621                       $133,912
                                        1997             33,471        11,018         8,684                         53,173
                                        1996             25,784         5,468                                       31,252

Extraordinary loss on 
extinguishment of debt                  1998           $    675       $              $   --                       $    675
                                        1997                 --            --            --                             --
                                        1996                 --            --            --                             --
                                        
</TABLE>















                                     -82-
<PAGE>
<PAGE>

Product Net Sales Information

The following is supplemental information on net sales by product category
(in millions):

                                           Household
                                          Cleaning &
                              Food &       Personal
           Automotive        Beverage        Care          Total
           ----------        --------     -----------     -------
 1998        $188.7           $221.1        $178.3         $588.1
 1997         196.4            150.6         174.7          521.7
 1996         180.9            116.4         162.4          459.7





































                                     -83-
<PAGE>
<PAGE>

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

     Holdings, which is composed of the legal entities and operations that
prior to the Recapitalization, which occurred on February 2, 1998, were known
as the Graham Packaging Group (the "Group"), has engaged Deloitte & Touche
LLP as its independent auditors for the year ending December 31, 1998 to
replace the firm of Ernst & Young LLP, who were dismissed as auditors of
Holdings effective April 30, 1998.  The action was formalized by a resolution
adopted by Investor GP, as general partner of Holdings, on July 10, 1998, but
effective as of April 30, 1998.

     The reports of Ernst & Young LLP on the financial statements of the
Group for the years ended December 31, 1997 and 1996 and for each of the
two years in the period ended December 31, 1997 did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope, or accounting principles.

     In connection with the audits of the Group's financial statements for
each of the two years in the period ended December 31, 1997, and in the 
subsequent interim period, there were no disagreements with Ernst & Young LLP 
on any matters of accounting principles or practices, financial statement 
disclosure, or auditing scope and procedures which, if not resolved to the 
satisfaction of Ernst & Young LLP would have caused Ernst & Young LLP to make 
reference to the matter in their report.

                                   PART III

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

     The members of the Advisory Committee of Holdings and the executive
officers of the Operating Company since the Recapitalization and their
respective ages and positions are set forth in the table below. For a
description of the Advisory Committee, see "The Partnership Agreements--
Holdings Partnership Agreement."

Name                       Age    Position
----                       ---    --------

Donald C. Graham           65     Chairman of the Advisory Committee
                                  of Holdings

William H. Kerlin, Jr.     47     Vice Chairman of the Advisory
                                  Committee of Holdings

Philip R. Yates            51     President and Chief Executive
                                  Officer of the Operating Company



                                     -84-
<PAGE>
<PAGE>

Name                       Age    Position
----                       ---    --------

John E. Hamilton           40     Chief Financial Officer of the
                                  Operating Company

G. Robinson Beeson         50     Senior Vice President and General
                                  Manager, Automotive of the Operating
                                  Company

Scott G. Booth             42     Senior Vice President and General
                                  Manager, Household Cleaning and
                                  Personal Care of the Operating
                                  Company

Roger M. Prevot            39     Senior Vice President and General
                                  Manager, Food and Beverage of the
                                  Operating Company

Philippe LeJeune           50     Senior Vice President and General
                                  Manager, Europe of the Operating
                                  Company

George  M. Lane            54     Senior Vice President Global Human
                                  Resources of the Operating Company

Geoffrey R. Lu             43     Vice President and General Manager,
                                  Latin America of the Operating
                                  Company

George  W. Stevens         55     Vice President and General Manager,
                                  Canada of the Operating Company

Robert M. Gibson           59     Vice President Global Procurement of
                                  the Operating Company

Jay W. Hereford            48     Vice President, Finance and
                                  Administration of the Operating
                                  Company

Chinh E. Chu               32     Member of the Advisory Committee of
                                  Holdings

Howard A. Lipson           35     Member of the Advisory Committee of
                                  Holdings

Simon P. Lonergan          30     Member of the Advisory Committee of
                                  Holdings

     Donald C. Graham has served as Chairman of the Advisory Committee of
Holdings since the Recapitalization. From June 1993 to the Recapitalization,
Mr. Graham served as Chairman of the Board of Directors of the Company. Prior
to June 1993, Mr. Graham served as President of the Company.

                                     -85-
<PAGE>
<PAGE>

     William H. Kerlin, Jr. has served as Vice Chairman of the Advisory
Committee of Holdings since the Recapitalization. From October 1996 to the
Recapitalization, Mr. Kerlin served as Vice Chairman of the Board of
Directors and Chief Executive Officer of the Company. From 1994 to 1996, Mr.
Kerlin served as Vice President of the Company and Vice Chairman of the
Company. Prior to 1994, Mr. Kerlin served as Secretary of the Company.

     Philip R. Yates has served as President and Chief Executive Officer of
the Operating Company since the Recapitalization. Since the Recapitalization,
Mr. Yates has also served as President and Chief Executive Officer of Opco GP
and of various subsidiaries of the Operating Company or their general
partner, as President, Treasurer and Assistant Secretary of CapCo I and CapCo
II, and as a member of the Boards of Directors of CapCo I and CapCo II. From
April 1995 to the Recapitalization, Mr. Yates served as President and Chief
Operating Officer of the Company. From 1994 to 1995, Mr. Yates served as
President of the Company. Prior to 1994, Mr. Yates served in various
management positions with the Company.

     John E. Hamilton has served as Chief Financial Officer or Senior Vice
President, Finance and Administration or Vice President, Finance and
Administration of the Operating Company since the Recapitalization. Since
January 21, 1999, Mr. Hamilton has  served as Chief Financial Officer of Opco
GP and Holdings,  and has served as Treasurer and Secretary of Opco GP and of
various subsidiaries of the Operating Company or their general partner since
the Recapitalization.  Since the Recapitalization, Mr. Hamilton has served as
Vice President, Secretary and Assistant Treasurer of CapCo I and CapCo II,
and as a member of the Boards of Directors of CapCo I and CapCo II.
Subsequent to the Recapitalization and until January 21, 1999, Mr. Hamilton
served as Vice President, Finance and Administration of Opco GP and Holdings. 
From November 1992 to the Recapitalization, Mr. Hamilton served as Vice
President, Finance and Administration, North America of the Company. Prior to
1992, Mr. Hamilton served in various management positions with the Company.

     G. Robinson Beeson has served as Senior Vice President or Vice President
and General Manager, Automotive of the Operating Company since the
Recapitalization. From July 1990 to the Recapitalization, Mr. Beeson served
as Vice President and General Manager, U.S. Automotive of the Company.

     Scott G. Booth has served as Senior Vice President or Vice President and
General Manager, Household Cleaning and Personal Care of the Operating
Company since the Recapitalization. From July 1990 to the Recapitalization,
Mr. Booth served as Vice President and General Manager, U.S. Household
Cleaning and Personal Care of the Company.

