Document:

*Certain
                confidential information contained in this document, marked by brackets,
                has been omitted and filed with the Securities and Exchange Commission
                pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
                amended.

            

    

     

    Amendment
      No. 1
      to
      OTT License Agreement Number L-086-2000/0

     

    This
      is
      the First Amendment to the OTT License Agreement Number L-086-2000/0 dated
      May
      21, 2004 by and between the United States Public Health Service as represented
      by the Office of Technology Transfer, National Institutes of Health having
      offices at 6011 Executive Boulevard, Suite 325, Rockville, MD 20852-3804
      (“PHS”)
      and
      Targeted Genetics Corporation (“TGC”),
      a
      corporation of Washington having a principal place of business at 1100 Olive
      Way, Suite 100, Seattle, WA 98101(hereinafter, First Amendment).
      

     

    WHEREAS,
      the parties would like to amend the License Agreement having OTT License
      Agreement Number L-086-2000/0 (hereinafter, “License Agreement”)
      in
      connection with the development and commercialization of HIV vaccine
Licensed Products
      by the
      International Aids Vaccine Initiative (“IAVI”),
      in
      collaboration with Licensee,
      for use
      and sale in the Developing World.

     

    WHEREAS,
      the parties are also amending the License Agreement
      to
      improve the administration of the License Agreement.

     

    In
      consideration of the value of the availability of vaccines in the Developing
      World to accomplishing the public health mission of the National Institutes
      of
      Health the parties agree to amend the License Agreement
      as
      follows:

     

    
      	
              1.

            	
              The
                Recitations on the Cover Page of the “Agreement”
                are amended to add a Reference to Appendix G - Royalty Payment
                Options which is also being added by this First Amendment
                The amended text of the recitations reads as
                follows:

            

    

     

    This
      Patent License Agreement, hereinafter referred to as the “Agreement”,
      consists of this Cover Page, an attached Agreement,
      a
      Signature Page, Appendix A (List of Patent(s) and/or Patent
      Application(s)), Appendix B (Fields of Use and Territory),
      Appendix C (Royalties), Appendix D (Modifications),
      Appendix E (Benchmarks),
      Appendix F (Commercial Development Plan) and
      Appendix G (Royalty Payment Options). The Parties to this Agreement
      are:

     

    
      	 	
              1)

            	
              The
                National Institutes of Health (“NIH”), the Centers for Disease Control and
                Prevention (“CDC”), or the Food and Drug Administration (“FDA”),
                hereinafter singly or collectively referred to as “PHS”,
                agencies of the United States Public Health Service within the
                Department of Health and Human Services (“DHHS”);
                and

            

    

     

    
      	 	
              2)

            	
              The
                person, corporation, or institution identified above and/or on the
                Signature Page, having offices at the address indicated on the
                Signature Page, and its Affiliates
                as
                defined in Appendix D, Paragraph 2.14, hereinafter referred
                to as “Licensee”.

            

    

     

     

    
      
        
        

      

      
        Page
          1 of
          8

        
          

        

      

      
        
        

      

    

     

    
      	
              2.

            	
              Appendix C,
                Section C Earned Royalties
                is
                amended to read as follows:

            

    

     

    
      	 	
              C.

            	
              Earned Royalty(ies)
                pursuant to Paragraph 6.03, as amended and set forth in
                Appendix D, of this Agreement:

            

    

     

    Licensee
      agrees
      to pay to PHS,
      according to schedule as set forth in Paragraph 9.04 of this Agreement,
      an
Earned Royalty
      amount
      calculated on the basis of Net Sales
      according to percentage set forth below:

     

    
      	 	
              1.

            	
              [*]
                Percent ([*]%)
                of Net Sales
                of
                Licensee
                and its sublicensees of all Licensed Products
                manufactured and sold in the Licensed Territory.

            

    

     

    Notwithstanding
      the foregoing, Licensee
      shall be
      entitled to a One Percent (1.0%) credit against the earned royalty
      rate set forth in Paragraph C.1. above for each percent of royalty in
      excess of [*]
      Percent ([*]%)
      Licensee
      must pay
      to other unaffiliated licensors for the manufacture and sale of Licensed Products.
      Said
      reduction, however, shall not reduce the earned royalty rate for Licensed Products
      below
[*]
      provided
      for in Paragraph C.1. above.

     

    Notwithstanding
      the foregoing, Earned
      Royalty(ies)
      will be
      waived by PHS
      related
      to sales of any HIV vaccine Licensed Products
      in the
Developing World,
      for use
      in the Developing World,
      which
      have been specifically developed through a collaboration between the
Licensee
      and the
      International AIDS Vaccine Initiative (IAVI),
      an IRS
      certified 501(c)3 tax exempt organization, with principal offices at 110 William
      Street, Floor 27, New York, NY 10038-3001. Should Licensee
      receive
      any sales royalty from sales of Licensed Products
      by
IAVI
      or its
      designee in the Developing World,
      TGC
      and
PHS
      shall
      mutually agree on compensation from Licensee
      to
PHS.

     

    Any
      other
Licensed Product
      which is
      not the direct result of the above-mentioned collaboration and is not intended
      solely for use and sale in the Developing World
      will be
      subject to all applicable Earned Royalty obligations.

     

    First
      Amendment Continues on Next Page

     

    *Confidential
      Treatment
      Requested.

    
      
        
        

      

      
        Page
          2 of
          8

        
          

        

      

      
        
        

      

       

    

    
      	
              3.

            	
              Appendix C,
                Section D shall be amended to read as
                follows.

            

    

     

    
      	 	
              D.

            	
              Benchmark Royalty(ies)
                pursuant to Paragraph 6.04, as amended and set forth in
                Appendix D, of this Agreement:

            

    

     

    Licensee
      agrees
      to pay to PHS Benchmark Royalties
      in the
      amounts set forth herein:

     

    
      	
              Benchmark

            	
              Benchmark Royalty

            
	
              For
                each [*]
                up
                to a total of [*],
                at the time of [*]
                of
                a [*]
                or
                equivalent clinical trial for a particular [*]

            	
              [*]

            
	
              For
                each [*],
                up to a total of [*],
                at the time of [*]
                of
                a [*]
                or
                equivalent clinical trial for a particular [*]

            	
              [*]

            
	
              For
                each [*],
                up to a total of [*],
                at the time of [*]
                for a particular [*]

            	
              [*]

            

    

     

    Each
      Benchmark Royalty
      payment
      as set forth herein is due to PHS
      upon
Licensee,
      its
      sublicensees, or other Person,
      as set
      forth in Appendix D, Paragraph 2.14 of this Agreement,
      acting
      by or on behalf of Licensee,
      achieving the Benchmark
      and is
      payable to PHS
      within
      thirty (30) days thereof or in the event that a sublicensee achieves
      the benchmark and sublicensee is responsible for making a benchmark/milestone
      payment to Licensee
      upon
      achieving the benchmark/milestone the Benchmark Royalty
      is
      payable to PHS
      by
Licensee
      within
      thirty (30) days of receipt by Licensee
      from
      sublicensee of the benchmark/milestone payment due from
      sublicensee.

