Employees

        As of March 31, 2005, approximately 3,700 of our approximately 8,700 employees are covered by collective bargaining agreements with various international and local labor unions. Our union agreements typically have a term of three or four years and thus regularly expire and require negotiation in the course of our business. Over the next twelve months, collective bargaining agreements covering approximately 410 of our employees will expire. We believe that we enjoy good relations with our employees and there have been no significant work stoppages in the past three years.

Environmental Matters

        Our operations, both in the U.S. and abroad, are subject to national, state, foreign, provincial and/or local laws and regulations that impose limitations and prohibitions on the discharge and emission of, and establish standards for the use, disposal and management of, regulated materials and waste, and that impose liability for the costs of investigating and cleaning up, and damages resulting from, present and past spills, disposals or other releases of hazardous substances or materials. These domestic and international environmental laws can be complex and may change often, compliance expenses can be significant and violations may result in substantial fines and penalties. In addition, environmental laws such as the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, also known as "Superfund" in the United States, impose strict, and in some cases joint and several, liability on specified responsible parties for the investigation and cleanup of contaminated soil, groundwater and buildings, and liability for damages to natural resources, at a wide range of properties. As a result, we may be liable for contamination at properties that we currently own or operate, as well as at our former properties or off-site properties where we may have sent hazardous substances. We are not aware of any material noncompliance with the environmental laws currently applicable to us and are not the subject of any material claim for liability with respect to contamination at any location. Based on existing information, we believe that it is not reasonably likely that losses related to known environmental liabilities, in aggregate, will be material to our financial position, results of operations, liquidity or cash flows. For our operations to comply with environmental laws, we have incurred and will continue to incur costs, which were not material in fiscal 2004 and are not expected to be material in the future.

59

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

Intellectual Property

        We hold, or have applications pending for, more than 750 design and utility patents, including patents and other proprietary technology such as Active Cage™, ATP™, Monosorb™, Flexa Tube™, SurShot™, SurBond™ and SurFresh™. We have used many of these patents to deliver innovative plastic packaging products to our customers.

        We license certain controlled intellectual properties to our affiliates and to third parties, including Amcor, Toyo Seikan and Coca-Cola and its affiliates. See also "Certain Relationships and Related Party Transactions." Primary licensed products or manufacturing processes include:

•

Container base designs (e.g., base for 2 liter carbonated soft drinks);



•

Refillable PET bottle designs and manufacturing processes; and



•

SurShot™ for multi-layer injection, stretch and blow molded PET barrier containers.

        In addition, we license many other designs, processes, patents and manufacturing equipment. In certain instances, we license technologies from third parties in order to augment our technical development and product portfolio. Two of our technical partners are Toyo Seikan and Husky Injection Molding Systems Ltd. While in the aggregate the patents are of material importance to our business, we believe that our business is not dependent upon any one patent or trademark.

        We also rely on unpatented proprietary know-how and continuing technological innovation and other trade secrets to develop and maintain our competitive position. Others could, however, obtain knowledge of this proprietary know-how through independent development or other access by legal means. For example, certain of our manufacturing equipment designs, including, without limitation, our PET blow molding machines, are unpatented and could be legally copied by our competitors. In addition to our own patents and proprietary know-how, we are a party to licensing arrangements and other agreements authorizing us to use other proprietary processes, know-how and related technology and/or to operate within the scope of certain patents owned by other entities. The duration of our licenses generally ranges from 5 to 17 years. In some cases the licenses granted to us are perpetual and in other cases the term of the license is related to the life of the patent associated with the license.