     Roger M. Prevot has served as Senior Vice President or Vice President
and General Manager, Food and Beverage of the Operating Company since the
Recapitalization. From July 1990 to the Recapitalization, Mr. Prevot served
as Vice President and General Manager, U.S. Food and Beverage of the Company.


                                     -86-
<PAGE>
<PAGE>

From June 1991 to October 1994, Mr. Prevot also served as President and
General Manager of Graham Recycling.

     Philippe LeJeune has served as Senior Vice President and General
Manager, Europe of the Operating Company since October 1998.  Prior to
joining the company. Mr. LeJeune served as Group Vice President, Plastic
Bottles for Carnaud Metalbox SA from February 1997 to October 1998, as Vice
President, South Europe, for Danisco Flexible from December 1995 to February
1997 and as Division Director, CMB Flexibles, for Carnaud Metal Box from
February 1992 until December 1995.

     George M. Lane has served as Senior Vice President, Global Human
Resources of the Operating Company since September 1998.  From July 1990 to
September 1998, Mr. Lane served as Vice President, Human Resources of the
Operating Company.

     Geoffrey R. Lu has served as Vice President and General Manager, Latin
America of the Operating Company since the Recapitalization. From May 1997 to
the Recapitalization, Mr. Lu served as Vice President and General Manager,
Latin America of the Company. From 1994 to 1997, Mr. Lu served as Director
and General Manager, Latin America of the Company. Prior to 1994, Mr. Lu
served as Director, Global Business Development of the Company.

     George W. Stevens has served as Vice President and General Manager,
Canada of the Operating Company since March 1998.  From August 1992 to March
1998, Mr. Stevens served as Director of Sales North America, Household
Cleaning and Personal Care of the Operating Company.

     Robert M. Gibson has served as Vice President Global Procurement of the
Operating Company since November 1998.  Prior to that he served as Vice
President Procurement for the Operating Company.

     Jay W. Hereford has served as Vice President, Finance and
Administration, Assistant Treasurer and Assistant Secretary of the Operating
Company since November 1998.  Mr. Hereford has also served as Vice President,
Finance and Administration, Assistant Treasurer and Assistant Secretary of
Opco GP, and as Vice President, Secretary, Assistant Secretary and Assistant
Treasurer of various subsidiaries of the Operating Company.  Prior to joining
the company, Mr. Hereford served as Vice President, Treasurer and Chief
Financial Officer of Continental Plastic Containers, Inc. and Continental
Caribbean Containers, Inc. from 1992 to November 1998.

     Chinh E. Chu is a Managing Director of The Blackstone Group L.P. which
he joined in 1990. Since the Recapitalization, Mr. Chu has served as Vice
President, Secretary and Assistant Treasurer of Investor LP and Investor GP,
as a Vice President of CapCo I and CapCo II and as a member of the Boards of
Directors of Investor LP, CapCo I and CapCo II. Prior to joining Blackstone,
Mr. Chu was a member of the Mergers and Acquisitions Group of Salomon
Brothers Inc from 1988 to 1990. He currently serves on the Boards of

                                     -87-
<PAGE>
<PAGE>

Directors of Prime Succession Inc., Roses, Inc. and Haynes International,
Inc.

     Howard A. Lipson is Senior Managing Director of The Blackstone Group
L.P. which he joined in 1988. Since the Recapitalization, Mr. Lipson has
served as President, Treasurer and Assistant Secretary of Investor LP and
Investor GP and as a member of the Board of Directors of Investor LP. Prior
to joining Blackstone, Mr. Lipson was a member of the Mergers and
Acquisitions Group of Salomon Brothers Inc. He currently serves on the Boards
of Directors of Allied Waste Industries, Inc., Volume Services, Inc., AMF
Group Inc., Ritvik Holdings Inc., Prime Succession Inc. and Roses, Inc.

     Simon P. Lonergan is an Associate of The Blackstone Group L.P. which he
joined in 1996. Since the Recapitalization, Mr. Lonergan has served as Vice
President, Assistant Secretary and Assistant Treasurer of Investor LP and
Investor GP, as a Vice President of CapCo I and CapCo II and as a member of
the Boards of Directors of Investor LP, CapCo I and CapCo II. Prior to
joining Blackstone, Mr. Lonergan was an Associate at Bain Capital, Inc. and a
Consultant at Bain and Co. He currently serves on the Board of Directors of
CommNet Cellular, Inc. and the Advisory Committee of InterMedia Partners VI.

     The Boards of Directors of CapCo I and CapCo II are comprised of Philip
R. Yates, John E. Hamilton, Chinh E. Chu and Simon P. Lonergan. The Board of
Directors of Investor LP is comprised of Howard A. Lipson, Chinh E. Chu and
Simon P. Lonergan.

     Except as described above, there are no arrangements or understandings
between any director or executive officer and any other person pursuant to
which such person was elected or appointed as a director or executive
officer.

Item 11.  Executive Compensation

     The following table sets forth all cash compensation paid to the Chief
Executive Officers and four other most highly compensated executive officers
of the Company (the "Named Executive Officers") for the year ended
December 31, 1998, and their respective titles at December 31, 1998.













                                     -88-
<PAGE>
<PAGE>

                          Summary Compensation Table
<TABLE>
<CAPTION>
                                                           Annual Compensation             Long-Term Compensation
                                                  --------------------------------------    ---------------------
                                                                                             Awards      Payouts
                                                                                            --------
                                                                   (3)                                     (4)           (5)
                                                                                           Restricted
       Name and Principal Position                                           Other annual    Stock        LTIP        All Other
 --------------------------------------    Year     Salary        Bonus      Compensation    Awards      Payouts    Compensation
                                           ----   ----------   -----------   -----------   ---------   ----------   ------------
                                                      $             $             $            $            $             $
<S>                                           <C>    <C>           <C>           <C>           <C>         <C>          <C>
Philip R. Yates (1)                        1998    300,019       100,474         -0-      3,866,000    2,225,000       4,800
Chief Executive Officer                    1997    250,016       120,000         -0-         -0-          -0-          5,053
                                           1996    237,109        90,000         -0-         -0-          -0-          4,194

William H. Kerlin, Jr. (2)                 1998     12,000        6,000          -0-         -0-          -0-            240
Chief Executive Officer                    1997    140,000        70,000         -0-         -0-          -0-          2,750
                                           1996    135,900        67,950         -0-         -0-          -0-          2,670

John E. Hamilton                           1998    158,520       132,864         -0-       688,000      400,000        3,586
Chief Financial Officer                    1997    133,207        60,000         -0-         -0-          -0-          3,503
                                           1996    121,336        50,000         -0-         -0-          -0-          3,386

G. Robinson Beeson                         1998    164,719       138,273         -0-     1,074,000      500,000        4,194
Senior Vice President and General          1997    138,677        52,000         -0-         -0-          -0-          3,812
Manager,  Automotive                       1996    128,767        45,000         -0-         -0-          -0-          3,449