     

    Notwithstanding
      the foregoing, Benchmark Royalty(ies)
      will be
      waived by PHS,
      as set
      forth in Appendix D, Paragraph 2.14 of this Agreement
      if and
      only if the Benchmark
      is
      achieved during the course of development of an HIV vaccine Licensed Product
      which is
      specific for use and sale in the Developing World
      and is
      the direct result of a collaboration between the Licensee
      and
IAVI.

     

    Any
      other
Licensed Product
      which is
      not the direct result of the above-mentioned collaboration and is not intended
      solely for use and sale in the developing world will be subject to all
      applicable Benchmark Royalties.

     

    
      	
              4.

            	
              Appendix
                D - Modifications is amended to add the following Paragraph 2.18 to
                Article 2 - Definitions:

            

    

     

    
      	 	
              
                2.18.

              

            	
              “Developing World”
                means those countries defined from time to time by the World Bank
                as
                having “low-income economies” or “middle-income economies” (whether
                lower-middle or upper-middle).

            

    

     

    
      *Confidential
        Treatment
        Requested.

    

    
      
        
        

      

      
        Page
          3 of
          8

        
          

        

      

      
        
        

      

       

    

    
      	
              5.

            	
              Appendix
                D - Modifications is changed to amend Paragraph 9.06 to reflect that
                Appendix G has been added to the Agreement.
                Paragraph 9.06 as amended reads as
                follows:

            

    

     

    
      	 	
              9.06

            	
              Royalties
                due under Article 6 shall be paid in U.S. dollars and payment
                options are listed in Appendix G. For conversion of foreign currency
                to U.S. dollars, the conversion rate shall be the average New York
                foreign exchange rate quoted in The
                Wall Street Journal
                for the previous thirty (30) trading days prior to the date the
                payment is due. All checks and bank drafts shall be drawn on
                United States banks and shall be payable, as appropriate, to
                “NIH/Patent Licensing”. Any loss of exchange, value, taxes, or other
                expenses incurred in the transfer or conversion to U.S. dollars shall
                be paid entirely by Licensee.
                The royalty report required by Paragraph 9.04 of this Agreement
                shall accompany each such payment, and a copy of such report shall
                also be
                mailed to PHS
                at
                its address for Agreement Notices indicated on the Signature Page of
                this First Amendment.

            

    

     

    First
      Amendment Continues on Next Page

     

    
      
        
        

      

      
        Page
          4 of
          8

        
          

        

      

      
        
        

      

    

    
      	
              6.

            	
              Appendix G
                - Royalty Payment Information is added to the Agreement
                in
                order to facilitate the administration of the Agreement
                in
                the future. New Appendix G reads as
                follows:

            

    

     

    APPENDIX
      G - ROYALTY PAYMENT OPTIONS

     

    NIH/PHS
      License Agreements

     

    *In
      order to process payment via Electronic Funds Transfer sender MUST supply the
      following information:

     

    Procedure
      for Transfer of Electronic Funds to NIH for Royalty
      Payments

     

    Bank
      Name: Federal Reserve Bank

     

    [*]

    TREAS
      NYC

    [*]

    OBI=Licensee
      Name and OTT Reference Number

    Dollar
      Amount Wired=$$

     

    NOTE:
      Only U.S. banks can wire directly to the Federal Reserve Bank. Foreign banks
      cannot wire directly to the Federal Reserve Bank, but must go through an
      intermediary U.S. bank. Foreign banks may send the wire transfer to the U.S.
      bank of their choice, who, in turn forwards the wire transfer to the Federal
      Reserve Bank.

     

    Mailing
      Address for Royalty Payments:

     

    National
      Institutes of Health

    P.O.
      Box
      360120

    Pittsburgh,
      PA 15251-6120 USA

     

    Overnight
      Mail for Royalty Payments only

     

    National
      Institutes of Health

    360120

    Mellon
      Client Service Center

    Room
      670

    500
      Ross
      Street

    Pittsburgh,
      PA 15262-0001

     

    (412)
      234-4381 (Customer Service)

     

    Please
      make checks payable to:
      NIH/Patent Licensing

     

    The
      OTT Reference Number MUST
      appear
      on checks, reports and correspondence

     

    
      *Confidential
        Treatment
        Requested.

    

    
      
        
        

      

      
        Page
          5 of
          8

        
          

        

      

      
        
        

      

    

     

    
      	
              6.

            	
              This
                First Amendment
                is
                effective on the date on which the last party executes this First Amendment.

            

    

     

    
      	
              7.

            	
              Unless
                expressly modified by this First Amendment
                the terms and conditions of the License Agreement
                are incorporated in their entirety into the terms and conditions
                of this
                First Amendment
                and this First Amendment
                together with the License Agreement
                constitute the entire agreement between the parties and all prior
                negotiations, representations, agreements, and understandings are
                merged
                into, extinguished by, and completely expressed by this First Amendment.

            

    

     

    SIGNATURES
      BEGIN ON NEXT PAGE

     

    
      
        
        

      

      
        Page
          6 of
          8

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE

     

    For
      PHS:

     

    
      	/s/
              Steven M. Ferguson 	 	8/14/06 
	
              Steven
                M. Ferguson, MBA 

              Director,
                Division of Technology Development and Transfer

              Office
                of Technology Transfer

              National
                Institutes of Health

            	 	Date
	 	 	 
	
              Mailing
                Address for Agreement Notices:

              Chief,
                Monitoring and Enforcement Branch

              Office
                of Technology Transfer

              National
                Institutes of Health

              6011
                Executive Boulevard, Suite 325

              Rockville,
                Maryland 20852-3804 U.S.A.

            	 	 

    

     

    For
      Licensee
      (Upon,
      information and belief, the undersigned expressly certifies or affirms that
      the
      contents of any statements of Licensee
      made or
      referred to in this document are truthful and accurate):

     

    By:

    Targeted
      Genetics Corporation

    Licensee

    
       

      
        	/s/
                B.G. Susan Robinson  	 	08-18-06 
	
                Signature
                  of Authorized Official 

              	 	Date
	 	 	 
	
                B.G.
                  Susan Robinson 

              	 	 
	Printed Name	 	 
	 	 	 
	VP,
                Business Development 	 	 
	Title	 	 

      

       

    

    
      	
              I.

