to stop developing or marketing the products or services, to obtain licenses to develop and market the services from the holders of the patents or to redesign the products or services  in such a way as to avoid infringing on the patent claims. The company cannot assess the extent to which it may be required  in the future to obtain licenses with respect to patents held by others, whether such licenses would be available or, if available, whether the company would be able to obtain such licenses on commercially reasonable terms. If the company were unable to obtain such licenses, the company may not be able to redesign  its products or services to avoid infringement, which could  materially adversely affect the company’s business, financial condition and operating results. PRODUCT LIABILITY MATTERS. The company’s business exposes  it to potential liability risks that arise from the manufacturing, marketing and sale of its products. In addition to direct expendi- tures for damages, settlement and defense costs, there is a possibility of adverse publicity as a result of product liability claims. Product liability is a significant commercial risk. Some plaintiffs have received substantial damage awards in some  jurisdictions against companies based upon claims for injuries allegedly caused by the use of their products. In addition, it  may be necessary to recall products that do not meet approved  specifications, which would also result in costs connected to the recall and loss of revenue. The company cannot assure that a product liability claim or series of claims brought against it would not have an adverse effect on the company’s business, financial condition or results  of operations. If any claim is brought against the company, regardless of the success or failure of the claim, the company cannot assure that it will be able to obtain or maintain product liability insurance in the future on acceptable terms or with adequate coverage against potential liabilities or the cost of a recall. FLUCTUATIONS IN FINANCIAL PERFORMANCE. The company’s finan- cial performance is subject to quarterly and annual fluctuations due to a number of factors, including: The occurrence of any of these factors could materially  and adversely affect the company’s business, financial condition and results of operations. ENVIRONMENTAL EXPOSURE. The company’s operations are  regulated under a number of federal, state and local environ- mental laws and regulations that govern, among other things, the discharge of hazardous materials into the air and water as well  as the handling, storage and disposal of these materials. In the event of a violation of environmental laws, the company could  be held liable for damages and for the costs of remedial actions. Environmental laws could also become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with any violation, which could negatively affect operating results. DISRUPTION IN PRODUCTION FROM UNIONIZED WORKFORCE. Because the company has a significant number of workers  whose employment is subject to collective bargaining agreements and labor union representation, the company is vulnerable to possible organized work stoppages and similar actions. Unionized employees accounted for approximately 20% of the company’s workforce as of January 1, 2005. At the company’s Elgin, Illinois facility, the company has a union contract with the International Brotherhood of Teamsters that extends through April 2007. The company also has a union workforce at its manufacturing facility in the Philippines, under a contract that extends through June 2006. Although the company believes that the current  relationships between employees, union and management are good, any future strikes, employee slowdowns or similar actions  by one or more unions, in connection with labor contract negotia- tions or otherwise, could have a material adverse effect on its ability to operate the business. DEPENDENCE ON KEY PERSONNEL. The company depends signifi- cantly on certain of the company’s executive officers and certain other key personnel, many of whom could be difficult to replace. While the company has employment agreements with certain key executives, the company cannot assure that it will succeed in retaining personnel. The incapacity, inability or unwillingness of certain of these people to perform their services may have a material adverse effect on the company. There is intense competi- tion for qualified personnel within the industry, and the company cannot assure that it will be able to continue to attract, motivate and retain personnel with the skills and experience needed to successfully manage the company’s business and operations. • the lengthy, unpredictable sales cycle for commercial  cooking equipment; • the gain or loss of significant customers; • unexpected delays in new product introductions; • level of market acceptance of new or enhanced versions  of the company’s products; • unexpected changes in the levels of the company’s  operating expenses; • competitive product offerings and pricing actions; and • general economic conditions. 14 MIDDLEBY CORPORATION AND SUBSIDIARIES