Scott G. Booth                             1998    158,104       132,489         -0-     1,074,000      500,000        3,625
Senior Vice President and General          1997    132,463        52,000         -0-         -0-          -0-          3,600
Manager, Household Cleaning and            1996    118,973        40,000         -0-         -0-          -0-          3,409
Personal Care

Roger M. Prevot                            1998    194,404       164,169         -0-     1,933,000      750,000        3,554
Senior Vice President and General          1997    164,180        72,000         -0-         -0-          -0-          3,544
Manager, Food & Beverage                   1996    154,813        60,000         -0-         -0-          -0-          3,440


<FN>
(1)  Philip R. Yates has served as Chief Executive Officer since the
     Recapitalization (see Item 10,  Advisory Committee Members,
     Directors and Executive Officers of the Registrant).
(2)  William H. Kerlin, Jr. served as Chief Executive Officer prior to
     the Recapitalization (see Item 10,  Advisory Committee Members,
     Directors and Executive Officers of the Registrant).  Mr. Kerlin,
     who is compensated solely by Graham Capital, provided services to

                                     -89-
<PAGE>
<PAGE>

     companies other than Holdings. Amounts set forth for Mr. Kerlin
     represent the portion of Mr. Kerlin's compensation allocable to
     Holdings based on the amount of services provided to Holdings.
(3)  Represents bonus paid in the current year, but accrued in the prior
     year under Company's annual discretionary bonus plan.
(4)  Represents cash payments to the named executive officers which was
     used by the recipients to purchase shares of restricted common
     stock of Investor LP, the value of a grant of the same number of
     additional restricted shares as the shares purchased and taxes
     payable in respect of these awards (see Management Awards).
(5)  Represents contributions to the Company's 401(k) plan and amounts
     attributable to group term life insurance.
</TABLE>


Management Awards

     Pursuant to the Recapitalization Agreement, immediately prior to the
Closing, Holdings made cash payments to approximately 20 senior level
managers equal to approximately $7.0 million, which represented the aggregate
value payable under Holdings' former equity appreciation plan (which was
cancelled upon the Closing) and additional cash bonuses.

     Pursuant to the Recapitalization Agreement, immediately after the
Closing, Holdings granted to approximately 100 middle level managers stay
bonuses aggregating approximately $4.6 million, which are payable over a
period of up to three years.

     Pursuant to the Recapitalization Agreement, immediately after the
Closing, Holdings made additional cash payments to approximately 15 senior
level managers equal to approximately $5.0 million, which represented
additional cash bonuses and the taxes payable by such managers in respect of
the awards described in this paragraph. In addition, (a) Holdings made
additional cash payments to such managers equal to approximately $3.1
million, which was used by the recipients to purchase shares of restricted
common stock of Investor LP and (b) each such recipient was granted the same
number of additional restricted shares as the shares purchased pursuant to
clause (a). Such restricted shares vest over a period of three years, and
one-third of any forfeited shares will increase the Graham Partners'
ownership interests in Holdings.

     As a result of such equity awards, Management owns an aggregate of
approximately 3.0% of the outstanding common stock of Investor LP, which
constitutes approximately a 2.6% interest in Holdings.

Severance Agreements

     In connection with the Recapitalization, the Company entered into
severance agreements with Messrs. Yates, Hamilton, Beeson, Booth, Prevot,

                                     -90-
<PAGE>
<PAGE>

Stevens  and Lu. Such severance agreements provided that in the event a
Termination Event (as defined therein) occurs, the executive shall receive:
(i) a severance allowance equal to one year of salary (two years for Mr.
Yates) payable in equal monthly installments over a one year period (two
years for Mr. Yates); (ii) continued group health and life insurance coverage
for one year (the executive's contribution for which would be the same
contribution as similarly situated executives and would be deducted from the
severance allowance payments); and (iii) a lump sum amount payable when the
Company pays its executives bonuses, equal to the executive's target bonus,
pro-rated to reflect the portion of the relevant year occurring prior to the
executive's termination of employment.

Supplemental Income Plan

     Mr. Yates is the sole participant in the Graham Engineering Corporation
Amended Supplemental Income Plan (the "SIP"). Upon the Closing, 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 retire at or after attaining age 55 without any reduction in the
benefit (although such benefit would not begin until Mr. Yates attained age
65). In the event that Mr. Yates were to retire prior to attaining age 55
(the benefit would still commence at age 65), then the annuity payments would
be reduced. In the event the Company, without "just cause" (as defined in the
SIP) terminates Mr. Yates' employment, then upon attaining age 65, he would
receive the entire annuity. The SIP provides for similar benefits in the
event of a termination of employment on account of death or disability.

Management Option Plan

     Pursuant to the Recapitalization Agreement, the Company has adopted the
Graham Packaging Holdings Company Management Option Plan (the "Option Plan").

     The Option Plan provides for the grant to management employees of
Holdings and its subsidiaries of options ("Options") to purchase limited
partnership interests in Holdings equal to 0.01% of Holdings (prior to any
dilution resulting from any interests granted pursuant to the Option Plan)
(each 0.01% interest being referred to as a "Unit"). The aggregate number of
Units with respect to which Options may be granted under the Option Plan
shall not exceed 500 Units, representing a total of up to 5% of the equity of
Holdings.

     The exercise price per Unit for those Units granted is $25,789.  The
exercise price per Unit for Units not yet granted has yet to be determined.
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 Plan is intended to

                                     -91-
<PAGE>
<PAGE>

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 committee (the "Committee") shall be appointed to administer the
Option Plan, including, without limitation, the determination of the
employees to whom grants will be made, the number of Units subject to each
grant, and the various terms of such grants. The Committee may provide that
an Option cannot be exercised after the merger or consolidation of Holdings
into another company or corporation, the exchange of all or substantially all
of the assets of Holdings for the securities of another corporation, the
acquisition by a corporation of 80% or more of Holdings' partnership interest
or the liquidation or dissolution of Holdings, and if the Committee so
provides, it will also provide either by the terms of such Option or by a
resolution adopted prior to the occurrence of such merger, consolidation,
exchange, acquisition, liquidation or dissolution, that, for ten business
days prior to such event, such Option shall be exercisable as to all Units
subject thereto, notwithstanding anything to the contrary in any provisions
of such Option and that, upon the occurrence of such event, such Option shall
terminate and be of no further force or effect. The Committee may also
provide that even if the Option shall remain exercisable after any such
event, from and after such event, any such Option shall be exercisable only
for the kind and amount of securities and other property (including cash), or
the cash equivalent thereof, receivable as a result of such event by the
holder of a number of partnership interests for which such Option could have
been exercised immediately prior to such event. No suspension, termination or
amendment of or to the Option Plan shall materially and adversely affect the
rights of any participant with respect to Options issued hereunder prior to
the date of such suspension, termination or amendment without the consent of
such holder.



