            	
              Official
                and Mailing Address for Agreement
                Notices:

            

    

     

    Targeted
      Genetics Corporation

    1100
      Olive Way, Suite 100

    Seattle,
      WA 98101

     

    
      
        
        

      

      
        Page
          7 of
          8

        
          

        

      

      
        
        

      

    

     

    
      	
              II.

            	
              Official
                and Mailing Address for Financial Notices (Licensee’s
                contact person for royalty
                payments)

            

    

     

    
      
        	 	Susan
                Robinson 	 
	
                 

              	Name	 
	 	 	 
	
                 

              	Vice
                President, Business Development 	 
	 	Title	 
	 	 	 
	 	Mailing Address:	 
	 	 	 
	 	
                1100
                  Olive Way, Suite 100

              	 
	 	 	 
	 	
                Seattle,
                  WA 98101 

              	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

      

       

      
        	Email
                Address: 	susan.robinson@targen.com 	 
	 	 	 
	Phone: 	206-521-7330 	 
	 	 	 
	Fax:  	206-512-4782	 

      

       

    

     

    Any
      false
      or misleading statements made, presented, or submitted to the Government,
      including any relevant omissions, under this Agreement
      and
      during the course of negotiation of this Agreement
      are
      subject to all applicable civil and criminal statutes including Federal statutes
      31 U.S.C. §§3801-3812 (civil liability) and 18 U.S.C. §1001
      (criminal liability including fine(s) or imprisonment).

     

    
      
        
        

      

      
        Page
          8 of
          8Exhibit 10.1

                         EXCHANGE AND PURCHASE AGREEMENT
                         -------------------------------

         This Exchange and Purchase  Agreement  (this  "Agreement")  is made and
entered into as of this 22nd day of March,  2007, by and between __________ (the
"Holder"), and Greatbatch, Inc., a Delaware corporation (the "Company").

                                    RECITALS

         WHEREAS, the Holder currently holds $__________ principal amount of the
Company's 2 1/4% Convertible Subordinated Debentures due 2013 (the "Outstanding
Notes") issued pursuant to the Indenture, dated as of May 28, 2003, between the
Company and Manufacturers and Traders Trust Company;

         WHEREAS, the Holder desires to exchange the Outstanding Notes for an
equal principal amount of the Company's 2 1/4% Convertible Subordinated
Debentures due 2013 (the "Exchange Notes") to be issued pursuant to the
Indenture (as defined below) on the terms and conditions set forth in this
Agreement (the "Note Exchange");

         WHEREAS, the Company desires to issue to the Holder $__________
principal amount of Exchange Notes in exchange for the Outstanding Notes in the
Note Exchange;

         WHEREAS, the Company desires to issue and sell to the Holder
$__________ principal amount of the Company's 2 1/4% Convertible Subordinated
Debentures due 2013, which shall have identical terms (except for principal
amount) as those set forth in the Exchange Notes (the "Additional Notes," and
together with the Exchange Notes, the "New Notes") at a purchase price of $950
per $1,000 principal amount of Additional Notes;

         WHEREAS, the Holder desires to purchase $__________ principal amount of
Additional Notes at a purchase price of $950 per $1,000 principal amount of
Additional Notes on the terms and conditions set forth in this Agreement (the
"Sale of Additional Notes" and together with the Note Exchange, the
"Transaction");

         WHEREAS, the New Notes will be issued pursuant to the Indenture, to be
entered into by the Company and the Trustee named therein (the "Trustee"),
substantially in the form of Exhibit A hereto (the "Indenture");

         WHEREAS, in connection with the issuance of the New Notes the Company
will agree to provide the Holder registration rights pursuant to the
Registration Rights Agreement, to be entered into by the Company and the Holder,
the other holders of Outstanding Notes exchanging such notes for New Notes and
any other purchasers of the New Notes to be issued by the Company, if any (the
"Registration Rights Agreement"), substantially in the form of Exhibit B hereto;

<PAGE>

         NOW, THEREFORE, in consideration of the premises and the agreements set
forth below, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

                                   ARTICLE I
                                    Exchange

         Section 1.1 Exchange and Sale of the New Notes.

               (a)  Upon  the  terms  and  subject  to the  conditions  of  this
Agreement,  at the  Closing  (as defined  herein),  the Company  shall issue and
exchange  to the  Holder,  and the  Holder  agrees to accept  from the  Company,
$__________ in aggregate  principal amount of Exchange Notes,  together with all
accrued  and  unpaid  interest  paid in cash on the  Outstanding  Notes to,  but
excluding,  the Closing Date,  for  $__________  aggregate  principal  amount of
Outstanding Notes.

               (b)  Upon  the  terms  and  subject  to the  conditions  of  this
Agreement,  at the Closing, the Company shall sell to the Holder, and the Holder
agrees to purchase from the Company, the $__________  aggregate principal amount
of Additional  Notes at a purchase price of 95% of the principal  amount thereof
(the "Purchase Price").

         Section 1.2 Closing.  The closing of the  transactions  contemplated by
this  Agreement  (the  "Closing")  is  anticipated  to take  place on the  third
business  day after the date hereof at the offices of the  Company,  9645 Wehrle
Drive,  Clarence, New York, 14031, or on such other date and at such other place
as the parties may agree in writing (the "Closing  Date").  At the Closing,  (i)
the Holder shall deliver or cause to be delivered to the Company (a) all of such
Holder's right,  title and interest in and to all of the Outstanding  Notes, and
all  documentation  related  thereto,  and whatever  documents of  conveyance or
transfer may be necessary or desirable to transfer to and confirm in the Company
all  right,  title  and  interest  in and to the  Outstanding  Notes and (b) the
Purchase Price, and (ii) the Company shall issue to the Holder the New Notes and
pay to the Holder in cash by wire  transfer of  immediately  available  funds an
amount  equal to the accrued and unpaid  interest  on the  Holder's  Outstanding
Notes to, but excluding,  the day of the Closing,  provided,  however,  that the
parties  acknowledge  that the issuance of the Exchange  Notes to some or all of
the Holders may be delayed due to procedures and mechanics  within the system of
the Depository  Trust Company  ("DTC") and that such delay will not be a default
under this  Agreement  so long as (i) the  Company is using its best  efforts to
effect the issuance of one or more global notes representing the Exchange Notes,
(ii) such  delay is no longer  than 3  business  days and (iii)  interest  shall
accrue on such Exchange Notes from the date of the Indenture.