                                     -92-
<PAGE>
<PAGE>

     The following table sets forth certain information with respect to
Options granted to the Named Executive Officers for the year ended
December 31, 1998.

                     OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>

                                                                                   Potential Realizable Value
                                                                                               At
                                                                                     Assumed Annual Rates Of
                                                                                              Stock
                                                                                     Price Appreciation For
                                                                                             Option                 Alternative:
                                     Individual Grants                                        Term                Grant Date Value
                       --------------------------------------------                 -------------------------    -----------------

                                           Percent of
                          Number of      total Options/
                          Securities     SARs Granted To   Exercise
                          Underlying      Employees In     or Base      Expi-                                        Grant Date
                         Option/SARs         Fiscal         Price       ration                                        Present
        Name             Granted (#)           Year         ($/Sh)      Date         5% ($)         10% ($)            Value $ 
------------------      --------------    -------------    --------    --------    -----------    ------------    ----------------
          

<S>                   <C>               <C>              <C>          <C>         <C>            <C>            <C>

Philip R. Yates              63.8             16.0%        $25,789      2/2/02     $1,035,000      $2,622,000           N/A
Chief Executive
Officer

William H. Kerlin,            0                0%             0           "             0              0                N/A
Jr.  Chief
Executive Officer

John E. Hamilton             29.8             7.5%          25,789        "          483,000       1,225,100            N/A
Chief Financial
Officer


G. Robinson Beeson           29.8             7.5%          25,789        "          483,000       1,225,000            N/A
Senior Vice
President and
General Manager,
Automotive





                                     -93-
<PAGE>
<PAGE>

Scott G. Booth               29.8             7.5%          25,789        "          483,000       1,225,000            N/A
Senior Vice
President and
General Manager,
Household Cleaning
and Personal Care

Roger M. Prevot              43.4             10.9%         25,789        "          704,000       1,784,000            N/A
Senior Vice
President and
General Manager,
Food & Beverage

</TABLE>


Pension Plans
  
     In the year ended December 31, 1998, 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. See Note 11 to the Financial 
Statements of Graham Packaging Group for each of the three years in
the period ended December 31, 1998.
  















                                     -94-
<PAGE>
<PAGE>

     The following table shows estimated annual benefits upon retirement
under the defined benefit plan for salaried employees, based on the final
five years average compensation and years of service, as specified therein:

                              Pension Plan Table
<TABLE>
<CAPTION>
                                                         Years of Service
                                   ------------------------------------------------------------
Remuneration                           15          20           25           30           35
------------                       ---------    ---------    ---------   ---------    ---------
<S>                               <C>          <C>          <C>         <C>          <C>
125,000                               $27,198      $36,265      $45,331     $54,397      $55,959
150,000                                33,198       44,265       55,331      66,397       68,272
175,000                                39,198       52,265       66,331      78,387       80,584
200,000                                45,198       60,265       75,331      90,397       92,897
225,000                                51,198       68,265       85,331     102,397      105,209
250,000                                57,198       76,265       95,331     114,397      117,522
300,000                                69,198       92,265      115,331     138,397      142,147
400,000                                93,198      124,265      155,331     186,397      191,397
450,000                               105,198      140,265      176,331     210,397      216,022
500,000                               117,198      156,265      195,331     234,397      240,647
</TABLE>

     Note: The amounts shown are based on 1998 covered compensation of
$31,129 for an individual born in 1933. In addition, these figures do not
reflect the salary limit of $160,000 and benefit limit under the plan's
normal form of $130,000 in 1998.

     The compensation covered by the defined benefit plan for salaried
employees is an amount equal to "Total Wages" (as defined). This amount
includes the annual Salary and Bonus amounts shown in the Summary
Compensation Table above for the five Named Executive Officers who
participated in the plan. The estimated credited years of service for the
year ended December 31, 1998 for each of the five Named Executive Officers
participating in the plan was as follows: Philip R. Yates, 27 years; John E.
Hamilton, 15 years; G. Robinson Beeson, 24 years; Scott G. Booth, 11 years;
and Roger M. Prevot, 11 years.  Benefits under the plan are computed on the
basis of straight-life annuity amounts. Amounts set forth in the Pension
Table are not subject to deduction for Social Security or other offset
amounts.

     The Recapitalization Agreement provided that assets of the Graham
Engineering defined benefit plan related to employees not covered by
collective bargaining agreements will be transferred to a new non-
contributory defined benefit plan sponsored by the Company for such
employees. Such was completed in 1998.



                                     -95-
<PAGE>
<PAGE>

401(k) Plan

     During 1998 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 also sponsored other noncontributory defined contribution plans under
collective bargaining agreements. The Company's contributions were determined
as a specified percentage of employee contributions, subject to certain
maximum limitations. The Company's costs for the salaried and non-collective
bargaining hourly plan for 1996, 1997, and 1998 were $722,000, $742,000 and
$787,000 respectively. See Note 11 to the Financial Statements of
Graham Packaging Group for each of the three years in the period ended
December 31, 1998.

     Pursuant to the Recapitalization Agreement, assets of this plan related
to Company employees were transferred to a new plan sponsored by the Company
following the Closing of the Recapitalization.

Item 12.   Security Ownership of Certain Beneficial Owners and Management

     The following table and accompanying footnotes set forth certain
information regarding beneficial ownership of the limited partnership and
general partnership interests in the Issuers, as of the date hereof, by (i)
each person who is known by the Issuers to own beneficially more than 5% of
such interests, (ii) each member of the Advisory Committee of Holdings and
each of the executive officers of the Operating Company and (iii) all members
of the Advisory Committee of Holdings and the executive officers of the
Operating Company as a group. For a more detailed discussion of certain
ownership interests following the Recapitalization, see "Business   The
Recapitalization" (Item 1) and "Certain Relationships and Related Party 
Transactions" (Item 13).