         Section 1.3  Conditions  to Closing.  (i) The  obligation of the Holder
hereunder to consummate the transactions  contemplated  hereby at the Closing is
subject to the  satisfaction,  at or before  the  Closing  Date,  of each of the
following  conditions,  provided that these conditions are for the Holder's sole
benefit  and may be waived by the Holder at any time in its sole  discretion  by
providing the Company with prior written notice thereof:

                                       2
<PAGE>

               (a) The Company shall have executed and delivered  this Agreement
to Holder;

               (b) The Company and the Trustee shall have executed and delivered
the Indenture;

               (c) The Company  shall have  executed and delivered the New Notes
in the aggregate principal amount set forth in Section 1.1;

               (d)  The  Company   shall  have   executed  and   delivered   the
Registration Rights Agreement to Holder;

               (e) The Company shall have submitted an additional  share listing
application  for the shares of Common Stock issuable upon  conversion of the New
Notes with the New York Stock  Exchange and the shares of Common Stock  issuable
upon  conversion of the New Notes shall have been approved by the New York Stock
Exchange for listing prior to the Closing;

               (f) The  Company  shall  have  delivered  to the Holder and Piper
Jaffray & Co. a certificate of the Company,  dated the Closing Date, executed by
the  secretary of the Company  certifying  in such capacity and on behalf of the
Company (i) as to the incumbency and signature of the officer of the Company who
executed  this  Agreement  and the New  Notes;  and (ii) as to the  adoption  of
resolutions of the board of directors of the Company which are in full force and
effect on the Closing Date,  authorizing  (x) the execution and delivery of this
Agreement,  the Indenture,  the Registration Rights Agreement and the New Notes,
and  (y)  the  performance  of the  obligations  of the  Company  hereunder  and
thereunder;

               (g) The  Company  shall  have  delivered  to the Holder and Piper
Jaffray & Co. a certificate of the Chief  Executive  Officer or Chief  Financial
Officer  of the  Company,  dated  the  Closing  Date,  to the  effect  that  the
representations  and  warranties  of the Company in this  Agreement are true and
correct  on and as of the  Closing  Date with the same  effect as if made on the
Closing  Date and that the  Company has  complied  with all the  agreements  and
satisfied  all the  conditions  on its part to be  performed  or satisfied at or
prior to the Closing Date;

               (h) Simultaneously  with the Closing,  the Company shall issue an
aggregate  principal  amount of New Notes that,  together  with notes  issued to
Other  Holders (as  defined  below) is not less than  $130,000,000,  of which at
least $50,000,000 aggregate principal amount shall be Exchange Notes;

               (i)  Subsequent to the  execution and delivery of this  Agreement
and prior to the Closing  Date,  there shall have been no suspension or material
limitation of trading in the Common Stock on The New York Stock Exchange;

               (j) The New Notes  shall have been  approved  for  trading on The
PORTAL Market of the National  Association of Securities Dealers,  Inc., subject
only to notice of issuance at or prior to the time of purchase;

               (k) The  Company  shall  have  obtained  a  Committee  on Uniform
Securities Identification Procedures number (CUSIP number) for the New Notes;

                                       3
<PAGE>

               (l) The New  Notes  satisfy  the  requirements  set forth in Rule
144A(d)(3) under the Securities Act; and

               (m) The Company shall have  delivered to Holder and Piper Jaffray
& Co.  the  opinion  of  Hodgson  Russ LLP,  dated as of the  Closing  Date,  in
substantially the form of Exhibit C attached hereto.

         (ii) The obligation of the Company hereunder to consummate the
transactions contemplated hereby at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion by providing the Holder with
prior written notice thereof:

               (a) The Holder shall have  executed and  delivered to the Company
this Agreement;

               (b) The Holder shall have  executed and  delivered to the Company
the Registration Rights Agreement; and

               (c) The Holder shall have  delivered,  or caused to be delivered,
to the Company the Outstanding Notes being exchanged  pursuant to this Agreement
and the  Purchase  Price in  accordance  with the  written  instructions  of the
Company.

         Section 1.4 Exchange and Sale of Additional Notes.  Simultaneously with
the  Closing,   the  Company  (i)  shall  enter  into  one  or  more  agreements
substantially  identical to this Agreement (the "Other  Agreements") with one or
more holders (the "Other  Holders") of  Outstanding  Notes to exchange  Exchange
Notes with one or more Other Holders for Outstanding Notes, subject to the terms
of the  Indenture,  in an aggregate  principal  amount that,  together  with the
Exchange Notes issued pursuant to this Agreement,  is not less than $50,000,000,
and (ii) may issue  Additional  Notes pursuant to one or more Other  Agreements,
subject to the terms of the Indenture, with one or more Other Holders and/or any
new Holders,  so long as the purchase price for any such Additional Notes is not
less than $950 per $1,000 principal amount of Additional Notes.

                                   ARTICLE II
                  Representations and Warranties of the Holder

         The Holder hereby makes the following representations and warranties,
each of which is true and correct on the date hereof and shall survive the
Closing Date and the transactions contemplated hereby to the extent set forth
herein.

         Section 2.1 Existence and Power.

               (a) The Holder is duly  organized,  validly  existing and in good
standing  under the laws of the  jurisdiction  of its  organization  and has the
power, authority and capacity to execute and deliver this Agreement,  to perform
its  obligations  hereunder,  and to consummate  the  transactions  contemplated
hereby.

                                       4
<PAGE>

               (b)  The  execution  of  this  Agreement  by the  Holder  and the
consummation by the Holder of the  transactions  contemplated  hereby do not and
will not constitute or result in a breach, violation,  conflict or default under
any  note,  bond,  mortgage,  deed,  indenture,   lien,  instrument,   contract,
agreement,  lease or license to which the Holder is a party,  whether written or
oral,  express or  implied,  or any  statute,  law,  ordinance,  decree,  order,
injunction, rule, directive, judgment or regulation of any court, administrative
or regulatory body, governmental authority, arbitrator, mediator or similar body
on the part of the Holder or on the part of any other party thereto or cause the
acceleration or termination of any obligation or right of the Holder, except for
such  breaches,  conflicts,  defaults,  rights or  violations  which  would not,
individually  or in the  aggregate,  reasonably  be  expected to have a material
adverse  effect  on the  ability  of  the  Holder  to  perform  its  obligations
hereunder.

         Section  2.2  Valid  and  Enforceable  Agreement;  Authorization.  This
Agreement has been duly  executed and delivered by the Holder and  constitutes a
legal,  valid and  binding  obligation  of the Holder,  enforceable  against the
Holder in accordance with its terms, except that such enforcement may be subject
to (a) bankruptcy, insolvency, reorganization,  moratorium or other similar laws
affecting or relating to enforcement  of creditors'  rights  generally,  and (b)
general principles of equity.

         Section  2.3 Title to  Outstanding  Notes.  The Holder is a  beneficial
owner of and has the  investment  power,  including the power to dispose of, and
has good and valid  title to, the  Outstanding  Notes  being  exchanged  by such
Holder hereby, free and clear of any mortgage,  lien, pledge,  charge,  security
interest,  encumbrance,  title  retention  agreement,  option,  equity  or other
adverse claim  thereto.  The Holder has not, in whole or in part,  (i) assigned,
transferred,  hypothecated,  pledged or  otherwise  disposed of the  Outstanding
Notes or its rights in such  Outstanding  Notes being  exchanged  or redeemed by
such Holder hereby, or (ii) given any person or entity any transfer order, power
of attorney or other  authority  of any nature  whatsoever  with respect to such
Outstanding Notes.

         Section 2.4 Investment Decision.  The Holder is either (i) a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended (the "Securities Act") or (ii) an "accredited  investor" within
the meaning of Rule 501 of Regulation D under the Securities  Act, and in either
case was not  organized for the purpose of acquiring the New Notes or the shares
of the Company's common stock (the "Common Stock"),  $0.001 par value per share,
into which the New Notes may be converted (the "Underlying  Common Stock").  The
Holder  (or its  authorized  representative)  is  familiar  with  the  Company's
objectives and business  plan,  has had the  opportunity to review the Company's
filings currently filed with the Securities and Exchange Commission (the "SEC"),
including, without limitation, the Company's Annual Report on Form 10-K filed on
February 27, 2007, the Company's  Definitive  Proxy Statement filed on April 27,
2006,  and the  Company's  Current  Reports  on Form 8-K filed on July 5,  2006,
August 8, 2006,  October 20, 2006,  November 28, 2006 and February 28, 2007 (all
of such filings currently filed with the SEC referred to,  collectively,  as the
"SEC  Documents").  The Holder has reviewed  copies of each of the Indenture and
the Registration Rights Agreement, including copies of each of the Indenture and
Registration  Rights  Agreement  marked  to show the  differences  between  such
documents and the respective indenture and registration rights agreement related
to the  Outstanding  Notes,  and has had an  opportunity to ask questions of the
Company and to obtain from representatives of the Company such information as is
necessary to determine the changes  reflected in each such  document,  including
the changes to the terms of the New Notes compared with the  Outstanding  Notes.
The Holder has had such  opportunity  to ask  questions  of the  Company and its
representative   and  to  obtain  from   representatives  of  the  Company  such
information as is necessary to permit it to evaluate the merits and risks of its
investment  in the  Company and has  independently,  without  reliance  upon any

                                       5
<PAGE>

representatives  of the  Company  and based on such  information  as the  Holder
deemed  appropriate,  made its own  analysis  and  decision  to enter  into this
Agreement.  The Holder has had the  opportunity to consult with its  accounting,
tax,  financial and legal  advisors to be able to evaluate the risks involved in
the exchange of the Outstanding  Notes and/or the purchase of new Notes pursuant
hereto and to make an informed investment decision with respect to such exchange
and/or  purchase.  The  Holder  acknowledges  that for U.S.  federal  income tax
purposes, the Exchange Notes and the New Notes are intended by the Company to be
contingent payment debt instruments  within the meaning of Treasury  Regulations
Section   1.1275-4.   Each   Holder   must   report   consistently   with   such
characterization,  unless  it  discloses  a  contrary  position  on a  statement
attached to the  Holder's  timely filed U.S.  federal  income tax return for the
taxable year that includes the Closing Date.  The Holder  acknowledges  that the
Company is relying on the truth and  accuracy of the  foregoing  representations
and  warranties  in the offering of the New Notes to the Holder  without  having
first  registered  the New  Notes  or the  Underlying  Common  Stock  under  the
Securities Act.

         Section 2.5 Purchase Entirely for Own Account.  The Holder is acquiring
the New Notes for its own account and not towards,  or for resale in  connection
with,  the  public  sale or  distribution  thereof,  except  pursuant  to  sales
registered  or exempted  under the  Securities  Act;  provided,  however that by
making the representations herein, the Holder does not agree to hold any of such
New Notes for any  minimum  or other  specific  term and  reserves  the right to
dispose  of such  New  Notes  or the  Underlying  Common  Stock  at any  time in
accordance  with or pursuant to a registration  statement or an exemption  under
the Securities Act and pursuant to the applicable  terms of this Agreement.  The
Holder is  acquiring  the New Notes to be issued to the Holder  hereunder in the
ordinary  course  of its  business.  The  Holder  does  not  presently  have any
understanding,  directly or indirectly, with any person to distribute any of the
New Notes to be issued to the Holder hereunder.

         Section 2.6 Restricted Securities.  The Holder understands that neither
the New Notes nor the  Underlying  Common Stock have been  registered  under the
Securities Act, and are being issued hereunder by reason of a specific exemption
from the registration provisions of the Securities Act which depends upon, among
other things,  the bona fide nature of the investment intent and the accuracy of
the Holder's  representations  as expressed herein.  The Holder understands that
the New Notes (and the  Underlying  Common  Stock) are  "restricted  securities"
under applicable U.S.  federal and state  securities laws and that,  pursuant to
these laws, the Holder must hold the New Notes (and the Underlying Common Stock)
indefinitely  unless they are  registered  with the SEC and  qualified  by state
authorities,   or  an  exemption  from  such   registration  and   qualification
requirements is available.  The Holder further acknowledges that if an exemption
from  registration  or  qualification  is available,  it may be  conditioned  on
various requirements including, but not limited to, the time and manner of sale,
the holding period for the New Notes (and the Underlying  Common Stock),  and on
requirements  relating to the Company which may be outside the Holder's control,
and which, except as set forth in the Registration Rights Agreement, the Company
is under no obligation and may not be able to satisfy.

                                       6
<PAGE>

         Section 2.7 No Public  Market.  The Holder  understands  that no public
market now exists for the New Notes,  and that the Company has made no assurance
that a public market will ever exist for the New Notes.

         Section 2.8 Legends.  The Holder understands that the New Notes and any
shares of Underlying  Common Stock will bear one or more of the legends required
by the Indenture, and the removal of such legends shall be governed by the terms
of the Indenture.

         Section  2.9  Affiliate  Status.  The  Holder is not,  and has not been
during the preceding three months, an "affiliate" of the Company as such term is
defined in Rule 144 under the Securities Act.

                                  ARTICLE III
            Representations, Warranties and Covenants of the Company

         The Company hereby makes the following representations, warranties, and
covenants each of which is true and correct on the date hereof and shall survive
the date of the Closing and the transactions contemplated hereby to the extent
set forth herein.

         Section 3.1 Existence and Power.

               (a) The Company is a corporation duly organized, validly existing
and in good standing  under the laws of the State of Delaware and has the power,
authority  and  capacity to execute and deliver this  Agreement,  to perform the
Company's obligations hereunder, and to consummate the transactions contemplated
hereby.