                           Name and Address
                             of Beneficial                        Percentage
Issuer                           Owner         Type of Interest    Interest
-----------------------    -----------------    ---------------   ----------
                                               Limited
Graham Packaging Company  Holdings             Partnership           99%

                                               General
                          Opco GP(1)           Partnership            1%

GPC Capital Corp. I       Operating Company    Common Stock         100%
Graham Packaging
Holdings Company          Investor LP(2)       Limited               81%


                                     -96-
<PAGE>
<PAGE>

                           Name and Address
                             of Beneficial                        Percentage
Issuer                           Owner         Type of Interest    Interest
-----------------------    -----------------    ---------------   ----------
                                               General           
                          Investor GP(2)       Partnership             4%

                          Graham Family        Limited
                          entities(3)          Partnership            14%

                          Graham Packaging     General
                          Corporation(3)       Partnership             1%

GPC Capital Corp. II      Holdings             Common Stock          100%


(1)  Opco GP is a wholly owned subsidiary of Holdings.
(2)  Investor GP is a wholly owned subsidiary of Investor LP. Upon the
     consummation of the Recapitalization, Blackstone, Blackstone Offshore
     Capital Partners III L.P. and Blackstone Family Investment Partnership
     III L.P. became, collectively, the beneficial owner of 100.0% of the
     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 and Howard A. Lipson are members of
     BMA, which has investment and voting control over the shares held or
     controlled by Blackstone. Each of such persons disclaims beneficial
     ownership of such shares. The address of each of the Equity Investors is
     c/o The Blackstone Group L.P., 345 Park Avenue, New York, New York
     10154. Following the consummation of the Recapitalization, Blackstone
     transferred to Management approximately 3.0% of the common stock of
     Investor LP. See "Management--Management Awards." In addition, an
     affiliate of BT Alex. Brown Incorporated and Bankers Trust International
     PLC, two of the Initial Purchasers of the Old Notes, acquired
     approximately 4.8% of the common stock of Investor LP. After giving
     effect to these transactions, Blackstone's beneficial ownership of the
     common stock of Investor LP declined by a corresponding 3.0% and 4.8%,
     respectively, to approximately 92.2%.
(3)  Each of these entities is wholly owned, directly or indirectly, by the
     Graham family. The address of each of these entities is c/o Graham
     Capital Company, 1420 Sixth Avenue, York, Pennsylvania 17403.

  
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. Copies of the Recapitalization Agreement, the
Consulting Agreement, the Equipment Sales Agreement and the Partners
Registration Rights Agreement are exhibits to this Report on Form 10-K.

                                     -97-
<PAGE>
<PAGE>

Transactions with Graham Partners and Others

     Prior to the Closing of the Recapitalization, Donald C. Graham, as
lessor, and Holdings, as lessee, were parties to four lease agreements
relating to two properties in Berkeley, Missouri and two properties in York,
Pennsylvania. For the year ended December 31, 1997, the Company paid Donald
C. Graham $2.0 million in the aggregate pursuant to such lease agreements.
Upon the consummation of the Recapitalization, the real property subject to
each such lease agreement was contributed to the Operating Company as part of
the Graham Contribution. See "The Recapitalization."

     Prior to the Closing, York Transportation and Leasing, Inc. (an
affiliate of the Graham Partners), as lessor, and Graham Packaging Canada,
Ltd., as lessee, were parties to three lease agreements relating to
properties located in Missassuaga, Ontario, Burlington, Ontario and Anjou,
Quebec. For the year ended December 31, 1997, the Company paid York
Transportation and Leasing $0.6 million in the aggregate pursuant to such
lease agreements. Upon the Closing, the real property subject to each such
lease agreement was contributed to the Operating Company as part of the
Graham Contribution. See "The Recapitalization."

     Prior to the Closing, Graham GP Corp., Graham Capital and Graham Europe
Limited (affiliates of the Graham Partners) were parties to management
agreements, pursuant to which Donald C. Graham, William H. Kerlin, Jr. and
others provided management services and served as executive officers of the
Company. The Company paid $1.7 million for the year ended December 31, 1997
for such services.

     Prior to the Closing, Holdings, Graham Capital, Graham GP Corp. and York
Transportation and Leasing were all parties to an Airplane Lease
Agreement/Aircraft Sharing Agreement. The Company paid $0.3 million for the
year ended December 31, 1997 pursuant to such agreement.

     For the year ended December 31, 1997, the Company also paid Viking
Graham Corporation (an affiliate of the Graham Partners) $0.6 million for
certain consulting services.

     All of the agreements described above were terminated upon the Closing.

     At the time of the Recapitalization, Donald C. Graham and Jean Rubie
were each one-third owners of Techne Technipack Engineering Italia S.p.A.
("Techne"). Techne supplies shuttle blow-molders to many of the Company's
non-U.S. facilities. The Company paid Techne approximately $5.2 million and
$3.5 million for such equipment for the year ended December 31, 1998 and
1997, respectively.  Prior to the Recapitalization, Mr. Rubie served as
General Manager, Europe, of the Company.  Subsequent to the Recapitalization,
Mr. Graham sold his ownership interest in Techne.



                                     -98-
<PAGE>
<PAGE>

     Graham Engineering has supplied both services and equipment to the
Company. The Company paid Graham Engineering approximately  $16.8 million and
$11.3 million for such services and equipment for the years ended
December 31, 1998 and 1997, respectively.

     The Company has provided certain services to Graham Engineering. Graham
Engineering paid the Company approximately $1.4 million and $1.0 million for
such services for the years ended December 31, 1998 and 1997, respectively.

     Graham Capital and Viking Graham, Inc. (an affiliate of the Graham
Partners) has supplied management services to the Company.  The Company paid
Graham Capital and Viking Graham, Inc. approximately $1.1 million for such 
services for the year ended December 31, 1998.

     Blackstone has supplied management services to the Company.  The Company
paid Blackstone approximately $1.0 million for such services for the year
ended December 31, 1998.

     The Company has entered into an Airplane Time Sharing Agreement with
Graham Capital Company.  Other parties to the agreement were Graham
Architectural Products Corporation, Viking Graham, Inc. and Graham
Engineering Corporation.  The Company paid $3,500 for the year ended
December 31, 1998 pursuant to such agreement.

     An affiliate of BT Alex. Brown Incorporated and Bankers Trust
International PLC, two of the Initial Purchasers of the Old Notes, acquired
approximately a 4.8% equity interest in Investor LP. See "Security
Ownership." Bankers Trust Company, an affiliate of BT Alex. Brown
Incorporated and Bankers Trust International PLC, acted as administrative
agent and provided a portion of the financing under the New Credit Agreement
entered into in connection with the Recapitalization, for which it received
customary commitment and other fees and compensation.  

     The New Credit Agreement includes a $100 million Growth Capital
Revolving Credit Facility under which the Operating Company is entitled to
draw amounts for capital expenditure requirements and to finance acquisitions
and investments; provided that loans under the Growth Capital Revolving
Credit Facility may only be incurred to the extent that such loans are
matched with equity contributions from the principal equity holders of
Investor LP (which equity contributions shall, in turn, ultimately be
contributed to the Operating Company) on a dollar-for-dollar basis. 

     As part of the Amendment to the New Credit Agreement, if certain events
of default  were to occur (including, without limitation, if the Company's
Net Leverage Ratio were above 5.15:1.0 at March 31, 2000), Blackstone has
agreed to make an equity contribution to the Company through the
administrative agent of up to $50 million.