               (b)  The  execution  of this  Agreement  by the  Company  and the
consummation by the Company of the transactions contemplated hereby (i) does not
require  the  consent,   approval,   authorization,   order,   registration   or
qualification  of, or filing with, any governmental  authority or court, or body
or arbitrator having jurisdiction over the Company other than as contemplated in
the Registration  Rights Agreement,  state securities  regulators,  the New York
Stock  Exchange,  The Depository  Trust Company and The PORTAL Market;  and (ii)
does not and will not  constitute  or result in a breach,  violation  or default
under any note, bond, mortgage,  deed, indenture,  lien,  instrument,  contract,
agreement,  lease or license,  whether written or oral,  express or implied,  or
with the Company's Certificate of Incorporation or by-laws, or any statute, law,
ordinance, decree, order, injunction, rule, directive, judgment or regulation of
any  court,   administrative   or  regulatory  body,   governmental   authority,
arbitrator,  mediator or similar  body on the part of the Company or on the part
of any other  party  thereto or cause the  acceleration  or  termination  of any
obligation or right of the Company or any other party thereto.

         Section  3.2  Valid  and  Enforceable  Agreement;  Authorization.  This
Agreement has been duly executed and delivered by the Company and  constitutes a
legal,  valid and binding  obligation  of the Company,  enforceable  against the
Company  in  accordance  with its terms,  except  that such  enforcement  may be
subject  to (a)  bankruptcy,  insolvency,  reorganization,  moratorium  or other
similar  laws  affecting  or  relating  to  enforcement  of  creditors'   rights
generally, and (b) general principles of equity.

                                       7
<PAGE>

         Section 3.3  Capitalization.  At the Closing,  the  authorized  capital
stock of the Company will consist of  100,000,000  shares of Common  Stock,  par
value $0.001 per share,  and 100,000,000  shares of Preferred  Stock,  par value
$0.001 per share.  As of the close of  business  on March 19,  2007,  there were
22,317,591  shares of Common Stock issued and  outstanding.  All such issued and
outstanding  shares have been duly authorized and validly issued,  and are fully
paid and non-assessable, and were issued in compliance with all applicable state
and federal  laws  concerning  the  issuance of  securities  and all  applicable
pre-emptive, participation, rights of first refusal and other similar rights.

         Section  3.4 Valid  Issuance  of the New  Notes.  The New  Notes,  when
issued,   sold  and  delivered  in  accordance   with  the  terms  and  for  the
consideration  set forth in this  Agreement and the Indenture,  will  constitute
legal and binding  obligations  of the  Company,  be validly  issued and free of
restrictions  on  transfer  other  than  restrictions  on  transfer  under  this
Agreement,   applicable   state  and  federal   securities  laws  and  liens  or
encumbrances  created by or imposed by the Holder,  and enforceable  against the
Company in  accordance  with their terms,  except that such  enforcement  may be
limited  by (a)  bankruptcy,  insolvency,  reorganization,  moratorium  or other
similar  laws  affecting  or  relating  to  enforcement  of  creditors'   rights
generally,  and (b) general  principles of equity.  Assuming the accuracy of the
representations  of the Holder in Section 2 of this Agreement and subject to the
filing of Form D pursuant to  Regulation  D under the  Securities  Act and state
securities  laws,  the New Notes will be issued in  compliance  in all  material
respects with all applicable  federal and state  securities laws. The Underlying
Common  Stock  has  been  duly  reserved  for  issuance,  and upon  issuance  in
accordance  with the terms of the Company's  Certificate  of  Incorporation,  as
amended,  will be  validly  issued,  fully  paid and  nonassessable  and free of
restrictions on transfer other than  restrictions  on transfer under  applicable
federal  and state  securities  laws and  liens or  encumbrances  created  by or
imposed by the Holder.  Based in part upon the  representations of the Holder in
Section 2 of this Agreement, the New Notes and the Underlying Common Stock, when
issued  and  delivered  in  accordance  with the  terms of the New Notes and the
Indenture,  will be issued  in  compliance  in all  material  respects  with all
applicable federal and state securities laws.

         Section 3.5 SEC Documents; Financial Statements. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities  Act or the  Securities  Exchange Act of 1934, as amended (the
"Exchange  Act"),  as the case may be, and the rules and  regulations of the SEC
thereunder  applicable to such SEC Documents.  As of their respective dates, the
SEC Documents did not contain any untrue statement of a material fact or omit to
state a material  fact  required to be stated  therein or  necessary to make the
statements  therein,  in light of the circumstances  under which they were made,
not  misleading.  The audited  consolidated  financial  statements and unaudited
interim financial statements of the Company included in the SEC Documents comply
as to form in all material respects with applicable accounting  requirements and
with the published  rules and regulations of the SEC with respect  thereto.  The
financial  statements  and schedules  included in the SEC  Documents:  have been
prepared in accordance with generally accepted accounting  principles applied on
a consistent basis (except as may be indicated therein or in the notes thereto);
present fairly, in all material respects, the consolidated financial position of
the Company and its  subsidiaries  as at the dates thereof and the  consolidated
results of their operations and cash flow for the periods then ended subject, in
the case of the unaudited interim financial statements, to normal year-end audit
adjustments  and any  other  adjustments  described  therein  and the fact  that
certain  information and notes have been condensed or omitted in accordance with
the Exchange Act and the rules promulgated  thereunder;  and are in all material
respects, in accordance with the books of account and records of the Company.

                                       8
<PAGE>

         Section 3.6 Legal Proceedings.  No legal or governmental proceedings or
investigations  are pending or, to the  knowledge of the Company,  threatened to
which the  Company is a party or to which the  property of the Company or any of
its subsidiaries is subject that are not described in the SEC Documents,  except
for such  proceedings or  investigations  which would not reasonably be expected
to, singly or in the aggregate,  result in a Material Adverse Effect. As used in
this  Agreement,  the term  "Material  Adverse  Effect"  shall mean when used in
respect of any matter  relating to the Company a material  adverse effect on the
business,   condition  (financial  or  otherwise),   properties  or  results  of
operations of the Company and its subsidiaries, considered as one enterprise, or
would  materially  adversely  affect the  ability of the  Company to perform its
obligations  under  this  Agreement,  the  Indenture,  the  Registration  Rights
Agreement and the New Notes.

         Section  3.7  Compliance  with  Laws;  Permits.  The  Company  and  its
subsidiaries possess all certificates,  authorizations and permits issued by the
appropriate  federal,  state or  foreign  regulatory  authorities  necessary  to
conduct  their  respective  businesses,  except  where the  failure to have such
certificates,  authorizations  and permits  would not  reasonably be expected to
have a Material Adverse Effect, and none of the Company and its subsidiaries has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit which would reasonably be expected
to, singly or in the aggregate, result in a Material Adverse Effect. The Company
and its  subsidiaries  are and have been in compliance with all applicable laws,
statutes, ordinances, rules, regulations, orders, judgments, decisions, decrees,
standards,  and  requirements  relating to their respective  businesses,  except
where  any such  non-compliance  would  not  reasonably  be  expected  to have a
Material Adverse Effect.