                                     -99-
<PAGE>
<PAGE>

     Pursuant to the Purchase Agreement dated January 23, 1998, the Initial
Purchasers, BT Alex. Brown Incorporated, Bankers Trust International PLC,
Lazard Freres & Co. LLC and Salomon Brothers Inc, purchased the Senior
Subordinated Old Notes at a price of 97.0% of the principal amount, for a
discount of 3% from the initial offering price of 100% or a total discount of
$6,750,000. Pursuant to the Purchase Agreement, the Initial Purchasers
purchased the Senior Discount Old Notes at a price of 57.173% of the
principal amount, for a discount of 2.361% from the initial offering price of
59.534% or a total discount of $3,990,090. Pursuant to the Purchase
Agreement, the Issuers also reimbursed the Initial Purchasers for certain
expenses.







































                                     -100-
<PAGE>
<PAGE>

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. Upon the Closing of the Recapitalization, the name of the
Operating Company was changed to "Graham Packaging Company." The Operating
Company will continue until its dissolution and winding up in accordance with
the terms of the Operating Company Partnership Agreement (as defined). 

     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 sale and manufacturing of
rigid plastic containers and any business necessary or incidental thereto. 

     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 participate in the management or control of the business. 

     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 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

                                     -101-
<PAGE>
<PAGE>

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 the limited partner shall not transfer its limited
partnership interests. 

     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). 

     As contemplated by the Recapitalization Agreement, upon the Closing,
Graham Capital and its successors or assigns, 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 Graham
Family Growth Partnership, Graham Capital and Investor LP. 

     The purpose of Holdings is the sale and manufacturing 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

                                     -102-
<PAGE>
<PAGE>

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. 

     The partnership and the general partners shall be advised by a committee
(the "Advisory Committee") comprised of five individuals, three of whom shall
be appointed from time to time by Investor GP and, for so long as the
Continuing Graham Partners and their affiliates do not sell more than two-
thirds of their partnership interests owned at the Closing, two of whom shall
be appointed from time to time by the other general partners. 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 Continuing Graham Partners and their affiliates do not sell more than
two-thirds of their partnership interests owned at the Closing, Holdings will
pay to Graham Family Growth Partnership an annual fee of $1.0 million. 

     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 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 (as defined). 

     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) 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. 


                                     -103-
<PAGE>
<PAGE>

     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 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. 

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

Partners Registration Rights Agreement

     Pursuant to the Recapitalization Agreement, upon the Closing, Holdings,
CapCo II, the Continuing Graham Partners, the Equity Investors and Blackstone
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 Continuing Graham
Partners and their affiliates (and their permitted transferees of partnership
interests in Holdings) two "demand" registrations after an initial public

                                     -104-
<PAGE>
<PAGE>

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 Blackstone and its affiliates are selling
their shares in such offering) and (ii) to the Equity Investors, Blackstone
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
Continuing Graham Partners, the Equity Investors, Blackstone 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--Holdings Partnership Agreement."

Certain Business Relationships

     Equipment Sales Agreement.  Pursuant to the Recapitalization Agreement,
upon the Closing, Holdings and Graham Engineering entered into the Equipment
Sales, Service and Licensing Agreement ("Equipment Sales Agreement"), which
provides that, with certain exceptions, (i) Graham Engineering will sell to
Holdings and its affiliates certain of Graham Engineering's larger-sized
proprietary 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 set forth 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
the Closing and any other country in or to which Holdings has produced or
shipped extrusion blow molded plastic bottles 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.
After December 31, 1998, either party may terminate the other party's right
to receive consulting services.

     Consulting Agreement.  Pursuant to the Recapitalization Agreement, upon
the Closing, Holdings and Graham Capital entered into a Consulting Agreement
(the "Consulting Agreement"), pursuant to which Graham Capital will provide
Holdings with general business, operational and financial consulting services
at mutually agreed retainer or hourly rates (ranging from $200 to $750 per
hour). The Consulting Agreement terminates on the second anniversary of the
Closing, unless mutually extended by the parties.




                                     -105-
<PAGE>
<PAGE>

Promissory Notes of Graham Partners

     From 1994 through the Closing, there was outstanding $20.2 million
principal amount of promissory notes owed by the Graham Partners to Holdings,
which had been contributed by the Graham Partners as capital in Holdings.
Such promissory notes (including accrued interest) were repaid in full in
connection with the Recapitalization. For the year ended December 31, 1997,
accrued interest income on the promissory notes was approximately $1.0
million.

Payment of Certain Fees and Expenses

     In connection with the Recapitalization, Blackstone received a fee of
approximately $9.3 million, and the Operating Company has reimbursed or will
reimburse Blackstone for all out-of-pocket expenses incurred in connection
with the Recapitalization. In addition, pursuant to a monitoring agreement
(the "Monitoring Agreement") entered into among Blackstone, Holdings and the
Operating Company, Blackstone will receive a monitoring fee equal to $1.0
million per annum, and will be reimbursed for certain out-of-pocket expenses.
In the future, an affiliate or affiliates of Blackstone 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.

























                                     -106-
<PAGE>
<PAGE>

                                    PART IV

Item 14.  Exhibits, Financial Statements Schedules and Reports on Form 8-K

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

          Schedule I - Registrant's 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
-------     ----------------------

2.1      -  Agreement and Plan of Recapitalization, Redemption and Purchase
            dated as of December 18, 1997, as amended as of January 29,
            1998, by and among Graham Packaging Holdings Company, BCP
            /Graham Holdings L.L.C., BMP/Graham Holdings Corporation and the
            other parties named therein (incorporated herein by reference to
            Exhibit 2.1 to the Registration Statement on Form S-4 (File No.
            333-53603-06)).

2.2      -  Purchase Agreement dated January 23, 1998 among Graham Packaging
            Holdings Company, Graham Packaging Company, GPC Capital Corp. I,
            GPC Capital Corp. II, BT Alex. Brown Incorporated, Bankers Trust
            International PLC, Lazard Freres & Co. L.L.C. and Salomon
            Brothers Inc (incorporated herein by reference to Exhibit 2.2 to
            the Registration Statement on Form S-4 (File No. 333-53603-03)).

2.3      -  Purchase Agreement between CarnaudMetalbox S.A. and Graham 
            Packaging Company dated as of July 27, 1998.

3.1      -  Certificate of Limited Partnership of Graham Packaging Company
            (incorporated herein by reference to Exhibit 3.2 to the
            Registration Statement on Form S-4 (File No. 333-53603-03)).

3.2      -  Amended and Restated Agreement of Limited Partnership of Graham
            Packaging Company dated as of February 2, 1998 (incorporated
            herein by reference to Exhibit 3.2 to the Registration Statement
            on Form S-4 (File No. 333-53603-03)).

                                     -107-
<PAGE>
<PAGE>

Exhibit
Number      Description of Exhibit
-------     ----------------------            

3.3      -  Certificate of Incorporation of GPC Capital Corp. I
            (incorporated herein by reference to Exhibit 3.3 to the
            Registration Statement on Form S-4 (File No. 333-53603-03)).