         Section 3.8 No Material  Adverse Effect.  Since the respective dates as
of which information is given in the SEC Documents, there has not been any event
or  occurrence   having  a  Material  Adverse  Effect  on  the  Company  or  its
subsidiaries, except as reflected or disclosed in a subsequent SEC Document.

         Section 3.9  Disclosure.  On or before the first business day following
the date of this Agreement,  the Company shall issue a press release and/or file
a Form 8-K with the SEC disclosing all material terms of the Transaction (to the
extent not previously  disclosed) and any other material  nonpublic  information
delivered  by the  Company  or its  agents or counsel to the Holder or any agent
acting on its behalf.  Upon the filing of such press release, no Holder shall be
in  possession  of any  information  that  constitutes  or could  reasonably  be
expected to constitute material, nonpublic information provided to Holder by the
Company or any agent acting on its behalf. The Company  understands and confirms
that each of the Holders will rely on the foregoing representations in effecting
the Transaction

                                       9
<PAGE>

         Section 3.10 Existing Credit Agreement.  As of the date hereof,  and at
the  Closing,  no  obligations  are  outstanding  under the Second  Amended  and
Restated  Credit  Agreement,  dated  as of May  31,  2005  (as  may be  amended,
supplemented or otherwise  modified from time to time, the "Credit  Agreement"),
by and among  Greatbatch Ltd., the lenders party thereto and  Manufacturers  and
Traders Trust Company, as administrative agent. The Company hereby covenants and
agrees that neither the Company nor its subsidiaries shall borrow any amounts or
otherwise incur any obligations  under the Credit Agreement until such time that
the Transaction  contemplated  hereby is expressly permitted by the terms of the
Credit Agreement and all documents related thereto.

                                   ARTICLE IV
                            Miscellaneous Provisions

         Section 4.1 Notice.  Any notice provided for in this Agreement shall be
in writing and shall be either personally delivered,  or mailed first class mail
(postage prepaid) with return receipt  requested or sent by reputable  overnight
courier service  (charges  prepaid) to such address and to the attention of such
person as the  recipient  party has  specified  by prior  written  notice to the
sending  party.  Notices  will be  deemed  to have  been  given  hereunder  when
delivered personally, three business days after deposit in the U.S. mail postage
prepaid  with return  receipt  requested  and two  business  days after  deposit
postage prepaid with a reputable  overnight  courier service for delivery on the
next business day.

         Section 4.2 Entire  Agreement.  This Agreement and the other  documents
and agreements  executed in connection  with the  Transaction  embody the entire
agreement and  understanding  of the parties  hereto with respect to the subject
matter  hereof  and  supersede  all prior and  contemporaneous  oral or  written
agreements,    representations,     warranties,    contracts,    correspondence,
conversations,  memoranda and understandings between or among the parties or any
of their agents,  representatives or affiliates relative to such subject matter,
including, without limitation, any term sheets, emails or draft documents.

         Section 4.3  Assignment;  Binding  Agreement.  This  Agreement  and the
various rights and obligations  arising  hereunder shall inure to the benefit of
and be binding upon the parties hereto and their successors and assigns.

         Section 4.4  Counterparts.  This  Agreement may be executed in multiple
counterparts,  and on  separate  counterparts,  each of which shall be deemed an
original,  but all of which taken  together  shall  constitute  one and the same
instrument.  Any counterpart or other signature  hereupon delivered by facsimile
shall be deemed for all purposes as  constituting  good and valid  execution and
delivery of this Agreement by such party.

         Section 4.5 Remedies  Cumulative.  Except as otherwise provided herein,
all rights and remedies of the parties under this  Agreement are  cumulative and
without prejudice to any other rights or remedies available at law.

         Section 4.6  Governing  Law.  This  Agreement  shall in all respects be
construed in accordance with and governed by the  substantive  laws of the State
of New York, without reference to its choice of law rules.

                                       10
<PAGE>

         Section  4.7 No Third  Party  Beneficiaries  or Other  Rights.  Nothing
herein  shall grant to or create in any person not a party  hereto,  or any such
person's dependents or heirs, any right to any benefits  hereunder,  and no such
party shall be entitled to sue any party to this Agreement with respect thereto.

         Section  4.8  Waiver;  Consent.  This  Agreement  may  not be  changed,
amended,  terminated,   augmented,   rescinded  or  discharged  (other  than  in
accordance with its terms), in whole or in part, except by a writing executed by
the parties  hereto.  No waiver of any of the  provisions  or conditions of this
Agreement  or any of the rights of a party  hereto shall be effective or binding
unless such waiver  shall be in writing and signed by the party  claimed to have
given or consented thereto. Except to the extent otherwise agreed in writing, no
waiver of any term,  condition  or other  provision  of this  Agreement,  or any
breach  thereof  shall be deemed to be a waiver of any other term,  condition or
provision  or any breach  thereof,  or any  subsequent  breach of the same term,
condition  or  provision,  nor shall any  forbearance  to seek a remedy  for any
noncompliance  or  breach be  deemed  to be a waiver  of a  party's  rights  and
remedies with respect to such noncompliance or breach.

         Section 4.9 Word Meanings.  The words such as "herein",  "hereinafter",
"hereof", and "hereunder" refer to this Agreement as a whole and not merely to a
subdivision  in which such words appear unless the context  otherwise  requires.
The  singular  shall  include  the plural,  and vice  versa,  unless the context
otherwise  requires.  The masculine  shall include the feminine and neuter,  and
vice versa, unless the context otherwise requires.

         Section  4.10 No Broker.  Neither  party has engaged any third party as
broker or finder or incurred or become obligated to pay any broker's  commission
or  finder's  fee in  connection  with  the  transactions  contemplated  by this
Agreement  other  than  such  fees and  expenses  for  which it shall be  solely
responsible.

         Section 4.11 Further Assurances. The Holder and the Company each hereby
agree to execute and deliver, or cause to be executed and delivered,  such other
documents,  instruments and agreements,  and take such other actions,  as either
party may reasonably request in connection with the transactions contemplated by
this Agreement.

         Section 4.12 Costs and Expenses.  The Holder and the Company shall each
pay their own  respective  costs and expenses  incurred in  connection  with the
negotiation,   preparation,   execution  and   performance  of  this  Agreement,
including, but not limited to, attorneys' fees.