3.4      -  By-Laws of GPC Capital Corp. I (incorporated herein by reference
            to Exhibit 3.4 to the Registration Statement on Form S-4 (File
            No. 333-53603-03)).

3.5      -  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 (File No. 333-53603-03)).

3.6      -  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 (File No. 333-53603-03)).

3.7      -  Certificate of Incorporation of GPC Capital Corp. II
            (incorporated herein by reference to Exhibit 3.7 to the
            Registration Statement on Form S-4 (File No. 333-53603-03)).

3.8      -  By-Laws of GPC Capital Corp. II (incorporated herein by
            reference to Exhibit 3.8 to the Registration Statement on Form
            S-4 (File No. 333-53603-03)).

4.1      -  Indenture dated as of February 2, 1998 among Graham Packaging
            Company and GPC Capital Corp. I and Graham Packaging Holdings
            Company, as guarantor, and United States Trust Company of New
            York, as Trustee, relating to the Senior Subordinated Notes Due
            2008 of Graham Packaging Company and GPC Capital Corp. I,
            unconditionally guaranteed by Graham Packaging Holdings Company
            (incorporated herein by reference to Exhibit 4.1 to the
            Registration Statement on Form S-4 (File No. 333-53603-03)).

4.2      -  Form of 8 3/4% Senior Subordinated Note Due 2008, Series A
            (included in Exhibit 4.1) (incorporated herein by reference to
            Exhibit 4.2 to the Registration Statement on Form S-4 (File No.
            333-53603-03)).

4.3      -  Form of 8 3/4% Senior Subordinated Note Due 2008, Series B
            (included in Exhibit 4.1) (incorporated herein by reference to
            Exhibit 4.3 to the Registration Statement on Form S-4 (File No.
            333-53603-03)).


                                     -108-
<PAGE>
<PAGE>

Exhibit
Number      Description of Exhibit
-------     ----------------------            

4.4      -  Form of Floating Interest Rate Term Security Due 2008, Series A
            (included in Exhibit 4.1) (incorporated herein by reference to
            Exhibit 4.4 to the Registration Statement on Form S-4 (File No.
            333-53603-03)).

4.5      -  Form of Floating Interest Rate Term Security Due 2008, Series B
            (included in Exhibit 4.1) (incorporated herein by reference to
            Exhibit 4.5 to the Registration Statement on Form S-4 (File No.
            333-53603-03)).

4.6      -  Registration Rights Agreement dated as of February 2, 1998 among
            Graham Packaging Company and GPC Capital Corp. I and Graham
            Packaging Holdings Company, as guarantor, and BT Alex. Brown
            Incorporated, Bankers Trust International PLC, Lazard Freres &
            Co. L.L.C. and Salomon Brothers Inc, relating to the Senior
            Subordinated Notes Due 2008 of Graham Packaging Company and GPC
            Capital Corp. I, unconditionally guaranteed by Graham Packaging
            Holdings Company (incorporated herein by reference to Exhibit
            4.6 to the Registration Statement on Form S-4 (File No. 333-
            53603-03)).

4.7      -  Indenture dated as of February 2, 1998 among Graham Packaging
            Holdings Company and GPC Capital Corp. II and The Bank of New
            York, as Trustee, relating to the Senior Discount Notes Due 2009
            of Graham Packaging Holdings Company and GPC Capital Corp. II
            (incorporated herein by reference to Exhibit 4.7 to the
            Registration Statement on Form S-4 (File No. 333-53603-03)).

4.8      -  Form of 10 3/4% Senior Discount Note Due 2009, Series A
            (included in Exhibit 4.7) (incorporated herein by reference to
            Exhibit 4.8 to the Registration Statement on Form S-4 (File No.
            333-53603-03)).

4.9      -  Form of 10 3/4% Senior Discount Note Due 2009, Series B
            (included in Exhibit 4.7) (incorporated herein by reference to
            Exhibit 4.8 to the Registration Statement on Form S-4 (File No.
            333-53603-03)).









                                     -109-
<PAGE>
<PAGE>

Exhibit
Number      Description of Exhibit
-------     ----------------------            

4.10     -  Registration Rights Agreement dated as of February 2, 1998 among
            Graham Packaging Holdings Company, GPC Capital Corp. II, BT
            Alex. Brown Incorporated, Bankers Trust International PLC,
            Lazard Freres & Co. L.L.C. and Salomon Brothers Inc. relating to
            the Senior Discount Notes Due 2009 of Graham Packaging Holdings
            Company and GPC Capital Corp. II (incorporated herein by
            reference to Exhibit 4.10 to the Registration Statement on Form
            S-4 (File No. 333-53603-03)).

10.1     -  Credit Agreement dated as of February 2, 1998 among Graham
            Packaging Holdings Company, Graham Packaging company, GPC
            Capital Corp. I, the lending institutions identified in the
            Credit Agreement and the agents identified in the Credit
            Agreement (incorporated herein by reference to Exhibit 10.1 to
            the Registration Statement on Form S-4 (File No. 333-53603-03)).

10.2     -  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 (File No. 333-53603-03)).

10.3     -  Equipment Sales, Service 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 (File No. 333-
            53603-03)).

10.4     -  Forms of Retention Incentive Agreement (incorporated herein by
            reference to Exhibit 10.4 to the Registration Statement on Form
            S-4 (File No. 333-53603-03)).

10.5     -  Forms of Severance Agreement (incorporated herein by reference
            to Exhibit 10.5 to the Registration Statement on Form S-4 (File
            No. 333-53603-03)).

10.6     -  Registration Rights Agreement by and among Graham Packaging
            Company, 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 (File No. 333-53603-03)).





                                     -110-
<PAGE>
<PAGE>

Exhibit
Number      Description of Exhibit
-------     ----------------------            

10.7     -  Monitoring Agreement dated as of February 2, 1998 among Graham
            Packaging Holdings Company, Graham Packaging Company and
            Blackstone (incorporated herein by reference to Exhibit 10.7 to
            the Registration Statement on Form S-4 (File No. 333-53603-03)).

10.8     -  Management Stockholders Agreement (incorporated herein by
            reference to Exhibit 10.8 to the Registration Statement on Form
            S-4 (File No. 333-53603-03)).

10.9     -  Form of Equity Incentive Agreement (incorporated herein by
            reference to Exhibit 10.9 to the Registration Statement on Form
            S-4 (File No. 333-53603-03)).

10.10    -  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 (File No. 333-53603-03)).

10.11    -  Graham Packaging Holdings Company Management Option Plan
            (incorporated herein by reference to Exhibit 10.11 to the
            Registration Statement on Form S-4 (File No. 333-53603-03)).

10.12    -  First Amendment to Credit Agreement dated as of 
            August 13, 1998.

21.1     -  Subsidiaries of Graham Packaging Holdings Company

24       -  Power of Attorney--Page II-  of Form 10-K.

27       -  Financial Data Schedule

99.1     -  Form of Fixed Rate Senior Subordinated Letter of Transmittal
            (incorporated herein by reference to Exhibit to the Registration
            Statement on Form S-4 (File No. 333-53603-03)).

99.2     -  Form of Fixed Rate Senior Subordinated Notice of guaranteed
            Delivery (incorporated herein by reference to Exhibit to the
            Registration Statement on Form S-4 (File No. 333-53603-03)).

                                     -111-
<PAGE>
<PAGE>

Exhibit
Number      Description of Exhibit
-------     ----------------------            

99.3     -  Form of Floating Rate Senior Subordinated Letter of Transmittal
            (incorporated herein by reference to Exhibit to the Registration
            Statement on Form S-4 (File No. 333-53603-03)).

99.4     -  Form of Floating Rate Senior Subordinated Notice of guaranteed
            Delivery (incorporated herein by reference to Exhibit to the
            Registration Statement on Form S-4 (File No. 333-53603-03)).

99.5     -  Form of Senior Discount Letter of Transmittal (incorporated
            herein by reference to Exhibit to the Registration Statement on
            Form S-4 (File No. 333-53603-03)).

99.6     -  Form of Senior Discount Notice of guaranteed Delivery
            (incorporated herein by reference to Exhibit to the Registration
            Statement on Form S-4 (File No. 333-53603-03)).


(c) Reports on Form 8-K

     No Reports on Form 8-K were required to be filed during the quarter
ended December 31, 1998.
























                                     -112-
<PAGE>
<PAGE>

                                  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
on its behalf by the undersigned thereunto duly authorized.

Dated: March 31, 1999


                                GRAHAM PACKAGING HOLDINGS COMPANY
                                (Registrant)

                                By: BCP /Graham Holdings L.L.C.,
                                    its General Partner


                                By: /s/ John E. Hamilton
                                    Name: John E. Hamilton
                                    Title: Chief Financial Officer
                                           (chief accounting officer and
                                           duly authorized officer)





























                                     -113-
<PAGE>
<PAGE>

                               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
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 Philip R. Yates and John E. Hamilton, 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 31st day of March, 1999 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/ Howard A. Lipson    President, Treasurer and Assistant Secretary
 ------------------------
     Howard A. Lipson      (Principal Executive Officer) of BCP /Graham
                           Holdings L.L.C.

   /s/ John E. Hamilton    Chief Financial Officer,
 ------------------------
     John E. Hamilton      Assistant Secretary and Assistant Treasurer
                           (Principal Financial Officer and Principal
                           Accounting Officer) of BCP / Graham Holdings
                           L.L.C.

   /s/ Howard A. Lipson    Director of BMP/Graham Holdings Corporation
 ------------------------
     Howard A. Lipson








                                     -114-
<PAGE>
<PAGE>

        Signature                                Title        
        ---------                                -----


     /s/ Chinh E. Chu      Director of BMP/Graham Holdings Corporation
 ------------------------
       Chinh E. Chu

  /s/ Simon P. Lonergan    Director of BMP/Graham Holdings Corporation
 ------------------------
    Simon P. Lonergan









































                                     -115-
<PAGE>
<PAGE>

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.






































                                     -116-



























                                    
<PAGE>

                                                                    SCHEDULE I

                       GRAHAM PACKAGING HOLDINGS COMPANY
                  REGISTRANT'S CONDENSED FINANCIAL STATEMENTS
                                (In thousands)

                                 BALANCE SHEET

<TABLE>
<CAPTION>
                                                                           December 31, 1998
                                                                   ------------------------------
<S>                                                                <C>
Assets
 Current assets                                                                        --
 Intangible assets, net                                                             5,047
                                                                                ---------
   Total assets                                                                $    5,047
                                                                                =========

Liabilities and Partners' Capital
 Current liabilities                                                           $    6,972
 Long-term Debt                                                                   110,697
 Investment in subsidiary                                                         326,172
                                                                                ---------
   Total liabilities                                                              443,841
   Partners' capital                                                             (438,794)
                                                                                ---------
   Total liabilities and partners' capital                                     $    5,047
                                                                                =========
</TABLE>

                              STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
                                                                     Year Ended December 31, 1998
                                                                   ------------------------------

<S>                                                                <C>
Equity in earnings of subsidiaries                                            $  (14,516)
Recapitalization expenses                                                         (1,000)
Interest expense                                                                 (10,546)
                                                                                --------
   Net Loss                                                                   $  (26,062)
                                                                                =========
                                                                               
</TABLE>




                                     -117-
<PAGE>
<PAGE>

                            STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                     Year Ended December 31, 1998
                                                                   ------------------------------
<S>                                                                <C>
Cash flows from operating activities:
 Net Loss                                                                      $ (26,062)
 Adjustments to reconcile net income to net cash provided by
   operating activities:
    Amortization of debt issuance costs                                         
    Accretion of senior discount notes                                               462
    Changes in current liabilities                                                10,085
 Net cash provided by operating activities                                         6,972
 Equity income in subsidiaries                                                    14,516
                                                                                --------
                                                                                   5,973
Cash flows from investing activities:
 Investments in a Business                                                       314,477

Cash flows from financing activities:
 Borrowings on long-term debt
 Cash distributions to Partners                                                  100,612
 Debt issuance fees                                                             (415,554)
 Net cash used in financing activities                                            (5,508)
                                                                                --------
                                                                                (320,450)

Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period                                       0
Cash and cash equivalents at end of period                                             0
                                                                                --------
                                                                               $       0
                                                                                ========
Supplemental cash flow information:
 Cash paid for interest                                                        $       --

See footnotes to consolidated financial statements of Graham Packaging         
Holdings Company.
</TABLE>











                                     -118-
<PAGE>
<PAGE>

                                                                   SCHEDULE II


                       GRAHAM PACKAGING HOLDINGS COMPANY
                       VALUATION AND QUALIFYING ACCOUNTS
                                (In thousands)

<TABLE>
<CAPTION>
                                        Balance @                                                    Balance @
                                       beginning of                                                   end of
   Year ended December 31, 1998            year            Additions       Deductions       Other(1)    year
 ---------------------------------   ---------------    ---------------   ---------------   -------  ------------
<S>                                       <C>                <C>                <C>          <C>          <C>
Allowance for Doubtful Accounts           $1,635             $ 32               $395         163       $1,435

Allowance for Inventory Losses               566              514                220         587        1,447



   Year ended December 31, 1997
 ---------------------------------
Allowance for Doubtful Accounts            1,202              512                 79                    1,635

Allowance for Inventory Losses               901               75                410                      566



   Year ended December 31, 1996
 ---------------------------------
Allowance for Doubtful Accounts              619              816                 233                   1,202

Allowance for Inventory Losses             1,217              298                 614                     901









(1)  Represents allowance attributable to entities acquired during 1998.


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