         Section  4.13  Headings.   The  headings  in  this  Agreement  are  for
convenience  of  reference  only and  shall not limit or  otherwise  affect  the
meaning hereof.

         Section  4.14  Severability.  If any  one  or  more  of the  provisions
contained  herein,  or the  application  thereof  in any  circumstance,  is held
invalid, illegal or unenforceable,  the validity, legality and enforceability of
any such  provision  in every  other  respect  and of the  remaining  provisions
contained herein shall not be affected or impaired thereby.

                                       11
<PAGE>

         IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the date first above written.

                               HOLDER:

                               ----------------------------------------

                               By: ______________________________________
                               Name:
                               Title:

                               THE COMPANY:

                               GREATBATCH, INC.

                               By: ______________________________________
                               Name:
                               Title:

                      Signature Page to Exchange Agreement

<PAGE>

                                                                       Exhibit A

                                Form of Indenture

<PAGE>

                                                                       Exhibit B

                      Form of Registration Rights Agreement

<PAGE>

                                                                       Exhibit C

                       Form of Opinion of Hodgson Russ LLP

1.       The Company has been duly  incorporated and is an existing  corporation
         in good standing under the laws of the State of Delaware with corporate
         power and authority to own its  properties  and conduct its business as
         described  in the  Company's  most recent  filing on Form 10-K with the
         Securities and Exchange Commission (the "SEC").

2.       The Company has an authorized equity capitalization as set forth in its
         Amended and Restated Certificate of Incorporation, filed as Exhibit 3.1
         to  the  Company's   Registration  Statement  on  Form  S-1  (File  No.
         333-37554).

3.       The shares of Common Stock  initially  issuable upon  conversion of the
         New Notes  (the  "Conversion  Shares")  have been duly  authorized  and
         reserved  for  issuance  upon such  conversion  and,  when  issued  and
         delivered in  accordance  with the  provisions of the New Notes and the
         Indenture,  will be validly  issued and fully paid and  non-assessable.
         The stockholders of the Company have no preemptive  rights with respect
         to the  issuance of the  Conversion  Shares  under the  Certificate  of
         Incorporation, Bylaws or DGCL.

4.       To our knowledge,  except as disclosed in the SEC Documents,  there are
         no pending  actions,  suits or  proceedings  to which the  Company is a
         party nor are  there any such  actions,  suits or  proceedings  overtly
         threatened  in writing  against the Company  that would have a material
         adverse  effect on the business,  results of  operations,  or financial
         condition of the Company and its subsidiaries, taken as a whole.

5.       The Exchange and Purchase Agreement has been duly authorized,  executed
         and  delivered  by the  Company  and  constitutes  a valid and  binding
         agreement of the Company.

6.       The New Notes being issued on the date hereof have been duly authorized
         by the Company and, when executed by the Company and  authenticated  by
         the Trustee in the manner  provided for in the Indenture and issued and
         delivered  to the Holder in  accordance  with the terms of the Exchange
         and Purchase  Agreement,  will constitute valid and binding obligations
         of the  Company,  enforceable  against the Company in  accordance  with
         their   terms,   subject   to   applicable   bankruptcy,    insolvency,
         reorganization,  moratorium and other laws affecting  creditors' rights
         generally and subject to general  principles  of equity,  regardless of
         whether  considered  in a  proceeding  in equity or at law, and will be
         entitled to the benefits of the Indenture.

7.       The Indenture has been duly  authorized,  executed and delivered by the
         Company and  constitutes a valid and binding  agreement of the Company,
         enforceable  against the Company in accordance with its terms,  subject
         to applicable bankruptcy,  insolvency,  reorganization,  moratorium and
         other laws affecting creditors' rights generally and subject to general
         principles of equity,  regardless of whether considered in a proceeding
         in equity or at law.

<PAGE>

8.       The Registration  Rights  Agreement has been duly authorized,  executed
         and  delivered  by the  Company  and  constitutes  a valid and  binding
         agreement of the Company, enforceable against the Company in accordance
         with  its  terms,   subject  to  applicable   bankruptcy,   insolvency,
         reorganization,  moratorium and other laws affecting  creditors' rights
         generally and subject to general  principles  of equity,  regardless of
         whether  considered  in a proceeding in equity or at law, and except as
         rights to  indemnification  and  contribution  under  the  Registration
         Rights Agreement may be limited under applicable law.

9.       The  issuance  and sale of the New Notes  being  delivered  on the date
         hereof,  the  issuance  of the  Conversion  Shares,  if  any  (assuming
         conversion  on the date hereof  pursuant to the terms of the New Notes)
         and  the  performance  by the  Company  of its  obligations  under  the
         Indenture,  the New Notes and the Exchange and Purchase  Agreement  and
         the  consummation  of  the  transactions  therein  contemplated  do not
         conflict  with and did not  result  in a  breach  or  violation  by the
         Company of any of the terms or  provisions  of, or constitute a default
         under any Reviewed  Agreement listed on Exhibit A hereto, nor will such
         actions  result in any violation by the Company of (i) the  Certificate
         of  Incorporation  or the Bylaws,  (ii) any U.S. federal or New York or
         Delaware  (under the DGCL) state  statute  applicable  to the  Company,
         (iii) any rule or any regulation known to us of any U.S. federal or New
         York or Delaware (under the DGCL) state court or governmental agency or
         body having jurisdiction over the Company or any of its properties,  or
         (iv) any order,  judgment or decree known to us to which the Company is
         a party.

10.      Assuming the filing of the Form D in accordance with Regulation D under
         the Securities Act and any necessary  filings in connection  with state
         securities   laws,   no  consent,   approval,   authorization,   order,
         registration or  qualification  of or with any U.S. federal or Delaware
         (under the DGCL) state court or governmental agency or body is required
         for the  issue  and sale of the New  Notes on the  date  hereof  or the
         consummation  by the Company of the  transactions  contemplated  by the
         Exchange and  Purchase  Agreement  or the  Indenture,  except as may be
         expressly  contemplated  by the Exchange and  Purchase  Agreement,  the
         Indenture,  New Notes and the Registration  Rights Agreement or by U.S.
         federal  and  state  securities  laws  with  respect  to the  Company's
         obligations under the Registration Rights Agreement.

11.      Assuming the filing of a Form D in accordance  with  Regulation D under
         the Securities  Act, no registration of the New Notes or the Conversion
         Shares under the  Securities  Act is required  for the offer,  sale and
         delivery of the New Notes by the Company to the Holder  pursuant to the
         Exchange and Purchase Agreement (it being understood that no opinion is
         expressed as to any resale of the New Notes or the Conversion Shares).

<PAGE>

12.      The Company is not required to register as an "investment  company," as
         such term is defined in the Investment Company Act of 1940, as amended.

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